Southwest hit by record $140 million fine for holiday service meltdown in 2022

Washington (CNN) — The federal government is fining Southwest Airlines $140 million for last year’s historic, 10-day-long holiday meltdown that stranded more than 2 million travelers.

The Department of Transportation’s announcement of its largest-ever civil penalty comes about one year after cascading issues at Southwest led to the cancelation of nearly 17,000 flights. Those flights made up nearly half of Southwest’s flight schedule during the busy holiday travel period.

The agency says it levied the fine “for numerous violations of consumer protection laws during and after the operational failures,” including not communicating with passengers, failing to provide adequate customer service and not refunding passengers quickly enough.

Southwest said it was “pleased” to reach the settlement with the DOT and that it is committed to delivering the highest quality of customer service. It said the agreement includes “a new, industry-leading policy to compensate customers during significant delays and cancellations.”

Southwest has already paid $600 million in refunds and reimbursements to passengers, the DOT said.

The company said the service meltdown cost it nearly $1.2 billion between the fourth quarter of last year and the first two months of 2023. In additional to customer compensation, the airline faced additional labor costs and lost revenue that continued into February. On an after-tax basis, it reported the service meltdown cost $914 million.

In a statement, Transportation Secretary Pete Buttigieg said the fine “sets a new precedent” while sending a message to other carriers. “If airlines fail their passengers, we will use the full extent of our authority to hold them accountable,” he said.

Most of the fine will be used to create a new $90 million fund that will compensate “future Southwest passengers affected by cancellations or significant delays caused by the airline,” according to the DOT. Only $35 million of the total amount will be paid to the US Treasury.

“How you bounce back from a weather event is under your control and this sends a message that every airline has to make the proper investments in having a good enough system and good enough customer service,” Buttigieg told CNN. “When the unexpected happens … you can quickly get back on your feet, take care of your passengers and get people where they need to be.”

Southwest had said it expected to face a significant fine from the DOT.

Labor unions at Southwest, including those that represent pilots and flight attendants, blamed many of the problems on “antiquated” scheduling technology that made it more difficult for the airline to adjust its flight schedule and to have crews available to fly the rescheduled flights.

Airline executives admitted the scheduling system was a problem at a February congressional hearing on the meltdown, and Southwest said it had already taken steps to fix the scheduling issue. But its executives testified the airline had made other mistakes that led to the flood of cancellations, including a lack of sufficient de-icing equipment at the Denver and Chicago Midway airports.

“Let me be clear. We messed up,” Southwest Chief Operating Officer Andrew Watterson told the hearing. “In hindsight, we did not have enough winter operations resiliency.”

Southwest CEO Bob Jordan promised in a speech last week at at a Wings Club luncheon that the airline had improved its internal controls and investments in technology to ensure that the problems would not reoccur in the future.

Related: Southwest continues to cancel flights, leaving thousands stranded