A lawsuit has been filed against Southwest Airlines.
The company canceled thousands of flights around the holidays after severe weather originally stranded passengers.
A group of Southwest shareholders has now filed a lawsuit against the company with allegations that the airline hid problems that resulted in the chaos.
The class action suit was filed in federal court in Houston against Southwest, former CEO and executive chairman Gary Kelly, current CEO Robert Jordan, and CFO and Executive Vice President Tammy Romo, accusing the airline of not noting or downplaying failures in its scheduling system that resulted in frequent cancellations.
The lawsuit claims the "serious issues" with the airline's technology that had been downplayed for years were finally exposed during the meltdown over the recent holidays. More than 16,700 flights on the Dallas-based carrier were canceled from Dec. 22 to Jan. 1 -- significantly more flights than any other airline.
In a securities filing, Southwest estimated that the disruptions will result in a net loss of between $725 million to $825 million. Shareholders allege they, too, "have suffered significant losses and damages" because of how the company's market value dropped after the mass cancellations.
As news spread of the issues driving Southwest's operational meltdown, its stock fell by more than 12%, according to the lawsuit.
"As flights were getting cancelled around the country, it soon emerged that the root cause behind Southwest Airlines' cancellations was outdated and ineffective technology," the lawsuit states. "Southwest Airlines continuously downplayed or ignored the serious issues with the technology it used to schedule flights and crews, and how it stood to be affected worse than other airlines in the event of inclement weather; and it did not discuss how its unique point-to point service and aggressive flight schedule could leave it prone in the event of inclement weather."
The shareholders claim that Southwest violated federal law by issuing "materially false and misleading" statements and filings, and engaging "in acts, practices and a course of business that operated as a fraud or deceit," which led investors to purchase securities "at prices that were artificially inflated." Had they been aware of the "truth," the shareholders claim "they would not have purchased Southwest Airlines securities at the artificially inflated prices that they did, or at all," according to the lawsuit.
It's not clear how many shareholders have joined the lawsuit, which represents "persons or entities who purchased or otherwise acquired publicly traded Southwest Airlines securities between June 13, 2020 and December 31, 2022." The lawsuit is seeking "damages in an amount to be established at trial."
Southwest Airlines has not commented on the lawsuit.
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