By Abhijith Ganapavaram and Kannaki Deka

(Reuters) -Southwest Airways Co mentioned on Friday it expects to put up a loss within the fourth quarter after it canceled over 16,700 flights between Christmas and New Yr’s Eve because of a tech meltdown.

The mass cancellations through the peak season for U.S. airways will end in a pre-tax hit of $725 million to $825 million to quarterly earnings, mentioned Southwest, which had earlier forecast a robust revenue.

Shares of the corporate fell 2.8% premarket earlier than turning optimistic in morning commerce.

On Thursday, the biggest U.S. home airline promised an intensive evaluation of the operational collapse after a union chief blamed its outdated scheduling system and mentioned the service had not recognized find out how to keep away from a repeat.

Throughout winter storm Elliott, Southwest’s crew scheduling software program did not bear the load of staffing adjustments made by the airline and staff needed to manually match crew and planes that led to very large ready instances for pilots and cabin crew.

The service is a well-liked possibility for purchasers in search of fast journey instances because it depends on a point-to-point service to attach huge swathes of the nation, as an alternative of working out of huge hubs. However adversarial climate made it troublesome for it to marshal workers scattered throughout the nation.

The impression from the cancellations will spill over to the present quarter, Cowen analyst Helane Becker mentioned, after the corporate scrapped many flights in a bid to reset its system.

Southwest, which led cancellations amongst U.S. carriers for a lot of the final two weeks of December, has invited scrutiny from the U.S. authorities and a lawsuit.

PRESSURE FROM ALL SIDES

The White Home has mentioned Southwest “failed its clients”, whereas the pilots union, which is in heated contract negotiations with Southwest, on Dec. 31 revealed a letter denouncing firm management as a “cult” that has spent the final 15 years destroying the airline’s legacy.

“It’s unclear to what extent this episode leads administration to improve flight operations software program, set up crew bases or the like,” Citi Analysis analyst Stephen Trent mentioned in a observe.

Earlier than the latest disaster, Southwest had cultivated a fame for dependable customer support, humorous flight crews and low-cost flights.

Southwest Chief Government Bob Jordan mentioned in a video posted on the corporate’s web site on Thursday, following criticism from the union, the airline had made “nice progress” in processing tens of hundreds of refunds and reimbursements, and delivered the overwhelming majority of luggage that went lacking.

However Bernstein analyst David Vernon mentioned in a observe earlier this week, “it could take time for Southwest to restore its model notion with buyers.”

The airline mentioned on Friday that vacation cancellations had been prone to have lower its capability by about 6% within the fourth quarter in comparison with 2019, roughly 4 factors lower than its earlier forecast.

Income loss from the disruptions is predicted to be between $400 million and $425 million, it mentioned, including the online loss forecast contains the rise in working bills from reimbursements, worth of ‘Speedy Rewards’ factors provided as a gesture of goodwill to clients, and additional pay for workers.