Washington has imposed fines totalling USD1.4 million on KLM Royal Dutch Airlines, Lufthansa, and South African Airways for what it has labelled "extreme delays" in the repayment of almost USD1 billion in passenger refunds during the early part of the Covid-19 pandemic.

Penalties of USD1.1 million each against Lufthansa and KLM were assessed but reduced to USD550,000 respectively. The remaining USD550,000 was credited to each airline for refunds they issued to passengers with non-refundable tickets for flights to/from the United States who chose not to travel and were not entitled to refunds under US law, regulatory filings by the Department of Transportation reveal.

Lufthansa must pay its USD550,000 fine within 30 days of the order (by July 3), while KLM must make four payments of USD137,500 each by December 31. According to the DOT, the airlines took more than 100 days to process passenger refunds of USD775 million (Lufthansa) and USD113.3 million (KLM).

South African Airways was fined USD300,000 for failing to refund within 100 days passenger refunds of USD15.2 million. The penalty must be paid in six tranches of USD50,000 each over 540 days, the first payment due within 90 days of June 3.

In response, Lufthansa said it had long been in dialogue with the DOT on this matter. "In comparison with other airlines in the USA, the amount of the fine does not vary from the DOT's standard. Lufthansa has made all the refunds we were required to make. The delay in payment sanctioned by the DOT is solely due to the historically unprecedented level of refunds during the Covid-19 pandemic."

KLM said it was fully aware that the exceptional circumstances during the pandemic had a major impact on its customers. "Given the scale of the Corona crisis and the number of cancellations due to global travel restrictions, KLM initially decided in early 2020 to offer vouchers to customers whose flights were cancelled. Later, we offered customers the choice between a voucher and a refund. As a result, customers who wanted a refund had to wait longer than usual for a refund, for which the US Department of Transportation is now imposing a fine. KLM accepts this."

In a statement, SAA confirmed it had reached an amicable settlement with the DOT on the matter. It said its situation had been exacerbated by its business rescue process between December 2019 and April 2021. "SAA has always contended that notwithstanding the challenges of business rescue and the Covid-19 pandemic, SAA took extraordinary steps during 2019-2022 to process refunds for passengers whose flights were cancelled or significantly delayed by the airline, not only in the USA but throughout SAA’s markets. Between April 2021 and March 2023, SAA paid around ZAR2.2 billion rands (USD117.6 million) in Covid-period unflown ticket refunds," it said.

According to its business rescue plan, SAA had an overall unflown ticket liability (covering all its markets) of ZAR3.2 billion (USD171 million), which it plans to repay in four tranches: FY2021 ZAR384 million (USD20.5 million), FY2022 ZAR1.6 billion (USD85.5 million), FY2023 ZAR960 million (USD51.3 million), and FY2024 ZAR256 million (USD13.6 million).