Pete Buttigieg and the Southwest Airlines Meltdown

The Southwest Airlines meltdown over the holidays resulted in more than 15,000 flights canceled and upwards of one million Southwest passengers stranded.

Pete Buttigieg

Senators Ed Markey (D-Massachusetts) and Richard Blumenthal (D-Connecticut) called on Southwest to “fairly compensate passengers whose flights were canceled, including not only rebooked tickets, ticket refunds, and hotel, meal, and transportation reimbursement, but significant monetary compensation for the disruption to their holiday plans.”

“Southwest is planning to issue a $428 million dividend next year – the company can afford to do right by the consumers it has harmed,” Blumenthal and Markey said. “Southwest should focus first on its customers stranded at airports and stuck on interminable hold.”

But will they? 

And who will hold their feet to the fire?

In most industries, if federal regulation fails, then the state Attorneys General can step in. Or customers can take to state courts to file lawsuits against the industry seeking justice. 

But not against the airline industry. 

The airline industry has a sole regulator – the Secretary of Transportation. Federal law preempts state law.

When it comes to airline regulation, all the power is concentrated in one office – the office of the Secretary of Transportation.

Airline consumer advocates were frustrated with the previous Secretary, Elaine Chao. She refused to meet with them. But Biden’s new Secretary, Pete Buttigieg, gave the advocates a ray of hope.

A number of consumer advocates met with Buttigieg in July 2021, about six months after he took office.

“We were very happy with the meeting,” William McGee of the American Economic Liberties Project told Corporate Crime Reporter in an interview earlier this month. 

“Secretary Elaine Chao never once met with consumer advocates. We talked to him by Zoom. It lasted about an hour. He was everything you see on television. He was intelligent, articulate, he had good questions for us, he was taking notes, he seemed concerned.”

“We came out of that meeting feeling very good. We thought – wow, this is a new sheriff. This is not Elaine Chao.”

“Now it’s been a year and a half since that meeting. And while he has talked a great deal, he has not cracked the whip on this industry. If you are lax in regulation, the industry will take full advantage of it. And they have.”

If Buttigieg had done his job, what would he have done with respect to the Southwest meltdown?

“He’s been in office for two years now. He’s had two years to exert his influence over the industry. We are disappointed in his performance. He has not in any effective way regulated this industry. He has not penalized and fined the airlines for their bad behavior.”

“In the recent Southwest meltdown, more than one million passengers were stranded. Those are numbers we have never reached before by one single airline in one event. I was not surprised by this meltdown. Secretary Buttigieg has not fined one airline one dollar for their bad behavior in logging record numbers of flight cancellations in 2022. We have been saying for a year and a half now that we have seen a level of cancellations that we have not seen in the past.”

“I’m very comfortable saying this because I did this for a living, I was in flight operations. I’m an FAA licensed aircraft dispatcher. I canceled flights. I rescheduled flights. I diverted flights. I delayed flights. I did that every day.”

“What happened in the last 18 months is a different kind of animal. The airlines have been scheduling flights and then canceling. And there is ample evidence that they didn’t have the ability to operate the flights they were scheduling.” 

“Pete Buttigieg has had time to clamp down on this. To this point, he has not conducted a thorough investigation.” 

“We have called on the Department to open an investigation into why these flights are being scheduled when it was clear that there was a shortage of pilots. The airlines didn’t have the ability to operate these flights. It was a cumulative thing. It didn’t just happen last week.”

“The airlines have been overscheduling for over a year now. There has been no thorough investigation by the Department of Transportation. And there hasn’t been so much as one dollar in penalties for any U.S. airline.”

“The first thing he should have done is launch an investigation into what has been going on in the last eighteen months. They could look at the aircraft scheduling records, their crew scheduling records to see if they had sufficient staffing to operate the flights that they were selling tickets for and collecting money on. None of that was done.”

“Second, Pete Buttigieg has broad authority under the Unfair and Deceptive Practices Act. And that allows him to move against the airlines. I would argue that the scheduling and canceling of flights is both unfair and deceptive.”

“Third, he could have moved against other airline industry actions. And he has chosen not to fine the airlines and instead engage in long and cumbersome rulemaking. Let’s take refunds as an example.” 

What’s the current law on refunds?

“If the airline cancels a flight, for any reason, you are entitled to a full cash refund. It doesn’t matter if it’s an act of God, or because of short staffing. It doesn’t matter the reason. For any reason, if an airline cancels a flight in the United States, you are entitled to a full cash refund. All caps cash.”

“Often, when the major airlines cancel a flight, they will send you a message saying – your flight has been canceled, would you like to have a credit on our airlines? That’s not what the Department of Transportation regulations say.” 

“In March of 2020, when Covid hit, I and other consumer advocates met with the Department of Transportation and started talking about refunds for these cancellations. Since then, we have met a total of twelve times. Since March 2020 until a month ago, in twelve separate meetings, we asked them to address this problem of airlines not paying refunds.”

“The Department of Transportation’s own database bears this out. In 2020, we reached numbers we have not seen before. The number of complaints filed with the Department in 2020 was 57 times the number of complaints that were filed in 2019. These were numbers that we had never seen before.”

“We kept asking – what is happening with refunds? We were told – the Department of Transportation is investigating the refund issue. We asked – why is it taking two and a half years to investigate when your own database shows where the problems are?”

“Then in November, Secretary Buttigieg announced what he called a record fine on a refund case. To say that we were tremendously disappointed is an understatement. The six airlines that were fined were Frontier and five foreign airlines. Frontier has two percent of the market in the U.S. They deserve to be fined.”

“But why is it that the worst offenders didn’t get fined? United Airlines had more than 10,000 complaints against it in 2020, twice as many as the next nearest U.S. airline. The other major airlines were not fined. When we asked the Department about this, they said that investigations into the other airlines were closed. These major airlines didn’t receive so much as a slap on the wrist.”

“And remember, for every person who files a complaint with the Department of Transportation, it’s estimated that there are 20 to 25 who don’t file. This is obviously a widespread systemic problem. Senator Ed Market (D-Massachusetts) has estimated that at the peak there was something like $10 billion in unpaid refunds.” 

“The Department of Transportation is saying – we fine the worst offenders and the others have paid refunds. But we find it hard to believe that the largest offenders, the ones who generated the most complaints, did not deserve to be punished.”

“For us, that was a disturbing move. We saw that if you are an airline executive in the United States, you can get away with some awful behavior. You are not going to be punished for it.” 

“Secretary Buttigieg is asking the airlines to improve their behavior. But it’s all about the carrot and not about the stick. There has not been a single U.S airline in the last 18 months that has been fined so much as one dollar for all of these massive cancellations for scheduled flights that they didn’t have the ability to operate.”

“Southwest went into the holiday season with a fragile system, with IT and technology tools that should have been upgraded 20 to 30 years ago. Call centers melted down.”

“If you have a Secretary of Transportation who does not punish the airlines when they act terribly, then we should not be surprised when they continue to behave terribly.”

Why isn’t Buttiegieg doing the right thing?

  “I can’t answer that,” McGee said. 

Last year, 38 Attorneys General called on Congress to empower them to enforce consumer protections for airline travelers. And now McGee has drafted legislation that would do just that.

The law would strip the federal government of its exclusive regulatory authority and give states authority to go after the airlines.

(For the complete Interview with William McGee, see page 12.)

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