Southwest Airlines says the holiday crisis will impact fourth-quarter results

Southwest Airlines under scrutiny in holiday travel chaos

Southwest Airlines The holiday meltdown will “certainly” match fourth-quarter results, executives said Thursday, adding that it will take several weeks to process refund requests from affected travelers.

The system-wide chaos stranded hundreds of thousands of customers over the holiday week and put Washington under scrutiny.

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Southwest Airlines remains a strong buy for travelers despite the recent turmoil, according to CFRA

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The low-cost airline has slashed its flight schedules in recent days, flying just about a third of its scheduled flights in a desperate attempt to stabilize its operations and get planes and crews where they need to go.

Southwest said it expects to operate a normal schedule on Friday. According to FlightAware, 39 flights scheduled for Friday have been cancelled, up from more than 2,300 on Thursday.

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

Travelers at Baltimore Washington International Airport are grappling with the impact of Southwest Airlines’ December 27, 2022 cancellation of more than 12,000 flights around the Christmas holiday weekend across the country and in Baltimore, Maryland.

Michael McCoy | Reuters

The airline also resumed Friday ticket sales after taking a break before stabilizing its flight schedule, said Jordan, a more than three-decade veteran of the Southwest who became CEO in February.

Southwest’s operations ground to a halt during the holiday week after brutal winter weather swept across the United States. Southwest’s problems worsened as most airlines recovered late last week. Executives cited challenges, including overburdened internal planning platforms, that are critical to getting crews aligned with flights.

Executives on Thursday vowed to improve crew planning platforms and said modernization efforts were already underway, but noted such projects would take years.

In a call to reporters Thursday, Chief Commercial Officer Ryan Green said there will “certainly be an impact in the fourth quarter.”

But executives declined to give an estimate of how much the disruptions will cost the airline overall. A similar incident in October 2021 cost the airline about $75 million, the airline said last year, but that event lasted longer as more travelers and significantly higher fares flew due to the holidays.

The airline previously said it expects quarterly revenue to grow as much as 17% from 2019, when it brought in nearly $6 billion.

“Not Much Love”

Southwest faces significant customer service challenges to reimburse travelers for expenses related to canceled flights. Some travelers have incurred additional expenses in addition to hotel and meals, e.g. B. for replacing toiletries and other essentials.

Jack Leon, a 34-year-old teacher who was due to fly Southwest on Christmas Day, canceled his trip to Boston after a series of flight changes that would have cut his vacation in half. Leon had to return to the airport to secure a refund for his return flight on Thursday, four days after his trip derailed, after being unable to reach customer service by phone, email or online form.

“For a company that talks about love and has a heart as a graphic, there wasn’t a lot of love on Christmas Day,” Leon said.

In a bid to placate its most loyal customers, Southwest said Thursday it would be extending the qualifying period for elite statuses like free Wi-Fi, early boarding and, in some cases, a companion pass.

Suzie Chism, a 33-year-old recording artist from Nashville, told CNBC here in December. 26 Southwest’s flight home from Las Vegas was canceled, causing her to miss a week of work and her final musical performance of the year.

“My two-day trip suddenly lasted a week,” Chism said. “The loss of income is overwhelming.”

Chism said she could book a new flight with her Border for Friday night.

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

Some competitors said they would cap fares for certain cities to help stranded Southwest passengers reach their destinations without raising fares, but Thursday’s fare search still turned up some one-way flights for $600 or more.

The moves came after Transport Secretary Pete Buttigieg urged airlines to cap fares.

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

“No monetary compensation can fully compensate passengers who have missed moments with their families that they will never get back — Christmas, birthdays, weddings and other special events,” Buttigieg wrote. “That’s why it’s so important for Southwest to first reimburse passengers for what can be measured in dollars and cents.”

Buttigieg told NBC Nightly News the transportation department will “understand” Southwest and levy fines as necessary to ensure the airline agrees with passengers.

Several lawmakers also said they were investigating what caused Southwest’s outsized troubles over the past week.

Southwest shares were up nearly 4% on Thursday, but shares are still down more than 7% this week at about $33 a share. CFRA Research earlier Thursday cut its 12-month price target on Southwest to $41 from $47, while maintaining a strong buy rating on the stock.

“History shows that customers tend not to leave an airline permanently, even after a horrific experience, due to the commodity-like nature of the product,” wrote CFRA analyst Colin Scarola.

Not all customers agree.

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

At the very least, the couple plans to claim reimbursement for the hotels, rental car, gas, and Alaska Airlines flight. Cain estimated the cost at up to $3,000.

“There is no amount of money they could give us to fly southwest again,” Kain told CNBC.

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