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Southwest flight upheaval a ‘system failure,’ U.S. says

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WASHINGTON, Dec 28 (Reuters) –

U.S. Transportation Secretary Pete Buttigieg on Wednesday ratcheted up pressure on Southwest Airlines, saying thousands more canceled flights indicated a system failure at the low-cost carrier.

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“We are past the point where they could say this is a weather-driven issue,” Buttigieg said in an interview posted by ABC News on its website. “Don’t get me wrong, all of this began with that severe storm. We saw winter weather affecting the country and severely disrupting all airlines.”

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Nationwide, at least 60 people died in weather-related incidents in recent days, NBC News reported.

The rest of the aviation system and other airlines seemed to be back from the weather disruptions, Buttigieg said.

“So what this indicates is a system failure (at Southwest), and they need to make sure that these stranded passengers get to where they need to go and that they are provided adequate compensation, not just for the flights itself … but also things like hotels, like ground transportation, like meals because this is the airlines’ responsibility,” he said, adding that he had spoken to the company’s leadership.

U.S. airlines had canceled thousands of flights as a massive winter storm swept over much of the country before and during the Christmas holiday weekend, but Southwest’s woes have deepened while other airlines have largely recovered.

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Southwest has canceled a total of more than 14,500 flights since Friday. On Wednesday it canceled 2,500 flights as of late morning, according to the flight tracking website FlightAware.

Southwest told Reuters that it would reimburse customers for travel-related costs and had already processed thousands of requests by Tuesday.

Delta Air Lines said in an email it had capped fares in all markets where Southwest operates, including domestic and international markets. The program includes over 700 nonstop markets and are valid through Dec 31. United and American announced similar programs.

U.S. Representative Rick Larsen, the top Democrat on the House Transportation and Infrastructure Committee, said in a tweet that the company was treating flight cancellations as “controllable” beginning Dec. 24, which triggers reimbursement for incidental expenses and refunds for full fares.

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The airline’s CEO, Bob Jordan, said the low-cost carrier needed to upgrade its legacy airline systems and apologized to customers and employees in a video message.

Shares of Southwest tumbled 6% on Tuesday and were down about 1.5% in morning trading on Wednesday. Some analysts said the cancellations will pressure profits in the fourth quarter.

“The total impact to revenue could be in the 9% range of our expected Q4 revenue, which compares to our current estimate with revenues 15% ahead of 2019 levels in 2022” Jefferies analyst Sheila Kahyaoglu said.

Kahyaoglu estimated total EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent costs) impact from the cancellations could be in the range of $700 million. (Reporting by Kanishka Singh in Washington; Additional reporting by David Shepardson in Grand Rapids, Michigan and Abhijith Ganapavaram in Bengaluru; Editing by Mark Porter, Howard Goller, Alexandra Alper and David Gregorio)

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