Holiday Cancellations Cost Southwest $800M


A Southwest plane in mid flight. | Image by Jeffry Surianto.

Southwest Airlines reported fourth-quarter earnings on Thursday, and all eyes were on the impact of the company’s holiday meltdown that saw 16,700 flight cancellations between December 21 and December 31.

Southwest said the cancellations cost the company $800 million in pretax earnings due to the cancellations that were caused by a computer system failure.

The U.S. Department of Transportation is investigating whether the cancellations were actually due to overscheduling and plans to conduct a “rigorous and comprehensive” look into the company’s practices.

“DOT is also probing whether Southwest executives engaged in unrealistic scheduling of flights which under federal law is considered an unfair and deceptive practice,” a Department of Transportation spokesperson said. “DOT will leverage the full extent of its investigative and enforcement power to ensure consumers are protected.”

Southwest spokesman Chris Mainz said the company did not mislead customers in its scheduling and affirmed it was a systemic issue.

“Our holiday flight schedule was thoughtfully designed and offered to our customers with the backing of a solid plan to operate it and with ample staffing,” Mainz said in an emailed statement to The Dallas Morning News. “Our systems and processes became stressed while working to recover from multiple days of flight cancellations across 50 airports in the wake of an unprecedented storm. We’re acutely focused on learning from this event, mitigating the risk of a repeat occurrence, and delivering the hospitality and outstanding service our customers expect from us.”

Transportation Secretary Pete Buttigieg said he would “mount an extraordinary effort” to ensure that Southwest would meet its obligations to its customers through refunds immediately after the cancellations in December, according to Politico.

Southwest blamed the cancellations on a cold weather system that hit key airports, Chicago, and Denver. With delays mounting, the carrier’s software systems were not able to keep up with what started as hundreds and quickly became thousands of requests to reschedule pilots and flight attendants, according to The Dallas Morning News. Southwest offered 25,000 bonus points to customers, worth $300, in addition to refunds.

GE Digital, the company that created Southwest’s scheduling software, has defended its system.

“The GE digital tool that is integrated into Southwest’s systems performed as designed throughout the event, and we are working with them to define new functionality as they improve their crew rescheduling capability,” a GE spokesperson said.

Some analysts have blamed Southwest’s underinvestment in technology as the reason for the holiday meltdown.

In a letter to customers, Southwest CEO Bob Jordan says the carrier will commit to spending $1 billion a year on technology and plans additional improvements.

Southwest’s point-to-point network has also been criticized.

“There will be areas that we need to invest in even more. There will be things that we need to accelerate,” Jordan told The Dallas Morning News earlier this month. “I guarantee there’ll be changes to our plan to put even more focus on operations because, and I can’t say it enough, this just can’t happen again.”

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1 month ago

Just think what a $800M investment in IT systems to modernize their environment would have yielded. Short side strategies cost them dearly and will be used by many many consultants myself included as an example of what could happen if they defer investments in tech. Sorry SWA but you became a great case study for years to come. Now hunker down and put the strategy hats on and make some magic. You’re still a good airline but you can be great once again!

1 month ago

With the new pricing schedules of Southwest I would believe that the company will begin losing $$. I can’t afford to fly them any longer.