Lufthansa has been slapped with a $4 million fine after the US Department of Transportation (DOT) ruled the airline had discriminated against Jewish passengers.

On a flight from New York to Budapest, which had a connection in Frankfurt, in 2022, some Jewish people allegedly refused to follow the airline’s rules which required all passengers to wear face masks.

The DOT said Lufthansa discriminated against the 128 Jewish passengers, treating them “as if they were all a single group,” though many were not travelling together and did not know one another.

The fine is the largest it has ever issued against an airline for civil rights violations.

Lufthansa said it agreed to the payment to avoid legal action but denied discrimination, blaming the incident on “an unfortunate series of inaccurate communications”.

The German flag carrier said in a statement that it is “dedicated to being an ambassador of goodwill, tolerance, diversity and acceptance,” adding that it had co-operated with the investigation and remained focused on staff training.

According to the DOT, many of the passengers were male and wearing a “distinctive garb typically worn by Orthodox Jewish men”.

A number of them had used the same handful of travel agencies to book their tickets, the department added.

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.

US Transportation Secretary Pete Buttigieg said: “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.”

The DOT said it was requiring Lufthansa to pay $2mn and would give the airline credit for $2mn it has already paid to passengers as part of a legal settlement.