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Grounded Aircraft Costing Southwest Airlines ‘Millions’ Weekly

Southwest's daily out-of-service aircraft count jumped from its normal range of 15-20 to more than 60 about three weeks ago.

Schedule interruptions due to unavailable aircraft are costing Southwest Airlines millions of dollars each week, and the issue's uncertainty makes providing short-term financial guidance challenging.

"The damage to the company runs in the millions of dollars weekly in lost revenue due to canceled flights and millions of dollars weekly in terms of additional costs caused by delays and cancellations," CEO Gary Kelly said at a J.P. Morgan investors conference Mar. 5. 

Southwest's daily out-of-service aircraft count jumped from its normal range of 15-20 to more than 60 about three weeks ago—a situation airline management blames on deliberate efforts by its mechanics to disrupt the carrier. The Aircraft Mechanics Fraternal Association-represented mechanics say un-airworthy aircraft are the problem. The two sides are locked in contentious contract talks.

The schedule interruptions began Feb. 12, about a week after Southwest lowered its initial first quarter unit-revenue guidance growth projection by 1 point to 3-4%. It blamed the partial government shutdown, which it said cost it as much as $60 million. The airline has not offered a precise estimate on the losses from the maintenance issues, and has not updated its guidance.

"Other than the effects of the maintenance of out-of-service aircraft…there's really no update that we're providing this morning to revenues or cost guidance," Kelly told JP Morgan attendees.

Southwest on Feb. 28 filed a lawsuit against AMFA, charging the union with a deliberate campaign to keep aircraft out of service unnecessarily—a tactic the airline amounts to a violation of the Railway Labor Act, which puts strict limits coordinated work actions during contract talks. 

The unavailable aircraft are forcing Southwest to cancel hundreds and delay thousands of flights each week. It operates about 4,000 departures on its peak days. It has said its schedule can absorb about 35 downed aircraft in a day before cancellations and delays kick in.

The disruptions do not seem to be altering the airline's big-picture strategy. It is launching long-awaited Hawaii service on March 17 and will steadily expand it. It also is on track to expand its fleet to 775 aircraft and focus its expansion on Hawaii.

"Our plans for 2019 are rock-solid. They're unchanged," Kelly said. "We've got a net increase in the fleet of 25 airplanes. [Available seat-mile] growth under 5%, half of that is dedicated to Hawaii. And beyond Hawaii, there's not much more in the development stage in terms of our capacity year-over-year."

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