Southwest Airlines Reaches Agreement To Pay $140 Million For Canceling Flights During the Holidays Last Year

In December 2022, Southwest Airlines experienced a massive disruption, resulting in the cancellation of thousands of flights and the stranding of over 2 million passengers. To address the matter, the airline has reached a settlement of $140 million, with a $35 million fine included.

The U.S. Department of Transportation views the majority of the monetary settlement as a motivator for Southwest to prevent a similar situation from happening again in the future. This settlement will be used to compensate passengers affected by the previous incident.

The penalty imposed on an airline for not meeting consumer protection regulations was the most extensive so far.

Pete Buttigieg, the Secretary of Transportation, expressed that the agreement shows that his agency is committed to ensuring airlines properly take care of their customers.

Buttigieg stated that this penalty should serve as a warning to all airlines to take every measure they can to make sure nothing similar to this happens again.

Southwest expressed its appreciation for having come to an agreement that is beneficial to its customers. The airline further noted that they have drawn lessons from this situation and are now fully focused on the future.

Almost 17,000 flights were cancelled a year ago, the consequence of a winter storm that completely halted Southwest’s operations in Denver and Chicago, and the crew-scheduling system’s difficulty in managing the resulting disarray.

The nation’s fourth-largest airline, prior to settlement, reported that the fallout from the situation cost it over $1.1 billion in reimbursements, additional fees, and lost ticket sales across several months.

In a decree dated Friday, the government declared that Southwest had “breached the law on multiple occasions,” such as not providing assistance to customers who had been left stranded at airports or hotels, causing them to scramble to find alternative transportation.

People who attempted to call the airline’s inundated customer service center were either met with a busy tone or found themselves waiting on hold for extended periods of time.

Southwest neglected to notify passengers of canceled and delayed flights within the mandated 30 minutes. Numerous passengers reported that they had not received any email or text notifications and were unable to access the airline’s website.

The government claimed that Southwest’s refund process was not prompt enough. Refund requests with errors were not noticed, therefore preventing the customers from receiving their money back. Furthermore, refunds for items like pet fees and boarding upgrades were not given back in a timely manner when flights were canceled, as stated by the department.

In the agreement, Southwest disagreed with a lot of the Transportation Department’s discoveries.

Southwest revealed that only a small portion of reimbursements were distributed after the due date and that they had not made any incorrect assurances about extended waiting periods when trying to contact customer service during weather-related issues. Even so, the business stated that it had decided to reach an agreement merely in order to resolve the matter.

Southwest reported that the storm in 2022 which caused record-breaking cold temperatures, blizzards, and power outages a few days before Christmas posed “unanticipated operational challenges.” They stated that they acted swiftly to reimburse travelers for meals, hotel stays, and alternate transportation, as well as providing frequent flyer points.

At airports like Denver, CEO Robert Jordan has reported that Southwest has augmented their fleet with trucks and other de-icing gear, in addition to expanding personnel during bitter cold weather.

Southwest had already decided to pay out more than $600 million in reimbursements and refunds; however, in October, the airline revealed that the federal authorities had determined that their attempts had been inadequate and they could be subjected to a civil penalty due to their treatment of passengers.

In addition to the $35 million fine, Southwest will receive a $33 million credit for the compensation they have already provided, mostly in the form of 25,000 frequent flyer points ($300 value) to affected customers. Southwest has also committed to providing $90 million in vouchers to future travelers.

Beginning in the spring of 2024 and continuing until April 2027, Southwest will present a voucher to passengers who arrive at their destination three or more hours behind schedule, due to a delay or cancellation initiated by the airline. The voucher will be worth a minimum of $75.

The government has ascribed a value of 80% to the vouchers, so Southwest was credited with $72 million, not the total $90 million to be given out over a three-year period. In the event that Southwest pays out less than $30 million in any of those years, they will have to pay an 80% penalty for any amount not covered.

In lieu of the government taking any action on the allegation that Southwest had advertised a flight schedule that it knew it could not keep, the airline agreed to pay the fine as well as comply with other measures.

The Transportation Department reportedly had thoroughly examined thousands of grievances from customers, inspected Southwest premises, and consulted with high-ranked business executives as part of their investigation.