Thread: SWA Losses from Computer Glitch $400+Mil

More than a million passengers faced delays, cancellations or were stranded — or all of the above — during the holidays in what ranks as the largest airline operational breakdown in recent history. And many found Southwest's recovery not satisfactory.
But what are passengers' rights? What are Southwest passengers entitled to? What is the airline required to do? And what will they actually do? And, what will the U.S. Department of Transportation do?


The airline, facing the prospect of a huge enforcement fine from the agency, has publicly stated it will reimburse passengers for "reasonable" expenses. But Southwest has not defined "reasonable." In some cases, the airline has offered bonus frequent flyer miles to compensate passengers for their ordeal — hardly adequate, since so many Southwest passengers may only fly the airline twice each year, when redeeming those miles or points can be very difficult.
Plus, it doesn't reimburse them for their true out-of-pocket expenses when they were stranded, such as hotel accommodations, food, clothing and toiletries — since so many bags were also lost during this time — and the cost of seeking alternative forms of transportation.


It's reasonable to estimate the cost to most stranded passengers averages about $400, not counting lost wages and other missed revenue events or reservations, like concert performances and hotel bookings in destination cities. With 1 million-plus passengers affected, the projected cost of the reimbursements would be north of $400 million, and by some estimates, that's a low figure and could rise to nearly $700 million.



Then there's the lost revenue to Southwest — which the airline can never recoup — for the revenue the airline lost during the time the airline was essentially shut down. The latest estimates are in the range of $500 million. For an airline that has been consistently profitable for more than 50 years, this quarter may mark a real profit hit.


While the federal government is taking a hard look at Southwest's behavior before and during the meltdown, the airline is bracing for a huge proposed fine. However, the full amount of the proposed fines by federal agencies is historically almost never paid in full. They are negotiated down. For example, a proposed $25 million fine by the Department of Transportation against Air Canada during the pandemic for not issuing passenger refunds was negotiated down to less than $4 million