Southwest promises refund as airline sees ‘definite’ financial impact

WASHINGTON, Dec. 29 (Reuters) – Southwest Airlines (LUV.N) It promised to reimburse passengers for expenses like hotels and car rentals as well as ticket refunds after it canceled thousands of flights due to a massive winter storm and said there would be unspecified damage to its earnings.

“There will definitely be an impact on the fourth quarter,” Chief Commercial Officer Ryan Green told reporters on a conference call Thursday. “We’re… working through all the financial elements of this. We’ll share that information when we’ve got it all together and are ready to do so.”

Some analysts estimate that the collapse could reduce up to 9% of Southwest’s fourth-quarter earnings.

During the call, company executives declined to estimate the number of passengers affected by the disruptions since Friday.

While other US carriers got back on their feet relatively quickly, Dallas-based Southwest is still getting back to normal. The carrier canceled at least 16,000 flights in the past week, including nearly 60% of all flights scheduled for Thursday, according to data from FlightAware flight tracker software.

“If you have to make alternative travel arrangements such as hotels, meals, car rentals, and gas for rental cars, those arrangements will be eligible for reimbursement,” Green said, adding that reimbursement will take several weeks.

Cancellations on Friday are expected to drop significantly, with Southwest saying it is “eager to get back to normal” before New Year’s weekend.

Just two months ago, Southwest forecast “strong” fourth-quarter earnings and estimated a 13% to 17% jump in operating revenue.

Bitter weather was just part of the problem for the Southwest. Its outdated technology has failed flight crewing, and its point-to-point operating structure has wreaked havoc on schedules, the company has admitted it, union members said.

The US government called the airline’s collapse a system failure and vowed to take action.

In a letter to Southwest President Bob Jordan on Thursday, Transportation Secretary Pete Buttigieg warned that the company would be held liable if it did not fulfill its obligations to customers due to “controllable delays and cancellations.”

The company was keen to show that it was turning the page on the debacle, which sent its share price down. Southwest shares closed Thursday up 3.7% as Wall Street rose broadly, in its first day of gains since last Friday.

Jordan apologized for the disruption and said repositioning crew and aircraft in the aftermath of the storms was a “manual process” that took some time, and that a “volunteer army” of paid employees at corporate headquarters was helping with it.

“I can’t imagine this doesn’t lead to changes in plan” to modernize the airline’s operations, Jordan said, adding that technology improvements were underway but that it was “a large and complex process.”

Employee unions say they have repeatedly warned Southwest management that the airline’s technology systems badly need upgrades.

Flight attendants have been complaining about technological failures at the airline for years, according to Lynn Montgomery, president of the Southwest Airlines Flight Attendants Association, the local 556 transport workers union.

“There are a lot of ways that could have been avoided,” Montgomery said Thursday on CNN, noting that that could have included commitments by Southwest executives to ensure that IT infrastructure would be able to meet the growth of Carrier.

The comments echoed those from the Southwest Airlines Pilots Association, which said the leadership had failed to adapt operations to handle frequent systems failures, despite the union’s calls for improvements for years.

The improvements called for included changes to crew scheduling software and communication tools that would have allowed displaced crews to stay in touch with the company.

(Press coverage) By Duenna Chiacco and David Shepardson in Washington. Additional reporting by Ismail Shakil, Alexandra Alper and Koh Gui Ching Editing by Mark Porter, Frances Kerry, Sayantani Ghosh and Leslie Adler

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