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Germany’s biggest airline has been slapped with a record fine after being accused of discrimination against Jewish passengers.

Lufthansa has been forced to pay $US4m ($AU5.9m) over the incident in 2022 when it barred the travellers for allegedly refusing to wear face masks.

According to a report on bbc.com, the passengers were travelling from New York to Budapest with a connection in Frankfurt.

Many of the passengers were male, wearing “distinctive garb typically worn by Orthodox Jewish men”, according to the Department of Transportation (DoT).

During the first flight, the captain alerted Lufthansa security that some passengers had failed to follow crew instructions requiring masks and barring gathering in aisles and other places on board.

The alert led to holds on tickets of more than 100 passengers, all of them Jewish, which led to them being blocked from their connecting flight. The majority were rebooked on other flights the same day.

The DOT said the penalty is its largest ever issued by the federal agency for civil rights violations.

“No one should face discrimination when they travel, and today’s action sends a clear message to the airline industry that we are prepared to investigate and take action whenever passengers’ civil rights are violated,” said Pete Buttigieg, US Transportation Secretary.

Lufthansa said in a consent order that it was agreeing to the payment to avoid litigation but denied discrimination, blaming the incident on “an unfortunate series of inaccurate communications”.

“Lufthansa is dedicated to being an ambassador of goodwill, tolerance, diversity, and acceptance,” the company said in a statement, adding that it had cooperated with the investigation and remained focused on training for its staff.