Southwest Airlines to Pay $35 Million Fine for December 2022 Meltdown
Southwest Airlines has agreed to pay a $35 million fine as part of a $140 million settlement with the U.S. Department of Transportation to resolve a federal investigation into the airline's meltdown in December 2022. During that time, Southwest canceled thousands of flights and left over 2 million travelers stranded over the holidays.
The majority of the settlement, $105 million, will be allocated towards compensating future passengers. This is seen as an incentive for Southwest to prevent a repeat of last winter's chaos, according to the U.S. Department of Transportation.
According to Transportation Secretary Pete Buttigieg, the settlement showcases the agency's commitment to holding airlines accountable for their treatment of passengers. "This penalty should serve as a warning to all airlines to take all necessary measures to ensure that a meltdown like this never occurs again," he stated.
CBS News senior transportation and national correspondent Kris Van Cleave believes that this settlement sends a message to other airlines regarding violations of consumer protection laws related to customer notifications, refunds, and customer service assistance.
"Southwest Airlines Settles with US Department of Transportation"
Southwest Airlines has reached a settlement with the US Department of Transportation (DOT) over allegations of violating consumer protection regulations. The airline has agreed to pay a $1.5 million fine and implement changes to improve customer treatment and service.
The settlement comes after Southwest faced criticism for its handling of flight cancellations and delays during a winter storm last year. The DOT accused the airline of failing to assist stranded customers and leaving them to find alternative flights on their own.
In addition to the fine, Southwest has agreed to provide compensation to affected customers and make improvements to its customer service center to prevent similar incidents in the future.
The settlement comes at a time when the DOT is working on new regulations that could require airlines to compensate passengers for long delays, similar to the regulations in the European Union.
Southwest Airlines has expressed gratitude for the settlement and stated that it has learned from the incident and will focus on improving its operations moving forward.
Background: Southwest's Winter Storm Meltdown
The settlement follows a series of events that occurred during a winter storm last year. Southwest Airlines faced nearly 17,000 canceled flights, starting with the storm's impact on operations in Denver and Chicago. The situation worsened when the airline's crew rescheduling system was unable to keep up with the chaos.
The airline estimates that the incident cost it over $1.1 billion in refunds, reimbursements, extra costs, and lost ticket sales over several months.
The DOT's investigation found that Southwest violated consumer protection regulations by failing to assist stranded customers and provide adequate customer service during the crisis. Many customers reported being unable to reach the airline's overwhelmed customer service center, with busy signals and long wait times.
The settlement with the DOT marks a significant step for Southwest Airlines in addressing the issues raised during the winter storm meltdown. The airline's agreement to pay a fine and implement changes demonstrates its commitment to improving customer treatment and service.
Southwest Airlines faced criticism for failing to keep customers informed about canceled and delayed flights. The airline did not meet the requirement to notify the public within 30 minutes of a change, leaving many passengers without email or text notices and unable to access Southwest's website.
The government also accused Southwest of not providing refunds promptly. Customers who made refund requests through a special Southwest website and made errors were not informed to fix the mistakes, resulting in delayed refunds. Additionally, some passengers did not receive immediate refunds for fees such as pet fees and boarding upgrades that were unused due to canceled flights.
In response, Southwest disputed many of the Transportation Department's findings, stating that only a small percentage of refunds were issued late. However, the airline agreed to a consent order to settle the matter.
The airline's actions
Southwest attributed the challenges to the 2022 storm, which brought severe cold temperatures, blizzards, and power outages shortly before Christmas. The airline claimed that it promptly reimbursed affected travelers for expenses such as meals, hotels, and alternative transportation. Southwest also distributed frequent flyer points as compensation.
To prevent similar issues in the future, Southwest has implemented measures such as adding de-icing equipment and increasing staff during extreme cold temperatures at key airports. CEO Robert Jordan emphasized the airline's commitment to improving its services.
Although Southwest had already agreed to provide over $600 million in refunds and reimbursements, the carrier disclosed in October that federal officials found its efforts insufficient, potentially leading to a civil penalty.
The settlement's details
The settlement agreement includes a $35 million fine for Southwest Airlines. As part of the settlement, Southwest will also receive $33 million in credit for compensation already provided to affected customers. This compensation mainly consisted of giving 25,000 frequent flyer points to each affected customer, which is valued at approximately $300. Additionally, Southwest has committed to distributing $90 million in vouchers to future travelers.
The government values these vouchers at 80% of their face value, resulting in Southwest receiving credit for $72 million. However, the vouchers will be distributed over a period of three years, with $30 million being distributed each year between April 2024 and April 2027. If Southwest fails to distribute the full amount, they will be subject to a penalty of 80% of the shortfall.
In exchange for Southwest agreeing to the fine and other measures, the government has chosen not to pursue charges related to Southwest advertising flight schedules that they knew could not be kept. Transportation Secretary Pete Buttigieg had previously raised this concern publicly.
The investigation conducted by the Transportation Department involved reviewing thousands of consumer complaints, visiting Southwest facilities, and meeting with senior company officials.
