Here's How Much Southwest's Holiday Meltdown Cost the Airlineby Daniel McCarthy /
As thousands of travelers still await news on refunds—and the location of their baggage—more than a week after Southwest Airlines’ holiday meltdown, the carrier on Friday said that the crisis could cost the airline up to $825 million.
In a filing with the SEC, Southwest said that it expects a net loss in the fourth quarter of 2022, “driven by a preliminary estimated fourth quarter 2022 pre-tax negative impact in the range of $725 million to $825 million.”
According to Southwest, most of that $725 to $825 million came from revenue loss due to the cancellations (estimated to be between $400 and $425 million) and the rest came from a net increase in operating expenses (reimbursements, refunds, Southwest Rewards points, employee expenses).
Southwest was forced to cancel more than 16,700 flights from Dec. 21, 2022, through Dec. 31, 2022, the peak of the holiday travel period. Like other North American airlines, the carrier was affected by Winter Storm Elliot, which brought blizzards, high winds, snowfall, or record-cold temperatures across the U.S. and parts of Canada.
However, issues with Southwest’s crew scheduling software led to extended waiting times for pilots and cabin crew, which created a snowball effect that eventually led to those more than 16,700 cancellations, a number that no other North American carrier came close to.
Aside from the $725 to $825 million loss, the meltdown has also invited a potential hearing with the U.S. Senate Commerce Committee, which said last week that it plans to hold hearings prior to the carrier’s FAA reauthorization, which needs to be done by the end of September. The meltdown has also resulted in at least one lawsuit, a number that will likely grow over the coming weeks.
Still, even with that meltdown, Southwest, which had garnered goodwill with travelers during its history with pro-consumer policies including free bags, was ranked 5th in Cirium’s recent rankings with an on-time percentage of 74.06% across 1,336,888 flights in 2022, more than any other carrier in the top 10.