Investing in Southwest Airlines May No Longer Be Worth It Following Holiday Fiasco
Airlines obviously can’t control the weather, but how they handle subsequent delays is of utmost importance. For Southwest Airlines, the inability to get back on track following a storm that rocked most U.S. travelers during the Christmas holiday weekend is reflecting poorly on the company — and its stock price.
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On Dec. 26, Southwest faced more than 2,900 cancelled flights, according to FlightAware. This represented 71% of all cancellations for the day. Delta was next in the running for U.S.-based airlines with just 276 cancelled flights, or 9%. By the following day, mid-afternoon, Southwest had 63% of all cancelled flights, with 2,570. Spirit Air was next in the running with just 85 cancellations.
The weather-related cancellations were compounded by a lack of staffing due to pilots and support staff taking sick days for COVID, the flu or RSV.
While neither weather or illness is the airline’s fault, the delays and cancellations sparked an investigation from the U.S. Department of Transportation, under directions from the Biden administration, reported CNN. “The Department will examine whether cancellations were controllable and if Southwest is complying with its customer service plan,” the DOT said in a tweet.
Southwest pilot Captain Casey Murray, president of the Southwest Airline Pilots Association, told CNN that “outdated processes and outdated IT” are partly to blame for the problems. “We’ve been having these issues for the past 20 months,” he said. In spite of Southwest CEO Bob Jordan acknowledging the problem in a message to employees, stockholders seem to be losing faith in the airline.
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Southwest stock dropped nearly 4.5% midday on Dec. 27, plummeting to $34 — close to its 52-week low of $30 — that morning. Before the holidays, the stock was hovering near the $40 mark. While other airlines may rebound after winter woes, Southwest’s systemic issues could damage the carrier’s reputation — and revenue — for the long term.
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