Southwest Airlines stabilizes after holiday travel mayhem

Yahoo Finance Live anchors discuss how Southwest Airlines stock is trading after a tumultuous two weeks.

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DAVE BRIGGS: All right, my play also a tough road ahead. Southwest Airlines, things are finally stable there after their massive meltdown over the holidays. But there is turbulence ahead. Bank of America says the debacle, which involved some 16,000 canceled flights, will cost the airline between $600 and $700 million. That includes both lost revenue from refunds and the reimbursements to affected passengers, such as hotels and rental cars. And that process could likely take several weeks.

BofA analyst Andrew Didora cutting his fourth quarter adjusted earnings forecast for Southwest to $0.37 a share. That's from $0.87. Southwest will report earnings on January 26. It's just been a brutal slide for this stock, as you can see, down another 3%, almost 4% today. And it's just been one challenge after another, down 10% in the last seven days. They do say the baggage crisis is going to be solved by midweek. But how do they regain customers? Trust, Seana, that I have no idea.

SEANA SMITH: And that's probably going to take much longer. That's clearly the safe answer. It could take years. If you've been caught up in this mess, you weren't able to get to whatever your destination was over the holidays, I don't think you're forgiving Southwest Airlines any time soon.

Now, during the White House press briefing just a couple of hours ago, we heard from White House Press Secretary Karine Jean-Pierre, and she said that the Department of Transportation is going to hold them accountable. We heard that from Department of Transportation Secretary Pete Buttigieg last week. But then she did go on to say that the Biden administration, saying that Southwest, quote, "failed its customers point blank," also went on to threaten fines on the carrier if it doesn't make customers whole.

So the pressure is on not only from a government perspective, from regulation perspective, also clearly from the customer perspective. And I think if you're one of those that were caught up, had your flights canceled numerous times over the last, what, week and a half or so, I would venture to guess you're not going to be booking Southwest anytime soon.

PRAS SUBRAMANIAN: I mean, I didn't even fly Southwest, and I would be scared to fly them next, right, based on the next kind of storm. $600 to $700 million? I thought it'd be more than that for that charge, no?

DAVE BRIGGS: 600, 700, right. Yeah, I think down the road, I think that's not taking into account the damage already done to the stock. That is just to really refund tickets and reimburse passengers. But the damage done to the stock has been three or four times that. And yeah, I agree with you. I just don't know-- how do you get back customers? You further discount your tickets, which is going to further hurt your margins, which is going to further drive the stock down.

I don't know. Elizabeth Warren says this is a consequence of consolidation in the airline industry. I don't think so. This is an outdated computer system and a system nationwide that no longer makes sense for Southwest.

SEANA SMITH: Yeah, I don't think her argument holds when you just compare Southwest performance to all the other major airlines last week and this low-- and the low number of cancellations that we saw relative to what we saw from Southwest. Clearly, a lot of investment is needed in terms of updating their technology, which also is a solution that's not going to happen overnight. That's going to take time. So we can't also count out that maybe something like this, maybe not to this scale, but something like this could potentially happen again for Southwest until some of those changes are made.