Why Southwest Airlines (LUV) Shares Are Trading Lower Today - Southwest Airlines (NYSE:LUV)

The crisis that cost Southwest Airlines Co LUV over 15,000-holiday flights could cost the carrier up to earnings for nine months of 2022 in lost revenue and customer reimbursements, industry analysts say.
Southwest struggled to recover from frigid weather after its crew scheduling processes failed to keep up with flight cancellations and quickly reassign pilots and flight attendants, Ney York Times reports.
"A number of their employees, flight attendants, and pilots have been warning about this for years — that they were underinvesting and that they were one storm away from disaster," said Helane Becker of Cowen.
Analysts at Jefferies estimate that the debacle could cost the airline up to $800 million.
The carrier's net income in the first nine months of 2022 was $759 million. Other analysts came up with similar estimates.
Southwest has said it could take some time to process and pay claims for unused tickets, lodging, meals, or alternate travel arrangements from its holiday cancellations.
But it has begun trying to appease customers with frequent-flier points for canceled and delayed flights.
Southwest said it had already taken some steps to modernize the system.
However, upgrading complex operations and software systems is always expensive and challenging. Doing so under pressure can be even more so.
"You're looking at a fairly substantial hit in what is already an inflationary environment," said Scott Forbes of Jefferies.
Southwest's low debt and profitability left ample cash to reward shareholders in the last five years. Southwest decided to reinstate its stock dividend after facing flak.
Analysts sought more transparency and disclosures from the airlines, like the amount spent on upgrading its technology to appease regulators and lawmakers.
Southwest held $13.7 billion in cash and equivalents as of September 30.
Price Action: LUV shares traded lower by 3.91% at $32.23 in the premarket on the last check Friday.

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Southwest's Holiday Crisis Could Cost It Up To First Nine Months Of FY22 Earnings, Analysts Say

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