WASHINGTON, Dec 29 (Portal) – Southwest Airlines (LUV.N) vowed to reimburse passengers for expenses such as hotels and rental cars, in addition to ticket refunds, after thousands of flights were canceled due to a massive winter storm, and said it was would give an as yet undetermined blow to its profits.
“The fourth quarter will certainly have an impact,” Chief Commercial Officer Ryan Green told reporters Thursday. “We’re … working through all the financial elements of it. We will share this information when we have all of this put together and ready to do so.”
Some analysts estimate that the meltdown could eat into Southwest’s fourth-quarter earnings by as much as 9%.
Company executives declined to estimate the number of travelers affected by the disruptions since Friday.
While other U.S. airlines bounced back relatively quickly, Dallas-based Southwest is still limping back to normal. The airline canceled at least 16,000 flights in the past week, including about 60% of all scheduled flights on Thursday, according to data from flight tracker FlightAware.
“If you would have to make alternative travel arrangements such as hotels, meals, rental cars, gas for rental cars, those are eligible for a refund,” Green said, adding that it would take several weeks to pay back.
Cancellations are expected to fall drastically on Friday, with Southwest saying it is “eager to return to a state of normality ahead of the New Year’s weekend.”
Just two months ago, Southwest was forecasting “strong” fourth-quarter earnings, estimating a 13% to 17% increase in operating income.
The bitter weather was only part of the problem for Southwest. Its outdated technology hasn’t been able to match crew to flights and its point-to-point operating structure has resulted in chaos with flight schedules, the company has admitted and union members said.
[1/2] Southwest Airlines passengers wait in line at the baggage handling office after U.S. carriers, led by Southwest, canceled thousands of flights due to a massive winter storm that swept much of the country at Dallas Love Field Airport ahead of and during the Christmas holiday weekend in Dallas, Texas , U.S., December 28, 2022. Portal/Shelby Tauber
The US government has described the airline’s meltdown as a system failure and announced action.
In a letter to Southwest boss Bob Jordan on Thursday, Secretary of Transportation Pete Buttigieg warned the company would be held accountable if it failed to meet commitments to customers over “controllable delays and cancellations.”
The company was keen to show that it was turning the page on the debacle that sent its share price plummeting. Southwest shares closed up 3.7% on Thursday as Wall Street rose broadly, the first day of gains since last Friday.
Jordan apologized for the disruption and said the process to reposition crews and planes after the storms was a “manual process” that took some time and a “volunteer army” made up of employees at company headquarters , help.
“I can’t imagine that this doesn’t bring changes to the plan” to modernize the airline’s operations, Jordan said, adding that technological improvements are underway, but it’s a “huge and complicated process.”
Labor unions say they have repeatedly warned Southwest management that the airline’s technology systems are in urgent need of an upgrade.
According to Lyn Montgomery, president of the Southwest Airlines Flight Attendants Union, a local 556 of the Transport Workers Union, flight attendants have complained about technology failures at the airline for years.
“There are many ways it could have been avoided,” Montgomery said on CNN on Thursday, saying this could have included commitments from Southwest executives to ensure the IT infrastructure would be able to support the airline’s growth to be fair.
The comments echoed those of the Southwest Airlines Pilots Association, which said leadership had failed to adjust operations to fix repeated system failures, despite years of calls for improvements from the union.
Improvements requested included changes to the workforce scheduling software and communication tools that would have allowed the transferred crews to stay in touch with the company.
Reporting by Doina Chiacu and David Shepardson in Washington; additional reporting by Ismail Shakil, Alexandra Alper and Koh Gui Qing Editing by Mark Porter, Frances Kerry, Sayantani Ghosh and Leslie Adler
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