Southwest Airlines Settles for $140 Million Penalty Regarding 2022 Holiday Operational Disruptions
Southwest Airlines (LUV.N) has agreed to a historic $140 million civil penalty related to the December 2022 holiday disruptions that resulted in 16,900 flight cancellations and left 2 million passengers stranded, as confirmed by the U.S. government on Monday.
The consent order from the U.S. Department of Transportation (USDOT) concludes a lengthy investigation into the widespread travel chaos and serves as a robust deterrent, according to the agency. The settlement includes a $35 million cash fine and a three-year requirement for Southwest to offer $90 million in travel vouchers of $75 or more to passengers experiencing delays of at least three hours due to airline-related issues or cancellations.
This unprecedented delay compensation program, set to commence by April, is part of the Biden administration’s determined efforts to hold airlines accountable, with the aim of implementing new passenger compensation requirements. Southwest stated that vouchers will be granted “upon request.”
Transportation Secretary Pete Buttigieg emphasized, “If airlines fail their passengers, we will use the full extent of our authority to hold them accountable.”
The tumultuous events of the 2022 winter storm and ensuing chaos led to distressing travel experiences, including missed funerals, disrupted holiday gatherings, and cancer patients unable to access treatment. Southwest, having paid over $600 million to impacted passengers, underwent significant technological and customer service enhancements, including network-wide investments in de-icing equipment. The airline has demonstrated substantial operational improvements this year.
While Southwest did not admit wrongdoing, it agreed to the settlement to avoid litigation. The airline expressed gratitude for reaching a “consumer-friendly settlement” with USDOT, enabling it to redirect its focus to the future.
This penalty surpasses previous records, with Air Canada (AC.TO) facing the prior largest penalty of $4.5 million. Southwest’s penalty, encompassing the $35 million fine payable over three years, exceeds all penalties combined by USDOT since 1996. USDOT announced plans in January to seek higher fines.
The settlement addresses violations of consumer protection laws by Southwest, including inadequate customer service assistance and delayed flight status notifications and refunds. USDOT credited Southwest with $33 million toward the penalty for voluntarily awarding frequent flyer points to affected passengers.
President Joe Biden previously stated that USDOT would propose new rules mandating cash compensation for significant flight delays or cancellations caused by airlines. While most carriers committed to providing accommodations for delays or cancellations, including Southwest, they resisted offering cash compensation.