Southwest Airlines became the subject of much controversy during the 2022 holiday travel season. An operational meltdown in December 2022 canceled thousands of flights and stranded more than two million passengers across Southwest's network.

On December 18, the United States Department of Transportation (USDOT) issued Southwest a $140 million fine in response to its cancellation of around 17,000 flights last year. Let's look into this move by the USDOT and how America's "most-loved" airline is responding.

Historic Fine

The USDOT's hefty fine on Southwest marks one of the largest fines it has ever imposed. The $140 million amount is thirty times larger than any civil penalty in the USDOT's history. Transportation Secretary Pete Buttigieg said that this penalty is not just about Southwest.

In an interview with NPR's "Morning Edition," Secretary Buttigieg stated, “This [fine] is about the entire industry, sending a signal that you should not be cutting corners - because if you fail your passengers, we will hold you accountable.”

The USDOT's penalty comes as part of a broader consent order that was last updated as of Monday, December 18, 2023. The order is titled "Southwest Airlines - Order 2023-12-11". The USDOT consent order noted that Southwest has paid over $600 million in refunds and reimbursements to consumers who experienced flight disruptions.

However, the Department noted that "Southwest also violated the law on numerous occasions." This refers to Southwest failing to provide prompt or proper refunds to some of its passengers onboard flights that the carrier canceled or significantly changed. This violated 49 U.S.C § 41712, which targets "unfair and deceptive practices." It also violated 14 CFR Part 259, which guarantees "Enhanced Protection for Airline Passengers" during lengthy delays and bolsters airlines' accountability to customers.

Another violation found by the Department is that Southwest "failed to provide prompt flight status notifications for flight disruptions, which harmed numerous consumers..." This violated 14 CFR 259.8, which refers to "notifying passengers of known delays" and, again, 49 U.S.C. 41712 mentioned earlier. Furthermore, the Department determined that Southwest failed to provide adequate customer service assistance to consumers during the widespread flight irregularities, once again violating U.S. 41712.

What Happened with Southwest?

Understanding what was behind Southwest's massive operational meltdown last year is important. Firstly, a major winter storm at the time caused travel disruptions across the country. However, unlike Southwest, most airlines quickly recovered from these disruptions. Many of the issues facing Southwest were blamed on rather "ancient" scheduling technology, making it increasingly difficult for the airline to adjust its schedules and reassign flight crews.

Southwest says it is "pleased" to settle with the USDOT. The meltdown cost the airline $1.2 billion in Q4 2022 and the first two months of 2023. After taxes, the meltdown cost Southwest around $914 million. Most of the $140 million fine will be used to create a new $90 million fund that Southwest will put toward future compensation. Specifically, "future Southwest passengers affected by cancellations or significant delays caused by the airline."

The USDOT has also stated that from now on, if a Southwest flight is delayed more than three hours due to the airline's fault, Southwest will be required to issue all passengers of that flight a $75 flight credit. That includes mechanical issues. As stated by 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."