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Southwest Airlines Told Imaginary Seats Don't Count

Stocks in this article: LUV

NEW YORK (TheStreet) -- Southwest Airlines (LUV) was fined $300,000 by the U.S. Department of Transportation for two incidents in which the airline advertised fares on seats that did not exist.

The latest incident occurred in October, when Southwest ran a television ad claiming that flights to Chicago, Los Angeles and New York from Atlanta were only $59.

The issue arose when customers called to book the discounted seats and Southwest claimed that it was a mistake, tickets to those cities were never intended to be part of the Atlanta fare sale.

In the eyes of the Transportation Department, which announced its ruling on Thursday, Southwest's ads were deceptive and violated rules on advertising of airline fares.

"DOT's full-fare advertising rules were put into place to ensure that consumers are not deceived when they search for plane tickets," Transportation Secretary Anthony Foxx said in a statement.

The rule essentially requires that any advertisement for tickets state the entire price to be paid and offer a reasonable number of seats at that price.

"As soon as we became aware of our mistake, we pulled all incorrect advertisements off the air," Southwest spokeswoman Brandy King said in a statement, adding that the airline did honor the $59 fare.

Regulators levied a $200,000 penalty for the October advertisements and imposed a $100,000 fine that had been suspended last July upon Southwest's pledge to correct its violations.

Last July, the DOT claimed Southwest had violated rules during a Valentine's Day "Luv a Fare Sale" promotion. The airline advertised one-way, nonstop fares "for $100 or less." The DOT asserts, however, that Southwest "failed to include a reasonable number of seats available in a significant number of city-pair markets in the fare sale."

Southwest is known as a low-cost airline that skimps on luxury in order to get passengers from point A to point B for as cheaply as possible. Now fliers may have to be more wary of deals that appear too good to be true.

Shares of Southwest were recently trading at $26.56, up 12 cents. The stock has soared 41% so far this year, compared with a gain of 4% for the Standard & Poor's 500 Index.

>>Read More: Is Google Crazy for Selling a PC at $350? Definitely Not

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>>Read More: Mark Zuckerberg Bets Big on the Bay Area

At the time of publication, the author had no position in the stock mentioned.

Follow @macroinsights

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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