Lufthansa owes the US government $25,000. The penalty is being assessed after the carrier accidentally collected approximately $125,000 from US-based passengers in “taxes” that were not applicable on “non-revenue international tickets” (i.e. frequent flier rewards). The Department of Transportation and the airline announced the settlement today with Lufthansa accepting the penalty while neither admitting nor denying the actions that triggered it.
The company incorrectly charged passengers for more than a year, from June 2016 to November 2017, including adjusting the fee at one point. And the airline claims it submitted all funds collected to the US government as it was charging the fee as a tax item. When it finally realized that it had been charging the fee in error the carrier refunded the erroneous fee to “almost every single ticket in which a tax was inadvertently collected.” It is unclear if the US government refunded the payments made by the airline once it was determined that those passengers did not owe the fee.
The tax in question appears to be the “US International Departure Tax” coded as “US” in a fare construction. That fee (now $18.60 per passenger) is charged for all revenue tickets departing the United States. But the US tax law does not require the payment of that tax on frequent flyer tickets. Lufthansa charged it anyways. The DoT Enforcement Office found that more than 6,900 passengers were charged the fee.
The carrier was alerted to the mistake by only one passenger. It refunded the fee to that traveler on two separate occasions but did not dig deeper into the fact that it was being charged. The company indicated that “because the carrier did not receive further inquiries from any other passengers during this entire period, it believed the two instances to be isolated incidents relative to the same passenger.”
After considering Lufthansa’s position, and that the company refunded the money once it determined there was a mistake, the DoT chose to assess the fine anyways. The agency hopes the fine “establishes a strong deterrent to future similar unlawful practices by Lufthansa and other carriers.”
As with most enforcement actions by the DoT the penalty is split in two parts. Lufthansa owes $25,000 today, half of the total assessment. If it screws up again the other half becomes due.