Southwest's maintenance problems are costing it millions a week, CEO says

Canceled flights and out-of-service jets amid a feud with the mechanics’ union is costing Southwest Airlines millions of dollars a week, the airline’s CEO Gary Kelly said Tuesday.

The Dallas-based airline sued the union last week, alleging it is encouraging members to purposefully write up minor maintenance issues in order keep jets out of service to gain leverage in contract talks, which began more than six years ago. The mechanics union denies the allegations. The mechanics rejected a new contract offer in September, saying the proposed pay increase came up short.

The airline declared an “operational emergency” at several maintenance bases last month, telling scheduled mechanics to show up at work or risk termination.

The American Mechanics Fraternal Association, which represents some 2,400 Southwest mechanics, did not immediately respond to a CNBC request for comment.

More Southwest flights have been canceled since mid-February compared with competitors. The airline has said it usually plans to have about 20 planes out of service for unexpected maintenance issues but that number has doubled.

On Tuesday, 89 Southwest flights were canceled, about 2 percent of its schedule, according to flight-tracking site FlightAware. In comparison, JetBlue had 12 canceled flights and United had eight.

“Customers are harmed. Our employees suffer through reduced profit sharing,” Kelly said at a transportation conference hosted by J.P. Morgan Chase. A spokesman for the airline declined to provide a more specific estimate of how much Southwest is losing from the issue. Analysts expect Southwest to post revenue of about $5.3 billion this quarter.