Southwest Airlines will pay a $35 million fine as part of a $140 million settlement to resolve a federal investigation into awhen the airline canceled thousands of flights and stranded more than 2 million travelers during the holidays.
Most of the settlement will go toward compensating future passengers, which the U.S. Department of Transportation sees as an incentive for Southwest to avoid repeating last winter's disaster.
The government said the assessment was the largest it has ever imposed on an airline for violating consumer protection laws.
Transportation Secretary Pete Buttigieg said Monday in a post on .
Kris Van Cleave, CBS News national and senior transportation correspondent, says the settlement “is both a message to other airlines of what the DOT considers violations of consumer protection laws involving customer notifications, refunds and assistance Customer service.
“It also comes as (the department) has been aggressively regulating and pressuring airlines in terms of performance and customer treatment. The DOT is in the process of creating new consumer protection regulations that could require airlines to compensate airlines. travelers due to long delays similar to those in the European Union.”
Southwest said it was “grateful to have reached a pro-consumer settlement” giving the airline credit for compensation it had already provided to customers. The airline said it “learned from the event and can now focus all its attention on the future.”
The assessment stems from nearly 17,000 flights canceled a year ago, beginning when a winter storm paralyzed Southwest operations in Denver and Chicago and then escalating when a crew rescheduling system couldn't keep pace with the chaos.
Even before the deal, the country's fourth-largest airline by revenue said the crisis cost it more than $1.1 billion in refunds and refunds, additional costs and lost ticket sales for several months.
Southwest's alleged mistakes
The government said in a consent decree dated Friday that Southwest “violated the law on numerous occasions,” including by failing to help customers who were stranded at airports and hotels, leaving many of them scrambling for other flights.
Many who called the airline's overwhelmed customer service center received a busy signal or were left on hold for hours.
Southwest also failed to keep its customers informed about canceled and delayed flights, failing to comply with a requirement that airlines notify the public within 30 minutes of a change. Some said they never received a notice via email or text message and were unable to access Southwest's website.
The government also accused Southwest of not providing refunds quickly enough. People whose refund requests to a special Southwest website contained errors were not told to correct the errors, they simply did not receive the money. Others did not receive immediate refunds for things like pet fees and boarding upgrades that went unused due to canceled flights, according to the department.
In the consent order, Dallas-based Southwest disputed many of the Transportation Department's findings and said only a small percentage of refunds were issued late, but the company said it signed the agreement only to resolve the matter.
The airline's responses
Southwest said the 2022 storm that produced record cold temperatures, blizzards and power outages just days before Christmas created “unforeseen operational challenges.” The airline said it quickly began reimbursing travelers for meals, hotels and alternative transportation and also distributed frequent flyer points.
Southwest has added de-icing equipment and will increase staffing during extremely cold temperatures at key airports, CEO Robert Jordan said.
Southwest had previously agreed to make more than $600 million in refunds and refunds. Still, the airline revealed in October that federal officials found its efforts were insufficient and that the airline could face a civil penalty for its service to customers.
The details of the agreement
The agreement states that, in addition to the $35 million fine, Southwest will receive $33 million in credit for compensation already awarded, primarily for awarding 25,000 frequent flyer points each, worth approximately $300, to the affected customers. The company promised to give away $90 million in vouchers to future travelers.
The government values the vouchers at 80% of their face value, so Southwest received a $72 million credit for future vouchers, not the full $90 million that will be distributed $30 million a year between April 2024 and April 2027. If Southwest pays less than promised, will owe the government a fine of 80% of any shortfall.
In exchange for Southwest agreeing to the fine and other measures, the government stopped short of deciding whether the airline announced a flight schedule it knew it could not meet. Buttigieg had raised that accusation publicly.
The Transportation Department said it reviewed thousands of consumer complaints, visited Southwest facilities and met with top company officials during the investigation.
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