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US imposes $2.5 million in airline penalties over delayed COVID refunds

Published 06/03/2024, 10:25 AM
Updated 06/03/2024, 12:25 PM
© Reuters. An Air France Airbus A350 airplane lands at the Charles-de-Gaulle airport in Roissy, near Paris, France April 2, 2021. REUTERS/Christian Hartmann

By David Shepardson

WASHINGTON (Reuters) -The U.S. Transportation Department (USDOT) said on Monday it has imposed $2.5 million in civil penalties in total against Lufthansa, Air France unit KLM Royal Dutch Airways and South African Airways.

The civil penalties, the department said, are for significant delays in providing more than $900 million in refunds owed to passengers due to flights disrupted by the COVID-19 pandemic and after thousands of airline customers were forced to wait months. Of the $1.1 million penalties imposed on KLM and Lufthansa, each carrier was credited $550,000 for refunds for non-refundable tickets on U.S. flights.

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

In 2020, thousands of refund requests from Lufthansa passengers on U.S. 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 COVID effects, it was forced to cancel thousands of flights and inundated with refund requests, putting it at risk of insolvency. It said it was getting "equivalent to the workload of two-and-a-half months coming in every day" of refund requests.

The German carrier said between March 2020 and September 2022, it provided $5.3 billion in refunds, including $802 million to U.S. customers.

KLM told USDOT in June 2020 it began offering refunds to all consumers holding non-refundable tickets on disrupted U.S. flights but said "staffing and technical issues and the large number of refund requests led to thousands of consumers waiting for many months."

KLM says it has adopted one of the most customer-friendly ticket refund and exchange policies in the industry and provided $84.15 million in refunds to customers on U.S. 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 pandemic restricted air travel and depleted its already minimal cash flow.

© Reuters. An Air France Airbus A350 airplane lands at the Charles-de-Gaulle airport in Roissy, near Paris, France April 2, 2021. REUTERS/Christian Hartmann

Air Canada in November 2021 agreed to a $4.5 million 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 others that broke consumer protection rules, saying they were necessary to deter future violations.

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