US fines airlines $2.5m for delaying COVID-19 refunds to travellers

Civil penalties are for significant delays in providing nearly $1bn in refunds owed to passengers.

The United States Department of Transportation (USDOT) says it has imposed a total of $2.5m in civil penalties against Lufthansa, KLM Royal Dutch Airlines and South African Airways.

The civil penalties, the department said on Monday, are for significant delays in providing more than $900m in refunds owed to passengers due to flights disrupted by the COVID-19 pandemic after thousands of airline customers were forced to wait months.

KLM and Lufthansa were each hit with $1.1m in penalties, and both carriers were credited $550,000 for refunds for nonrefundable tickets on US flights, Reuters reported.

South African Airways was ordered to pay $300,000.

In 2022, Transportation Secretary Pete Buttigieg said the US government had completed 10 airline investigations into delayed pandemic passenger refunds and 10 more were pending.

In 2020, thousands of refund requests from Lufthansa passengers on US flights took longer than 100 days to process.

Lufthansa said in a statement it has made all required refunds and the “delay in payment sanctioned by the USDOT is solely due to the historically unprecedented level of refunds during the COVID pandemic.” KLM and South African Airways did not immediately comment.

Lufthansa told USDOT that due to unforeseeable effects caused by the pandemic, it was forced to cancel thousands of flights and was inundated with refund requests, putting it at risk of insolvency. It said the refund requests were “equivalent to the workload of two and a half months coming in every day”.

The German carrier said from March 2020 to September 2022, it provided $5.3bn in refunds, including $802m to US customers.

KLM told USDOT in June 2020 that it began offering refunds to all consumers holding nonrefundable tickets on disrupted US flights but said “staffing and technical issues and the large number of refund requests led to thousands of consumers waiting for many months”.

KLM said it has adopted one of the most customer-friendly ticket refund and exchange policies in the industry and provided $84.15m in refunds to customers on US flights who were not entitled to refunds.

USDOT said it had more than 400 complaints that state-owned South African Airways had failed to make timely refunds. The airline was on the verge of being liquidated before it entered a form of bankruptcy protection in 2019, and its finances worsened as the COVID-19 pandemic restricted air travel and depleted its already minimal cash flow.

Air Canada in November 2021 agreed to a $4.5m settlement to resolve a USDOT investigation into claims that thousands of air passenger refunds were delayed.

In January 2023, USDOT said it planned to seek higher penalties for airlines and other companies that broke consumer protection rules, saying they were necessary to deter future violations.