Southwest Airlines' holiday chaos could cost the company as much as $825 million

Southwest Airlines says disruptions that led to more than 16,700 cancelled flights over the holidays could cost the company as much as $825 million, according to a company regulatory filing on Friday.

Severe weather, staff shortages brought on by the pandemic and an outdated computer system caused the largest domestic airline in the U.S. to cancel thousands of flights from Dec. 21 to Dec. 31. The widespread cancellations left families, and airline staff, stranded over Christmas and New Year's, while unclaimed luggage piled up at airports across the country.

Some affected customers are still waiting to get their luggage back. It's been over two weeks since Southwest cancelled Brittney Buckley's flight from Denver to Chicago on Dec. 21. And she still has no idea where her luggage is.

She said the airline hasn't given her any more updates, and the online portal won't let her upload receipts the airline promised to reimburse.

"I'm just hoping that eventually someday I'll be able to find them," Buckley said. "I just don't know how much I trust Southwest anymore."

As a result, the airline is expected to sustain some serious losses: its stock plummeted immediately after the holiday meltdown and one passenger is suing Southwest after he claims it failed to properly refund him, or his daughter, for a cancelled flight. On Wednesday, the airline began offering 25,000 frequent-flyer points — worth more than $300 in flights — to passengers whose flights were cancelled, or significantly delayed, over the holidays.

The operational meltdown also led to widespread criticism of the airline's operations. The Southwest Airlines Pilots Association published a letter that criticized the airline's chairman and former CEO, Gary Kelly.

"Gary Kelly still reigns supreme on the board of this Company despite having overseen the decisions and setting the conditions that made this most recent fiasco possible," Captain Tom Nekouei, vice president of the Southwest pilots union, wrote. "I, for one, am tired of seeing my Company's good name, and in some cases our fellow employees' reputations, dragged through the mud in national media."

U.S. Transportation Secretary Pete Buttigieg said the airline "failed its customers" and added that his department would work to "get travelers what they are owed."

"In 2023 we will continue our work, from accountability for Southwest Airlines to further progress supporting all airline passengers through action on enforcement, rulemaking, and transparency," Buttigieg, tweeted on Dec. 31.

In Friday's filing, Southwest said it expects to lose an estimated $400 million to $425 million in revenue. It said the remainder of the $725 million to $825 million estimated negative financial impact comes from covering an increase in operating expenses, including reimbursing travelers, and awarding them with the frequent-flyer points, as well as paying its employees.

On Thursday, Bob Jordan, the current Southwest CEO, apologized to its passengers.

"I can't say it enough how sorry I am for the impact these challenges have had on our employees and our customers," he said. "We have a long and proud record of delivering on expectations, and when we fall short, we aim to do the right thing."