WASHINGTON, Dec 29 (Reuters) – Southwest Airlines (LUV.N) has promised to reimburse passengers for expenses such as hotels and car rental in addition to refunding tickets after canceling thousands of flights due to a huge winter storm and said there would be an as-yet-undetermined hit to its earnings.
“There will definitely be an impact on the fourth quarter,” chief commercial officer Ryan Green told reporters on a call Thursday. “We… are working on all the financial elements of this. We will share this information when we have compiled everything and are ready to do so.”
Some analysts believe the collapse could shave 9% off Southwest’s fourth-quarter earnings.
Company executives on the call declined to estimate the number of travelers affected by the disruptions since Friday.
While other US airlines got back on their feet fairly quickly, Dallas-based Southwest is still getting back to normal. The carrier has canceled at least 16,000 flights over the past week, including about 60% of all scheduled flights on Thursday, according to FlightAware flight tracking data.
“If you were to make alternative travel arrangements like hotels, meals, rental cars, gas for a rental car, those would be eligible for refunds,” Green said, adding that it would take several weeks for refunds.
Friday cancellations are expected to drop significantly, with Southwest saying it is “looking forward to getting back to a state of normality” ahead of the New Year holiday weekend.
Just two months ago, Southwest forecast “strong” fourth-quarter earnings and estimated a 13% to 17% jump in operating revenue.
Bad weather was only part of the problem for Southwest. Its outdated technology failed to map crew on flights and its point-to-point operational structure created chaos for schedules, the company admitted and union members said.
[1/2] Southwest Airlines passengers line up at the baggage services desk after US airlines, run by Southwest, canceled thousands of flights due to a massive winter storm that swept through much of the country before and during Christmas holiday weekend, at Dallas Love Field airport in Dallas, Texas, U.S., December 28, 2022. REUTERS/Shelby Tauber
The US government called the airline’s collapse a system failure and promised to act.
In a letter to South West Chief Bob Jordan on Thursday, Transport Secretary Pete Buttigieg warned the company would be held liable if it failed to meet commitments to customers for “controllable delays and cancellations”. .
The company was keen to show that it was turning the page on the debacle, which caused its share price to fall. Shares in the Southwest closed Thursday up 3.7% as Wall Street rose broadly, the first day of gains since last Friday.
Jordan apologized for the disruption and said the process of repositioning crew and planes after the storms had been a “manual process” that took time, and that a “volunteer army” of salaried employees at the company’s headquarters was helping.
“I can’t imagine that this doesn’t lead to changes in the plan” to modernize the airline’s operations, Jordan said, adding that technological improvements were underway but it was a ” important and complicated process”.
Employee unions say they have repeatedly warned Southwest management that the airline’s technology systems are in dire need of upgrades.
Flight attendants have been complaining about airline technology failures for years, according to Lyn Montgomery, president of the Southwest Airlines Flight Attendants Union, a Local 556 of the Transport Workers Union.
“There are a number of ways to avoid this,” Montgomery told CNN on Thursday, saying it could have included commitments from Southwest executives to ensure the IT infrastructure would be able to meet the growth of the carrier.
The comments echoed those of the Southwest Airlines Pilots Association, which said executives had failed to adapt operations to deal with repeated systems failures, despite years of union calls for improvement. .
Requested improvements included changes to crew scheduling software and communications tools that would have allowed displaced 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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