Southwest Airlines reported a $220 million loss in the fourth quarter and warned investors that fallout from the company’s holiday meltdown would continue.
Southwest canceled a high number of flights relative to competitors over the Christmas holidays, even after severe winter weather conditions had subsided. The losses, which will cost investors $0.37 per diluted share, will persist into the first quarter of 2023 as the company experiences an “increase in flight cancellations and a deceleration in bookings” in January and February, assumed to be associated with the disruptions, according to the fourth quarter earnings report.
“We have swiftly taken steps to bolster our operational resilience and are undergoing a detailed review of the December events,” Southwest CEO Bob Jordan remarked. “In addition, our Board of Directors has established an Operations Review Committee that is working with the company’s management to help oversee the company’s response. As part of our efforts, we are also conducting a third-party review of the December events and are reexamining the priority of technology and other investments planned in 2023.”
Shares for Southwest fell 4.8% on Thursday morning after the announcement; the company’s stock price has fallen more than 12% since the beginning of December.
Southwest reported positive net income for 2022 despite the losses in the fourth quarter, as well as record fourth quarter and full year operating results of $6.2 billion and $23.8 billion, respectively. The company estimates that the number of available seat miles, a metric used by airlines to estimate capacity for revenue generation, would rise 10% year-over-year in the first quarter of 2023. Jordan added that executives are “encouraged” by current booking trends for the month of March and expect “solid profits” for the year.
Southwest canceled some 16,700 flights between December 21 and December 31, according to a filing submitted to the Securities and Exchange Commission, which added that the overall pre-tax negative impact from the meltdown would settle between $725 million and $825 million.
Executives have sought to recover lost customer trust among the thousands of passengers whose flights were delayed or canceled. At least some received reward points amounting to $300 in value; the company has also vowed to reimburse flyers for meals, hotel accommodations, rental cars, and tickets purchased with other carriers.
Difficulties for the company are likely to continue throughout the year despite expectations for profitability. Members of the Southwest Airlines Pilot Association, the company’s labor union, announced that a strike authorization vote would occur on May 1 in response to the holiday meltdown and an “utter lack of meaningful progress on a contract negotiation.”
“I think it is best to consider what our customers have been through over the past several years and the past several weeks,” Southwest Airlines Pilot Association President Captain Casey Murray said in a press release. “It was the lack of discussion or commitment by our leadership team to rectify these issues for our passengers and our pilots that drove us to make the decision to carry forward on this path.”
Regulators such as Transportation Secretary Pete Buttigieg have meanwhile exhorted Southwest to reimburse customers quickly; he described the “level of disruption” experienced by passengers as “unacceptable” and warned that his agency would exercise “the fullest extent of its investigative and enforcement powers” to ensure customers are refunded.