US Department of Transportation Imposes $2.5M Fines on Airlines for Delayed COVID Refunds

7 months ago Editor

The U.S. Transportation Department has fined Lufthansa, Air France-KLM, and South African Airways $2.5 million for significant delays in refunding passengers for flights disrupted by COVID-19. This action follows prolonged waits and a backlog of over $900 million in refunds owed to customers.

The U.S. Transportation Department (USDOT) announced on Monday that it has imposed a total of $2.5 million in civil penalties on Lufthansa, Air France-KLM, and South African Airways for prolonged delays in issuing over $900 million in refunds to passengers for flights disrupted by the COVID-19 pandemic. This decision comes after thousands of airline customers experienced months-long waits for their refunds.

Of the penalties, KLM and Lufthansa were each fined $1.1 million, but both carriers received a $550,000 credit for processing refunds for non-refundable tickets on U.S. flights. In 2022, Transportation Secretary Pete Buttigieg revealed that the U.S. government had completed ten investigations into delayed pandemic passenger refunds, with another ten pending.

Lufthansa disclosed that, due to the unprecedented surge in refund requests caused by COVID-19, it faced a significant backlog, processing refunds that amounted to the workload of two-and-a-half months daily. From March 2020 to September 2022, Lufthansa issued $5.3 billion in refunds, including $802 million to U.S. customers.

Amidst the COVID-19 pandemic, Lufthansa found itself grappling with an unprecedented influx of refund requests, leading to a substantial backlog. The sheer volume of refund processing equated to handling the workload of two-and-a-half months every day. This surge in demand placed immense pressure on the airline’s resources and systems, resulting in prolonged wait times for passengers seeking refunds for disrupted travel plans.

KLM reported similar challenges, citing staffing and technical issues that resulted in prolonged waits for thousands of customers. Despite these hurdles, KLM claims to have implemented one of the industry’s most customer-friendly refund policies, providing $84.15 million in refunds for U.S. flights.

South African Airways also faced severe delays in processing refunds, exacerbated by its financial struggles and the impact of COVID-19 on its cash flow. USDOT received over 400 complaints about the airline’s failure to issue timely refunds.

Previously, in November 2021, Air Canada agreed to a $4.5 million settlement with USDOT over similar delayed refund issues. USDOT has indicated plans to seek higher penalties for future violations to deter non-compliance with consumer protection rules.