Southwest Airlines posted $159 million in first quarter losses due to additional costs from a December operational disruption, according to the company’s Thursday Q1 2023 earnings report, for the three-month period ending March 31.
The company was saddled with a $380 million hit related to the incident, the majority of which was “driven by a negative revenue impact of approximately $325 million, as a result of cancellations of holiday return travel and a deceleration in bookings for January and February 2023 travel,” Bob Jordan, president and CEO of Southwest, said in the earnings release.
The loss added to the estimated $800 million costs the Dallas-based carrier reported last quarter, bringing the bill to over $1.1 billion.
Southwest committed $1 billion to technology and operations upgrades in December, as part of a five-year modernization plan. In February, that amount was upped to $1.3 billion as Lauren Woods, previously the company’s VP of Technology, was promoted to SVP and CIO.
The December disruption, which grounded nearly 17,000 flights during the holiday travel period, was tied to failures in the airline’s flight operations management software and manual crew rescheduling processes in the wake of a massive winter storm.
Southwest had an additional technology setback earlier this month, though operational impacts were minor.
“We experienced a double firewall failure that resulted in an unexpected loss of connection to some operational data,” COO Andrew Watterson said during a Thursday earnings call. Only 22 flights were canceled as technologists quickly addressed the problem, he said.
Jordan defended the company’s technology while acknowledging vital gaps and providing greater detail on the failures during a J.P. Morgan Industrials conference last month.
A modernization plan was already in place prior to December, Jordan said. The operational failures validated the need to upgrade operations, processes, tools and technology, he said.
Jordan pointed to a weather application that produced “inferior holdover times for our aircraft,” forcing cancellations that could have been avoided.
“We will be implementing a new weather application for our crews to provide more real-time and dynamic weather indications to enhance deicing holdover times,” Jordan said.
Southwest released an action plan detailing immediate remediation goals earlier this month.
The company expects to complete initial upgrades in October, Jordan said during the Thursday earnings call.
Southwest ranked second for on-time performance among domestic carriers through the first three months of the year, according to MasFlights data cited in the earnings report, despite several winter storms.
“Our on time performance through March was solid,” CFO Tammy Romo said during the earnings call. “Our operations team navigated through a string of difficult weather conditions successfully with no material impact to our network performance.”
