Southwest Airlines to pay $140 Million settlement over 2022 winter cancellations

A hefty $140 million settlement was announced Monday between Southwest Airlines and the U.S. Department of Transportation as a penalty for the 2022 winter service disruption.

The settlement includes new consumer protection measures after nearly 17,000 flights were canceled during Christmas.

According to government officials and industry experts, as another holiday travel season approaches, this settlement is also meant to send a message to other carriers about preparation and investment to avoid disruption.

At Dallas Love Field Monday, a family from Alaska was traveling on Southwest Airlines heading to Florida for a University of North Texas graduation celebration with daughter Victoria Ferguson.

“I got stuck in the storm last year,” she said.

The settlement comes after the Department of Transportation investigation of the 2022 problems with stranded baggage, stranded travelers, and difficulties reaching Southwest ticket agents on jammed telephones and insufficient internet technology.

The company’s crew scheduling software was inadequate to keep up with the required flight rescheduling.  

Southwest Chief Executive Officer Robert Jordan told a Dallas Citizens Council luncheon on Nov. 30 that this winter will be different.

“We’ve worked on hundreds and hundreds of things to ensure that we are ready from more capacity, designing, more people, more technology, and all of those things,” Jordan said.

He said a successful Thanksgiving Holiday with winter weather demonstrated better preparation.

“That included deicing and snow in Denver, deicing and snow in Chicago. So, I just wanted to make sure that you knew that Southwest Airlines is ready for the winter,” Jordan said.

Passenger Ferguson said she was unhappy after her 2022 experience but has already noticed changes.

“I think that they’ve hopefully made a lot of improvements. I’ve seen a lot of improvements. I’ve flown Southwest a few times since the meltdown last year around Christmas time,” she said.

The $140 million settlement is structured to boost consumer protection in the future.

It includes a new $35 million fine and other money already paid in restitution and fines. The largest portion is $90 million to be set aside for future refunds or retribution to customers for delays that are the airline’s fault.

“It’s nice that that is a possibility if something bad happens,” Ferguson’s sister Hannah Hutchins said. “It’s like, ok, we’re going to do something different and try to take care of people, because tickets are expensive.”

KRLD Business Analyst David Johnson said the government wants all the other carriers to get the message.

“What the Department of Transportation is trying to do is get airlines to have compensation for passengers who are inconvenienced or delayed by more than 3 hours when it’s the airline’s fault, not when it’s an act of God,” Johnson said.

Ferguson’s mom, Ann Marie Mabry, said the family from Alaska relies on airline service.

“We count on airline travel to be very robust and it’s really nice to hear about the investment in the infrastructure for Southwest Airlines so it can remain a robust airline,” she said.

Southwest Airlines issued a statement about the settlement Monday:

"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. Southwest appreciates an acknowledgment that we moved quickly and decisively to care for our Customers, that we learned from the event with subsequent investment, realizing a vast improvement toward our resiliency and Customer Experience, and one that allows us to put our entire focus on the future."

Southwest shares the DOT’s goal of delivering the highest standard of service to the traveling public and is grateful to have reached a consumer-friendly settlement that both credits past Southwest compensation that went above and beyond requirements for Customers and incorporates a future commitment for Southwest Customer care with a new industry-leading compensation policy. 

Regarding the terms of the settlement, the civil penalty of $140 million is composed of several pieces:  

• The DOT recognized that Southwest’s response to the disruption—particularly offering 25,000 Rapid Rewards points to impacted Customers—went above and beyond existing requirements and provided substantial value to Customers. In recognition of our efforts, the DOT credited the Company with $33 million of the overall settlement.  
• Also, the settlement accounts for our new industry-leading compensation policy to be implemented by April 30, 2024.  
• The remainder of the agreement will be settled in a one-time $35 million cash payment to be paid across a three-year period to the DOT.  

"We are pleased that we reached an agreement with the DOT that prioritizes our Customers. 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."