Southwest Airlines continues to see losses stemming from the holiday travel meltdown that left passengers stranded across the nation at the end of last year.
The company announced a net loss of $159 million in the first quarter of 2023 as customers booked fewer flights in reaction to the carrier canceling thousands of flights between December 21 and December 31. Even as other carriers resumed normal operations, Southwest continued to delay and cancel an elevated number of flights.
Southwest CEO Bob Jordan confirmed in an earnings announcement released on Thursday that the company incurred the losses due to “cancellations of holiday return travel” and a subsequent “deceleration in bookings” in January and February. He added that demand trends for March were strong, resulting in “solid profitability for the month.”
“We expect solid profits in second quarter 2023 and continue to expect solid profits and year-over-year growth in both margins and return on invested capital for full year 2023,” the executive forecasted. “We also continue to expect our network to be roughly restored to pre-pandemic levels by the end of this year. We remain confident in our low-cost, low-fare business model and our long-term strategy, which is supported by a robust set of strategic initiatives designed to drive significant financial value.”
Southwest has estimated that between $725 million and $825 million would be lost in the aftermath of the disruptions. The firm reported a $220 million loss in the fourth quarter of 2022 and previously warned investors that fallout from the holiday disruptions would continue.
Executives attributed the problems in December to outdated technology systems and announced that Southwest would seek to enhance software used by crew members with a $1.3 billion information technology investment. The internal issues continue to cause disruptions: Southwest experienced an unspecified technical problem that prompted a nationwide pause in departures on April 18, resulting in delays for nearly half of the carrier’s flights.
Southwest is unique among other major airlines in that flights are coordinated in a point-to-point system rather than a hub model, an arrangement that allows the carrier to service smaller cities more efficiently but worsens delays when the firm experiences unexpected disruptions.
Southwest COO Andrew Watterson told members of the Senate Commerce Committee two months ago that the holiday meltdown prompted the company to cancel flights so that crews could position themselves to resume normal operations. The firm has since attempted to regain the trust of disgruntled customers, granting many impacted passengers reward point vouchers amounting to $300 in value, as well as reimbursements for meals, hotel accommodations, rental cars, and tickets purchased with other carriers as a result of the delayed and canceled flights.
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“Southwest is intensely focused on reducing the risk of repeating the operational disruption we experienced in December,” Watterson asserted. “We are committed to running a great operation each and every day, and I have the utmost confidence that our people, processes, and technologies will do just that.”
The months since December have seen multiple air travel anomalies beyond Southwest. The Federal Aviation Administration grounded all flights nationwide early on January 11 as the agency’s systems failed; officials later determined that “personnel unintentionally deleted files while working to correct synchronization between the live primary database and a backup database.” An international terminal at John F. Kennedy International Airport in New York City was closed on February 16 and opened on February 17 due to a power outage.