SAA, Lufthansa, KLM fined $2.5m in airline penalties by the US over delayed Covid-19 refunds

 The US transportation department (USDOT) said on Monday it had imposed $2.5m in civil penalties in total against SAA, Lufthansa and Air France unit KLM Royal Dutch Airways.

The civil penalties, the department said, were for significant delays in providing more than $900m 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 $1.1m penalties imposed on KLM and Lufthansa, each carrier was credited $550,000 for refunds for non-refundable tickets on US flights.

In 2022, transportation secretary Pete Buttigieg said the US 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 US flights took longer than 100 days to process.

Lufthansa said in a statement it had 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 did not immediately comment while SAA said it would issue a statement on Tuesday.

Lufthansa told USDOT that due to unforeseeable Covid-19 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 $5.3bn in refunds, including $802m to US customers.

KLM told USDOT in June 2020 it began offering refunds to all consumers holding non-refundable 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 says it had 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 SAA 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 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 others that broke consumer protection rules, saying they were necessary to deter future violations.

Reuters