- 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.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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