Just in time for this year’s Christmas travel rush, Secretary Pete Buttigieg’s Department of Transportation (DOT) has slapped Southwest Airlines with a $140 million civil penalty for its disastrous handling of last year’s Christmas travel rush.
According to the Washington Examiner, “last year’s debacle” cost Southwest “nearly $1.2 billion between the fourth quarter of 2022 and the first two months of 2023.”
In December 2022, thousands of Southwest customers were left stranded when, on the day after Christmas, the airline canceled 2,886 of its flights, a number that represented 70 percent of its schedule.
In total, the airline canceled “nearly 17,000 flights scheduled between Dec. 21 and Dec. 29, affecting nearly 2 million customers, as a winter storm halted operations across major airports, overwhelming its scheduling crew,” The Examiner reports.
— BPR (@BIZPACReview) December 27, 2022
“USDOT is concerned by Southwest’s unacceptable rate of cancellations and delays & reports of lack of prompt customer service,” the agency stated on what was then Twitter. “The Department will examine whether cancellations were controllable and if Southwest is complying with its customer service plan.”
Following a yearlong investigation, Buttigieg is now praising the record-setting fine.
“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,” he said.
The Examiner breaks down the staggering penalty:
The fine includes a $35 million payment directly to the government, which will be paid out over three years, and is the largest fine ever imposed by the DOT for violations of consumer protection laws. Southwest has already paid more than $600 million in refunds and reimbursements to affected travelers and is expected to pay $750 million in compensatory damages.
Of the record-breaking $140 million fine, $72 million will be offset by credit for vouchers to future travelers through 2027. The DOT is crediting the airlines with $33 million in frequent-flier miles to affected passengers.
“This is a message to the entire airline industry: they must take care of passengers, or we’ll use the full extent of our authority to hold them accountable,” Buttigieg wrote on X.
This is a message to the entire airline industry: they must take care of passengers, or we’ll use the full extent of our authority to hold them accountable. https://t.co/Ir6HsPb3lU
— Secretary Pete Buttigieg (@SecretaryPete) December 18, 2023
Southwest issued a press release on Monday in which it characterized the fine as a “settlement” with DOT.
“Southwest shares with the DOT the goal of delivering the highest standard of service to the traveling public and is grateful to have reached a consumer-friendly settlement that both credits past compensation that went above and beyond requirements for Customers and incorporates a future commitment for Southwest Customer care with a new industry-leading compensation policy,” the airline said. “The remainder of the agreement will be settled in a one-time $35 million cash payment to be paid across a three-year period to the DOT. Southwest appreciates acknowledgment that it moved expeditiously to care for Customers, learned from the event, and now can shift its entire focus to the future.”
Following the “Winter Storm Elliott disruption,” the airline said it “immediately took action to care for Customers and Employees—endeavoring to meet its own high standard for Customer Service as well as regulatory requirements” and “quickly launched efforts across the operation to take care of Customer.”
“As part of today’s announcement,” the airline declared, “Southwest is introducing a new, industry-leading policy that provides additional compensation (in the form of a voucher of $75 or greater), upon request, during controllable cancellations and delays that cause Customers to reach their final destinations three or more hours after their scheduled arrival. The policy will be implemented by April 30, 2024.”
“This new policy for compensating Customers leads the industry and underscores Southwest’s dedication to its award-winning Customer care,” it added.
“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,” Bob Jordan, Southwest Airlines President & Chief Executive Officer, said. “Our commitment to Customers has been central to our success across our 52-year history and has helped us become one of the world’s most admired and trusted airlines.