Southwest Airlines Company LUV faces a record $140 million penalty from the U.S. Department of Transportation (DOT) for multiple consumer protection violations during the 2022 holiday season.
This penalty is 30 times larger than any previous DOT penalty for consumer protection violations.
This comes on top of over $600 million in refunds and reimbursements the airline has already provided to affected passengers under the DOT’s directive.
Related: ‘Penalty Is Warranted’ – DoT Notifies Southwest Airlines Over Holiday Flight Fiasco
The airline’s operational breakdown during the holiday period resulted in the cancellation of 16,900 flights, stranding over two million passengers. According to the regulatory, this enforcement action is part of DOT’s ongoing work to hold all airlines accountable to their passengers, advancing the biggest expansion of airline consumer rights.
The comprehensive investigation by the DOT scrutinized Southwest’s handling of the crisis. This involved reviewing thousands of documents, conducting in-depth audits, and examining consumer complaints. The findings revealed significant failures in customer service, timely flight status updates, and proper processing of refunds, leading to this hefty penalty.
In a proactive step, Southwest is now required to set up a $90 million compensation fund. This fund will provide vouchers to passengers impacted by future delays and cancellations within the airline’s control.
The total financial impact on Southwest Airlines surpasses $750 million, with the bulk being directed toward passenger compensation. This includes refunds, reimbursements, rapid rewards, and future compensation. U.S. Transportation Secretary Pete Buttigieg emphasized the importance of this action, stressing that airlines must prioritize passenger care and be prepared to face severe consequences for failures.
Price Action: LUV shares are trading lower by 0.38% at $28.90 premarket on Monday.
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