Southwest, lost 100 million a day to low-cost flights canceled by bad weather and chaos – Corriere.it

Heavy Christmas snowfall in the United States and a collapse in operations with thousands of flights canceled cost about $100 million a day to Southwest Airlines, the world’s largest low-cost carrier. This was confirmed by the airline itself which filed a brief update memo with the SEC, the American Stock Exchange. The number will rise further in the coming weeks as the carrier continues to compensate and as customers use the miles awarded as compensation. For this reason, it will close the last quarter of 2022 in the red.

What happened

The wave of bad weather that began just before Christmas affecting Canada and the United States trapped most of the two countries. But in the US, low-cost Southwest has been particularly hard hit: Its business and operating model has blown up the flight schedule. In a memo to the Securities and Exchange Commission, the airline calculated that it had to cancel “more than 16,700 ‘departures’ from December 21-31.” According to estimates courier At least 2.3 million passengers have been affected.

estimates

This collapse has cost the carrier, for the time being, between $725 and $825 million (684-778 million euros): half of this – 400-425 million – is considered lost revenue, while the remainder relates to additional costs incurred such as refunds. Your ticket, hotel accommodations, meals, or boarding on an alternate flight operated by Southwest or another carrier. The memo to the SEC was signed by Tammy Romo, the company’s executive vice president and chief financial officer.

Aircraft effect banned

“These numbers indicate that each canceled flight costs Southwest $43-50,000,” wrote Savanthi Seth and Matt Roberts of Raymond James Analysts. The range is “above $35-45k by our estimate, but still less than the roughly $65k per canceled flight Delta Air Lines cost when they had information problems in August 2016”.

other costs

The financial impact of the operational block will increase in the coming weeks. Experts state that coupons and loyalty points awarded to travelers affected by the cancellation will only be recorded on Southwest’s balance sheets as costs when they are “redeemed” by customers. Meanwhile, the low-cost carrier continues to make payments (“tens of thousands every day,” said a carrier executive), also under pressure from the White House.

given mileage

In addition to rerouting on another flight or getting a ticket refund, Southwest actually gave each traveler 25,000 miles from its loyalty program worth “about $300” according to Syth and Roberts. Multiply them by the 2.3 million passengers who have seen their flights cancelled courier It estimates another $680 million — in lost revenue — if all customers were to use the miles, potentially totaling $1.5 billion.

budgets

However, it must be remembered that the impact on Southwest’s coffers will also be felt in the coming months, but in a context where the low-cost carrier is among the largest in the world with 768 aircraft, with an average occupancy rate per flight of more than 85%, 123.3 million passengers in 2021 (there were 162.7 million in 2019, before the pandemic hit). And the third quarter of 2022 closed – awaiting the fourth quarter figures – by achieving 277 million net profits, $6.2 billion in revenue, and 14.7 billion in liquidity.