WASHINGTON, Dec 29 (Reuters) – Southwest Airlines ( LUV.N ) has promised to reimburse passengers for expenses such as hotels and rental cars, along with ticket refunds, after canceling thousands of flights due to a massive winter storm. an as-yet-unknown blow to their earnings.
“Certainly there will be an impact from the fourth quarter,” Chief Commercial Officer Ryan Green said on a call with reporters Thursday. “We’re … working through all the financial elements of this. We’ll share that information when it’s all put together and we’re ready to do that.”
Some analysts estimate the collapse could cut Southwest’s fourth-quarter earnings by 9%.
Company executives on the call declined to estimate the number of travelers affected by the outages since Friday.
While other US airlines bounced back relatively quickly, Dallas-based Southwest is still getting back to normal. The carrier has canceled at least 16,000 flights over the past week, including about 60% of all scheduled flights on Thursday, according to flight tracker FlightAware.
“If you had to make alternative travel arrangements, such as hotels, meals, rental cars, gas for a rental car, those will be eligible for reimbursement,” Green said, adding that payments will take several weeks.
Cancellations are expected to drop sharply on Friday, with Southwest saying it is “keen to get back to normal” ahead of the New Year holiday weekend.
Just two months ago, Southwest forecast “strong” earnings for the fourth quarter and estimated a 13% to 17% increase in operating income.
Bitter weather was only part of the problem for Southwest. Its legacy technology failed to link crew to flights, and its point-to-point operating structure created chaos for schedules, the company acknowledged and union members said.
The US government called the airline’s collapse a system failure and promised to take action.
In a letter to Southwest CEO Bob Jordan on Thursday, Transportation Secretary Pete Buttigieg warned that the company would be liable to customers for “controllable delays and cancellations” if it fails to meet its obligations.
The company was eager to show it had turned the page on the setback that sent its stock price plummeting. Southwest shares rose 3.7% on Thursday, the first day of Wall Street’s broad gains since last Friday.
Jordan apologized for the disruption, saying the process of relocating crew and planes after the storms was a time-consuming “manual process” with a “volunteer army” of paid workers at the company’s headquarters helping.
“I can’t imagine that this won’t lead to changes in the plan to modernize the airline’s operations,” Jordan said, adding that technological improvements are ongoing but that it is a “big and complex process.”
Labor unions say they have repeatedly warned Southwest management that the airline’s technology systems are in dire need of an upgrade.
According to Lyn Montgomery, president of the Southwest Airlines Flight Attendants Union, local 556 of the Transport Workers Union, flight attendants have complained about technology glitches at the airline for years.
“There are many ways to prevent this,” Montgomery said Thursday on CNN, adding that it could have included a commitment by Southwest executives to ensure that the IT infrastructure could meet the carrier’s growth.
The comments echoed the views of the Southwest Airlines Pilots Association, which said management had failed to align operations to address recurring system failures despite years of union calls for improvements.
Required upgrades include changes to crew scheduling software and communications tools that will allow displaced crews to communicate with the company.
Reporting by Doina Chiacu and David Shepardson in Washington; Additional reporting by Ismail Shakil, Alexandra Alper and Koh Gui Qing Editing by Mark Porter, Frances Kerry, Sayantani Ghosh and Leslie Adler
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