Southwest Airlines faces earnings loss, investigation

(NewsNation) — Southwest Airlines is facing a loss in earnings and a formal investigation by regulators after it experienced serious service disruptions in December.

Southwest reported a loss, although the airline said it was encouraged by booking trends for March. However, the company still anticipates taking a loss for the first three months of the year.

Southwest reported a $220 million loss after taking a hit of $800 million from canceling nearly 17,000 flights over the last 10 days of December.

The airline had signaled it would lose money, but the adjusted loss of 38 cents per share was worse than the 7 cents per share that Wall Street expected.

Shares of the company slid 4.7% in morning trading.

On an earnings call, the company stressed that it was putting mitigation efforts in place to prevent future large-scale disruptions, including an early indicator dashboard to alert them of potential problems.

When winter storms hit much of the country in early December, airlines began canceling flights due to the weather. But Southwest continued to experience cancelations and delays after the storms cleared. The problems stemmed from the airline’s point-to-point model.

As canceled flights stranded pilots, crews and planes, problems cascaded across the airline. Even when the weather was clear, the planes and crew weren’t where they needed to be for flights to operate. Unlike other airlines that employ a hub system, Southwest had no centralized location to gather resources and get people and planes back in place.

The Department of Transportation has also begun a formal investigation into the holiday meltdown. Officials are looking into whether the airline engaged in unfair or deceptive business practices by creating a flight schedule executives knew was unrealistic.

Southwest employees say they had been warning for years that the company’s outdated systems wouldn’t be able to handle a major event such as the winter storms that swept the country just before Christmas.

While other airlines resumed normal operations after the worst of the weather passed, Southwest eventually had to do a reset, reducing flights significantly until they could move crews, pilots and planes to where they needed to be.

On their earnings call, Southwest executives said the company plans to invest $1.3 billion into IT maintenance and upgrades in 2023. The company also said it is working on enhancing tools for crew members to communicate with scheduling, and updating the software used for crew recovery efforts when flights are canceled.

The DOT is also examining Southwest’s refunds and reimbursements to customers, which the airline is required to make in a timely fashion for canceled or significantly delayed flights.

Travel experts have said Southwest’s future relies on the airline’s ability to regain the trust of customers who rely on the company’s cheap and efficient flights, especially after some customers wound up spending thousands as they scrambled to get hotel rooms while waiting for a new flight, or booking flights on other airlines during the holidays.

One survey found more than half of Americans don’t plan to fly Southwest in the future. But among those significantly impacted by the delays, 44 percent said they would use the airline in the future, a possible sign that loyal Southwest customers aren’t fazed.

The Associated Press contributed to this report.