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Southwest Airlines says holiday meltdown will hit Q4 results

Southwest Airlines under scrutiny during the holiday chaos

Southwest Airlines’ The holiday crash will “definitely” take a toll on fourth-quarter results, directors said on Thursday, adding that it might take several weeks to process reimbursement claims from affected travelers.

The system-wide chaos left tons of of hundreds of consumers out of labor over the vacation week and drew Washington’s attention.

The low-cost airline has cut schedules over the past few days, operating just a 3rd of its scheduled flights, in a desperate bid to stabilize its operations and get planes and crews where they must be.

Southwest said it expects to operate on a standard schedule on Friday. According to FlightAware, 39 flights scheduled for Friday were cancelled, up from greater than 2,300 on Thursday.

“We have all hands on deck and have tested solutions to support the restored operation. I’m confident, but I’m also cautious,” CEO Bob Jordan said in an worker memo on Thursday.

Travelers at Baltimore Washington International Airport take care of Southwest Airlines’ cancellation of greater than 12,000 flights nationwide and in Baltimore, Maryland over the vacation season, December 27, 2022.

Michael McCoy | Reuters

The airline also resumed ticket sales on Friday after a hiatus it introduced before it stabilized its flight schedule, said Jordan, a Southwest veteran of greater than 30 years who became chief executive in February.

Southwest’s operations collapsed over the vacation week as a brutal winter swept across the United States. As most airlines recovered late last week, Southwest’s problems worsened. Management cited challenges, including overloaded internal flight planning platforms, critical to matching crews to flights.

Management on Thursday promised to enhance crew planning platforms and said upgrades were already underway, but noted that such projects take years.

Speaking to reporters on Thursday, Chief Commercial Officer Ryan Green said it was “definitely going to have an effect on the fourth quarter.”

But management declined to estimate how much the disruption would cost the airline in total. An identical incident in October 2021 cost the airline around $75 million, the carrier said last yr, but that event took longer, with more travelers flying on account of the vacations and far higher prices.

The airline previously said it expects quarterly revenue to extend by as much as 17% over 2019, when it brought in near $6 billion.

“Not Much Love”

Southwest faces major customer support challenges to reimburse travelers for canceled flights. Some travelers have incurred other expenses beyond the hotel and meals, akin to substitute of toiletries and other essentials.

Jack Leon, a 34-year-old teacher who planned to fly southwest on Christmas Day, canceled his trip to Boston after multiple flight changes that might have cut his vacation in half. Leon needed to return to the airport on Thursday, 4 days after his trip was derailed, to secure reimbursement for his return flight after being unable to contact customer support via phone, email or online form.

“For an organization that talks about love and has a heart as artwork, there wasn’t much love this Christmas,” said Leon.

In an try to appease its most loyal customers, Southwest said Thursday it’s going to extend the qualifying period for elite statuses that include perks like free Wi-Fi, early boarding and, in some cases, a companion pass.

Suzie Chism, a 33-year-old recording artist from Nashville, Tennessee, told CNBC that her December 26 flight home from Las Vegas Southwest was canceled, missing per week of labor and the last musical performance of the yr.

“My two-day trip suddenly becomes per week,” Chism said. “The lack of income is crushing.”

Chism said she could book a latest flight Border for Friday night.

“I just don’t trust Southwest to get me there,” she said.

Some competitors said they’d cap fares for certain cities to assist Southwest passengers reach their destinations without increasing prices, but fare searches on Thursday still returned some one-way flights for $600 or more.

The moves come after transport secretary Pete Buttigieg urged carriers to chop fares.

In a Thursday letter to Southwest’s chief executive, Buttigieg said he would hold Southwest accountable if he did not reimburse travelers for canceled flights, reimburse them and return lost bags.

“No amount of economic compensation can fully compensate passengers who’ve lost moments spent with their families that they are going to never get back – Christmas, birthdays, weddings and other special events,” wrote Buttigieg. “That’s why it is so vital for Southwest to start out by reimbursing passengers for costs that could be measured in dollars and cents.”

Buttigieg told NBC Nightly News that the Department of Transportation would put Southwest “under the microscope” and issue fines if mandatory to make sure the airline was doing the fitting thing with passengers.

Several lawmakers have also said they are going to look into what has caused Southwest huge trouble over the past week.

Southwest shares gained almost 4% on Thursday, however the stock continues to be down greater than 7% this week at around $33 a share. On Thursday, CFRA Research lowered its 12-month price goal for Southwest from $47 to $41, but maintained a robust buy rating on the stock.

“History shows that customers don’t permanently abandon an airline, even after a terrible experience on account of the commodity-like nature of the product,” wrote Colin Scarola, a CFRA analyst.

Not all customers agree.

Alex Kain, 37, was on account of fly home on Christmas Eve to Seattle from Denver, one in every of the airports most affected by the disruption. Instead, after Cain’s 2 a.m. flight was canceled, he and his girlfriend drove an 18-hour rental automobile to the airport in Redmond, Oregon, where they took Alaska airlines flight home.

At the very least, the couple plans to assert back the price of hotels, a rental automobile, fuel and an Alaska Airlines flight. Cain estimated the entire costs at $3,000.

“There’s no amount they might give us to fly southwest again,” Kain told CNBC.

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