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Future Southwest Airlines Passengers Could Get $75 for Delays Under Settlement

In deal over Christmas 2022 meltdown, $90 million is set aside for future passengers

Travelers wait in line at the Southwest Airlines ticketing counter at Nashville International Airport after flights were canceled in 2022.
Southwest Airlines will pay a $35 million fine as part of a settlement with the Department of Transportation in the wake of delays and cancellations that stranded millions of passengers in December 2022. Here, travelers wait in line at the Southwest ticket counter in Nashville, Tennessee, on Dec. 27, 2022.
SETH HERALD / Getty Images
By

Bobbi Dempsey,

 
AARP
Published December 19, 2023

In the wake of Southwest Airlines’ operational meltdown during the 2022 holiday travel season, future travelers will benefit from the airline’s civil penalty with the U.S. Department of Transportation (DOT).

The airline is required to allot $90 million to compensate passengers in the form of vouchers of at least $75 if they are impacted in the next few years by cancellations or delays within Southwest’s control.

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The settlement, announced Dec. 18, stems from travel nightmares experienced by Southwest passengers during the December holiday season last year. After several major winter storms caused travel headaches across the country, other airlines were able to recover fairly quickly – but Southwest’s widespread cancellations stretched out for days. Before the situation was finally resolved, Southwest had canceled nearly 17,000 flights, leaving more than two million passengers stranded.

The airline was widely criticized for both the system failures that caused the situation to occur and the way in which it handled the backlog of cancellations and stranded passengers.

In a statement released Dec. 18, the DOT said it determined Southwest violated numerous consumer protection laws, including by failing to provide sufficient customer service, failing to alert customers in a timely manner about delays or cancellations and failing to quickly provide refunds. 

The “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,” said U.S. Transportation Secretary Pete Buttigieg in the 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.”

Vouchers earmarked for future inconvenienced travelers

With the $90 million allotment, Southwest is required to issue vouchers, upon request, to passengers whose flight arrives more than three hours late as a result of “controllable cancellations and delays.” The voucher must be for an amount of at least $75, transferable, valid for a period of at least a year after being issued and able to be used for future domestic or international travel on Southwest.

The DOT is requiring Southwest to issue $30 million in vouchers each year for three years, starting April 30, 2024. For any year during that period in which Southwest doesn’t meet the $30 million voucher quota, it will have to pay the U.S. Treasury 80 percent of the difference between the dollar amount of the vouchers it provided and the $30 million required.

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The order said $72 million of the penalty will be offset to be used to fund this voucher compensation process.

The unprecedented settlement amount may provide little comfort to travelers whose holidays were derailed by Southwest issues last year, but experts view it as a reasonable figure.

“There seems to be a broad consensus that the penalty is fair,” says David Slotnick, senior aviation business reporter at The Points Guy, a consumer travel website. “The sheer amount sends a clear message to the airlines: DOT wants airlines to know that it’s serious about consumer protections and airlines’ obligations to their passengers.”

Southwest also will receive a $33 million credit toward the penalty for compensation or incentives it provided to travelers affected by the 2022 meltdown, including the 25,000 Rapid Rewards points it awarded to each impacted passenger.

Slotnick says the airline incurred huge costs for compensation it had already paid out to passengers involved in the meltdown, including the Rapid Rewards points. “It’s worth noting that the fine and the compensation fund is on top of $600 million in refunds and reimbursement that Southwest previously paid to affected passengers.”

In a statement announcing the settlement, the airline said it has worked hard to ensure customers don’t experience similar situations in the future. “We have spent the past year acutely focused on efforts to enhance the customer experience with significant investments and initiatives that accelerate operational resiliency, enhance cross-team collaboration and bolster overall preparedness for winter operations,” said Bob Jordan, president and CEO of Southwest.

“The sheer amount sends a clear message to the airlines: DOT wants airlines to know that it’s serious about consumer protections and airlines’ obligations to their passengers.”

– David Slotnick, senior aviation business reporter at The Points Guy 

“I think DOT is sending a two-part message,” Slotnick says. “The first part is that it will continue to hold airlines accountable when they fail their customers. But the second part is that they see, acknowledge and encourage when airlines respond and proactively take positive actions even before DOT gets involved.”

As far as the $75 vouchers mandated for future inconvenienced passengers, Slotnick notes that this “would be on top of anything else Southwest is responsible for, like refunds, food vouchers or hotel rooms. Other airlines have given more to affected passengers, but sporadically, and never as a blanket policy.”

While this penalty may seem to be an extra incentive for Southwest to do everything possible to prevent a repeat of last year’s holiday travel debacle, Slotnick notes that airlines don’t need any extra motivation to avoid such meltdowns.

“Just as delays and cancellations are inconvenient for passengers, they’re problematic for the airlines, too,” Slotnick says. “Aircraft and crews are left out of position for their schedules, which causes more delays down the line and costs the airline more — in lost revenue if nothing else, let alone refunds, hotel rooms and so on. Airlines are just as eager to avoid delays as passengers, especially an airline like Southwest that’s built on high use of their aircraft and quick turns. The extra vouchers only underscore that.”

Southwest says it has taken steps to prevent a repeat of last year and is confident it will perform much better during this holiday season. AAA projects 7.5 million people will travel by plane during the Christmas and New Year’s travel period from Dec. 23 to Jan. 1. With high passenger volume and experts predicting a winter weather pattern that also could add potential challenges, industry observers and leery Southwest passengers probably won’t need to wait long to see how the airline performs.

Bobbi Dempsey is a freelance writer who has written about a variety of topics including health and entertainment for AARP.org and AARP The Magazine. Her work has also appeared in Parade, The New York Times, Harper’s and other outlets.

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