Southwest Airlines is being required to set aside $90 million to compensate fliers who deal with certain delays and cancellations under a new settlement announced on Dec. 18.
The U.S. Department of Transportation (DOT) ordered Southwest under the settlement to establish the compensation system.
Southwest must pay a $75 voucher to customers who arrive at their destination three hours or more after the time they were originally scheduled to arrive, the department said.
The voucher will be good for future travel with the airline.
“This industry-leading benefit will ensure that Southwest passengers impacted by any future significant disruptions will receive not only flight rebooking, hotels, and food during the delay but also timely compensation from Southwest due to the inconvenience,” the department said in a statement.
Southwest said in a statement that it is “introducing a new, industry-leading policy that provides additional compensation (in the form of a voucher of $75 or greater), upon request, during controllable cancellations and delays that cause customers to reach their final destinations three or more hours after their scheduled arrival.”
The new system will be implemented starting April 30, 2024, according to the airline.
The requirement stems from a settlement reached following an agency investigation into Southwest cancellations and delays, which spiked around Christmas in 2022.
Many of the passengers who dealt with the problems in the 2022 holiday season have already received compensation. More than $600 million in refunds and reimbursements have been given, according to the U.S. government. Impeached passengers also received 25,000 miles.
The department’s probe involved looking through tens of thousands of pages, carrying out audits at Southwest’s headquarters, reviewing consumer complaints, and speaking with third parties such as airports.
Investigators found that Southwest violated consumer protection laws, including a law that prohibits engaging in unfair or deceptive practices.
Southwest, for instance, did not adequately provide call center assistance when it canceled or changed flights, which unfairly impacted customers, according to a consent order entered in the case.
Many stranded passengers in 2022 received busy signals when they called into Southwest’s 24/7 customer service line, while others were placed on hold for hours. The investigation “found that Southwest’s call center was overwhelmed, which, at times, led to a full call center queue and a busy signal upon calling Southwest’s customer service telephone number,” the order stated. Other calls were “garbled or choppy” while some were dropped, with callers being placed back on hold.
Southwest also did not provide prompt refunds to people who saw their flights canceled or delayed, the investigation found. One of the ways Southwest accepted refunds was through a newly created website, but if the information put into the site was not fully correct, such as the letter l being in place of the number 1, then requested refunds would not be processed, the investigation found. The customers who requested refunds that were deemed as including erroneous information were not notified that their requests were not being processed.
“Southwest did not obtain contact information from consumers requesting refunds through the Microsite and made no attempt to contact consumers whose requests included an error. Also, Southwest’s Microsite provided no error message or other type of communication alerting the consumer that there could be a problem. This led thousands of consumers to believe that they had submitted a refund request that would be promptly processed within the time frames required by law when this was not occurring,” the consent order stated.
The DOT said: “After DOT’s audit identified the issue, the airline subsequently refunded these consumers. In addition, thousands of passengers were not provided prompt refunds for optional service fees, like pet fees or upgraded boarding, that they purchased but were never able to use due to significant delays or flight cancellations.”
Southwest was hit with a $140 fine for the violations. Of that amount, $35 million must go to the U.S. Treasury. Another $33 million was credited for the miles that Southwest gave to passengers. The rest is going towards the compensation system.
“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,” U.S. Transportation Secretary Pete Buttigieg said in a statement. “Taking care of passengers is not just the right thing to do—it’s required, and this penalty should put all airlines on notice to take every step possible to ensure that a meltdown like this never happens again.”
The government said the settlement was part of its pressure on airlines to improve customer service, which has led to guaranteed free rebooking and meals across the 10 largest airlines in the United States.
Southwest said in the order it disagreed that it violated any laws and was not admitting any violation of laws or conceding to the DOT’s position.
“Southwest states that it sincerely regrets the inconvenience caused to all customers who were affected by the operational disruption that occurred following Winter Storm Elliott,” the company said. “Southwest emphasizes that it takes very seriously its responsibility to comply with all laws and regulations, and it has fully cooperated with the DOT’s investigation of this operational disruption.”
