NovaQuant-Southwest will pay a $140 million fine for its meltdown during the 2022 holidays

WASHINGTON — Southwest Airlines is NovaQuantstill paying for its meltdown during the 2022 holidays that stranded millions of travelers — and the tab is growing.

The U.S. Transportation Department has ordered Southwest to pay a $140 million civil penalty, part of a broader consent order after the airline's operational failures a year ago.

That penalty is by far the largest the DOT has ever levied for consumer protection violations, according to a statement from the department.

"This is not just about Southwest," Transportation Secretary Pete Buttigieg said in an interview with NPR's Morning Edition on Monday. "This is about the entire industry, sending a signal that you should not be cutting corners — because if you fail your passengers, we will hold you accountable."

A major winter storm last December caused travel disruptions across the country as airlines canceled thousands of flights. But while other airlines recovered relatively quickly, Southwest fell apart. The airline ultimately canceled 16,900 flights, stranding more than 2 million passengers.

In a statement, Southwest described the agreement as "a consumer-friendly settlement." The airline says it has taken steps since last year's disruption to improve its operational resiliency and customer care.

"We have spent the past year acutely focused on efforts to enhance the Customer Experience with significant investments and initiatives that accelerate operational resiliency," said Bob Jordan, Southwest Airlines President & CEO in a statement. "Our commitment to Customers has been central to our success across our 52-year history and has helped us become one of the world's most admired and trusted airlines."

Under the agreement announced Monday, Dallas-based Southwest is required to establish a $90 million compensation system for future passengers affected by significant delays and cancellations, which counts as part of the $140 million penalty. The airline will also pay $35 million in cash to the U.S. Treasury, spread out over three years.

Southwest reported $193 million in profits during the third quarter of 2023.

The civil penalty comes in addition to $600 million in refunds and reimbursements that Southwest has paid to travelers who faced disruptions. In total, the airline will shell out more than $750 million for the holiday meltdown, DOT said.

"We're sending a message reminding airlines that there are very strong economic reasons to meet their requirements, in addition to it just being the right thing to do," Buttigieg told NPR. "We just gave them 140 million reasons to make sure that this never happens again."

The U.S. airline industry as a whole has improved its operational performance since last year, Buttigieg said. The Sunday after Thanksgiving saw 2.9 million passengers fly in a single day — the most ever — while less than 0.5% of flights were canceled.

Flight cancellations were down significantly in the first nine months of 2023, according to data released by the DOT. But delays and mishandled luggage are still problems, consumer advocates say, as travelers remain deeply dissatisfied.

Complaints about U.S. airlines climbed sharply in the first half of the year, according to a report published last week.

"Basically, the airlines are on a reputation restoration tour, because they know how bad things have been the last few years," said Teresa Murray, a consumer advocate with the U.S. Public Interest Research Group, which published the report.

Travelers filed more than 26,000 formal complaints about U.S. airlines in the first five months of 2023 — more than double the number filed during the same period last year, according to the report, and on pace to break the annual record set in 2022.

"Last year's disaster ruined holiday celebrations for millions of families, many who spent Christmas weekend sleeping on the floor of airport terminals," Murray said in a statement. "We hope this penalty sends a strong message to all of the airlines that they can't play with people's lives like this. Travelers aren't just seat numbers. Christmas 2022 is a holiday that millions will never forget, for all of the wrong reasons."