Southwest Puts Initial Cost of Meltdown at Up To $825 Million

Southwest Airlines has put an initial number to the losses incurred during its holiday meltdown: a $725-825 million hit to its pre-tax income in the fourth quarter. That number includes both $400-425 million in lost revenue and added costs, for example reimbursing people for alternative travel costs.

As a result of the meltdown that the Dallas-based airline said Friday resulted in the cancellation of 16,700 flights over the Christmas and New Year holidays, Southwest now expects a net loss in the final quarter of 2022. That’s an about-face from the forecast CEO Bob Jordan provided in October, when he said the carrier expected “to generate strong profits and margins in fourth quarter.”

Southwest is expected to face additional costs from the meltdown in coming quarters. Many vouchers and points given to travelers affected by the cancellations will not be recorded as costs until they are redeemed. In addition, the airline continues to process reimbursements as they are submitted.

Jordan said Thursday that Southwest continues to process “tens of thousands of refunds and reimbursements a day.” It has also offered all affected travelers 25,000 Rapid Rewards points each, which are equal to roughly a $300 value.

Despite the carrier’s moves to reimburse and apologize to passengers, Congressional leaders are beginning to push for stronger consumer protections as a result of the incident. A group of 26 House Democrats sent a letter Thursday to Transportation Secretary Pete Buttigieg calling on him to improve passenger protections and set standards for airlines to “maintain a reasonable level of operational capabilities” during severe weather.

And U.S. Senate Commerce Committee chair Maria Cantwell said Wednesday that the committee will hold hearings on Southwest’s meltdown.

The Congressional response comes amid a growing view that the Southwest holiday meltdown could spur additional regulation on the airline industry.