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Southwest Airlines says holiday meltdown will hit Q4 results


Southwest Airlines’ holiday meltdown will “actually” hit its fourth-quarter results, executives said Thursday, adding that it can take several weeks to work through affected travelers’ reimbursement requests.

The systemwide chaos stranded tons of of hundreds of consumers over the vacation week and drew scrutiny from Washington.

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The low-cost airline slashed schedules during the last several days, flying nearly one-third of its planned flights, in a desperate effort to stabilize its operation and get planes and crews where they should go.

Southwest said it expects to operate a standard schedule on Friday. It’s canceled 39 flights scheduled for Friday, in keeping with FlightAware, down from greater than 2,300 on Thursday.

“Now we have all hands on deck and tested solutions in place to support the restored operation. I’m confident, but I’m also cautious,” CEO Bob Jordan said in a staff memo Thursday.

Travelers at Baltimore Washington International airport cope with the impact of Southwest Airlines canceling greater than 12,000 flights across the Christmas holiday weekend across the country and in Baltimore, Maryland, December 27, 2022.

Michael McCoy | Reuters

The airline also resumed selling tickets for Friday, after a pause it implemented before it stabilized its schedule, said Jordan, a greater than three-decade Southwest veteran who became CEO in February.

Southwest’s operation unraveled over the vacation week after brutal winter weather swept across the U.S. When most airlines had recovered at the top of last week, Southwest’s problems worsened. Executives cited challenges including overloaded internal scheduling platforms crucial to getting crews matched with flights.

Executives on Thursday vowed to enhance crew scheduling platforms and said that modernization efforts were already underway but noted such projects take years.

On a call with reporters on Thursday, Chief Business Officer Ryan Green said that there “will definitely be an impact to the fourth quarter.”

But executives declined to offer an estimate of how much the disruptions will cost the airline in total. An analogous incident in October 2021 cost the airline about $75 million, the carrier said last yr, but this event lasted longer, with more travelers flying due to the holidays and sharply higher fares.

The carrier previously said it expected quarterly revenue to rise as much as 17% over 2019, when it brought in near $6 billion.

‘Not much love’

Southwest faces significant customer support challenges to reimburse travelers for costs pertains to canceled flights. Some travelers incurred other expenses beyond hotels and meals, reminiscent of to switch 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 a slew of flight changes that will have cut his vacation in half. Leon had 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 achieve customer support via phone, email or a web based form.

“For a corporation that talks about love and has a heart as their graphic, there was not much love on Christmas day,” Leon said.

In an try to placate its most loyal customers, Southwest said Thursday it can extend the qualifying period for elite statuses reminiscent of free Wi-Fi, early boarding and in some cases, a companion pass.

Suzie Chism, a 33-year-old recording artist from Nashville, told CNBC her Dec. 26 Southwest flight home from Las Vegas was canceled, causing her to miss every week of labor and her final musical performance of the yr.

“My two night trip is suddenly every week long,” Chism said. “The lack of income is crushing.”

Chism said she was in a position to book a latest flight with Frontier for Friday night.

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

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

The moves got here after Transportation Secretary Pete Buttigieg urged carriers to cap fares.

In a letter to Southwest’s CEO on Thursday, Buttigieg said he would hold Southwest accountable if it doesn’t promptly refund travelers for canceled flights, reimburse them for expenses and return lost bags.

“No amount of economic compensation can fully make up for passengers who missed moments with their families that they will never get back — Christmas, birthdays, weddings, and other special events,” Buttigieg wrote. “That is why it’s so critical for Southwest to start by reimbursing passengers for those costs that could be measured in dollars and cents.”

Buttigieg told NBC Nightly News the Transportation Department would put Southwest “under a microscope” and levy fines if obligatory to make sure the airline does right by passengers.

Several lawmakers also said they might look into what caused Southwest’s outsized problems over the past week.

Southwest shares gained nearly 4% Thursday, but shares are still down greater than 7% this week at about $33 per share. CFRA Research earlier Thursday cut its 12-month price goal for Southwest from $47 to $41 but maintained its strong buy rating on the stock.

“History shows customers tend to not permanently ditch an airline even after an awful experience attributable to the commodity-like nature of the product,” CFRA analyst Colin Scarola wrote.

Not all customers agree.

Alex Kain, 37, was alleged to fly home on Christmas Eve to Seattle from Denver, considered one of the airports hit hardest by the disruptions. As a substitute, after Kain’s flight was canceled at 2 a.m., he and his girlfriend drove 18 hours in a rental automobile to an airport in Redmond, Oregon, where they took an Alaska Airlines flight home.

At minimum, the couple is planning to request reimbursement for the hotels, the rental automobile, the gas and the Alaska Airlines flight. Kain estimated the prices total as much as $3,000.

“There is not any amount of cash they might give us to make us fly Southwest again,” Kain told CNBC.

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