The Department of Transportation on Monday announced a $140 million fine against Southwest Airlines for a breakdown last winter that disrupted travel for nearly two million people during the holiday season.
Of the $140 million, Southwest Airlines will pay $35 million to the federal government. For the rest, the department is giving the airline credit for giving away frequent flyer points as an apology to customers affected by the problems and for agreeing to give out tens of millions of dollars in vouchers. to those affected by future delays and cancellations.
The fine is about 30 times the department’s previous largest penalty against an airline for consumer protection violations, a $4.5 million settlement to Air Canada in 2021 on customer refunds.
“Today’s action sets a new precedent and sends a clear message: If airlines fail their passengers, we will use the full scope of our authority to hold them accountable,” Transportation Secretary Pete Buttigieg said in a statement. . “Taking care of passengers is not only the right thing to do – it is necessary, and this penalty should put all airlines on notice to take every step possible to ensure that a crash that like this will never happen again.”
The department said Southwest violated federal law by failing to provide immediate customer service, flight notifications and refunds to passengers. In an order In imposing the fine, the agency said Southwest disagreed with the government’s conclusion that it violated the law but agreed to the penalty to avoid litigation.
The airline struck a more conciliatory tone in a statement, saying it was “grateful to have reached a consumer-friendly settlement.” Bob Jordan, the chief executive, said the company had worked since last winter to improve its service.
“We have spent the past year heavily focused on efforts to improve the customer experience with significant investments and initiatives that accelerate operational resilience, enhance cross-team collaboration and strengthen overall readiness for operations in winter,” Mr. Jordan said.
As part of the advertisement on Monday, the Transportation Department said it will require Southwest to hand out at least $90 million in vouchers to customers experiencing severe disruptions caused by the airline in the future. Under that policy, which the airline plans to put in place in May, passengers will be able to request a voucher of $75 or more if they arrive at their final destination at least three hours late due to factors in Southwest control. That voucher is in addition to the compensation provided for hotels and meals.
The fine against Southwest comes nearly a year after the holiday disaster, which began shortly before Christmas as the airline struggled to weather bad weather. In the end, Southwest canceled nearly 17,000 flights. Many travelers are forced to make expensive and cumbersome last-minute plans, with some spending hundreds of dollars or driving long distances to reach their destinations. Southwest customers also reported being on hold for hours to speak with customer service representatives.
The debacle cost Southwest about $1.2 billion, mostly in lost business and reimbursements. For weeks, the airline became the stuff of jokes on late-night television and the subject of widespread criticism, culminating in a Senate hearing in February where lawmakers grilled the company’s chief operating officer.
Southwest identified three main causes of the issues: The airline was unprepared for bad weather, it didn’t have the ability to reshuffle planes and crew as quickly as needed and it had communication gaps among teams. To address those problems, the airline has invested in equipment and infrastructure to improve its response to winter weather. It has made organizational changes to better monitor and respond to disruptions, and it has accelerated investments in its operations, including upgrading crew scheduling and notification systems.
So far, Southwest has avoided a repeat of last year’s troubles. In the first nine months of this year, it performed in line with the rest of the industry, with about 75 percent of its roughly one million flights reaching their destination within 15 minutes of their scheduled arrival time, according to federal data. Southwest also canceled slightly fewer flights than the industry average.
Despite a small loss early in the year, Southwest posted a $717 million profit in the first nine months of 2023. In a securities filing last week, the airline said it earned record Thanksgiving revenue and that near-term ticket sales performed. better than expected in recent weeks.
As part of its announcement Monday, the Transportation Department also said it was closing an investigation into whether Southwest offered an unrealistic flight schedule during the holidays last year, which the department considers an unfair and deceptive practice. The department said it was closing the inquiry without reaching a finding on the matter but would continue to monitor practice across the industry.
