The cost of Southwest’s near-disaster: Not much… | footnoted.com
On April 1, Southwest Airlines (LUV) Flight 812 suffered a 5-foot rupture in its fuselage, causing the cabin to depressurize rapidly and forcing the pilot into an emergency landing shortly after takeoff from Phoenix. Southwest canceled 624 flights over three days, found (and fixed) flaws in five other aircraft and the FAA ordered additional inspections for other airlines as well. The flying public was, to put it mildly, more than a little shaken, at least temporarily.
And the cost for Southwest Airlines? About $5 million. Except, no, wait — all those canceled flights also meant the company saved a bunch of fuel, which offset its other costs. So make that about $2 million. Or, to put it another way, the incident was immaterial to Southwest’s financial condition and results of operations. Moreover,
“management concluded that there were no known facts or circumstances related to the incident that were reasonably likely to have a material impact on the Company’s future financial condition and results of operations.”
In other words, from a financial and a disclosure perspective, the whole incident was a non-event. We only know this, in fact, because someone at the Securities and Exchange Commission wondered why Southwest never even mentioned the incident in the quarterly report it filed on April 25.
