Pete Buttigieg, U.S. Transportation Secretary, recently ratcheted pressure on Southwest Airlines, claiming thousands of canceled flights indicated a system failure at the low-cost carrier. “We are past the point where they could say this is a weather-driven issue,” said Buttigieg in an ABC News interview.
“Don’t get me wrong, all of this began with that severe storm. We saw winter weather affecting the country and severely disrupting all airlines,” said Buttigieg.
At least 60 people died nationwide in weather-related incidents across the U.S. in recent days. Other airlines and the rest of the aviation system seemed to bounce back from the disruptions from weather, said Buttigieg.
“So, what this indicates is a system failure (at Southwest), and they need to make sure that these stranded passengers get to where they need to go and that they are provided adequate compensation, not just for the flights itself … but also things like hotels, like ground transportation, like meals because this is the airlines’ responsibility,” said Buttigieg, who added he had already spoken to the leadership at Southwest.
Airlines in the U.S. canceled thousands of flights as a mammoth winter storm swept across much of the country before and throughout the Christmas weekend. However, Southwest’s troubles have grown deeper while other airlines have mostly recovered.
Southwest has canceled more than 14,500 flights since Friday. Wednesday, the airline canceled 2,500 flights as of the late morning, according to FlightAware, a flight tracking website. Southwest said it would reimburse customers for travel-related costs and had already processed thousands of requests by Tuesday.
In an email, Delta Air Lines said it had capped fares in all markets where Southwest also operates, including international and domestic markets. The program is valid through December 31 and includes over 700 nonstop markets. American and United announced similar programs.
U.S. Representative Rick Larsen, leading Democrat on the House Transportation and Infrastructure Committee, tweeted that the company was treating flight cancellations as “controllable” starting December 24, which triggers reimbursement for incidental expenses and refunds for entire fares.
Bob Jordan, the airline’s CEO, said the low-cost carrier needed to upgrade its legacy airline systems and apologized to employees and customers in a video message.
Airline’s stocks tumble, continue to trade lower
Stock shares of Southwest tumbled 6% on Tuesday and continued to remain around 1.5% in morning trading on Wednesday. Some analysts said continuing cancellations would pressure profits into the fourth quarter.
“The total impact to revenue may be in the 9% range of our expected Q4 revenue, which compares to our current estimate with revenues 15% ahead of 2019 levels in 2022,” said Sheila Kahyaoglu, an analyst.
Kahyaoglu estimates the total earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs’ impact from all the cancellations could be in the $700 million range.