Southwest Airlines Hires Former Congressman Ahead Of Potential DOT Investigation: What Investors Should Know

Zinger Key Points
  • Southwest Airlines cancelled over 16,000 flights in December.
  • An outdated system was part of the blame by the company and the sector and could now be the subject of an investigation.

Southwest Airlines Co LUV made headlines for all the wrong reasons during the 2022 holiday season. Keeping thousands of people from holiday gatherings and seeing family members generated tons of negative press for the airline and could be the subject of an investigation.

This latest move by Southwest may be to get ahead of trouble.

What Happened: Outdated software for Southwest and winter storm Elliot were blamed for the cancellation of more than 16,000 flights by Southwest Airlines in December.

While other airlines were impacted by the storm, the old software and systems in place from Southwest drew ire from passengers, family members and the Department of Transportation.

The cancellations were called “unacceptable” at the time by the Department of Transportation. Pete Buttigieg, the Transportation Secretary, said that he expected Southwest to take action to make things right or his department would “take action to hold Southwest accountable.”

The flight cancellations and refunds had an impact on the company’s fourth-quarter earnings, which were recently reported.

A new report from The Hill shows Southwest could be looking for a new person to help lead the lobbying efforts in case of possible investigations.

Former U.S. Representative Jerry Costello (D-Ill.) was hired by Southwest according to the report and a lobbying registration signed by Southwest on Jan. 10, 2023.

Costello served in the U.S. House from 1988 to 2013 and didn’t seek reelection in the 2012 election. Costello is now a for-hire lobbyist.

Most notable in the hiring is Costello’s former roles in Congress. Costello was the previous chairman of the House Transportation and Infrastructure Aviation Subcommittee.

Related Link: Southwest Airlines Flight Cancellation Chaos, DOT Steps In 

Why It’s Important: The Department of Transportation had previously spoken out about the cancellations by Southwest.

Senator Maria Cantwell (D-Wash.) said she would make sure Southwest is investigated and consumers see “how to strengthen consumer protections and airline operations.”

Cantwell is the Chairwoman of the Senate Commerce, Science and Transportation Committee, which oversees funding for the Federal Aviation Administration.

The FAA is working on a reauthorization package, which lawmakers will look to pass in 2023. The package could provide more funding for the sector, including Southwest. The package could also include tougher rules on cancellation.

Costello is expected to help Southwest lobby on the reauthorization package.

Southwest has spent over $800 million on refunds, reimbursements and wages due to the holiday cancellations.

Costello is the first outside lobbying hire by Southwest since 2018 according to The Hill. In 2022, Southwest spent $1.1 million on lobbying, trailing many of its peers, including American Airlines Group Inc AAL, which led the way by spending $4.9 million.

Southwest also recently hired consulting firm Oliver Wyman to help with its scheduling system. The consulting firm is also expected to help reset priorities for the company.

LUV Price Action: Southwest shares are up 0.79% to $35.76 on Tuesday versus a 52-week trading range of $30.20 to $50.10. Southwest shares are down 20% in the last year.

Read Next: Where Southwest Airlines Stands With Analysts 

Photo: Courtesy Southwest Airlines

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Posted In: GovernmentNewsPoliticsTravelTop StoriesGeneralairline stocksCongressDepartment of TransportationFAAFederal Aviation AdministrationJerry CostellolobbyingPete ButtigiegSouthwest Airlines
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