Southwest reimbursement schedule: Executives say it could take weeks

Southwest hopes refunds, refunds and loyalty points will persuade people not to switch airlines, in what’s known in the industry as “booking away.”

DALLAS — With its flights operating on a roughly normal schedule, Southwest Airlines is now turning its attention to repairing its damaged reputation after canceling 15,000 flights and stranding holidaymakers around Christmas.

CEO Robert Jordan said Thursday that Southwest has processed about 75% of the refund requests it received. The airline has also returned most of the lost bags to their owners and hired an outside firm to screen requests for refunds for things like hotels and meals that stranded passengers paid for out of their own pockets, he said.

That massive disruption began on December 22 with a winter storm and came to a head when Southwest’s legacy crew planning technology was overwhelmed and crews and aircraft were out of position to operate flights. The airline took eight days to recover.

Jordan said in a brief interview that Southwest is still investigating what went wrong and he doesn’t want to make any changes to the technology until that review is complete. He expressed optimism, but gave little information on how to avoid another meltdown.

southwest there 25,000 frequent flyer points to customers whose flights were canceled or significantly delayed between Dec. 24 and Jan. 2 and appears to be making progress on refunds, but executives concede it will take many weeks to process refund requests.

Danielle Zanin is still waiting to hear if Southwest will cover the $1,995.36 she spent during a four-day odyssey to bring her family of four home to Illinois after their flight in Albuquerque, New Mexico, has been cancelled. Even if she does eventually get the money, trying Southwest again might not be enough for her.

“It would take a lot for the airline to prove to me that they can fix whatever technology they use to get flight crews and planes where they need to go. It’s just not worth the trouble I’ve been through,” Zanin said. She said she plans to fly American Airlines again, even if it costs more.

Southwest hopes refunds, refunds and loyalty points will persuade people not to switch airlines, in what’s known in the industry as “booking away.”

“Book-Away typically has a short half-life, perhaps as little as a month, as many reports indicate that Southwest is very generous and reimburses not only the flight but other expenses” and is serious about correcting technological deficiencies, exacerbating the crisis, said Robert Mann, airline consultant in New York.

Retaining loyal customers is critical if Southwest is to limit the financial damage from the meltdown. The company has yet to say how much money it lost as a result of the canceled flights — Jordan promised more information before Southwest reports quarterly results on Jan. 26.

Raymond James airline analyst Savanthi Syth estimated the storm will cost Southwest about $585 million in lost revenue plus higher costs. Mann estimates it’s between $500 million and $600 million in cash, coupons and frequent flyer points.

Airlines — including Southwest as recently as October 2021 — have bounced back quickly from previous meltdowns, whether caused by inclement weather, staff shortages, IT outages, or other factors. Passenger numbers recovered quickly, if at all.

“The reputational damage is only as relevant as what consumers can do about it,” said Michael Mazzeo, who teaches strategy at Northwestern University’s business school and has researched airline competition. “In many markets, there is little or no competition with Southwest. If there is no consumer point of sale, the damage is more limited.”

Southwest, American, United and Delta control about 80% of the domestic air travel market. Southwest — which began 50 years ago as a low-cost competitor to major airlines but has gradually become much more like them — has a particularly outsized presence in some large states, including California, Arizona and Texas.

Southwest stayed relatively calm for several days, even after it became clear it was struggling while other airlines recovered from the winter storm – and after it faced repeated criticism from consumers, media reports and Transport Secretary Pete Buttigieg.

With canceled flights mounting by the day, Southwest gave few updates and turned down requests for interviews with key executives. It released a video apology from Jordan on December 27, followed a day later by a video with another executive. Company executives only spoke generally to the media on December 29, when they announced Southwest would resume normal operations the next day.

“The company was slow on the company’s PR communications until the government pursued them, the (transportation) secretary called the CEO directly and demanded that they take care of these people quickly,” said Larry Yu, a George Washington University professor studying crisis management in the tourism industry. “In the short term, it’s a big loss.”

But Yu also noted that Southwest has a decades-old reputation for relatively low fares and good service to fall back on. He commended the airline for promising refunds, refunds and frequent flyer points.

“You have to do something to win back those customers,” Yu said. Now, he added, Southwest must deliver on its promise to improve its technology “because you don’t want to equate low-cost with low-tech.”

Jordan said Southwest has good technology, but he said the airline will revisit IT priorities once it better understands how the outage unfolded in December.

The debacle also drew the attention of lawmakers in Congress to Southwest.

Sen. Richard Blumenthal, D-Conn., said Wednesday that he will reintroduce a “passenger bill of rights” that failed to become effective in the last Congress.

“The Southwest debacle creates a moment where forces could prevail in favor of this type of consumer protection action,” he said in an interview.

The Senate Commerce Committee said it would hold hearings on the Southwest meltdown this week. Blumenthal said witnesses should include executives from Southwest and other airlines.

“This problem (of flight disruptions) is hardly unique to the Southwest, it’s hardly the first collapse in air travel and it’s hardly unpredictable,” Blumenthal said. He said it’s baffling why Southwest hasn’t upgraded its crew scheduling technology after it failed in previous disruptions in the summer and fall of 2021.

Buttigieg has repeatedly said his department will closely monitor Southwest and hold it accountable for treating customers fairly.

Consumer groups have given mixed marks to the Department of Transport’s oversight of airlines. They viewed the Trump administration as a low point, with little enforcement action against airlines, even amid record levels of consumer complaints. The Biden administration last year fined Frontier Airlines and several foreign airlines for failing to quickly pay refunds to travelers whose flights were canceled in the early months of the pandemic, but advocates were disappointed that none of the four largest U.S. Airlines have been fined.

The Department of Transportation is tasked with enforcing consumer protection laws aimed at protecting air travelers. Several consumer groups are urging Congress to let state officials and private parties sue airlines to enforce these laws — an attempt that has so far been unsuccessful.

“Airlines will push hard to have as little regulation as possible, but with every collapse it’s becoming clearer that real change is needed,” said John Breyault, vice president of public policy at the National Consumers League. Southwest reimbursement schedule: Executives say it could take weeks

Laura Coffey

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