Southwest Airlines’ schedule stabilizes after the holiday catastrophe but expenses keep rising. After 16,000 flight cancellations, Southwest Airlines finally got its schedule back on track this past weekend. However, the company still stands to lose hundreds of millions of dollars due to a system-wide meltdown over the holidays.
Since last Friday, Southwest has canceled 304 flights, or 2% of its schedule. Most of these cancellations occurred on Monday when U.S. airlines were hit with bad weather and ground stops in Florida due to an FAA equipment outage. According to FlightAware, Southwest canceled approximately 45% of its flights between December 21 and 29.
Southwest must tackle two more challenging tasks: reviewing thousands of passenger reimbursement receipts and enhancing the internal technology that contributed to the meltdown.
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Southwest CEO Bob Jordan, who took over in February, addressed employees on Friday, saying, “We have plans to invest in tools, technology, and processes, but there will be immediate work to understand what lessons are learned here and how we keep this from happening again because it cannot happen again.”
Jordan has stated that other staff members have stepped up to assist customers and issue refunds.
The problems, which have affected flights across the United States, began with bad weather. However, Southwest crews needed help getting automatically reassigned after all the changes, and many had to wait on hold with crew scheduling services for long periods. There were tens of thousands of people affected, and Southwest is still dealing with the accumulated lost baggage.
For most of last week, the airline had to cancel roughly two-thirds of its flights to get crews and planes where they needed to go. However, by Friday, things had returned to near normal.
Andrew Diadora, an analyst for Bank of America’s airline stock division, estimated Tuesday that the disruption might cost Southwest between $600 million and $700 million. This accounts for money that couldn’t be made up by reimbursing affected travelers for hotel and vehicle rental costs.
Diadora reduced his forecast for Southwest’s adjusted earnings in the fourth quarter from 85 to 37 cents.
It will take weeks to process customers’ reimbursement requests, a Southwest executive said last week, and the cancellations will “certainly” affect the company’s fourth-quarter results.
Secretary of Transportation Pete Buttigieg has promised to fine Southwest if the airline fails to reimburse or refund its customers. However, such penalties can take months or even years to enforce.
Southwest’s stock dropped more than its competitors on Tuesday, falling by more than 4 percent. The Dallas-based airline will reveal its financial results on January 26, but it will likely provide a sneak peek at the consequences of the meltdown.
