U.S. fines LATAM Airlines $1 million over delayed ticket refunds

By David Shepardson

WASHINGTON (Reuters) -The U.S. Transportation Department (USDOT) said on Monday it fined LATAM Airlines (OTC:) Group SA $1 million after the airline and affiliates routinely failed to provide timely refunds to passengers for U.S. flights.

The department said since March 2020, it received more than 750 complaints alleging LATAM, the biggest carrier in Latin America, failed to provide timely refunds after cancelling flights to or from the United States. USDOT said it took LATAM more than 100 days to process thousands of refund requests to payment.

LATAM said in a statement it agreed to the $1 million fine as part of a consent order. It added the fine was “part of an ongoing USDOT audit of numerous airlines that operate into or within the U.S. that have been fined for the same reason, delays in refunds for unused tickets on flights canceled during the pandemic.”

LATAM invested $2 million in a new digital platform to process refunds faster and is investing another $2 million this year on refund processing efforts.

Because of COVID-19, LATAM had to cancel more than 1,100 flights daily and saw refund requests quadrupled, the airline told USDOT noting it filed for Chapter 11 bankruptcy and radically downsized the company, resulting in layoffs of thousands of employees.

LATAM issued more than $62 million in refunds since the beginning of the pandemic for canceled flights, the company told USDOT.

In January, USDOT said it planned to seek higher penalties for airlines violating consumer protection rules, saying they were necessary to deter future violations. USDOT vowed to “deter future misconduct by seeking higher penalties that would not be viewed as simply a cost of doing business.”

USDOT fines for airline consumer violations have often been a fraction of potential penalties. Last year, Air Canada agreed to a $4.5 million settlement to resolve a USDOT investigation into claims thousands of air passenger refunds had been delayed. USDOT initially sought a $25.5 million penalty.

Air Canada got $2.5 million credited for passenger refunds and paid $2 million in fines.

In November, USDOT imposed penalties on another six airlines totaling just $7.25 million after they agreed to issue $622 million in passenger refunds.