The US Department of Transportation's (DOT) Office of Aviation Consumer Protection has fined Southwest Airlines (WN, Dallas Love Field) USD140 million after it found the LCC had breached consumer protection laws during winter storms in late 2022 that caused it to cancel 16,900 flights over 11 days, stranding over two million passengers.
Docket DOT-OST-2023-0001, filed on December 15, 2023, details the consent order and follows the office reaching a settlement with Southwest Airlines, who were keen to avoid litigation. The carrier agreed to the settlement's terms and the penalties while not agreeing with the DOT's findings.
The DOT found Southwest breached 49 U.S.C. § 41712, which prohibits an air carrier, foreign air carrier, or a ticket agent from engaging in an unfair or deceptive practice in air transportation or the sale of air transportation. While contested by Southwest, the investigation found the airline had violated the law on numerous occasions, including failing to provide prompt or proper refunds to some of its passengers for delayed or cancelled flights during Winter Storm Elliott that disrupted flights across the United States between December 21, 2022, and January 2, 2023.
The DOT's investigation also found that Southwest failed to provide prompt flight status notifications for flight disruptions to some passengers, breaching 14 CFR Part 259 regulations and 49 U.S.C. § 41712. The investigation also determined that the carrier failed to provide adequate customer service assistance to consumers during the storm, saying it was unfair and caused substantial harm to passengers.
"Consumers gain no countervailing benefit from a lack of customer service assistance," the filing reads. "The practice appears to benefit only the carrier in reduced staffing and IT costs at the expense of consumers. In addition to being an unfair practice, the airline's practice of not providing adequate call centre assistance is deceptive when the carrier advertises the call centre to consumers as an available means of obtaining customer service assistance and fails to provide the service within a reasonable period."
The DOT made similar adverse findings about flight notification delays and tardiness in processing some refunds. "The Department has long considered it an unfair and deceptive practice where a carrier's failure to obtain and pass onto consumers up-to-date and accurate information is caused by the carrier's own procedural shortcomings," the filing says.
Southwest co-operated with the investigation, allowing the investigators onsite access to conduct audits, review complaints, and hold meetings with management. Southwest says it complies with all laws and regulations. The LCC says Winter Storm Elliott was unprecedented and disagrees that it violated 49 U.S.C. § 41712 and certain 14 CFR Part 259 regulations. The airline says it entered into the penalty agreement with the DOT for settlement purposes only.
The airline "strongly objects" to the DOT's findings that it engaged in deceptive practice concerning its cell centre operations during the storm. It says its call centres are staffed 24/7 by thousands of people but was overwhelmed by the sheer number of people calling during the 11 days. Southwest says it sent proactive emails and texts to passengers impacted by delays and cancellations and "worked tirelessly" to process refunds. The airline says it processed all valid refund requests, with only a small number processed late. The LCC says it learned a lot from Winter Storm Elliott and is now better positioned to handle similar events in the future. 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," said Southwest CEO and President Bob Jordan after the consent order was made public.
Southwest has agreed to the financial penalty to avoid potential civil penalties from any prosecutions. It has also agreed to implement an "industry-leading" policy whereby it will issue a USD75 voucher (on request) to passengers if their flight is delayed by three hours or more due to a reason within Southwest's control. The DOT says this will serve as a deterrent to similar future unlawful practices by Southwest and other US airlines. The DOT has also agreed to credit Southwest Airlines USD33 million of the total penalty in recognition of past compensation that was above and beyond existing requirements.
The remaining penalty is broken down into a USD35 million payment to the US Treasury, split across two payments of USD12 million each due on January 31, 2024, and 2025, and a final USD11 million payment due on January 31, 2026. Southwest will offset the remaining USD72 million penalty against future passenger compensation above and beyond existing requirements. "We order Southwest Airlines to provide USD90 million in vouchers from April 30, 2024, to April 29, 2027 (USD30 million per year), for which it will receive USD72 million in offset. The transferrable vouchers must be USD75 or more and useable for any future domestic or international travel on the airline for at least 12 months from the date of issue. If Southwest issues less than USD30 million per year in vouchers, they must pay the US Treasury 80% of the difference.
