Southwest under the microscope

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Jan 03, 2023 View in browser   By Alex Daugherty and Tanya Snyder With help from Oriana Pawlyk Quick fix — Southwest Airlines returns to normalcy following a holiday travel meltdown, but expect continued scrutiny from Congress and DOT. — The Treasury Department says that new sourcing requirements for electric vehicles probably won't take effect until March but that the tax credit will (without those strings attached). — The Biden administration announced new Covid testing requirements for travelers coming to the U.S. from China. IT'S TUESDAY: You're reading Morning Transportation, your Washington policy guide to everything that moves. As always, send tips, pitches, feedback and song lyrics to adaugherty@politico.com. You can find all of us on Twitter: @alextdaugherty, @TSnyderDC and @Oriana0214. WENT OFF THE GRID FOR THE HOLIDAYS? We got you — here's everything you missed while you disconnected from work and connected with loved ones. "We two have paddled in the stream / from morning sun till night / the seas between us Lord and swell / since the days of auld lang syne." Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. Driving the Day EYES ON SOUTHWEST: Southwest Airlines' flight operations returned to relative normalcy by Dec. 30 and remained stable throughout the New Year's holiday after an operational reset that meant thousands of canceled flights. But expect members of Congress from both parties who are returning to Washington this week to probe exactly what went wrong. In addition, DOT Secretary Pete Buttigieg said his agency "will mount an extraordinary effort" to ensure that Southwest issues refunds and determined that the airline's woes were not related to winter weather, a factor that gives passengers more favorable treatment. LOOKING FOR ACCOUNTABILITY: While Buttigieg wrote Southwest CEO Bob Jordan to call the meltdown "unacceptable" and noted on Twitter that DOT "set a new record for fines penalizing refund violations," a formal punishment is likely to take some time. In November, DOT announced $7.25 million in fines, along with more than $600 million in refunds, for six airlines for violating rules intended to protect passengers facing canceled flights and require millions to be paid in refunds. But five of those airlines were foreign and Southwest was not among the offenders. MORE FINES : Since the November announcement, DOT fined three additional airlines: Canadian-based Swoop and Air Canada Rouge, along with the private charter jet service Aeronexus. Swoop was the only one of the three airlines fined for failing to issue timely refunds, while Air Canada Rouge was fined for tarmac delays and Aeronexus was fined for operating flights in the U.S. without authorization. The three fines totaled $480,000, and DOT said on Monday to expect "issue additional order(s) with [a] civil penalty of more than $1 million in January 2023." OTHER ACTIONS: Expect Jordan to face congressional inquiries in the coming months and calls from some lawmakers to legislate against further consolidation of the airline industry. And a reminder that Southwest was the first U.S. airline to resume shareholder dividends after a congressional ban on the practice, instituted for airlines that accepted billions in pandemic relief funds, expired in October — which isn't likely to play well at hearings. WORTH NOTING: A coalition of state attorneys general along with anti-monopoly group the American Economic Liberties Project have been pushing for DOT's absolute authority to regulate airlines to be busted up and partially shared with the FTC. The proposal is likely to get fresh attention now, especially with an FAA bill actively being drafted. Automobiles TREASURY USES LIGHT TOUCH ON EV GUIDANCE: The Treasury Department signaled its willingness to give maximum flexibility to automakers seeking to qualify for the new electric vehicle tax credits, and the move quickly attracted both praise and serious blowback. NO STRINGS: In interim guidance released Dec. 29, Treasury said new sourcing requirements for critical minerals and battery components in electric vehicles won't take effect until new guidance is issued, likely in March — but the tax credit would still take effect without those strings attached. Sen. Debbie Stabenow (D-Mich.), a senior member of the Senate Finance Committee, said that Treasury's move was "a step in the right direction" to ensure that the sourcing requirements lead to more auto jobs in the United States. And Joe Britton, executive director of the Zero Emission Transportation Association, said that a quicker implementation of the rules just set companies up to fail. "What you want to have happen is to give companies an achievable standard," he said. Now the blowback: Sen. Joe Manchin (D-W.Va.), who was instrumental in drafting the new requirements, said he'd fight Treasury on its decision to start implementing the tax credit without the sourcing rules for battery components and minerals, Tanya reports. "The Treasury Department has known since August that they needed to release proposed guidance on the battery material and components," Manchin said in a statement. He accused Treasury of bending to the will "of the companies looking for loopholes." Mixed reviews: The Treasury Department also adopted "an expansive definition of which countries have a 'free trade agreement' with the United States," a move that "could help some overseas automakers qualify for at least a portion of the credit that favors U.S. manufactured vehicles," Doug Palmer reports. That's making the European Union happy, along with a flexible interpretation of a separate tax credit for clean commercial vehicles that "could provide some opportunities for overseas manufacturers through dealerships that lease cars to consumers." The EU is still not wild about the new sourcing requirements, though, whenever they come into effect. At the White House NEW TESTS: The Biden administration announced new testing requirements for travelers coming to the U.S. from China — a response to soaring Covid infections in China and a sign of increased worry about the potential emergence of new variants, David Lim and Phelim Kine report. Beginning Jan. 5, anyone older than 2 years old arriving from China, Hong Kong or Macau will need to show a negative result from a Covid-19 test taken within two days of their flight. CHINA WOES: The move comes after the Chinese government ended its strict Covid-zero policy — hinged to mass testing, tracing and lockdowns — on Dec. 7 following mass protests in November fueled by anger about the strategy. Since then, the Chinese government has stopped publicly releasing data about infections, narrowed the definition of what constitutes Covid deaths and has downplayed anecdotal reports of a surge in Covid fatalities. REMOTE WORK: President Joe Biden signed the $1.7 trillion 2023 omnibus appropriations bill Dec. 29 from St. Croix in the U.S. Virgin Islands. Bloomberg reported that "staff sent the bill to the president for his signature on a regularly scheduled commercial flight." Aviation WAIT AND SEE: Denver Airport CEO and FAA administrator nominee Phil Washington was asked on CNN whether or not he will be renominated to the FAA post after Congress declined to move forward with his nomination by the end of the year amid GOP opposition. His response? "We will see what happens." NOT ENOUGH: NTSB said Ethiopian authorities' report on the 2019 crash of an Ethiopian Airlines Boeing 737 MAX, which has yet to be released, did not take all of its recommendations into account when determining probable cause and other items, Oriana reports. In comments responding to the report by Ethiopia's Aircraft Accident Investigation Bureau, NTSB suggested its probable cause findings place too much weight on a new anti-stall system known as MCAS and a sensor that fed that system faulty data, without also citing other contributing factors. The Autobahn – "EPA and Army finalize rule establishing definition of WOTUS and restoring fundamental water protections." EPA. — "Electric vehicles: What to watch for in 2023." POLITICO Pro. — "Southwest Airlines says holiday meltdown will 'certainly' hit fourth-quarter results." CNBC. — "Racing the bomb cyclone on a 13-hour drive from Maryland to Chicago." The Washington Post. — "One of world's most crowded cities gets first mass-transit rail." Bloomberg. — "Why New York State insists that the Penn Station area is 'blighted.'" The New York Times. — "POLITICO Pro Q&A: Rep. Garret Graves, ranking member, House Transportation Aviation Subcommittee." POLITICO Pro. — "Congress keeps watch on West Coast port negotiations." POLITICO Pro. — "Flight disruptions: Florida hit by air traffic control issue; Denver by freezing fog." CNN. On the calendar Nothing on our radar! Did we miss an event? Let MT know at transpocalendar@politicopro.com.    Follow us on Twitter Kathryn Wolfe @kathrynwolfe Alex Daugherty @alextdaugherty Oriana Pawlyk @Oriana0214 Tanya Snyder @tsnyderdc   Follow us

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