Grounding Planes Likely Cost Southwest Millions

Saturday, 02 Apr 2011 06:53 PM

 

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DALLAS (AP) — Southwest Airlines Co.'s decision to cancel about 300 flights Saturday inconvenienced thousands of passengers and may have cost the airline several million dollars in lost revenue.

The damage to Southwest's earnings would be reduced, however, if stranded passengers rebook on other Southwest flights rather than canceling their planned trip.

The airline canceled the flights — more than 10 percent of its Saturday schedule — when it grounded nearly 80 planes of the same type that had a rupture in its fuselage after takeoff from Phoenix on Friday. The planes will undergo inspections of their aluminum skin.

Southwest spokeswoman Linda Rutherford said it was too soon for the company to estimate the cost of grounding one-seventh of its fleet. She said Southwest might provide numbers later this month, when it releases its first-quarter earnings report.

The grounded planes are 137-seat Boeing 737-300s. Using the airline's most recent available figures for average occupancy, it's possible to estimate that more than 31,000 paying passengers were stranded Saturday. Southwest says on its website, updated this week, that its average one-way fare is $130.27, which would produce a $4.1 million loss in revenue.

However, such an estimate could be conservative because planes are more full in April than February, the last month for which Southwest occupancy numbers are available. Also, some of the canceled flights were to use slightly bigger versions of the 737.

The estimate could also be too high for several reasons. Rutherford said Southwest tried to cancel flights with the fewest passengers — a standard practice when airlines must scrub flights. Also, Saturday flights may have fewer high-fare business travelers.

Southwest had 2010 revenue of $12.1 billion.

Whatever the cost of Saturday's cancelations, Southwest faces a bigger problem if a large number of those grounded planes remain out of service into the work week.

Recently, JetBlue Airways said it lost $30 million in revenue due to late-December storms that caused it to cancel 1,400 flights.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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