Southwest Fights $48M TSA Fine, Court Questions Refund Rules

Southwest Airlines has argued before the Fifth Circuit Court of Appeals, seeking to overturn a $48 million penalty imposed by the Transportation Security Administration (TSA).

The case centers on TSA audits, which concluded that Southwest failed to issue cash refunds of the 9/11 Security Fee to passengers whose flights were canceled and whose travel credits later expired unused.

Dispute over refund responsibility

TSA argues that airlines are required to refund the fee directly to passengers and later reconcile those refunds with TSA through reduced remittances.

Southwest counters that federal law, specifically 49 U.S.C. § 44940 and 49 CFR 1510, assigns refund authority to TSA for any mistake or overpayment involving the security fee, which the airline collects on behalf of the federal government rather than as airline revenue.

Southwest also argues that issuing travel credits at the time of cancellation satisfied its obligation, and that the law does not require an additional cash refund if a passenger allows a credit to expire unused.

Court skepticism

TSA rejected Southwest’s position that credits were sufficient, even when passengers chose not to use them. Judges openly questioned TSA’s position, including concerns about why airlines should be responsible for refunding federal funds. One judge also reacted skeptically when TSA acknowledged it lacked the operational capacity to handle refunds directly.

Southwest further pointed to TSA regulations, noting they do not explicitly require airlines to issue cash refunds of expired credits related to the security fee.

Latest update

As of January 12, 2026, the court has not issued a ruling. Southwest maintains confidence following the hearing, citing judicial skepticism toward TSA’s interpretation.

The case also follows earlier regulatory scrutiny of Southwest.

In December 2025, the US Department of Transportation forgave the final $11 million of a separate $140 million penalty tied to the airline’s 2022 holiday operational meltdown. After Southwest met reliability benchmarks for four consecutive quarters, DOT concluded the carrier had made meaningful improvements and waived the remaining fine to encourage continued progress.

Photo by David Syphers on Unsplash