The U.S. Department of Transportation (DOT) has launched an investigation into Southwest Airlines’ holiday operations in December, following the cancellation of thousands of flights due to a systems malfunction. The DOT is looking into whether the airline engaged in “unrealistic scheduling” that may have contributed to the breakdown in operations.
According to a DOT spokesperson, the investigation is in the early stages and is being conducted as a “rigorous and comprehensive” review. The agency is reviewing whether Southwest exceeded its flight capacity and if executives engaged in unrealistic scheduling, which is considered a violation of federal law. The DOT is also monitoring the airline’s compliance with rules regarding refunds for affected customers and reimbursement for expenses.
The systems meltdown occurred during the busy holiday travel period, causing the cancellation of over 16,700 flights between December 21st and December 31st, 2022. The disruptions affected thousands of passengers, causing significant inconvenience and financial loss.
Southwest Airlines stock (LUV:NYE) is set to announce its Q4 2022 results on January 26th. Analysts predict that the airline will post a loss per share of $0.08, compared to EPS of $0.14 in the same quarter of the previous year. Southwest has already announced that it expects to report a net loss for Q4 2022 due to the operational disruptions in December, with a pre-tax impact in the range of $725 million to $825 million and a revenue loss of $400 million to $425 million as a result of flight cancellations.
The DOT investigation is a significant development for Southwest Airlines, as the agency has the power to impose fines and penalties for violations of federal law. The airline will have to provide detailed information and data related to its holiday operations, and it remains to be seen whether the investigation will uncover any violations or issues that led to the systems meltdown.
Analysts are currently cautiously optimistic about Southwest Airlines stock, with a Strong Buy consensus rating. The average LUV stock price target of $46.35 implies a 20.6% upside. Despite the recent disruptions, shares of the airline have advanced 14% year-to-date.
