On Monday, the U.S. Transportation Department announced that it is assessing $2.5 million in civil penalties against three airlines for significant delays in issuing refunds owed to passengers due to COVID-19-related flight disruptions.
The affected airlines are Lufthansa (OTC: DLAKY), KLM Royal Dutch Airways (OTC: KLMR), and South African Airways.
The U.S. Department stated that these penalties stem from delays in providing over $900 million in refunds to passengers whose flights were disrupted by the pandemic.
Passengers had to wait months for their refunds. Lufthansa and KLM each faced penalties of $1.1 million.
The DOT reported it had facilitated the return of nearly $4 billion in refunds and reimbursements to airline passengers, including over $600 million for those affected by the Southwest Airlines Co (NYSE: LUV) holiday meltdown in 2022.
Reuters noted that in 2022, Transportation Secretary Pete Buttigieg revealed that the U.S. government had completed investigations into ten airlines regarding delayed pandemic passenger refunds, with another 10 investigations still pending.
The refund processing delays for Lufthansa passengers on U.S. flights extended beyond 100 days in 2020.
Lufthansa attributed the delays to an unprecedented volume of refund requests during the pandemic, describing the situation as handling "equivalent to the workload of two-and-a-half months every day."
The German airline stated that between March 2020 and September 2022, it issued $5.3 billion in refunds, including $802 million to U.S. customers.
KLM explained that staffing and technical issues, compounded by the sheer number of refund requests, resulted in many customers waiting for months.
Despite this, KLM has implemented what it claims to be one of the most customer-friendly refund policies in the industry, refunding $84.15 million to U.S. customers who were not initially entitled to refunds.
South African Airways faced over 400 complaints for failing to make timely refunds. The state-owned airline, already struggling financially and on the verge of liquidation before entering bankruptcy protection in 2019, saw its situation worsen with the pandemic's impact on air travel.