The agency issued large fines to the air travel providers while ordering refunds to be dispersed to passengers.
The U.S. Transportation Department (USDOT) recently announced that it has imposed $2.5 million in civil penalties against three airlines, informing Lufthansa, the Air France unit KLM Royal Dutch Airways, and South African Airways they must pay out the $900 million in refunds owed to passengers due to pandemic-related flight disruptions. This announcement follows an earlier one that the airlines have been required to pay substantial refunds to address flight cancellations or other schedule changes during the pandemic.
Transportation Secretary Pete Buttigieg emphasized the importance of consumer rights, saying, “When a flight is canceled or significantly changed, you shouldn’t have to fight with the airline to get their money back. We are using all of our tools to improve air travel for everyone.”
Lufthansa was ordered to pay $775 million in refunds, while KLM was required to pay $113.3 million, and South African Airways, $15.2 million. The civil penalties assessed against the three amounted to $1.1 million each for Lufthansa and KLM, and $300,000 for South African Airways. The penalties are in response not only to the disruptions themselves but to what USDOT described as “extreme delays” in providing reimbursements for these issues.
In 2020, Lufthansa struggled to process thousands of refund requests from passengers on U.S. flights, with some requests taking longer than 100 days. A company spokesperson stated that the airline has been in constant communication with USDOT to address problems with handling a “historically unique level of refunds required during the pandemic.”
Between March 2020 and September 2022, Lufthansa provided $5.3 billion in refunds to its passengers, including $802 million to U.S. customers. Despite these efforts, the volume of requests put the airline at risk of insolvency. Lufthansa reported processing an amount equivalent to the workload of “two-and-a-half months of refund requests daily.”
KLM began offering refunds in June 2020 to all consumers holding non-refundable tickets on disrupted U.S. flights. However, the airline faced staffing and technical issues that, combined with the large number of reimbursements to address, resulted in thousands of customers waiting for months on end to get their money back. KLM has since adopted one of the industry’s most customer-friendly ticket refund and exchange policies, providing $84.15 million in funds to date.
USDOT received over 400 complaints that South African Airways had failed to complete reimbursements. It was already on the verge of liquidation before entering bankruptcy protection in 2019, and the pandemic depleted its minimal cash flow.
The enforcement action against the three airlines is not an isolated incident. In November 2021, Air Canada agreed to a $4.5 million settlement to resolve a similar investigation. This settlement was part of the USDOT’s broader effort to ensure airlines comply with consumer protection laws, and in January 2023, the agency announced plans to seek higher penalties for entities that violate these protections. The department emphasized that the move was necessary to deter airlines from continually withholding funds.
COVID-19 pandemic has significantly disrupted many facets of global commerce, and the abrupt halt in international travel, coupled with widespread lockdowns and stringent safety measures, created a ripple effect that caused the aviation industry to face unprecedented challenges. USDOT’s actions underscore its commitment to holding airlines accountable for their obligations to passengers despite these unforeseen events, sending a strong message that it will ensure protections are upheld even amid widespread crises.
Sources:
US Department Penalizes 3 Airlines With $2.5M In Fines For Slow COVID-19 Refunds (msn.com)
SAA is fined R5.6 million over delayed refunds (msn.com)
Lufthansa Made To Pay $775 Mn In US Flight Refunds | Barron’s (barrons.com)
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