The airline has set up a page where customers can submit receipts for reimbursement, but executives admit it will take many weeks to process all requests.
Danielle Zanin is still waiting to hear if Southwest will cover the $1,995.36 she spent on a four-day odyssey to bring her family of four home to Illinois after their flight was canceled in Albuquerque, New Mexico. Even if she ends up with the money, it might not be enough for her to try Southwest again.
“It’s going to take a long time for the airline to prove to me that it can fix whatever technology it uses to get crews and planes to go where they need to go.” It’s just not worth the hassle I went through,” Zanin said. She plans to return to American Airlines flights, even if it costs more.
Raymond James airline analyst Savanthi Syth estimated the storm will cost Southwest about $585 million in lost revenue plus the cost of overhead. Airline consultant Robert Mann put the cost to Southwest at $500 million to $600 million in a combination of cash, vouchers and frequent flyer points.
Southwest hopes that refunds, reimbursements and loyalty points will persuade people not to switch to other airlines, known in the industry as “booking aside.”
“Book-away typically has a short half-life, perhaps as little as a month, given that it appears by many accounts that Southwest is very generous in reimbursing not only flights but other out-of-pocket expenses” and is serious about correcting technological flaws that worsened the crisis, Mann said.
Airlines — including Southwest as recently as October 2021 — have recovered quickly from previous crashes, whether caused by bad weather, crew shortages, IT outages or other factors. Passenger numbers, if at all down, are recovering quickly.
“Reputational damage is as important as what consumers can do about it,” said Michael Mazzeo, who teaches strategy at Northwestern University’s business school and has studied airline competition. “There is little or no competition for Southwest in many markets. When there is no way out for consumers, 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 the major airlines but has gradually become much more like them — has a particularly large presence in some major states, including California, Arizona and Texas.
Southwest remained relatively calm for several days, even after it became clear it was struggling as other airlines recovered from the winter storm — and after it came under repeated fire from consumers, media reports and Transportation Secretary Pete Buttigieg.
After an update on efforts to fix the operation on Dec. 24, Southwest went dark for three days until it released a video apology from CEO Robert Jordan, followed a day later by a video with another executive. Company executives did not speak to the media at all until Dec. 29, when they announced that Southwest would resume normal operations the next day.
“The company was slow to come forward with corporate PR communications until the government went after them, the secretary (of transportation) called the CEO directly and asked them to act quickly to take care of these people,” said Larry Yu, George Washington University professor who studies crisis management in the tourism industry. “In the short term, it’s a lot of damage.”
But Yu also noted that Southwest has a decades-long reputation for relatively low fares and good service to rely on. He praised the airline for its promises of refunds, refunds and frequent flyer points.
“They have to do something to get those customers back,” Yu said. Now, he added, Southwest needs to make good on its promises to improve its technology, “because you don’t want to equate low cost with low technology.”
The failure also focused attention on the Southwest among lawmakers in Congress.
Sen. Richard Blumenthal, D-Conn., said Wednesday he will reintroduce a “passenger bill of rights” that failed to become law in the last Congress.
“The failure of Southwest creates a moment when the forces in favor of this kind of consumer protection measure can prevail,” he said in an interview.
The Senate Commerce Committee said this week it will hold hearings on the Southwest debacle. Blumenthal said witnesses should include executives from Southwest and other airlines.
“This problem (of flight disruptions) is hardly limited to Southwest, it’s hardly the first disruption in air travel, and it’s hardly unpredictable,” Blumenthal said. He said it was puzzling why Southwest had not improved its crew scheduling technology after it failed during previous outages in the summer and fall of 2021.
Consumer groups have given mixed reviews to the US Department of Transportation’s oversight of airlines. They saw the Trump administration as a low point, with little enforcement action taken against airlines, even amid record consumer complaints. The Biden administration fined Frontier Airlines and several foreign carriers last year for failing to quickly reimburse passengers whose flights were canceled in the early months of the pandemic, but advocates were disappointed that none of the four largest U.S. airlines she was not fined.
The Department of Transportation has the burden of enforcing consumer protection laws aimed at protecting air carrier travelers. Several consumer groups have called on Congress to allow government officials and private individuals to sue airlines to enforce these laws, an attempt that has so far been unsuccessful.
“Airlines will lobby hard for as little regulation as possible, but with each subsequent meltdown it becomes more apparent that real change is needed,” said John Breaux, vice president of public policy at the National Consumers League.
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