The computer system failure that caused Southwest Airlines to cancel or delay more than 2,000 flights last month will cost the airline between $54 million and $82 million in lost revenue and increased costs.
The outage will trigger a 0.5 percent drop in its unit revenues during the third quarter, Dallas-based Southwest (NYSE: LUV) reported Wednesday in an investor advisory.
Southwest's CEO Gary Kelly previously said the outage would cost more than $10 million. The outage was caused by a faulty network router, although the airline is looking further into the technical details of the problem.
Southwest did not provide the specific dollar amounts of the financial costs, but information the airline did provide allows for an estimate.
Revenue losses including missed bookings, refunded tickets, canceled flights and vouchers will total at least $25 million. Additional costs including employee overtime, transportation, hotel and meal accommodations for stranded travelers and crew and other expenses will tally to between $28 million and $57 million.
Delta Air Lines Inc. also recently suffered a computer outage in its home base in Atlanta which disrupted its operations worldwide. The outage is expected to impact the company’s third-quarter performance as well, according to analysts.
Southwest blamed the router failure for starting a cascading technology crash that knocked reservations systems offline and grounded its planes nationwide. The Southwest outage hit on July 20 and took four days to fully resolve, causing more than 2,000 cancellations and delays.
The airline repeatedly apologized to customers and allowed customers ticketed to fly during the disruption to rebook flights free through Southwest.com for two weeks of their original date of departure. Southwest also extended a fare sale that had been set to expire.
Kelly said in an earnings call July 21 that the computer malfunctions were the worst outage in the airline’s history. He pegged the inability to take reservations alone at $5 million to $10 million.
The outage prompted major unions at Southwest to request that the airline replace Kelly. The unions representing pilots and mechanics complained that Southwest is spending too much of the airline’s recent record profits on buying back shares, and not enough on updating its technology. The pilots' union board voted 20-0 to ask that Kelly and Chief Operating Officer Mike Van de Ven be removed.
Southwest’s July passenger traffic increase 1.4 percent compared to the same month last year, the airline also reported Wednesday.
Fort Worth-based American Airlines’ (Nasdaq: AAL) passenger traffic dipped 0.3 percent in July, according to data released by that airline on Tuesday.