Southwest’s $140M penalty ‘should put all airlines on notice’ after travel debacle

The Transportation Department is slapping Southwest Airlines with the largest consumer protection penalty in the agency’s history, a response for last year’s days-long meltdown that stranded thousands of travelers and aircrew nationwide.

DOT’s $140 million fine — which is “30 times larger than any previous penalty for consumer protection violations” — stems from an investigation of an episode where the Texas-based airline ultimately canceled 16,900 flights and stranded more than two million passengers. The probe established that the airline failed to provide adequate customer service assistance, flight status notifications and refunds in a prompt and proper manner.

“Taking care of passengers is not just the right thing to do — it's required, and this penalty should put all airlines on notice to take every step possible to ensure that a meltdown like this never happens again,” Transportation Secretary Pete Buttigieg said in a statement, adding that the agency’s decision “sets a new precedent.”

As part of a consent order, Southwest is required to pay $35 million to the U.S. Treasury, the agency said. It will also set up a $90 million compensation system for future vouchers that would be issued to Southwest customers who experience a “controllable” cancellation or delay. Passengers who arrive at their destination more than three hours after their original scheduled arrival time will also be entitled to a transferable $75 voucher. That voucher is in addition to rebooking, hotel and food provided during a delay.

In exchange for establishing the compensation program, DOT will reduce its penalty against Southwest by $72 million.

Southwest, which had been notified about an anticipated penalty in October, said in a statement it is “committed to delivering the highest standard of excellence” in its customer service.

“We’re pleased to have reached this consumer-friendly settlement, which includes a new, industry-leading policy to compensate Customers during significant delays and cancellations,” spokesperson Chris Mainz said of the order. He added that Southwest “learned from the event with subsequent investment realizing a vast improvement toward our resiliency” and customer experience.

Last month, Buttigieg said DOT was still in the midst of an accompanying investigation into whether Southwest Airlines engaged in unrealistic scheduling practices — like creating schedules it knew it couldn’t properly staff — that led to its epic meltdown. However, DOT announced on Monday that it is closing that investigation without making a final finding “as its goal is to obtain quick relief for the public.”

DOT reviewed thousands of complaints from passengers affected by the event, which started last December with bad weather in Colorado that quickly overwhelmed Southwest’s internal scheduling system, leaving crews stranded at different airports.

The investigation also included visits to and interviews with Southwest officials, as well as affected airports. DOT said it consulted with the Justice Department’s consumer protection branch on the inquiry. Earlier this year, lawmakers held hearings with Southwest executives as well as the union representing the airline’s pilots to get to the bottom of the disruption, and ensure the company compensated those affected.

DOT said it "ensured" that Southwest passengers who experienced headaches during the 2022 travel season received more than $600 million for delays and cancellations, along with the airline's decision to provide 25,000 miles to affected passengers.

DOT will additionally credit Southwest $33 million against the penalty for issuing 25,000 Rapid Reward points to passengers affected by Southwest’s operational failures. But in total, the 2022 meltdown cost Southwest more than $750 million in direct costs.

As part of the order, Southwest will make its one-time $35 million cash payment to DOT over a three-year period, the airline said in an accompanying press release.

“We have spent the past year acutely focused on efforts to enhance the Customer Experience with significant investments and initiatives that accelerate operational resiliency, enhance cross-team collaboration and bolster overall preparedness for winter operations,” Southwest president and CEO Bob Jordan said in a statement.

In October, the airline’s Chief Operating Officer Andrew Watterson told POLITICO the airline gave itself through the end of that month to get all updates in place ahead of the upcoming holiday travel season, including new de-icing protocols and other ways to get planes out faster.

Other efforts included improving technologies that previously couldn’t link crews to their assignments fast enough. While crews can still call in for their next assignment, pilot and flight attendant unions agreed to use new electronic notifications as an alternative option, Watterson said at the time.