UPDATE 1-Southwest US Flight Cancellation Investigation Looks At Scheduling Practices

(Adds comments from Southwest Department of Transportation, USA)

By David Sheparson

WASHINGTON, Jan 25 (Reuters) – The US Department of Transportation (USDOT) said on Wednesday it is investigating whether Southwest Airlines engaged in “unrealistic flight scheduling” in December when it was affected by a systems collapse and canceled thousands of flights.

A “rigorous and thorough investigation into the Southwest Airlines holiday debacle that stranded millions” is in its early stages, the department said in a statement.

Southwest canceled more than 16,000 flights in the week ending Dec. 29 after its crew scheduling software couldn’t handle personnel changes. Congress is scheduled to hear on the cancellations.

The investigation was previously announced, but USDOT revealed Wednesday that it is reviewing whether “Southwest executives engaged in unrealistic flight scheduling that, under federal law, is considered an unfair and deceptive practice.”

Southwest said it “will cooperate with any inquiries or requests from government oversight or elected officials.” The airline defended its schedule by saying that its “holiday flight schedule was carefully designed and delivered to our customers backed by a robust plan to operate it and extensive staffing.”

The airline added that “as we worked to recover, our systems and processes were stressed by several days of flight cancellations at 50 airports in the wake of an unprecedented storm.”

Southwest will report earnings on Thursday and has warned that the collapse will result in a pre-tax hit of up to $825 million from lost revenue.

USDOT added that it “will leverage the full extent of its investigative and enforcement power to ensure consumers are protected and this process will continue to evolve as the Department learns more.”

USDOT has promised to take action if Southwest does not adequately reimburse customers and has sent thousands of complaints it received to the airline.

The department said this month that it will seek higher penalties for airlines and others who violate consumer protection rules and will hold airlines “accountable and deter future misconduct by seeking higher penalties that are not seen simply as a cost of doing business”.

USDOT fines for airline consumer violations are typically a fraction of the potential penalties. Last year, Air Canada agreed to a $4.5 million settlement to resolve a USDOT investigation into refund delays.

USDOT initially sought $25.5 million; Air Canada received $2.5 million credited in passenger refunds and paid only $2 million in penalties. (Reporting by David Shepardson; Editing by Grant McCool)