Southwest Airlines will be discontinued after the holidays but costs will accumulate

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Pristine Floyde searches for a friend’s suitcase in the baggage hold area for Southwest Airlines at Denver International Airport on December 28, 2022 in Denver, Colorado.

Michael Ciaglo | Getty Images

Southwest Airlines firmed up its schedule over the weekend after about 16,000 cancellations since late last month, but its system-wide holiday meltdown could cost hundreds of millions of dollars two.

Southwest had canceled 304 flights since Friday, 2% of its schedule, most of them on Monday as US airlines faced bad weather and ground stops in Florida linked to a Civil Aviation Administration equipment outage. Federal. For comparison, from Dec. 21 to Dec. 29 Southwest had scrapped about 45% of its operations, a much larger share than other major airlines, according to FlightAware.

Now comes two more difficult tasks for Southwest: going through thousands of passenger reimbursement receipts and developing the internal technology to add to the liquidation.

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“We have plans to invest in tools and technology and processes, but there will be immediate work to understand what lessons are being learned here and how to keep this from happening again, because we cannot for it to happen again,” said Southwest CEO Bob Jordan, who accepted. the lead in February, employees said Friday.

Jordan said employees from other departments have volunteered to help customers and process refunds. The carrier is working with it FedEx to help customers get their luggage.

“We have halved the number of bags since Thursday and are on track to have most if not all bags sent to our Customers later this month. -week,” Jordan told staff Monday.

On Tuesday, Southwest began offering 25,000 Rapid Rewards points, worth about $300, to travelers whose flights were canceled or significantly delayed between Dec. 24 and Jan. 2, and didn’t travel or rebook, 25,000 Rapid Rewards points, worth about $300, according to the airline.

The number of miles required to obtain a ticket varies according to demand and capacity. Over the Easter weekend, for example, it currently costs more than 25,000 Rapid Rewards points for round-trip travel between Baltimore and Los Angeles, but it would more than cover a ticket a week later.

Bad weather sparked the issues last month, affecting flights across the U.S. But Southwest’s crews struggled to be automatically reassigned after the changes all and had to wait hours with crew registration services. Hundreds of thousands of passengers were affected, and Southwest is still working through a backlog of misplaced luggage.

The carrier had canceled about two-thirds of its flights for much of last week in an effort to get crews and planes where they needed to go, before operating close to normal on Friday .

The disruption could cost Southwest between $600 million and $700 million, according to estimates from Bank of America airline stock analyst Andrew Didora on Tuesday. That includes both lost revenue from refunds and reimbursements to affected passengers, which could include costs such as housing hotel and rental cars.

Didora cut its fourth-quarter adjusted earnings forecast for Southwest to 37 cents a share from 85 cents.

A Southwest executive said last week that the cancellations will “definitely” hit its fourth-quarter results but that it will take weeks to work through freight reimbursement requests – shopping.

Transportation Secretary Pete Buttigieg vowed to hold Southwest accountable if it failed to provide refunds and refunds to customers, although those fines could be related to customers’ failure to pay. take back months if not years.

Southwest shares fell 3.2% to $32.60 on Tuesday, a bigger drop than rivals. The Dallas-based airline is expected to report results on January 26 but is likely to preview the costs of the liquidation before then.

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