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The Transportation Department fined Southwest Airlines $140 million for alleged multiple law violations during the collapse around Christmas and New Year's and also ordered the airline to set up a $90 million fund to compensate passengers who are affected by future delays.
The ministry said the penalty announced Monday was 30 times higher than any it has imposed in the past for airline consumer protection violations. Southwest disputed the Department of Transportation's legal conclusions but agreed to accept the fine, as outlined in the order outlining investigators' findings and the terms of the penalty.
“Taking care of passengers is not only the right thing, it is necessary, and this penalty should put all airlines on notice to take every step possible to ensure a meltdown like this never happens again,” Transport Secretary said Pete Buttigieg in a statement statement.
The problems began when freezing weather hit large parts of the country just before Christmas and lasted for more than a week. The airline ultimately canceled or significantly delayed about 16,900 flights, disrupting the travel plans of two million people, according to a Transportation Department investigation. While problems began with the weather, other airlines rebounded as Southwest struggled with a workforce scheduling system that unions had warned was a weakness.
Southwest has estimated that the disruption cost $800 million in lost revenue and payouts to cover passengers' alternative travel costs. This also led to Southwest's chief operating officer testifying before Congress. The Transportation Department said Monday that Southwest had paid $600 million in refunds and refunds to affected passengers.
Southwest acknowledged it faced unprecedented challenges last Christmas, but said in a statement Monday the investigation reflected how quickly the airline helped its passengers and responded “with care and in good faith.”
“We have focused intensely on improving the customer experience over the past year through significant investments and initiatives that accelerate operational resiliency, improve cross-team collaboration and strengthen overall preparedness for winter operations,” said Bob Jordan, the airline’s CEO.
Here's Southwest Airlines' plan to prevent a repeat of December's meltdown
Southwest said it has taken steps to improve reliability and that the airline performed well during Thanksgiving and other busy holidays this year.
The airline will receive credit for the $140 million penalty for setting up the compensation fund and issuing rewards points to customers affected by the disruptions. The airline will pay the government $35 million.
The Compensation Fund allows customers who arrive at their destination at least three hours late due to a delayed or canceled flight for reasons beyond Southwest's control to claim a $75 voucher. The fund is scheduled to be launched by April 30th.
As part of Monday's announcement, the Transportation Department said it was completing an investigation into whether Southwest set an unrealistic schedule last December without reaching any conclusions.
The investigation that led to the fine focused on breaches in the protection of passengers whose flights were either significantly delayed or cancelled. The Transportation Department said its investigation included a review of tens of thousands of pages of documents, several days of audits at Southwest's headquarters in Dallas and a review of thousands of passenger complaints.
Ultimately, investigators concluded that Southwest failed to properly notify passengers that their flights were canceled, failed to provide adequate customer service and failed to provide prompt refunds to thousands of customers.
Unions say Southwest failed to heed calls to modernize technology before collapse
In the Federal Office In a document summarizing the investigation, Southwest acknowledged the challenges it faced but denied that it engaged in unfair or deceptive practices that violated the law.
“Southwest strongly objects to the DOT’s determination that it engaged in deceptive practices with respect to its call center operations during Winter Storm Elliott,” the document states. “Southwest emphasizes that it has not misrepresented its call center capacity or wait times and has not made any statements that create the impression that it has the ability to respond to all calls during a severe weather-related disruption within a specific time period.”
The Southwest meltdown capped a rocky year for air travel, with passengers facing waves of delays and cancellations.
Capitalizing on travelers' frustration, Buttigieg last year pushed airlines to offer more help to passengers, and the White House announced it was considering regulations that would require airlines to provide cash compensation. Other rules being considered aim to improve rate transparency and prohibit charging families a fee for sitting together.
The Southwest penalty comes months after the Transportation Department fined American Airlines $4.1 million for holding passengers on airport tarmacs for hours.
In 2021 and 2022, airlines struggled to keep up with the recovery in travel demand as the coronavirus pandemic eased and airlines suffered from staff shortages. The latest Transport Ministry data shows that 1.7 percent of flights were canceled in the first eight months of this year, compared to 3 percent in the same period in 2022.