White House Threatens Fines As Southwest Airlines Doles Out Flyer Points To Compensate Canceled Flights

The White House on Tuesday said it is keeping a close eye on Southwest Airlines (NYSE: LUV) as it tries to resolve the kerfuffle brought about by a wave of flight cancellations over the holidays, leaving numerous passengers stranded at airports.

“Southwest Airlines failed its customers, point blank,” press secretary Karine Jean-Pierre told reporters on Tuesday.

Jean-Pierre stated that the Department of Transportation will monitor to guarantee that Southwest makes its clients whole by covering the costs of rebooking, hotel rooms, meals, and transportation to and from hotels when applicable. These expenses are covered by the airline’s prior agreement with its customers.

“The Transportation Department is watching,” she added. “They’re monitoring this very, very closely to ensure that this all happens. And we’ll see fines for Southwest if it doesn’t cover a cost.”

Jean-Pierre added that while every major airline encountered the same issues as a result of the pre-Christmas storm, all but Southwest were able to recover quickly and without large cancellations. The airline blamed technical issues with tools that create employee schedules at the time of massive flight cancellations.

To compensate, Southwest is giving slighted customers 25,000 frequent-flyer points as a “gesture of goodwill,” which it says are worth more than $300 in flights. The airline included the offer in a letter from CEO Bob Jordan, which also served as a second apology for the incident.

Passengers booked on flights from December 24 to January 2 will receive the points compensation, but the airline did not disclose how many.

“I know that no amount of apologies can undo your experience,” Jordan wrote, adding that the airline is working “with great urgency” to process refunds, retrieve missing luggage, and address claims for compensation of stranded guests’ costs.

Adding to the airline’s problems, one of the affected passengers filed a lawsuit against Southwest for breach of contract. The class-action suit, filed Friday in federal court in New Orleans, claims Southwest did not provide passengers with alternate flights or prompt refunds when the carrier was forced to halt more than half of its aircraft last week to reset operations.

According to the lawsuit, Eric F. Capdeville of Marrero, La., purchased two tickets on Dec. 27 for himself and his daughter to fly from New Orleans to Portland, Oregon, with a connection in Phoenix. Capdeville then discovered his flight was one of hundreds canceled before departing. Further on the suit, he said that he had no way of getting to Portland, where his booked stay was nonrefundable.

Instead of another flight or a refund that could have helped him arrange alternative transportation, Southwest offered him “a credit for use on a future flight,” according to the lawsuit.

Customers who choose not to travel are entitled to a refund if their flight is canceled for any reason or has a “significant” delay or schedule adjustment. Southwest’s tickets, on the other hand, include a contract of carriage that requires the firm to either provide passengers the option of taking the next available flight at no additional charge or provide them with a refund.

The lawsuit is calling on anyone slighted by the cancellations to come forward and join the class action.

Employee union representatives blamed the company’s reliance on antiquated technology and recent failures to replace internal systems as the root source of difficulties. Last week, Jordan recognized that the storm uncovered vulnerabilities that he promised to address.

Southwest last traded at $33.92 on the NYSE.

Information for this briefing was found via The Washington Post, The Hill, CTV News, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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