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The Street
The Street
Martin Baccardax

Southwest Airlines Flight Cancellation Chaos Hits Outlook

Southwest Airlines (LUV) posted a bigger-than-expected fourth quarter loss Thursday and warned that the impact of its holiday flight cancellation chaos would extend into the first three months of the year.

Southwest said its adjusted loss for the three months ending in December was pegged at $226 million, or 38 cents per share, well south of the Street forecast of a loss of around 12 cents per share. 

Operating revenues rose 7.7% from 2019 levels to $6.17 billion, Southwest said, but the cancellation chaos -- which disrupted some 16,700 flights -- caused overall expenses to surge by more than 30% to $6.56 billion as Southwest paid out cancellation fees, meal vouchers, rental car refunds and hotel reimbursements. 

Southwest said that, "based on current revenue and cost trends", it will likely post another adjusted loss for the first quarter, but noted the booking trends were improving and the carrier remains on track to deliver its longer-term financial targets. 

Looking into the current quarter, Southwest forecast operating revenues to rise by around 20% to 24% form last year's levels, with "solid profits" and improved margins for the whole of 2023.

"With regard to the operational disruptions, I am deeply sorry for the impact to our employees and customers," said Southwest CEO Bob Jordan. "We have swiftly taken steps to bolster our operational resilience and are undergoing a detailed review of the December events. In addition, our board of directors has established an Operations Review Committee that is working with the company's management to help oversee the company's response."

"As part of our efforts, we are also conducting a third-party review of the December events and are examining the priority of technology and other investments planned in 2023," he added.

Southwest shares were marked 3.9% lower in early afternoon Thursday trading following the earnings release to change hands at $35.43 each.

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