That is - to the best of my knowledge - not even remotely a downgrade
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The pax is a simple misconnect. And LX would be happy to shuttle them on the next flight which has F availability. This can however be a day or several days later.
As the misconnect happened due to weather, the airline is not liable for lodging during the wait for the ongoing flight.
So moving them to OS (is that what OA means?) is a compromise in comfort and efficiency between keeping the pace and providing acceptably stylish transport.
Now if the award was issued by M&L, I am convinced that they would retrospectively settle for a split award C out, F back. If the award was issued by MP or another *A system, then it might get tricky but refunds did and do happen even across the systems.
Is CH participating in the downgrade compensation rules?
Yes but they are lower than LH's. And this isn't a involuntary downgrade. Still, the pax would get the published fare difference which would be the appropriate amount of miles. If that can be done.