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Southwest Stock Drops 5.51% Amid Storm of Criticism

Southwest Stock Drops 5.51% Amid Storm of Criticism
(AP)

Tuesday, 27 December 2022 02:10 PM EST

Southwest Airlines remained in the hot seat Tuesday as it contended with mass flight cancellations while rival U.S. carriers recovered from a severe winter storm.

Shares of Southwest fell 5.56% to $34.08 in early-afternoon trading at 2 p.m. EST.

The Dallas-based, domestic-focused carrier, which has historically enjoyed a strong reputation with consumers, drew withering explicative-filled rebukes on social media, where labor leaders also highlighted horror stories from stranded airline employees.

"It's a complete meltdown," said Mike Sage, who had planned to fly back Monday to Florida after visiting Connecticut to tend to his kayaking business north of Orlando, Florida.

After Southwest's phone and Internet system "collapsed," Sage drove to the airport, waited in line for two hours and finally obtained a replacement ticket for Saturday from Southwest.

But it came with a warning, Sage recounted to AFP.

"When (the attendant) handed me the ticket, she looked me in the eyes and said: 'If I were you, I would not count on this flight either. I would book with another airline. We have crews stranded all over, pilots sleeping on the floor in airports.'"

At issue is Southwest's performance in the wake of a brutal winter storm that began ahead of Christmas, wreaking havoc with holiday travel networks and causing some 50 fatalities.

But while operations had largely returned to normal at American Airlines and United Airlines by Tuesday, Southwest canceled more than 2,500 flights, or nearly two-thirds of planned departures, according to tracking website FlightAware.

That's on top of some 8,150 flights canceled over the prior five-day stretch, according to the website.

The debacle weighed on company shares and drew attention in Washington.

The US Department of Transportation is "concerned by Southwest's unacceptable rate of cancellations and delays," the agency said on Twitter on Monday.

"The Department will examine whether cancellations were controllable and if Southwest is complying with its customer service plan."

President Joe Biden, retweeting the DOT statement, urged consumers to check on whether they're entitled to compensation.

- System overload -

Southwest has apologized for the debacle, describing the inconvenience to customers as "unacceptable."

"We were fully staffed and prepared for the approaching holiday weekend when the severe weather swept across the continent," said a company statement Monday.

"As we continue the work to recover our operation, we have made the decision to continue operating a reduced schedule by flying roughly one third of our schedule for the next several days."

Airline officials have acknowledged that outdated systems contributed to the problems.

Southwest Chief Executive Bob Jordan alluded to a "lack of tools," adding in a December 25 message to employees that the airline is "in the process of upgrading some of those systems," according to the Wall Street Journal.

Unions pointed to chronic underinvestment as a driver of the problems.

Lyn Montgomery, president of TWU Local 556, which represents Southwest flight attendants, posted to Twitter screenshots of flight attendants waiting for more than seven hours to receive assignments and get hotel information.

In a press release titled "Southwest Airlines Ruins Christmas for Flight Attendants," the TWU said the holiday nightmare "points to a shirking of responsibility over many years for investing in and implementing technology that could help solve for many of the issues that plague flight attendants and passengers alike."

The TWU, along with the Southwest Airlines Pilots Association (SWAPA), has been mired in labor negotiations with Southwest on a new contract.

SWAPA members picketed Southwest management outside the New York Stock Exchange earlier this month during an investor day at which executives reinstated the investor dividend "instead of focusing on the frontline employees directly responsible for the record revenues," said a SWAPA press release.

During the investor day, Jordan and other Southwest executives highlighted investment in a new computer system for revenue management.

Like rivals, Southwest has hiring campaigns to add pilots and other staff, part of an industry wide labor crunch that has pinched industry capacity throughout 2022.

At the December 7 investor day, Jordan expressed confidence the company would settle on contracts with unions.

Reinstating the dividend was a priority to "restore value to our shareholders," said Jordan, who added that reviving share buybacks would have to wait.

"We need to invest in our people," he said. "For right now, that's getting contracts done and investing in them."

© AFP 2024


StreetTalk
Southwest Airlines remained in the hot seat Tuesday as it contended with mass flight cancellations while rival U.S. carriers recovered from a severe winter storm.
southwest airlines flight cancellations, winter storm, stock
716
2022-10-27
Tuesday, 27 December 2022 02:10 PM
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