Up to $825M Lost in Epic Meltdown, Southwest Airlines Says
The so-called Christmastime “flightmare” of Southwest Airlines could cost the embattled company $825 million.
That’s the impact Southwest estimates so far in a new, government-required financial update.
Because the company canceled “more than 16,700 flights” from Dec. 21-31, Southwest declared an “estimated fourth quarter 2022 pre-tax negative impact in the range of $725 million to $825 million.”
The Texas-based company made these disclosures in a Jan. 6 filing with the U.S. Securities and Exchange Commission (SEC).
As a result of the massive cancellations, Southwest estimates that its fourth-quarter 2022 “available seat miles” or capacity took a 6-percent hit compared with the same period in 2019; that’s about 4 points lower than previously expected, the company said.
The crowded Montreal International Airport on Dec. 27, 2022, after a winter storm delayed flights. (Photo courtesy of Cassidy Charette)
Almost half of the projected losses come from “an estimated revenue loss in the range of $400 million to $425 million,” the company said.
The other half can be chalked up to additional operating expenses. Those include reimbursements to customers, “premium pay and additional compensation to employees,” and the value of frequent-flyer points “offered as a gesture of good will to Customers,” the filing said.
Earlier this week, CEO Bob Jordan announced that affected customers would be granted 25,000 rewards points, valued at more than $300, in addition to any refunds or reimbursements they’re owed.
Some customers claim the company failed to refund them properly; one filed a class-action lawsuit that could represent thousands of plaintiffs.
Storm Touched Off Trouble
The SEC report that the company filed, “results of operations and financial condition,” is required after certain events that could affect shareholders of publicly traded businesses.
In this case, the triggering event was the operational meltdown that struck a blow to the company’s bottom line.
Residents take in the view from atop a gigantic snow pile in front of Central Terminal in Buffalo, New York, on Dec. 29, 2022. (Joed Viera/AFP via Getty Images)
Southwest’s acute crisis began just before Christmas, as a winter storm swept much of North America. Although other U.S. airlines weathered the storm reasonably well, it took Southwest several days to get back on track….