Southwest Airlines fined $140 million

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Southwest Airlines agreed to a record-setting $140 million civil penalty over the December 2022 holiday meltdown that led to 16,900 flight cancellations and stranded 2 million passengers, the U.S. government said on Monday.

The U.S. Department of Transportation (USDOT) consent order resolves a lengthy government investigation into the massive travel disruption and provides “a strong deterrent,” the agency said.

The settlement includes a $35 million cash fine and a three-year mandate that Southwest provide $90 million in travel vouchers of $75 or more to passengers delayed at least three hours getting to final destinations because of an airline-caused issue or cancellation.

The “industry leading” U.S. delay compensation program, which will start by April, is part of the Biden administration’s aggressive efforts to get tough on airlines as it aims to require new passenger compensation. Vouchers will be awarded “upon request,” Southwest said.

“If airlines fail their passengers, we will use the full extent of our authority to hold them accountable,” said Transportation Secretary Pete Buttigieg.

The 2022 massive winter storm and subsequent chaos prompted travel horror stories: people missing funerals or long-awaited holiday gatherings, passengers with canceled flights forced to make cross-country drives of 17 or more hours across and some cancer patients could not get treatment.

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Southwest, which paid over $600 million to passengers impacted by the storm that cost it more than $1 billion, has over the last year made significant technology and consumer service upgrades and other investments including more de-icing equipment across its network, new staffing and software and using artificial intelligence to predict network health.

“We are absolutely prepared for winter,” Southwest CEO Bob Jordan said in a Reuters interview on Monday pointing to its strong performance this year.

He said the airline was pleased to resolve the investigation even though it did not admit wrongdoing. “It was a historic storm that led to a historic week of operational disruption,” Jordan said. A disruption of that magnitude “is not going to happen again.”

The largest penalty previously was $4.5 million imposed on Air Canada after USDOT initially sought $25.5 million. Southwest’s penalty — which includes the $35 million fine payable over three years — is more than all penalties assessed by USDOT combined since 1996. USDOT said in January it planned to start seeking higher fines.

USDOT found Southwest violated consumer protection laws by failing to provide adequate customer service assistance “via its call center to hundreds of thousands of customers” as well as failing to provide prompt flight status notifications to more than 1 million passengers and prompt refunds to thousands.

USDOT also said it closed its “unrealistic scheduling investigation” without making any finding.

Most carriers – including Southwest – voluntarily committed in August 2022 to provide hotels, meals and ground transportation for airline-caused delays or cancellations but resisted providing cash compensation.