Southwest Airlines sued by shareholders over operational meltdown

Southwest Airlines shareholders filed a lawsuit against the Texas-based carrier on Thursday, saying it downplayed and failed to disclose issues with outdated technology that left it vulnerable in adverse weather conditions.

The lawsuit is the latest sign Southwest is continuing to recover from an operational meltdown that resulted in nearly 17,000 canceled flights during the chaotic holiday travel season and is expected to cost the airline up to $825 million. .

In court papers, filed in Houston, shareholders say “Southwest Airlines has continually downplayed or ignored serious issues with the technology it used to schedule flights and crews, and how it was likely to be more adversely affected than other airlines in case of bad weather.”

SOUTHWEST AIRLINES PROMOTES EXECUTIVES AFTER OPERATIONAL COLLAPSE

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LOS ANGELES-CA-DECEMBER 29, 2022: Canceled Southwest Airlines flights appear on screens at LAX on Thursday, Dec. 29, 2022. (Christina House/Los Angeles Times via Getty Images) (Christina House/Los Angeles Times via Getty Images/Getty Images)

Court documents indicate that Southwest discussed the positive aspects of its “point-to-point” route structure, which differs from the “hub-and-spoke” route structure that most domestic airlines use, in its 2020 annual report. However, it “did not disclose that in adverse weather conditions, the ‘point-to-point’ structure could affect Southwest Airlines more adversely than its competitors,” according to court documents.

As a result, the shareholders claim that statements made about its activities in its financial reports “were materially false and misleading”.

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LUV SOUTH WEST AIRLINES CO. 36.99 +0.01 +0.03%

Disruption for several major airlines began when the Christmas weekend winter storm arrived. As other major national carriers recovered after the storm passed, Southwest’s problems continued to escalate. Its outdated crew planning technology was outdated, leaving crews and aircraft out of position to operate flights for an extended period of time. It took the carrier eight days to recover.

SOUTHWEST AIRLINES SAYS HOLIDAY CANCELLATIONS COULD MAKE $825M LOSS

“The root cause of Southwest Airlines’ cancellations was outdated and inefficient technology, particularly its crew scheduling system (called ‘Sky Solver’),” the official said. “Even more complicated on this issue, Southwest Airlines operated an aggressive flight schedule that left it subject to larger cancellations than its competitors in the event of unusual conditions, such as nationwide storms.”

Takeoff of a Southwest Airlines passenger plane

A Southwest Airlines passenger plane takes off from Chicago’s Midway Airport as flight delays resulting from a computer failure at the Federal Aviation Administration halted departures across the United States earlier Wednesday, January 11, 2023 , in ((AP Photo/Charles Rex Arbogast)/AP Newsroom)

The complaint also said that this news caused its stock to fall more than 12%.

The shareholders said Southwest officials “acted with a reckless disregard for the truth when they failed to verify and disclose the true facts in statements made by them or other Southwest Airlines personnel to members of the investing public”.

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According to court documents, the class action is seeking damages on behalf of all Southwest investors from June 13, 2020, when the Baltimore Sun reported issues with Southwest’s computer system, to December 31, 2022.

The lawsuits are piling up against the carrier, which is trying to rebuild its reputation and has promised to reimburse the passengers concerned and reimburse them for the travel costs incurred.

Southwest Airlines did not respond to FOX Business’ request for comment.

The Associated Press contributed to this report.

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