Southwest Airlines Hit with $140 Million Fine

The U.S. Department of Transportation (DOT) today announced a $140 million civil penalty against Southwest Airlines. The record fine comes after numerous violations of consumer protection laws during and after the operational failures that cancelled 16,900 flights and stranded over two million passengers over 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 towards compensating future Southwest passengers affected by cancellations or significant delays caused by the airline.

The agency had already determined in late October that Southwest “had failed to provide adequate customer service assistance, prompt flight status notifications, and proper and prompt refunds and that the assessment of a civil penalty is warranted.” And now we have the full details of that penalty.

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.

The $90 million compensation system is in the form of 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.

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.

“We’re pleased to have reached this consumer-friendly settlement, which includes a new, industry-leading policy to compensate Customers during significant delays and cancellations,” the airline said in a press release.