Jan 6, 2023 - Economy

Southwest's meltdown could end up being good for travelers

Illustration of an airplane ground crew member in front of a hundred dollar bill.

Illustration: Shoshana Gordon/Axios

A combination of regulatory threats and competitive pressure in the wake of Southwest Airlines' disastrous holiday meltdown could make it easier for travelers to assert their rights when travel plans go wrong.

Why it matters: Nearly 1 in 4 U.S. flights was canceled or delayed between January and September 2022, according to the Department of Transportation.

  • There's no more vivid example of how bad things can get than Southwest's recent debacle, which affected nearly 1 million travelers at the height of the holiday travel season.

What's happening: Southwest's recent failure has reignited discussions about a proposed Airline Passengers' Bill of Rights.

  • Sen. Richard Blumenthal (D-Conn.) is re-upping a bill he introduced in 2021 that would essentially ensure that airlines give refunds and compensation for extra costs caused by delayed or canceled flights and lost luggage.
  • "Rental cars, hotel, meals, no questions asked, money back," Blumenthal said, per CBS News.

Meanwhile: Transportation Secretary Pete Buttigieg is threatening to crack down on Southwest if the airline fails to take care of affected customers.

  • "No amount of financial compensation can fully make up for passengers who missed moments with their families that they can never get back — Christmas, birthdays, weddings, and other special events," Buttigieg wrote in a recent letter to Southwest CEO Bob Jordan.
  • "That's why it is so critical for Southwest to begin by reimbursing passengers for those costs that can be measured in dollars and cents."

Where it stands: Southwest says it has largely resumed its normal schedule, with a 99.1% completion rate over the New Year's weekend.

  • The airline is still working to reunite customers with their lost luggage and to reimburse passengers caught up in the chaos.
  • In a "goodwill gesture," Southwest is offering 25,000 "Rapid Rewards" points worth $300 toward a future flight — on top of other refunds and reimbursements it has already paid out.

Zoom in: For Southwest passengers like Zack Griff, a senior writer at travel site The Points Guy, such payouts can add up.

  • He got a refund for his canceled Southwest flight, reimbursement for an alternate flight, a $250 travel voucher, plus the 25,000 rewards points, he tells Axios.
  • Essentially, he was compensated four times for Southwest's screw-up.

The big picture: The Department of Transportation had already been turning up the heat on airlines in the wake of travel disruptions last summer.

  • It's proposing new rules that would enhance airline refund policies and require carriers to be more transparent about surprise add-on fees.
  • The agency also published a new customer service dashboard allowing travelers to see which services and amenities they should receive from particular airlines if they experience delays or cancellations caused by problems within airlines' control, like mechanical or staffing issues.
  • DOT officials say the pressure it's putting on airlines has inspired many to step up their game. Some are now guaranteeing meals and hotel accommodations when a flight is delayed or canceled, for example.

The bottom line: Refunds are costing the industry big bucks.

  • From January 2020 through September 2022, airlines issued $29.3 billion in cash refunds — just under $1 billion per month, according to Airlines for America.
  • Cash refunds through the first nine months of 2022 amounted to $8.3 billion, more than all refunds issued in 2021.
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