Shareholders sued Southwest Airlines after the operational meltdown
Southwest Airlines Shareholders sued the Texas-based carrier on Thursday, alleging that it downplayed and failed to disclose issues with outdated technology that left it vulnerable during bad weather.
The lawsuit is the latest sign of Southwest’s continuing operational meltdown that has canceled nearly 17,000 flights during the chaotic travel season and is expected to cost the airline as much as $825 million.
In court documents filed in Houston, the shareholders claim that “Southwest Airlines has consistently downplayed or ignored serious issues with the technology it uses to schedule flights and crews, and how it would be affected worse than other airlines in the event of bad weather.”
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Court documents say Southwest discussed positive aspects of its “point-to-point” route structure, which differs from the “hub-and-spoke” route structure used by most domestic airlines, in its 2020 annual report. However, it “did not disclose that in Given adverse weather conditions, the “point-to-point” structure could leave Southwest Airlines hurting more than its competitors, according to Court documents.
As a result, shareholders say statements made about its business in its financial reports were “fundamentally false and misleading.”
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The turbulence began at several major airlines when a winter storm rolled in over the Christmas weekend. And while other major domestic airlines recovered after the storm passed, Southwest’s problems continued to fester. The outdated crew scheduling technology was overwhelmed, leaving crews and aircraft out of position to fly flights for a long time. It took the company eight days to recover.
Southwestern airlines say holiday cancellations could total $825 million
“The root cause of Southwest Airlines’ cancellation was outdated and inefficient technology, in particular, the crew scheduling system (called ‘Sky Solver’),” said Compatibility. Complicating this issue further, Southwest Airlines’ use of a rigid flight schedule left it vulnerable to greater cancellations than its competitors in the event of unusual circumstances, such as nationwide storms.
The complaint also said that this The news caused its stock to drop by more than 12%.
The shareholders said that Southwest officials “acted with a reckless disregard for the truth when they failed to ascertain and disclose the true facts in statements made by these or other Southwest Airlines employees to members of the investing public.”
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According to court documents, the class action lawsuit seeks damages on behalf of all Southwest investors from June 13, 2020, when The Baltimore Sun reported problems with Southwest’s computer system, through December 31, 2022.
Lawsuits are mounting against The carrier, which is trying to rebuild its reputation, has promised to refund the affected passengers and compensate them for the travel expenses incurred.
Southwest Airlines did not respond to FOX Business’ request for comment.
The Associated Press contributed to this report.