The Southwest collapse could cost it up to $825 million

The airline did not say how soon it will upgrade the systems that contributed to the mass flight cancellations, or how much it will cost.

The collapse that forced Southwest Airlines to cancel more than 16,700 holiday flights could cost the carrier between $725 million and $825 million, the airline said in a statement. file on Friday. The total represents roughly as much as the airline earned in the first nine months of last year.

The crisis shows what can go wrong when a company that millions of people rely on is moving too slowly to invest in crucial but unglamorous parts of its operation. Southwest struggled to recover from freezing weather after its crew planning processes failed to track flight cancellations and quickly reassign pilots and flight attendants.

"A number of their employees, flight attendants and pilots have been warning for years that they are underinvesting and are a storm away from disaster," said Helane Becker, Managing Director and senior analyst at Cowen, an investment bank.

Southwest said Friday it now expects to report a loss in the last three months of 2022. About half of the costs it expects to incur in this quarter - $400 million to $425 million - relate to lost revenue from canceled flights.The remaining amount comes from customer reimbursement expenses, point value loyalty offered to the passengers concerned and overtime pay for employees.

Southwest has canceled about as many flights in the last 10 days of 2022 as it has in the last Previous 10 months, according to FlightAware data. The airline declined to disclose the number of passengers affected by the cancellations, though estimates are in the hundreds of thousands.

Southwest Chief Executive Bob Jordan, told reporters on a call last week that Southwest would accelerate improvements to its systems, but he did not say how quickly he would act. The airline could provide more details in the days and weeks to come – Southwest is expected to release its full financial results for the fourth quarter of 2022 at the end of this month. The carrier's net income in the first nine months of 2022 was $759 million.

The ongoing cost to the airline will also depend on the number of people filing claims and bounty or the miserly southwest is paying the claims. its computer systems, including one for crew planning.Credit...Taylor Glascock for The New York Times

To understand how the costs can add up, consider the case of the Horter family.

After their travel plans were disrupted last week, Julie and Len Horter spent hours trying to reschedule their flight over the phone and at the airport. They saved the trip, but not before spending $300 on car rental and hotel. The amount could be even higher if the couple decides to reclaim the money they lost taking extra leave.

They were taking their 14-year-old daughter, Adeline, from their Michigan home in Los Angeles, where she and her high school marching band performed in the Rose Parade, Ms. Horter said. Now the couple are hoping Southwest will keep their promise to reimburse them for their extra expenses.

"It was a once-in-a-lifetime opportunity, and we weren't going to miss it,” Ms. Horter said.

While the Southwest holiday debacle was unique in its scale, the com...