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Passenger Refund Delays Lead to $2.5 Million Penalties for Airlines

Lufthansa, KLM and South African Airways were alleged to have significantly delayed reimbursing more than $900 million collectively to disrupted passengers

by Samir Kadri

June 10, 2024

Photo: Lufthansa, Airbus A350-900. Courtesy of Lukas Souza / Unsplash

The U.S. Department of Transportation (DOT) has imposed significant civil penalties amounting to $2.5 million on Lufthansa, KLM, and South African Airways due to their prolonged delays in issuing refunds to affected passengers.

According to the DOT, the fines were levied against the three airlines for their substantial delays in reimbursing over $900 million in refunds to passengers for flight disruptions during the COVID-19 pandemic.

Numerous customers endured extensive waiting periods, with many left uncertain about the status of their refunds. This move by the DOT reaffirms its commitment to ensuring fair treatment of passengers by airlines, with almost $4 billion now recovered by passengers in refunds and reimbursements.

Photo: Lufthansa, Airbus A350-900. Courtesy of Munich Airport

Specifically, Lufthansa and KLM must refund customers $775 million and $113.3 million, respectively, while South African Airways has been directed to provide $15.2 million in refunds.

Additionally, the two European airlines have been fined $1.1 million each, and South African Airways must pay the U.S. Treasury $300,000.

U.S. Transportation Secretary Pete Buttigieg underlined that passengers should not have to struggle to obtain their refunds when flights are canceled or significantly altered, and the administration is dedicated to holding airlines accountable for failing to fulfill their refund obligations.

In an effort to improve air travel for all passengers, the DOT announced in May the mandatory provision of automatic cash refunds to passengers owed, along with measures to curb surprise and expensive airline fees, potentially saving consumers “half a billion dollars every year in hidden and surprise junk fees.”

Photo: Boeing 787-9 Dreamliner. Courtesy of KLM.

Lufthansa attributed the initial delays in processing refunds to the unprecedented refund requests during the COVID-19 pandemic. The German airline stated that it has since completed all required refunds, clarifying that the delays were due to the enormous influx of refund requests.

KLM and South African Airways have not yet responded publicly following the announcement of the fines.

In June 2020, KLM informed the DOT that it had commenced issuing refunds to consumers with non-refundable fares on U.S. flights, but logistical challenges resulted in significant delays.

The DOT revealed that it has received over 400 complaints alleging that financially strained South African Airways has failed to expedite refunds promptly.

The African airline has been facing severe financial difficulties since 2019, when it entered bankruptcy protection, and the impact of COVID-19 further exacerbated its challenges by severely limiting air travel and depleting its monetary reserves.

The DOT had previously announced its intention to prioritize consumer protection in air travel in January 2023. The recent imposition of substantial penalties underscores its commitment to following this promise.