Southwest’s strong 2022 rebound soured by holiday debacle
Southwest Airlines anticipates a money losing quarter after a holiday debacle led to nearly 17,000 canceled flights and thousands of people, traveling to see family and friends, being stranded.
It is a devastating turn financially and reputationally for the Dallas carrier, which led all U.S. airlines in profit during the first nine months of 2022, a year of recovery for the airline industry.
Southwest canceled more than 16,700 flights from Dec. 21 through Dec. 31. That will result in a pre-tax negative impact in the range of $725 million to $825 million, a net loss for the fourth quarter, the airline said Friday in a filing with the U.S. Securities and Exchange Commission.
The massive disruptions started with a winter storm, and snowballed when Southwest’s outdated crew-scheduling technology was overwhelmed, leaving crews and planes out of position to operate flights. It took the airline eight days to recover when other major airlines were up and running almost immediately after the storm passed.
Southwest Airlines Co. expects a quarterly revenue loss of $400 million to $425 million, it said Friday. In early December, before the holiday meltdown, Southwest projected fourth-quarter revenue would rise by up to 17% over the same period in 2019, before the pandemic.
It also said that it expects higher operating expenses related to travel expense reimbursements to customers, the estimated value of frequent-flyer points that were offered to customers that are expected to be redeemed, and premium pay and additional compensation for employees.
Just last month, Southwest announced the return of a dividend for shareholders, which it suspended after the pandemic devastated the airline industry. U.S. airlines were barred from paying dividends or buying back their own stock until October as a condition of taking $54 billion in federal pandemic aid.
Southwest’s flights are now running on a roughly normal schedule, and the airline is working on repairing its damaged reputation.
Shares dipped slightly before the opening bell Friday.