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If Southwest Was In Europe Would They Be Shelling Out Over $1B In Compensation?

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Southwest Flight Delay Compensation

Southwest Flight Delay Compensation

You hear that? That is the sound of Southwest destroying whatever credibility they had built up with their customers over the course of decades. They did it in a matter of a week. I have been doomscrolling Twitter looking at the baggage piling up, the terminal long lines for the help desk and people sharing their horror stories. Many of our readers have been right in the middle of it, and that makes me terribly sad. This is the time of the year that should bring families together and be filled with holiday cheer. That has been replaced with stress, financial burden and a worst nightmare scenario for most people.

You know what really irks me though? It is the fact that they don’t have to give their customers anything even as their system has completely failed them. They are not required to give them a hotel room, food or compensation. They probably will give them some of these things proactively, but that is if the customers can actually reach someone. I compare that to winning the lotto right now. Nothing is guaranteed though and many won’t pursue it anyway. They will end up spending a ton more money to fly with someone else, Southwest has no interline agreements after all, or rack up PTO days and hotel bills waiting it out. They may have to eat their prepaid hotel etc. if they were on their way to a trip they saved up for and looked forward to all year.

All of this got me to thinking, what if Southwest was in Europe? How much would this cost them?

My Fuzzy Southwest EU261 Math

Let’s do some back of the napkin calculation fun here and see how unprecedented this would be, and how much the liability SHOULD be for Southwest. What would EU261 cost them if it were in effect?  If anything comes of this hopefully it is the US Government growing a pair, and keeping the lobbyists at bay long enough to put in proper protections for their constituents. Yes, Washington…you actually work for US!

Yesterday, Southwest cancelled 2,909 flights and today they cancelled another 2,522 already (it is only 9AM).  That doesn’t include everything they cancelled since Christmas and what they will cancel the rest of the week. Let’s call it 15,000 flights when it is all said and done. Since they have to take the time to do this whole reset thing, and are telling people they won’t get out till Saturday at the earliest. Dang, 15,000 in total may be low. Although, to be fair, some of these cancellations are people getting doubled up. I also don’t want to hear about weather causing this, this goes way beyond a two day storm.

The EU261 law gives compensation based on distance traveled. The amount ranges from $250 for anything less than 932 miles, $400 if between that and 2175 miles and $600 if above 2175 miles. The amounts are in euros but since they are pretty much equal right now I just swapped it over to dollars.

Southwest Rapid Rewards Performance Business Card

Crunching The Numbers

Let’s make this easy and average it at $325 per flight, since Southwest has a lot of shorter flights. Each plane can fit 156 passengers on average. So here is the very basic estimate math:

15,000 flights X 156 passengers per (averaged across their fleet) X $325 per passenger = $760,500,000

That is three quarters of a billion right there. We haven’t even gotten into lost baggage claims, incidental expenses and the rest that is required to be offered by airlines under EU261.  That would have to push the number over $1 billion in total. Sit back and think about that for a minute, it is a massive number. That is what the DOT should fine the airline at and then send to everyone affected. Instead they will likely hit them with a fine that is a small fraction of that. Southwest will probably “take care of their customers” by sending out some $200 expiring vouchers as an apology. Just watch! I mean the DOT fined airlines $7 million for withholding refunds customers were due. And, that was after they got their government hand out. Don’t hold your breath here.

Final Thoughts

I hope something good comes from this. This meltdown has gone viral and mainstream in a way never before. It may actually get enough push back that the government has to finally seriously consider consumer protections for air travel. If it doesn’t happen now I have my doubts it ever will.

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Mark Ostermann
Mark Ostermann
Mark Ostermann is a father, husband and miles/points fanatic. He left the corporate world after starting a family in order to be a stay at home dad. Mark is constantly looking at ways to save money and stay within budget while also taking awesome vacations with his family. When he isn't caring for his family or taking a weekend trip, Mark is working towards his goal of visiting every Major League Baseball ballpark.

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17 COMMENTS

  1. They aren’t going to just offer you the “travel insurance” without raising your cost. That’s the point. You’re going to pay for it either way — on the front end or the back end.

    • You aren’t following here Kevin…
      While that is true, to an extent, it also requires the airlines actually being penalized for mistakes vs now where we pay out and they pay nothing. The insurance companies do.

      That would lead to them being more proactive since they don’t want that ding if they can avoid it. Costs us the same either way but now they are actually involved with it. It will lead to better planning and innovation on their point to make money off the potential downside. Right now there is no incentive for them.

      I know your hate runs deep so this is the last I’ll say on it and say have a great life. We won’t have to deal with each other anymore – thankfully

    • At least people are compensated with cash, rooms and food. Southwest passengers got none of the above…

      Worlds better

  2. “That is the sound of Southwest destroying whatever credibility they had built up with their customers over the course of decades.”

    I have learned from experience that people will continue flying with them as long as they have cheap prices. Just look at Jetblue who have cancelled and delayed way more flights than anyone else in the last 2 years and people still fly with them.

    And my sisters Jetblue flight 2 months ago which was cancelled because of “weather” was also on a day when no other airline had a weather issue.

    • That is true to a point for sure. But they will have to drop their prices to get there as well for some. They will lose a chunk of their most loyal customers which will be replacement for bargain chasers so a losing proposition for them still

      • Can relate. Had JB flight delayed this past spring for no reason it seemed. Next flight is not with JB. No need for loyalty in this industry.

    • Yeah, I doubt anything will come out of that. The government works for corporations in this country, not for the people. The same thing happened to SW in October 2021 when it cancelled thousands of flights. Did they change their processes? Of course no.

      • That is why having a law like EU261 would help imo (not that the Gov would do it) because it would force them to increase hiring, update systems and be more prepared to avoid the downside of the payouts. At least how it worked in the EU.

    • Well, given that their TTM Net Income is sitting at $827mm, such a payout would nearly return them to just above post-covid levels of un-profitability.

      You want these kinds of payouts for when SW employees decide not to work, or when mechanical equipment fails, prepare to shell out more money at check-in. Gone will be your “bags fly free” policy. Gone will be the “choose any seat that’s open (that isn’t a middle seat).”

      And if you’re thinking, “Just take it out of their ‘lobbying’ budget,” according to opensecrets.org, SW has only paid out $750,000 in lobbying in 2022. Down from their 20 year average of just about $1mm.

      So, if you want (all of the) cake, and to eat (all of) it too, be prepared for some “robbing peter to pay paul” financing. Or, if I can use another over used cliche: “there’s no such thing as a free lunch.”

      SW’s reliability problem has in an HR problem. Once they fix that, (hopefully) reliability will return. It’s either that or, SW goes bankrupt, and we’re one step closer to a three-headed oligopoly. Give it another decade (or global pandemic, or great recession) and it’ll be a duopoly.

      • It is already in place in Europe. Are their fares that much higher? Because I see cheaper flights to Europe than I do to Florida. And if they knew something like this could be coming maybe they would update the IT that they should have done ages ago and what was the real cause of this situation…

        • 1) are we talking “budget airlines” like Ryanair or EasyJet? Either way, there isn’t an airline equivalent in Europe that offers “free checked bags” and “picking your seat for free,” much less a “free carry-on bag.” If you add those things in, you’re ticket on EasyJet wont be all that different from a “main airline” like AF/KLM, BA, SAS, Lufthansa, et al.

          2) Flights CAN be cheaper in Europe relative to the US if all you’re looking at is distance traveled. But that has a lot to do with the difference in demographics of Europe. Most of Europe is population dense (lots of not-to-far from each other population dense townships/municipalities/cities). This allows “budget airlines” to get local government subsidized access to smaller airports. Much like SW and Love Field in Dallas, European budget airlines Wizzair, EasyJet, and RyanAir are able to negotiate lucrative contracts to “the next town over” which really isn’t that far away via good public transit, inter-city bus systems, and rail–something lacking in the US, simply because there’s a lot of unoccupied space between say, Tampa and Orlando. It wouldn’t make sense to fly into Tampa for a Disneyworld trip, unless you planned to book a rental car. But flying into Verona to see Venice is very achievable in Europe.

          3) What IT program was going to tell them half their staff isn’t gonna want to come in to work during inclement weather? What IT system intuitively knows half their ground crew is going to claim “being sick?” What IT services would have helped SW anticipate mechanical failure of de-icing trucks?

          • So one airport’s ramp employees calling off leads to a complete shut down for a week and that isn’t on old, archaic IT that has a manual process?

            Tell me another airline that would have thrown up their hands and said see you next week while we reset because our system can’t handle this? Come on now…

            There are have been warnings of this for years with smaller episodes. They have the money and decided not to invest in it. They should owe out the nose for that because them being cheap cost their customers undue hardship by the millions. Unprecedented doesn’t begin to explain how monumentally they failed.

          • Tom 2 Mark 0

            Tom’s basic point is invariably correct: sure, you can have what amounts to travel insurance from the government, but you are going to pay the premium with every ticket bought. Maybe you’ll see it in increased fares, maybe you’ll see it in diminished benefits… but you’ll see it somewhere. The airlines aren’t printing money, there isn’t that much meat on the bone.

          • The difference is it is travel insurance the airlines have to reimburse you for. That pain will create them being more innovative, invest in better systems, hire more workers, not oversell flights as much etc. etc. If you buy it yourself they don’t care if they strand you. This brings the pain mutually between the two parties, as it should be. If you fail your duty then you should have to pay when that failure is within your control.

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