The U.S. Department of Transportation has levied a $140 million civil penalty against Southwest Airlines for “numerous violations of consumer protection laws” during its 2022 holiday operational disruptions, which resulted in about 16,900 canceled flights, affecting more than 2 million passengers, the agency announced Monday.
DOT found that Southwest violated consumer protection laws by failing to provide adequate customer service assistance, failing to provide prompt flight status notifications, and failing to provide refunds in a prompt and proper manner.
The penalty is 30 times larger than any previous DOT penalty for consumer protection violations, according to the agency.
The full $140 million, however, will not necessarily come out of Southwest’s coffers. A DOT consent order stated that $35 million would be paid to the U.S. Treasury over a three-year period. But the $105 million balance involves credits and offsets, including $33 million for “past compensation that was above and beyond existing requirements” when the carrier issued 25,000 Rapid Rewards points to affected travelers. Southwest also paid out more than $600 million in refunds and reimbursements because of the disruptions.
The remaining $72 million will go toward compensating future Southwest passengers affected by cancellations or significant delays caused by the carrier via vouchers. Southwest will offer $30 million per year in vouchers for each of three years between April 30, 2024, and April 29, 2027, that are transferable and can be used for future domestic or international travel on the carrier. Any residual value of the voucher after use must remain available to consumers within the validity period, according to the consent order. The vouchers shall remain valid for at least one year after the issue date.
Southwest, however, will receive an offset of $24 million of the $30 million issued in vouchers per year. If the carrier during a one-year period does not issue $30 million worth of vouchers, Southwest must pay the U.S. Treasury 80 percent of the difference between what was issued and the $30 million.
“Today’s action sets a new precedent and sends a clear message: If airlines fail their passengers, we will use the full extent of our authority to hold them accountable,” DOT Secretary Pete Buttigieg said in a statement. “This penalty should put all airlines on notice to take every step possible to ensure that a meltdown like this never happens again.”
Southwest announced the DOT settlement as well, and in the consent order noted that it “sincerely regrets the inconvenience caused to all customers who were affected by the operational disruption” and that it “takes very seriously its responsibility to comply with all laws and regulations.”
The carrier, though, disagreed with DOT’s position that it violated consumer protection laws. Southwest “notes that it enters into this agreement for settlement purposes only and does not admit any violation of any statute or regulation or concede the DOT’s recitation of the facts and conclusions,” according to the consent order. “Southwest strongly believes that it fully complied with all applicable laws.”
During the middle of the disrupted period, Southwest took actions to course-correct its operations and since has worked to improve its winter operations, including adding more deicing trucks, pads and ground equipment. It also “improved tools and procedures to streamline communication and decision-making,” and it accelerated investments in tools and technology, including the software used to reassign its crews during disruptions.
“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.
[email protected] (Donna M. Airoldi)
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