Southwest flight cancellations lead world, expert predicts 10% hit on revenue
Will Winter Storm Elliot, compensation and outdated software sink air carrier’s Q4 earnings?
Following thousands of canceled flights due to inclement weather and an outdated scheduling system, Southwest Airlines is assuring customers they will be compensated as shareholders brace for a sizable loss in the company’s fourth quarter.
Data compiled by FlightAware shows the Dallas-based air carrier accounts for roughly 58% of the more than 4,100 canceled flights coming in and out of the U.S. on Thursday and around 2% of the 2,500 cancellations as of noon Eastern time.
In an email to Fox Business, Southwest Airlines said that it is flying "roughly one-third" of its schedule through Thursday, as of now.
"We have no updates or adjustments to share regarding Friday's schedule," a spokesperson said.
Southwest assures compensation to travelers
SOUTHWEST AIRLINES FLIGHT TURMOIL LEADS TO ANOTHER DAY OF MASS CANCELLATIONS, DELAYS
On Wednesday, the world's largest low-cost carrier released a video message from Chief Commercial Officer Ryan Green on how customers could submit receipts for travel expenses incurred during disrupted travel, request refunds for canceled or significantly delayed flights, and share information on how the company could deliver delayed bags free of charge.
In an interview with FOX Business, Adam Kobeissi, founder of the financial newsletter The Kobeissi Letter, said, "The situation will have a material impact on the airline’s fourth quarter earnings report with current estimates predicting a 10% hit to quarterly revenue."
"The number could rise as customers impacted by the cancellations are promised compensation, while the logistical collapse has still not been fully resolved," he added.
The airline canceled more than 5,600 flights in January due to staffing challenges caused by the Omicron variant of the coronavirus and weather, costing $50 million in operating revenue.
What about Southwest Airlines’ shareholders?
|LUV||SOUTHWEST AIRLINES CO.||30.64||+0.04||+0.15%|
SOUTHWEST AIRLINES PILOTS ASSOCIATION ON CANCELLATIONS: AIRLINE 'WASN'T PREPARED'
Shares are down approximately 24% year-to-date but are well into positive trading on Thursday, despite the flight cancellations and impending quarterly report.
Kobeissi said beyond the top-line impact the Southwest disaster would create, "Investors will look for more guidance on how this could be avoided moving forward."
"While the storm was the catalyst for the failure, it has become evident that Southwest’s system of redirecting flight crews and reorganizing canceled flights is severely outdated," he continued. "Investors will want a solution, more CapEx [capital expenditures] into the company’s systems, and to see the impact of the ensuing Federal investigation."
"Longer term implications may arise due to fines and investment into the necessary resources to avoid this issue in the future," he finished.
Currently, the Department of Transportation and a Senate panel have announced intentions to investigate the issue further.
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