The use of the photo was obviously a mistake of one person, the webmaster. The airline recognized their mistake and remedied it quickly
Usage fees for that image as it was used (small placement, brief impression on a web site and for a a selective audience) is not worth $2300. Web usage is notoriously low yielding. This image was not misused by TIME magazine folks.
Though, if you REALLY wanted to make yourself look like an ass and pretty much blackball yourself from any possible future work with the likes of Southwest, by all means... sue to your hearts content. Chances are you will lose more money than you make.
The way Paul handled it was a best-case scenario. Not only did he get a formal apology and monetary compensation, but he opened a professional dialogue with them. They obviously like his work, you never know, he may get a call in the future from them. Or, maybe Paul could actively strike a deal with the web site to supply them with imagery for an agreed price.
Lemonade from lemons I'd say.