DOT fines Southwest a record $140 million for operational meltdown

The Department of Transportation has imposed a $140 million fine on Southwest for last year’s operational collapse during the holiday season. 

The penalty, the DOT said, is 30 times larger than any previous fine the department has levied for consumer protection. 

“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 Monday statement. During the Dec. 21 to Dec. 31 meltdown, Southwest cancelled 16,900 flights impacting more than 2 million customers. 

Under a consent decree, to which Southwest has stipulated, the airline will pay $35 million of the $140 million penalty to the U.S. Treasury. The DOT will credit Southwest $33 million toward the remaining $105 million in consideration for the airline’s decision early this year to provide 25,000 Rapid Rewards points to customers who were caught up in the holiday meltdown. 

Southwest will put the final $72 million of the penalty toward a $90 million, three-year passenger-compensation fund the DOT has ordered. With the compensation fund, Southwest will introduce a formal policy obligating the airline to issue upon request flight vouchers of at least $75 to customers whose flights are canceled or delayed by more than three hours. Southwest already sometimes provides vouchers in such cases, but under its agreement with the DOT, the policy will become formalized, making it an industry-leading guarantee. 

Typically, Southwest vouchers have an expiration date. In an email, an airline spokesman said that it has not decided on a potential expiration for these vouchers, and Southwest also hasn’t decided whether it will end the voucher guarantee when the three-year stipulation ends. 

In a press release explaining its settlement with the DOT, Southwest touted its operations throughout 2023. So far this year, the airline has cancelled 0.9% of its scheduled flights and has been on time 76.8% of the time, FlightAware data shows. 

Southwest also reviewed steps it has taken to sure up operations. 

“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,” CEO Bob Jordan said. 

The DOT said it conducted a rigorous investigation into Southwest’s operations during the 2022 holiday season, including examining tens of thousands of pages of documents, conducting several multiday, in-person audits and site visits at Southwest’s headquarters and reviewing thousands of consumer complaints. 

Specifically, the department found that Southwest violated consumer-protection laws during the operational collapse by failing to provide adequate customer service via its call center; failing to provide notifications of flight delays and cancellations to more than a million passengers; and failing to provide proper and prompt refunds to thousands of passengers.

The first two findings were a result of the airline’s staffing and automated-messaging resources being overwhelmed by the scale of the operational failure. 

Southwest, for the most part, was quick to provide refunds to customers whose flights had been canceled. However, thousands of customers who made slight mistakes when entering flight and personal information onto a refund web page the airline set up to during the crisis were lost in the shuffle. 

As part of the consent agreement, the DOT closed its investigation into Southwest’s 2022 holiday schedule. The department launched that investigation in January, saying that scheduling more flights than the carrier could have reasonably expected to fly would be regarded as “unfair and deceptive” under federal regulations.

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