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Shareholders Sue Southwest Airlines Over Flight Meltdown



(Reuters) — Shareholders filed a lawsuit against Southwest Airlines Co. on Thursday, accusing the airline of fraudulently concealing problems that led last month to an operational meltdown and more than 15,000 flight cancellations.

According to the proposed class action filed in federal court in Houston, Southwest publicly downplayed or failed to disclose serious flaws in its flight scheduling software technology.

The lawsuit said Southwest also failed to discuss how its “point-to-point” route structure, which differs from the “hub-and-spoke” structure of other major U.S. airlines, could make it vulnerable to unexpected bad weather.

Shareholders led by Arthur Teroganesian said the inadequate disclosures made Southwest̵

7;s statements about its operations in regulatory filings and in a media appearance by former CEO Gary Kelly “materially false and misleading.”

Mr. Teroganesian said that when the truth came out, Southwest’s stock price fell about 10% between Dec. 23, 2022, and Jan. 3, 2023, wiping out more than $2 billion in shareholder value.

Southwest did not immediately respond to requests for comment. Mr. Kelly, his successor Bob Jordan and Chief Financial Officer Tammy Romo are all named as defendants, in addition to the airline.

Flight operations at Dallas-based Southwest were suspended just before Christmas when a severe winter storm swept across the United States.

The airline largely resumed normal operations by December 30, several days after other airlines had recovered.

Thursday’s complaint seeks unspecified damages on behalf of Southwest investors from June 13, 2020, when the Baltimore Sun wrote about computer problems at the carrier, to Dec. 31, 2022.

Southwest has also been sued for its alleged failure to provide refunds to passengers affected by the weather in December. The carrier has promised to process refunds and provide reimbursements.

In an interview Thursday, Jordan said Southwest was looking at all operations to avoid a repeat of the meltdown. “It just can’t happen again,” he said.

The case is Teroganesian v Southwest Airlines Co.US District Court, Southern District of Texas.


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