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DOT Penalizes Southwest Airlines $140 Million

DOT ensured Southwest paid over $600 million back to passengers and issued record penalty—30 times larger than any in DOT history—for 2022 holiday meltdown

By Todd R. Berger

12.18.23 NAME Blog Post Southwest Airlines Reaches Settlement with DOT
Southwest Airlines Boeing 737 taxis on Oct. 17, 2020, at Denver International Airport in Colorado. || Photo by donyanedomam, courtesy of Adobe

On Dec. 18, the U.S. Department of Transportation (DOT) assessed a $140 million civil penalty against Southwest Airlines for numerous violations of consumer protection laws during and after the operational failures that cancelled 16,900 flights and stranded over two million passengers during the 2022 Christmas holiday and into the New Year. This penalty is 30 times larger than any previous DOT penalty for consumer-protection violations. The majority of the penalty will go toward compensating future Southwest passengers affected by cancellations or significant delays caused by the airline.

The penalty is in addition to the more than $600 million in refunds and reimbursements that DOT already ensured Southwest provide passengers who faced travel disruptions during the operational meltdown. In September 2022, at the urging of Secretary of Transportation Pete Buttigieg, Southwest Airlines made significant changes to its customer service plan that entitled passengers to reimbursements for expenses such as meals, hotels, and ground transportation if a flight is significantly delayed or cancelled due to an airline issue. As a result of DOT’s actions, Southwest was legally required to adhere to those commitments during the 2022 holiday travel meltdown.

In total, Southwest will pay over $750 million for the holiday meltdown—with the vast majority going to passengers for refunds, reimbursements, rapid rewards, or future compensation—due to DOT’s actions.

“This 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,” says Secretary Buttigieg. “Taking care of passengers is not just the right thing to do—it’s required, and this penalty should put all airlines on notice to take every step possible to ensure that a meltdown like this never happens again.”

DOT’s rigorous and comprehensive investigation into Southwest’s operations during the 2022 holiday season included examining tens of thousands of pages of documents, conducting several multiday, in-person audits and site visits at Southwest’s headquarters, reviewing thousands of consumer complaints, and consulting with various third parties, such as airports. In addition, DOT regularly met with Southwest officials to gather information, ask questions, and ensure that any issues identified in the investigation were immediately addressed. DOT also reviewed Southwest’s internal policies and processes for responding to consumer concerns and providing impacted consumers with compensation. The U.S. Department of Justice’s Consumer Protection Branch provided valuable assistance to the U.S. Department of Transportation in this important investigation.

Specifically, in its investigation, DOT found the company violated consumer protection laws by:

  • Failing to provide adequate customer service assistance: Hundreds of thousands of Southwest customers had their flights cancelled and were stranded at the airport, in hotels, and in other locations away from home. The scale of the cancellations left travelers scrambling for alternate flight reservations and other accommodations, but when Southwest customers contacted the company’s customer service, they were often met with busy signals, hours-long queues to connect with agents, or dropped calls. DOT’s investigation found that Southwest’s call center was overwhelmed, which at times led to a full call center queue and meant customers got a busy signal upon calling the customer service telephone number.
  • Failing to provide prompt flight status notifications: Southwest’s policy states that it will update consumers about flight status changes via text or email, but during the holiday disruptions, many Southwest customers did not receive a flight status notification in any form, while others received inaccurate ones. Many passengers did not learn their flight had been cancelled until after arriving at the airport. DOT’s investigation found that Southwest’s process for notifying passengers broke down, and as a result, the airline failed to provide prompt notification of flight cancellations and delays.
  • Failing to provide refunds in a prompt and proper manner: DOT’s investigation included an audit of Southwest’s refunds and reimbursements system to ensure that harmed passengers received what they were owed. DOT found that thousands of customers were not promptly refunded. For example, Southwest failed to notify customers that their submissions to the airline’s refund request microsite contained errors that prevented them from receiving their refunds. After DOT’s audit identified the issue, the airline subsequently refunded these consumers. Additionally, thousands of passengers were not provided prompt refunds for optional service fees, like pet fees or upgraded boarding, that they purchased but were never able to use due to significant delays or flight cancellations.

As part of this settlement, DOT is closing its unrealistic scheduling investigation without making a finding as its goal is to obtain quick relief for the public. The order provides such relief by penalizing Southwest Airlines $140 million and compensating future Southwest passengers impacted by controllable cancellations and significant delays. Under federal law, unrealistic scheduling is considered an unfair and deceptive practice, and today’s penalty will deter airlines from engaging in any unfair and deceptive practices against consumers. DOT is continuing to monitor airlines to identify instances of potential unrealistic scheduling. The Department will act if it finds that an airline has violated consumer protection requirements including setting an unrealistic schedule.

“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,” says Bob Jordan, Southwest Airlines president and CEO, in a prepared statement. “Our commitment to customers has been central to our success across our 52-year history and has helped us become one of the world’s most admired and trusted airlines.”

Enforcement Action

The U.S. Department of Transportation’s investigation and enforcement action has taken the following actions to benefit consumers:

  • Requires Southwest to establish a $90 million compensation system for future passengers affected by significant delays and cancellations: Today, DOT ordered Southwest to reserve $90 million in vouchers for future Southwest customers impacted by controllable cancellations and significant delays. Specifically, in the event Southwest causes a passenger to arrive at their destination three hours or more after their original scheduled arrival time due to an issue within Southwest’s control, Southwest is required to provide the passenger with a transferrable $75 voucher for future use on the airline. This industry-leading benefit will ensure that Southwest passengers impacted by any future significant disruptions will receive not only flight rebooking, hotels, and food during the delay, but also timely compensation from Southwest due to the inconvenience.
  • Penalizes Southwest $140 million for violating consumer protection laws—deterring Southwest and other carriers from committing similar violations in the future: Of the $140 million civil penalty assessed against the carrier, Southwest is required to pay $35 million to the U.S. Treasury. Southwest will receive a $72 million offset toward the penalty for the $90 million compensation system DOT has ordered. 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. This acknowledges Southwest’s effort and will encourage other airlines to follow suit to be proactive during operational disruptions.
  • Ensured passengers were refunded and reimbursed over $600 million for significant delays and cancellations during the 2022 holiday season: Due to DOT requirements and Secretary Buttigieg’s pressure on airlines to improve their customer service policies in summer 2022, Southwest was obligated to reimburse passengers for meals, accommodations, and other disruption-related expenses incurred by stranded passengers. Southwest was also obligated to refund consumers for flights the carrier cancelled, regardless of the reason for the cancellation, if the consumers did not wish to accept the alternative offered. As a result of its oversight and investigation, DOT ensured that over $600 million in refunds and reimbursements were provided to Southwest passengers who faced travel disruptions over the 2022 holiday season. Southwest also provided 25,000 miles to each passenger impacted by the meltdown.

The announcement is part of DOT’s ongoing work to hold all airlines accountable to their passengers. Under the Biden-Harris Administration, the U.S. Department of Transportation has returned a record amount of over $3 billion in refunds and reimbursements to travelers, issued the largest-ever penalties against airlines for failing passengers, and is advancing the biggest expansion of airline consumer rights in more than a decade.

The consent order is available here.