Dive Brief:

• The Department of Transportation has levied a $140 million civil penalty against Southwest Airlines for violating consumer consumer protection laws when it grounded 16,900 flights and left more than 2 million passengers stranded during the holidays last year.
• The penalty is historic in size — 30 times larger than any the DOT has previously issued for consumer protection violations. It comes in addition to the $600 million in refunds and reimbursements already paid out by Southwest at the direction of the agency. 
• “Today’s 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,”  Transportation Secretary Pete Buttigieg said in a prepared statement.

Dive Insight:

The DOT is holding up Southwest’s massive fine as proof that taking care of customers is a requirement for airlines. The move, Buttigieg said, should “put all airlines on notice to take every step possible to ensure that a meltdown like this never happens again.”

The agency found multiple consumer protection violations over the course of its investigation into airline’s service last year. Southwest failed to provide adequate customer service assistance for stranded passengers, leading to hours-long queues to connect with agents and dropped calls, DOT found.

The airline also failed to provide prompt flight status notifications, with many customers never receiving notifications in any form and others receiving inaccurate ones, according to the DOT. As a result, many passengers did not learn their flights had been canceled until after they arrived at the airport.

The DOT’s investigation also an audit of Southwest’s refunds and reimbursements system and found that many customers were not promptly refunded. Southwest eventually rectified these issues once they were identified.

The $140 million penalty establishes a $90 million compensation system for passengers affected by significant delays and cancellations. The airline will also pay $35 million to the Department of the Treasury over the next three years.

The DOT already gave Southwest $33 million in credit toward the penalty due to its compensation efforts, including providing 25,000 points for its Rapid Rewards loyalty program to impacted customers, a company spokesperson told CX Dive in an email. The airline is also implementing a new compensation policy by the end of April 2024. 

Earlier this month, Southwest President Bob Jordan vowed that the holiday fiasco “will never happen again.” Already, the airline has taken steps to prevent a repeat of the holiday disaster. It is investing more than $1 billion in IT upgrades and appointed a new chief customer officer. Southwest also added new perks to its loyalty program as part of its emphasis on better CX.

The airline achieved an on-time performance of 97.3% on Thanksgiving Day, with no cancellations or diversions, according to Southwest’s spokesperson. The company carried more than 5 million travelers during the Thanksgiving period, including a record 615,000 on Nov. 26.

“We are pleased that we reached an agreement with the DOT that prioritizes our customers,” the spokesperson told CX Dive. “Since the disruption, Southwest has taken many steps to boost customer care and operational resiliency, including operational enhancements that are reflected in the airline’s disruption action plan completed earlier this year.”