My indirect experience has been that when its a real emergency, such as a death or serious illness they can be pretty good and really do almost anything to help. Of course some would probably turn to insurance (if they've got any) first. Its best if you tell them BEFORE you were due to fly, even if the medical backup comes later. No experience of Lufthansa though. In your case, you are due to fly late December.... they might wonder what kind of sudden emergency could cause you to know now that you can't fly then.

I think at this point you should have assumed it was non-refundable unless told otherwise. After all, with any other product or service, unless you've been told you can have a refund, would you expect to be able to change you mind and get a refund?

Are you sure it was not discounted in some way? Was it really the same as the full IATA fare? As there is a fee for changing it, I'm sure it was discounted. Full Y fares are often very expensive - and can usually be changed for free.

Well... it seems you can't! Anymore than they could turn around and say "sorry we've decided not to fly you - so please take the money back".

Regarding your specific questions:

1. why are some ticket fees not refundable?
Why should they be? Airlines need to manage their inventory - schedules and slots are hard to change. They need to fill planes to make money. They cannot afford to have people buying tickets and then changing their minds. Generally the more flexible the ticket, the more expensive it is.

2. It is the airline's word against mine that they warned me it was non-refund. I do not believe they said it.
I think in this case, its not important because I don't think they were under an obligation to warn you anyway. If they specifically promised you it was refundable - then that's a different matter. Then it just comes down to evidence.

3. Do the airlines pay an 'interest' fee on the thousands of dollars they are holding?
No. Fortunately PAX don't have to finance the capital expenditure involved in buying planes either. I suppose you could always buy flight tickets at the last minute if you want to avoid acting as banker.

4. Do they automatically refund on receipt of a medical letter--or can they question it? For example, could they potentially say, "A broken leg is not a good enough excuse" or "Migraines are not a reason not the fly."

Entirely up to them, nothing automatic about it. They could question it, or even just say no. After all, your misfortune is not really their problem - they are doing you a favour, even if you don't see it that way. They might want to establish the authenticity of the letter. In the two most recent cases I know of (both out of London, EVA and JAL), the PAX concerned were in hospital. There was so much circumstantial stuff I think there was little doubt. These guys are not stupid... they might phone to check. If its because of a condition you regularly suffer from then I doubt whether they would help.


5. Any suggestions on dealing with this.
If you can, get the "fare rules" - either online or off the ticket and get someone here or a travel agent to double check. You might be able to do something else with it - eg if its for a trip to Europe you might be able to change the destination to another European city if that fits in with your travel plans. OR, say, if you need to fly somewhere else, see if its cheaper to get a a new ticket and combine with your existing one rather than starting from SA. At least you'd get more airmiles (if it qualifies). I've also heard that some "non-refundable" tickets do, nevertheless, have some nominal value if turned in - maybe another poster has heard of this. You might, at least, be able to get the taxes back which would be a consolation.