Southwest Airlines’ holiday meltdown will “definitely” hit its fourth-quarter results, executives said Thursday, adding it’s going to take several weeks to work through affected travelers’ reimbursement requests.
The systemwide chaos stranded a whole bunch of 1000’s 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 traditional schedule on Friday. It’s canceled 39 flights scheduled for Friday, in line with FlightAware, down from greater than 2,300 on Thursday.
“We now 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 take care of 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 there “will definitely be an impact to the fourth quarter.”
But executives declined to supply an estimate of how much the disruptions will cost the airline in total. An identical incident in October 2021 cost the airline about $75 million, the carrier said last 12 months, but this event lasted longer, with more travelers flying due to 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, similar to 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 succeed in customer support via phone, email or a web-based form.
“For an organization 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’s going to extend the qualifying period for elite statuses that include perks similar to 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 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 12 months.
“My two night trip is suddenly every week long,” Chism said. “The lack of income is crushing.”
Chism said she was capable of book a recent flight with Frontier for Friday night.
“I simply don’t trust Southwest to get me there,” she said.
Some competitors said they’d 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 may be measured in dollars and cents.”
Buttigieg told NBC Nightly News the Transportation Department would put Southwest “under a microscope” and levy fines if vital to make sure the airline does right by passengers.
Several lawmakers also said they’d look into what caused Southwest’s outsized problems over the past week.
Southwest shares gained nearly 4% on Thursday, however the stock remains to be 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 resulting from 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, certainly 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 no sum of money they may give us to make us fly Southwest again,” Kain told CNBC.