Southwest Airlines was slapped with a $140 million civil penalty after its 2022 holiday travel meltdown canceled nearly 17,000 flights and stranded over 2 million passengers, the Department of Transportation announced.
The fine — which the agency said is 30 times larger than any penalty the agency has previously handed down and is meant to serve as a “strong deterrent” — includes more than $600 million in refunds to passengers and $35 million payment directly to the government, per its press release issued Monday.
The settlement also includes 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 first-of-its-kind US 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.
“Also, DOT will credit Southwest $33 million against the penalty for issuing 25,000 Rapid Reward points to passengers impacted by Southwest’s operational failures,” the government agency said, acknowledging the airline’s effort to compensate travelers.
However, as one senior Southwest executive bluntly told angry lawmakers: “We messed up.”
The 2022 massive winter storm and subsequent chaos prompted travel horror stories: people missed funerals or long-awaited holiday gatherings, passengers with canceled flights were forced to make cross-country drives of 17 or more hours and even some cancer patients could not get to their treatment on time.
Southwest, which paid over $600 million to passengers impacted by the storm that cost it more than $1 billion, has made significant technology and consumer service upgrades and other investments including de-icing equipment across its network.
The Dallas-based airline did not admit to wrongdoing but agreed to the settlement to avoid litigation and said Monday it was “grateful to have reached a consumer-friendly settlement” with the DOT and now “can shift its entire focus to the future.”
The DOT, however, said that Southwest violated consumer protection laws by failing to provide adequate customer service assistance “via its call center to hundreds of thousands of customers,” and severely faltered on providing prompt flight status notifications and prompt refunds to the onslaught of impacted travelers.
Southwest, however, can redeem itself as early as this week, as holiday travel starts to pick up.
It’s the 10-day year-end period from Dec. 23, 2023, to Jan. 1, 2024, that data shows airlines should be bracing for, when a record 115.2 million people will travel at least 50 miles from their home, per American Automobile Association data.
The AAA expects airports to have the busiest holiday season yet with a projected 7.5 million air travelers, beating 2019’s record of 7.3 million.
“This year-end holiday forecast, with an additional 2.5 million travelers compared to last year, mirrors what AAA Travel has been observing throughout 2023,” Paula Twidale, senior vice president of AAA Travel, said in a news release.
“More Americans are investing in travel, despite the cost, to make memories with loved ones and experience new places.”
Should there be another snafu this year as well, the DOT is trying to impose new rules requiring airlines compensate passengers with cash for significant flight delays or cancellations when carriers are responsible.
The agency last year asked carriers if they would pay at least $100 for delays of at least three hours caused by airlines and none agreed.
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.
With Reuters
This story originally appeared on NYPost
