Southwest Airlines said customers are booking away from the carrier after the December meltdown that resulted in 16,700 cancellations and disrupted holiday travel for millions of travelers.
After taking an $800 million pre-tax loss on the December fiasco, Southwest said it now expects to take a first-quarter loss as well due to lower bookings for January and February travel, which will cost it another $300 to $350 million in the quarter.
“Thus far in January 2023, the company has experienced an increase in flight cancellations and a deceleration in bookings, primarily for January and February 2023 travel, which are assumed to be associated with the operational disruptions in December 2022,” Southwest Airlines said Thursday.
The holiday meltdown hangover is expected to cost Southwest $300 to $350 million in the first quarter, the carrier said.
Southwest Airlines CEO Bob Jordan said the company intends “to regain our 51-year reputation for operational excellence.”
The results come as Southwest Airlines, which was poised for a profit to end 2022, recorded a $220 million net loss in the fourth quarter, which drug its full-year 2022 profit down to $539 million.
On Wednesday, the U.S. Department of Transportation confirmed that it is investigating Southwest Airlines over the potential “deceptive practice” of “unrealistic scheduling of flights.” Secretary of Transportation Pete Buttigieg has taken aim at Southwest over the holiday disruptions and has promised to hold the carrier accountable to refund and reimburse passengers who flew during the meltdown.
Southwest did say that “booking trends have improved sequentially this month” including an uptick in redemptions from its frequent flyer program. The company gave flight credits worth about $300 to every passenger impacted by the December disruptions in addition to refund and reimbursements.
The company also said March leisure booking “trends appear strong” and are trending in line with expectations it set in early December.
Southwest said it now expects to spend about $1.3 billion in technology infrastructure and investments in 2023. The carrier said it has hired consultant Oliver Wyman to review what happened leading up to the late December meltdown and is working with GE Digital, maker of its flight rescheduling software, to fix shortcomings that resulted in the cancellations.
