Southwest being investigated for holiday meltdown as officials say it cost the company $800 million
A month after a scheduling and staffing meltdown led to the cancellation of more than 16,000 flights and stranded millions of travelers over the holidays, the Department of Transportation said it is investigating Southwest Airlines over the debacle.
"We really made a mess for our customers and employees," said Southwest President and CEO Bob Jordan on an earnings call with investors Thursday. "At the end of the day, that kind of disruption cannot happen again."
While many airlines experienced disruptions ahead of Christmas — thanks to an Arctic air mass that brought winter storms and frigid temperatures across the central and eastern U.S. — Southwest's cancellations stretched well past the weekend.
The Department of Transportation said the company must provide refunds and reimbursements, and will hold the company accountable for doing so, an agency spokesperson said. Jordan said Thursday the company has completed 95% of reimbursements related to the holiday travel cancellations, and plans to finish the remaining by next week.
"DOT is also probing whether Southwest executives engaged in unrealistic scheduling of flights which under federal law is considered an unfair and deceptive practice," the spokesperson said.
The company said that wasn't the case.
"Our holiday flight schedule was thoughtfully designed and offered to our customers with the backing of a solid plan to operate it, and with ample staffing," the company said in a statement. "Our systems and processes became stressed while working to recover from multiple days of flight cancelations across 50 airports in the wake of an unprecedented storm."
The company is "acutely focused on learning from this event" and "mitigating the risk of a repeat occurrence" and will work with officials on the investigation.
The company lost $800 million in pretax results, leading to a net loss of $220 million in the company's fourth quarter — and could hit the company's first-quarter revenue as well.
"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. As a result, the Company currently estimates a negative revenue impact in the range of $300 million to $350 million in first quarter 2023," the company said in a statement.
On Thursday's call, company officials said 25% of those customers caught in the holiday meltdown have future travel booked on Southwest. Some of those trips have been booked with the points offered by the company in the wake of the cancellations — travelers were offered 25,000 points as a gesture of goodwill — and others with cash, officials said.