On Thursday, shareholders filed a lawsuit against Southwest Airlines Co, accusing the carrier of fraudulently concealing problems that led to an operational meltdown and more than 15,000 flight cancellations last month.
Southwest publicly downplayed or failed to disclose serious flaws in its flight scheduling software technology, according to a proposed class action filed in federal court in Houston.
According to the lawsuit, Southwest also failed to discuss how its “point-to-point” route structure, which differs from the “hub-and-spoke” structure used by other large U.S. airlines, could expose it to unexpected bad weather.
Shareholders led by Arthur Teroganesian claimed that due to inadequate disclosures, Southwest’s statements about its operations in regulatory filings and a media appearance by former CEO Gary Kelly were “materially false and misleading.”
According to Teroganesian, as the truth became public, Southwest’s share price fell about 10% between December 23, 2022, and January 3, 2023, wiping out more than $2 billion in shareholder value.
Southwest did not respond immediately to requests for comment. In addition to the airline, Kelly, his successor Bob Jordan, and Chief Financial Officer Tammy Romo are named as defendants.
Southwest Airlines’ flight operations buckled shortly before Christmas as a fierce winter storm swept across the United States.
By December 30, the airline had mostly resumed normal operations, several days after other airlines had recovered.
The complaint filed on Thursday seeks unspecified damages on behalf of Southwest investors from June 13, 2020, when the Baltimore Sun reported on computer problems at the airline, to December 31, 2022.
Southwest has also been sued for allegedly failing to provide refunds to passengers who were impacted by the December weather. The carrier has promised to process refunds and reimburse expenses.
Jordan stated in an interview on Thursday that Southwest was reviewing all operations to avoid a repeat of the meltdown. “It simply cannot happen again,” he stated.