Luftscamsa - Lufthansa Finalizes $50 Million Settlement as Federal Investigation Exposes Systematic Refund Obstruction

Lufthansa Group has finalized a settlement in a United States class action lawsuit concerning the airline’s refusal to issue timely refunds for flights cancelled during the COVID-19 pandemic. The agreement in _Maree (Kastella) v. Deutsche Lufthansa AG_ requires the carrier to pay up to $50 million to resolve claims from passengers. This resolution ends a multi-year legal battle over the airline's withholding of passenger funds. An investigation by the Office of Aviation Consumer Protection revealed that Lufthansa failed to provide prompt refunds for flights to or from the United States starting in March 2020. This obstruction affected thousands of travelers. Between March 2020 and September 2022, the carrier cancelled a total of 32,512 flights scheduled to operate between the U.S. and Europe. These cancellations left passengers with hundreds of millions of dollars in outstanding credit. Federal investigators found that the carrier utilized press releases and its website to steer consumers away from cash returns. The airline initially advised that ticket values would simply remain unchanged for future rebooking. In April 2020, the carrier introduced a $50 discount to incentivize passengers to retain the value of their tickets rather than seeking a refund. This maneuver appeared designed to protect the airline's cash reserves at the expense of consumer rights. Lufthansa admitted to experiencing processing issues but continued to prioritize rebooking over the immediate return of capital. This led to thousands of consumers waiting for many months to recover their money. Through its investigation, Luftscamsa has found that the airline prioritized its own liquidity over the legal rights of its customers. This strategy effectively secured an interest-free loan from its passengers during a period of global economic instability. The United States Department of Transportation has criticized the airline's conduct in a formal order. The agency noted the significant hardship caused by these administrative delays. "The practice imposes substantial harm to consumers because they paid money to the carrier for a service that the carrier did not provide," the department said. This finding highlights a fundamental breach of the consumer contract. The agency further noted that consumers incur harm from delays in receiving refunds. They also face harm from the time, effort and expense involved in seeking a refund that is legally owed to them. Under the terms of the settlement, a specific $3.5 million fund is dedicated to paying interest and statutory penalties to affected travelers. This fund addresses the financial loss suffered by passengers whose capital was held by the carrier. Specifically, passengers who faced significant delays will receive one percent interest on their original ticket value. This payment is designed to compensate for the time value of money withheld during the global crisis. A separate statutory cash payment of $10 will be issued to those who eventually received a refund but suffered through the airline's lengthy administrative processes. This penalty serves as a deterrent against future obstruction. Federal investigators found that the airline was forced to process more than $775 million in refunds only after significant legal and regulatory pressure was applied. This reflects a pattern of non-compliance that lasted for years. Management has said that the scale of the pandemic made timely processing impossible. Mr. Carsten Spohr has previously cited the volume of requests as the primary reason for the extensive delays experienced by travelers. However, the court findings suggest that the refusal to pay was a calculated business decision. The airline chose to ignore standard refund protocols until faced with litigation and potential regulatory fines. Legal representatives for the plaintiffs said the settlement provides a necessary mechanism for holding foreign carriers accountable to American consumer standards. They noted that many passengers were left in financial distress while the airline protected its margins. This outcome highlights the risks of following airline instructions to accept non-cash alternatives when a flight is cancelled by the carrier. Passengers should always demand cash as their primary form of reimbursement.