Southwest Airlines says disruptions that led to more than 16,700 canceled flights over the holidays could cost the company as much as $825 million, according to a company regulatory filing on Friday.
Severe weather, staff shortages brought on by the pandemic, and an outdated computer system caused the largest domestic airline in the U.S. to cancel thousands of flights from Dec. 21 to Dec. 31. The widespread cancellations left families, and airline staff, stranded over Christmas and New Year’s, while unclaimed luggage piled up at airports across the country.
Southwest said that more than half of the losses are from issuing flight refunds, which cost between $400 million and $425 million. In addition, the airline offered compensation for travelers’ out-of-pocket expenses and the cost of booking flights on other airlines. The airline was also saddled with additional operating expenses, including extra overtime pay for employees.
The report does not mention any potential fines from the Department of Transportation, which has launched an investigation into the meltdown. It also does not include any estimates about the potential of lost revenue in the future due to customers choosing to fly on other airlines.
After initially staying quiet and faulting the weather for the disruptions, Southwest executives have repeatedly apologized and taken the blame. A nasty, nationwide winter storm hammered some of the airline’s biggest airports, straining its point-to-point flying network, and rendering an antiquated crew scheduling platform useless.
“I’ve said it before, but I can’t say it enough how sorry I am for the impact these challenges have had on our employees and our customers. We have a long and proud record of delivering on expectations, and when we fall short, we aim to do the right thing,” Southwest CEO Bob Jordan said on Thursday.”
Southwest has vowed to cover travelers’ additional expenses like backup tickets on other airlines, hotels, meals, and more. Though there’s still no clarity on how much Southwest will cover per passenger – nor on how fast those checks will come – Jordan said the airline was “making great progress by processing tens of thousands of refunds and reimbursements a day.”
Meanwhile, many Americans are still waiting for their lost baggage to be returned. Jordan said a “vast majority” of bags had either been returned as of Thursday night or were en route.
According to DailyWire:
Share prices for Southwest have fallen more than 7% over the past month as executives scramble to win back the trust of disgruntled customers. Executives in the carrier’s pilot union claimed the elevated number of cancelations arose from “a combination of processes, outdated technology, and infrastructure.” Southwest is unique among other major airlines in that flights are arranged in a point-to-point system rather than a hub model.
Southwest had earned record revenue of $6.2 billion in the third quarter and boasted liquidity of $14.7 billion, exceeding debt outstanding of $8.7 billion, according to an earnings report.
Sources: DailyWire, SouthWestairlinesInvestorRelations
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