DOT fines Southwest up to $140 million over 2022 holiday meltdown

Southwest Airlines will be fined $140 million for violating customer protection laws during its 2022 holiday travel operations failure, the U.S. Department of Transportation announced Monday morning.

It was the highest penalty ever leveraged against an airline for consumer protection violations by a factor of 30, the DOT said, part of a move by the Biden administration to crack down on airlines over unreliable operations, hidden fees and other practices the administration has characterized as anti-consumer.

The fine includes $35 million to be paid to the federal government as a penalty. The rest of the funds will be used toward creating a compensation system for passengers affected by future flight cancellations or significant delays — three hours or more — caused by something within the airline's control. The DOT said the airline must reserve $90 million to issue passengers transferable vouchers worth at least $75 under that system.

The airline received a $33 million credit toward the fine for the Rapid Rewards points it issued last year as an apology to affected passengers. The fine was also offset by $72 million to free up funds for the compensation fund, DOT said, both of which "acknowledges Southwest's effort and will encourage other airlines to follow suit to be proactive during operational disruptions."

Related: Should you worry about another airline meltdown this year? Here's what to know about holiday travel

In a statement, Southwest said it was pleased to have reached a settlement with the DOT surrounding the fine.

"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."

More than two million passengers were stranded during the 2022 episode when Southwest canceled 16,900 flights as it struggled to regain its footing after a severe winter storm swept through several of its main airports, even as other airlines managed to recover their operations once the weather had passed.

Southwest has previously paid more than $600 million in refunds and expense reimbursements to passengers and said that the storm has cost it over $1 billion.

Daily Newsletter

Reward your inbox with the TPG Daily newsletter

Join over 700,000 readers for breaking news, in-depth guides and exclusive deals from TPG’s experts

Email address

Sign up

By signing up, you will receive newsletters and promotional content and agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.

Don't miss: 'I think we're going to win': United CEO says airline is ready for industry's challenges

Over the past year, the airline has spent over $1 billion making improvements across its systems, upgrading software and technology, hiring more staff, purchasing more de-icing equipment, and changing how it manages its network during disruptions.

The airline has pointed to its overall reliability over the past year, including during holidays and major travel weekends, as well as during an IT glitch in April, as proof that its investments are paying off.

Millions of Americans are expected to travel in the coming days for the holidays. While conditions are expected to largely clear up after the East Coast was walloped by a storm on Monday and Tuesday, forecasts can always change.

Be sure to stay with TPG for the latest throughout this holiday travel season.

Related reading:

• Key travel tips you need to know — whether you're a beginner or expert traveler
• The best travel credit cards
• Where to go in 2024: The 16 best places to travel
• 6 real-life strategies you can use when your flight is canceled or delayed
• 8 of the best credit cards for general travel purchases