Southwest Airlines says it expects to be fined for last winter’s meltdown

New York (CNN) — Southwest Airlines is bracing itself for a fine from the US government for last year’s operational meltdown over Christmas that canceled 16,700 flights and left two million passengers stranded.

The carrier said that it “could be subject to fines and/or penalties resulting from investigations by the Department of Transportation,” in a regulatory filing Monday, adding that it’s “currently not able to estimate” how much the fine could be.

Southwest said it was notified last week by the US DOT because the agency had determined that it had “failed to provide adequate customer service assistance, prompt flight status notifications, and proper and prompt refunds,” making a penalty “warranted.”

Southwest has warned investors since January that a fine associated with the meltdown was looming. But this is the first time it had disclosed the DOT’s finding against it.

Last December, a winter storm barreled through the US and disrupted thousands of flights. Although many airlines were able recover relatively quickly, Southwest Airlines didn’t return to normal operations for several days. Crewmembers were left stranded because they were unable to communicate with their dispatchers and schedulers, and the airlines’ legacy technology could not keep up with the rate of changes.

Earlier this year, Southwest released an “action plan” to prevent another nightmare. It calls for increasing the availability of winter equipment and staffing at some airports, investing in technology to help it quickly restart operations during extreme weather, and improving communication and decision-making processes across departments that handle flight operations.

The airline reported it lost $800 million at the end of last year due to the costs and lost revenue associated with the service meltdown. Then it reported it took another $325 million hit to revenue during the first three months of this year due the spillover effect of the meltdown on ticket sales.

The Dallas-based airline is investing $1.3 billion on technology projects this year, about 25% more than it spent in 2019, the last full year before the pandemic.

Southwest’s meltdown caught the ire of its pilot’s union and Congress. The union had previously testified that the operation was held together by “duct tape” and that the airlines’ technology failures were predictable and avoidable because the system has failed multiple times “with increasing frequency and magnitude.”

– CNN’s Chris Isidore contributed to this report.

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