Southwest Airlines says holiday cancellations could amount to $825M loss

Southwest expects a revenue loss in the range of $400M to $425M

Southwest Airlines expects to lose as much as $825 million from the operational meltdown that led to nearly 17,000 canceled flights over the chaotic holiday season.

In a Friday filing with the Securities and Exchange Commission, the Dallas-based carrier said it expects the disruption that occurred between Dec. 21 and Dec. 31 to result in a pre-tax negative impact in the range of $725 million to $825 million. 

The carrier expects to report a net loss in the fourth quarter. 

"A significant portion of this impact is from an estimated revenue loss in the range of $400 million to $425 million," it said in the filing. Before the meltdown, Southwest projected fourth-quarter revenue would rise by up to 17% over the same period in 2019. 

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Southwest

Canceled Southwest Airlines flights appear on the monitors at LAX on Thursday, December 29, 2022.  (Christina House / Los Angeles Times via Getty Images / Getty Images)

The carrier also expects an increase in operating expenses primarily driven by estimated travel expense reimbursements to customers and the estimated value of Rapid Rewards points that were offered to customers that are expected to be redeemed, as well as premium pay and additional compensation for employees.

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Disruptions for several major airlines started when the Christmas weekend winter storm rolled in. However, most were up and running almost immediately after the storm passed. 

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For Southwest, it was a different story. Its outdated crew-scheduling technology was overwhelmed, which left crews and planes out of position to operate flights for an extended period. It took the carrier eight days to recover. 

In order to get back in good graces with customers, the airline promised to refund and reimburse affected travelers. 

The carrier is already facing a lawsuit from one passenger claiming they were never refunded. But, as of Thursday, the carrier already processed about 75% of the refund requests it has received, CEO Bob Jordan said. 

Southwest

Rows of luggage wait for their owners in the Southwest Airlines baggage claim at LAX on Thursday, December 29, 2022. (Christina House / Los Angeles Times via Getty Images / Getty Images)

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"We are making great progress by processing tens of thousands of refunds and reimbursements a day and will not let up until we have responded to every impacted Customer," Jordan said. "We also sent a goodwill gesture of 25,000 Rapid Rewards Points this week to all Customers significantly disrupted."

The airline has also returned "the vast majority" of lost bags have been returned or on their way back to their owners, Jordan said.

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The carrier has also hired an outside firm to sift through requests for reimbursement of things like hotels and meals that stranded passengers paid out of their own pockets, he added. 

The Associated Press contributed to this report.