Southwest's strong 2022 rebound soured by holiday debacle

DALLAS (AP) — Southwest Airlines anticipates a money-losing fourth quarter after a winter storm and technology meltdown led to nearly 17,000 canceled flights and stranded hundreds of thousands of holiday travelers.

The cancellations will result in a pretax hit of $725 million to $825 million from lost revenue plus extra costs, including reimbursements for travelers and premium pay for employees, Southwest said Friday in a regulatory filing.

The storm and slow recovery was a devastating turn financially and reputationally for the Dallas-based carrier, which led all U.S. airlines in profit during the first nine months of 2022, a year of recovery for the pandemic-battered airline industry.

The massive disruptions started with a winter storm that hit much of the country before Christmas. They snowballed when Southwest’s outdated crew-scheduling technology was overwhelmed, leaving crews and planes out of position to operate flights. Managers and a cadre of volunteer employees at company headquarters were forced to manually reassign pilots and flight attendants to flights.

It took Southwest eight days to recover just before the New Year's Day weekend, while other major airlines were up and running quickly after the storm passed.

Southwest said in the filing with the U.S. Securities and Exchange Commission that it canceled more than 16,700 flights between Dec. 21 and Dec. 31, causing a loss of $400 million to $425 million in revenue. In early December, before the meltdown, Southwest projected fourth-quarter revenue would rise by up to 17% over the same period in 2019, before the pandemic.

The airline said that expenses increased due to reimbursements to customers for out-of-pocket costs — the company has promised to cover “reasonable” bills for hotel rooms, meals and...