Southwest’s Meltdown Could Cost It Up to $825 Million

The airline has not said how soon it will upgrade the systems that contributed to mass flight cancellations, or how much that will cost.

By Niraj Chokshi and Peter Eavis
Jan. 6, 2023

The meltdown that forced Southwest Airlines to cancel more than 16,700 holiday flights could cost the carrier between $725 million and $825 million, the airline said in a filing on Friday. The total represents about as much as the airline earned in the first nine months of last year.

The crisis shows what can go wrong when a company that millions of people rely on moves too slowly to invest in crucial but unglamorous parts of its operation. 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.

“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, a managing director and senior analyst at Cowen, an investment bank.

Southwest said on Friday that it now expects to report a loss in the final three months of 2022. About half of the cost it expects to incur in that quarter — $400 million to $425 million — relates to revenue lost from the canceled flights. The remaining amount stems from spending on customer reimbursements, the value of loyalty points offered to affected passengers and overtime pay for employees.

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Niraj Chokshi covers the business of transportation, with a focus on autonomous vehicles, airlines and logistics. @nirajc

Peter Eavis is a New York-based reporter covering companies and markets. Before coming to The Times in 2012, he worked at The Wall Street Journal. @PeterJEavis

A version of this article appears in print on Jan. 7, 2023, Section B, Page 1 of the New York edition with the headline: Southwest’s Meltdown Could Cost It Up to $825 Million. Order Reprints | Today’s Paper | Subscribe