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 US. USDOT said it took Latam more than 100 days to process thousands of refund requests for payment.

Latam said in a statement it agreed to the US$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 US that have been fined for the same reason, delays in refunds for unused tickets on flights cancelled during the pandemic”.

Latam invested US$2 million in a new digital platform to process refunds faster and is investing another US$2 million this year in 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 US$62 million in refunds since the beginning of the pandemic for cancelled 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 US$4.5 million settlement to resolve a USDOT investigation into claims thousands of air passenger refunds had been delayed. USDOT initially sought a US$25.5 million penalty.

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

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