WASHINGTON, Dec. 29 (Reuters) – Southwest Airlines (LUV.N) promised to reimburse passengers for expenses such as hotels and car rentals, in addition to refunding tickets after it canceled thousands of flights due to a massive winter storm and said there would be an as-yet undetermined hit to its earnings.
“There will definitely be an impact in the fourth quarter,” Chief Commercial Officer Ryan Green told reporters on a phone call Thursday. “We’re… going through all the financial elements of this. We’ll share that information when we’ve gathered all that and are ready to do that.”
Some analysts estimate the meltdown could shave as much as 9% of Southwest’s fourth-quarter revenue.
Company executives declined to estimate the number of travelers affected by the disruptions since Friday.
While other US carriers got back on their feet relatively quickly, Dallas-based Southwest is still limping back to normal. The airline has canceled at least 16,000 flights in the past week, including about 60% of all scheduled flights on Thursday, according to data from flight tracker FlightAware.
“If you had to make alternative travel arrangements, such as hotels, meals, rental cars, gas for a rental car, those would be eligible for reimbursement,” Green said, adding that it would take several weeks for the refunds.
Cancellations are expected to drop dramatically on Friday, with Southwest saying it was “eager to return to normalcy” ahead of the New Year’s holiday weekend.
Just two months ago, Southwest had forecast a “strong” fourth-quarter profit and estimated a 13% to 17% increase in operating revenue.
The bitter weather was only part of the problem for Southwest. The outdated technology failed to allocate crew to flights and the point-to-point operational structure created chaos in schedules, the company has admitted and union members have said.
The US government called the airline’s collapse a system failure and promised action.
In a letter to Southwest chief Bob Jordan on Thursday, transportation secretary Pete Buttigieg warned the company would be held accountable if it failed to meet its commitments to customers for “manageable delays and cancellations.”
The company was eager to show that it was turning the page of debacle, causing its share price to plummet. Southwest stocks closed 3.7% higher on Thursday as Wall Street rose broadly, its first day of gains since last Friday.
Jordan apologized for the disruption, saying the process to reposition crew and aircraft after the storms was a “manual process” that took time, and that a “volunteer army” made up of paid employees at the company’s headquarters helped .
“I can’t imagine this doesn’t lead to changes in the plan” to modernize the airline’s operations, Jordan said, adding that technological improvements were underway but that it was a “large and complicated process” .
Unions say they repeatedly warned Southwest management that the airline’s technology systems were in dire need of upgrades.
Flight attendants have been complaining about technology glitches at the airline for years, according to Lyn Montgomery, president of the Southwest Airlines Flight Attendants Union, a local 556 of the Transport Workers Union.
“There are a lot of ways this could have been avoided,” Montgomery said on CNN Thursday, saying commitments from Southwest executives could have included making sure the IT infrastructure could handle the carrier’s growth.
The comments echoed those of the Southwest Airlines Pilots Association, which said leadership had failed to adapt operations to deal with repeated system failures despite years of calls for improvements by the union.
Improvements needed included changes to crew scheduling software and communication tools that allowed displaced crews to stay in touch 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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