Yahoo Finance Live anchors Brian Sozzi and Brad Smith discuss the expectations for Southwest Airlines’ earnings amid news that the airline has continued to cancel flights, ensuing chaos among travelers.

Video Transcript

BRIAN SOZZI: All right, let's fly into a sector that you, of course, follow very closely there, Brad. Shares of Southwest Airlines continue to be in focus in the midst of one of the worst weeks that we have seen in terms of cancellations and delays. Over 60% of Southwest flights canceled yesterday, and already 50% canceled so far today.

Brad, we were talking about it yesterday. I believe Julie mentioned on the Citi note, impacting an impact earnings by 4% to 8% in the current quarter. But now as these delays continue, you have to wonder, can this impact to earnings this quarter be even worse? And then like we also mentioned yesterday, what is the longer term impact from really letting down just tons and tons of customers here at such a key period?

BRAD SMITH: Yeah, there's a customer sentiment impact. And perhaps that would be seen most notably on a metric that you can track and their net promoter score. But outside of that, on another metric that you can track on a quarterly basis, it is going to be their earnings and what that profit actually looks like. Now, we had a guest on yesterday tell us that it could be hundreds of millions of dollars in impact to their bottom line for this quarter.

And it's more than just some of the weather delays that we were discussing. Of course, that really initiated, or at least, elucidated some of the issues with their underlying software that they have to track the employees and the crew that are making their way from one city to another in order to make sure that flights are staffed. And we were just looking at the FlightAware tracker before this block started.

And it's amazing to know, number one, how much traffic control has to take place for the number of planes that there are on a daily basis here in the US and internationally to be in the sky. But now you think about the fact that over the past two days, we've seen, what, 2,000 flights canceled by Southwest. That is multiples higher, actually exponentially higher, than a lot of the other US-based air carriers.

And so as of right now, even today, still more than 2,300 flights canceled. And Southwest still has a lot of explaining to do even to the administration as Secretary-- Department of Transportation Secretary Pete Buttigieg continuing to take them to task.

BRIAN SOZZI: Yeah, and look, I ripped them apart yesterday, CEO Bob Jordan and even chairman Gary Kelly, a long-time CEO. And I think it was, Brad, maybe yesterday afternoon in a Journal article, the CEO or maybe it was Bob, Bob Jordan-- it escapes me right now-- saying they had talked about, talked about earlier in the year, investing more in technology. Well, you should have did it.

But now, you would probably not be in the situation if you were investing the money you were supposed to in CapEx in your technology to prevent a situation like this. So again, I think it's just a bunch of executives and a board trying to meet an earnings number in a challenging year, instead of thinking about the next decade for this company.

BRAD SMITH: Well, it was part of the issue that I brought up yesterday, too, is that if you're looking at where they did invest, and instead of investing in what should have been an overhaul of the technology that they were using to track exactly where those crew members are, they invested elsewhere. And for some of those investments, it goes towards fleet.

For some of the investments, it goes towards just making sure that you've got pilot training that's going forward as well and pilot shortage and to address one of the pilot shortages that has impacted the ability to bring capacity back online, which, by the way, capacity is not going to be back at full restoration for Southwest until the end of 2023, based on what they have said.

And so now you're looking at them building on top of a system that has clearly been broken, but they have not invested to fix. So it really brings the question once again of, will they actually get back to full capacity if they have to look at that technology specifically, uproot that, install something else new, and then build on top of that to bring back up to the full operating procedure that they had seen even pre-pandemic. And I just don't know if that actually is a metric, or at least, a timeline that is still accurate at this point.

BRIAN SOZZI: And a lot of times, you see during situations like this, other executives, everyone wants to play nice. But if I'm Ed Bastian at Delta, I'm Robin Hayes over at JetBlue, I'm using this opportunity maybe perhaps send an op-ed into Yahoo Finance, tell us-- tell your investors. Speak directly to your investors on what you'd do differently than a Southwest, because right now, this is a huge market share grab potential for companies like that as this company likely continues to struggle deep into 2023.

BRAD SMITH: All right. We're going to continue to track the airlines. You're taking a look at a few of the stock reactions here on the day. AAL up by about 7/10 of a percent. UAL, American Airlines-- or United Airlines, excuse me, up by about 9/10 of a percent. We'll continue to keep an eye on those.