Canadian Airlines May Soon Have To Offer Cash Compensation For Flight Delays (With A Big Catch)

There’s huge variance globally when it comes to the legal obligations airlines have to passengers when things go wrong.

On one end of the spectrum you have Europe, where EU261 means that passengers could be entitled to as much as 600EUR in compensation in the event of a flight delay. On the other end of the spectrum you have the US, where passengers aren’t entitled to any compensation whatsoever, no matter how long the delay is.

It looks like another country will shortly be imposing strict new rules that could prove costly for airlines… sort of.

New Canadian passenger bill of rights

The Canadian Transportation Agency (CTA) has today outlined a new passenger bill of rights that they’re in the process of trying to put into law.

These regulations include guidelines for how airlines have to communicate with passengers, what passengers are owed in the event of overbooking and lost bags, etc.

But perhaps most interesting is that airlines will be on the hook for cash compensation in the event of a flight delay.

The amount of compensation will vary based on how long the delay is, and what the circumstances are. Compensation will range from 400CAD for a three to six hour delay, to 700CAD for a six to nine hour delay, to 1,000CAD for a delay of more than nine hours.

At least those would be the compensation amounts for the major airlines, while the smaller airlines serving remote communities in the north wouldn’t have to pay as much.

But there’s a big catch

There’s a huge catch here, though. Specifically, in the event of a mechanical delay, airlines wouldn’t have to be on the hook for compensation. As a point of comparison, in Europe a mechanical delay would make one eligible for compensation.

What’s the CTA’s logic with that? They don’t want airlines cutting corners and taking off when they shouldn’t to avoid having to pay compensation, and they want to make sure Canadian airlines can “remain competitive.” I would hope that airlines would have higher safety standards than to cut corners like that.

The reality is that a vast majority of major delays are for mechanical reasons. So really the cash compensation will only apply in cases like where a crew member doesn’t show up, where an airline decides to cancel a flight for whatever reason, etc.

Mechanical delays not being included presents another huge issue. Even if an airline cancels a flight for another reason, you can bet they’ll blame it on a mechanical, knowing that this would get them out of it. Passengers have no way to keep airlines honest in this sense.

What’s next for this draft

The CEO of CTA says that these changes follow the EU’s lead. Canada’s Transport Minister says that these changes are “fair and balanced,” and believes that “it’s the best passenger rights bill in the world.”

I disagree on both fronts, at least when it comes to the compensation for delays.

As of now these are just draft regulations, so Canadians will have a couple of months to comment, and after that the regulations would have to be approved by the cabinet, and are expected to be in force by next summer.

The cost of these new regulations

These added regulations will allegedly cost airlines about 2.75CAD per ticket. Obviously the costs of this have to come from somewhere.

The question is to what extent that will be passed on to consumers. A lot of airline executives seem to believe that the demand for air travel is more inelastic than it actually is (hi Scott Kirby!), so while they might just want to pass that on to consumers, it’s questionable how successful they’d be with that strategy.

Bottom line

I’m happy to see Canada add some form of serious regulations, because it’s something we lack in the US. However, don’t expect this to be anything like EU261 in terms of compensation, given that mechanical delays are excluded.

What do you think — should airlines be on the hook for compensation when a mechanical problem is at fault?

Comments

  1. Hmm. Airlines in Europe don’t cut corners with mechanical delays and take off when they shouldn’t just to evade EC261. Is the CTA saying that Air Canada, Westjet, et al, aren’t trustworthy enough to do the same?

    Airlines in the US already lie about mechanical delays (claiming “weather”) to avoid paying out food vouchers so I can only imagine we’ll see the same level of dishonesty with Canadian flights once this new law is in effect.

  2. We already see this level of dishonesty as people have gone after airlines with Montreal Convention rules in mind. For anyone that has actually followed this in the Canadian news you will know that our senate made amendments to this that were passenges friendly and more akin to EU 261 and then parliament turned its back on the amendments and spit out the ‘bill of rights’ in its current form. For anyone interested please check out: the Air Passenger Rights (Canada) Facebook page. There is a dedicated group of advocates that have been pushing for better treatment of passengers and who vehemently disagree with the legislation as it stands.

  3. European airlines don’t cut costs. The crew are maintenance departments are highly unlikely to even know about eu261. Their only concern is operating a flight safety
    Therefore how can they claim it’s the best passenger rights bill. EU 261 requires airlines to offer care and assistance whatever the reason for the delay Therefore if mechanical and weather delays or cancellations are exempt y’day rules out 95% of delays. Then what’s left ?
    However passengers can still claim under the Montreal Convention for damages if it’s mechanical

  4. It’s better than nothing. We might have to wait forever for anything remotely substantive to come out of the US Congress along these lines.

    I flew AC a few times on TATL flights through Toronto about 15 years ago and both times they cancelled my outbound flights a week out for no apparent reason except to possibly load up half empty flights the day before or after. Each time, they tried to put me on a flight leaving a day later, which was ridiculous and so the only other solution was a day earlier. Both unacceptable with no offer of compensation. Haven’t flown AC since.

  5. Yeah, that’s a catch you could drive a Mack truck through. I get the logic, but isn’t there also a logic that by having fines for mechanical delays you are encouraging airlines to have proper maintenance, back-up aircraft etc to ensure that they don’t actually happen?

  6. The Canadian government would literally never offer genuine consumer protections against “national champions” like AC. Their version of “regulation” never seems to serve anyone but the companies involved.

  7. You don’t mention what is probably a more important issue: does this only apply to Canadian airlines or to any airline that flies to/from Canada? One of the best things about EU261 is that it applies if you are flying from EU on any airline.

  8. The whole Lionair situation was the result of it cutting corners. It had the airspeed unreliable warning on take off for the previous flight, yet it proceeded to destination as normal with what was essentially an unairworthy plane. And then without even figuring out what was wrong, it dispatched the plane to operate the subsequent flight, the aftermath we are all familiar.

    So yeah airlines do cut corners and the law makers’ logic totally make sense. In that it is not making the “no-go” decision overwhelmingly burdensome.

  9. @Norman: I’m not an expert, but is it fair to compare Indonesia with Canada? Surely, the maintenance problem at Lionair was primarily an issue with bad regulators and corporate cultural practices, neither of which should/would be affected by fines for mechanical delays. Having a strong regulator is usually the key to ensuring proper maintenance practices, and I would expect that Canada’s is on a different level than Indonesia’s.

  10. Last year I we endured a 4 hour delay in boarding a Swiss flight from ZRH. The monitor displayed that it was due to (repeated) mechanical issues. Swiss denied compensation, without any explanation (well they said the events were beyond their control). Liars ………..

  11. “I’m happy to see Canada add some form of serious regulations,…”
    Why would anyone ever advocate for government regulations? They do nothing more than add costs and complexity. And those costs and complexity are borne by the consumer. We gain nothing from the government’s involvement.

  12. @Cedric: Switzerland isn’t part of EU but they fly within EU cities (Florence, etc.). That means they must pay under EU261 *but they refuse at first until you push hard enough. Works in their favor probably 75%. (United Airlines has to follow EU261 and United isn’t based in the EU).

  13. @Norman. Cutting corners at Lionair was not related to any potential compensation to passengers. It was cost-saving and endemic slackness in maintenance.

  14. No mechanical delay compensation? Who cares? European airlines are the safest in the world, precisely because EU261 incentivizes airlines to keep their planes in good shape so they don’t have to pay out for mechanical delays!

  15. @glenn t

    And compensation to passenger adds to … wait for it… cost!

    Cutting corners are about cost saving. The idea of this particular regulation is not to have Captains think harder than they should be when making the decision to stay on the ground, which is why they decided to take the cash payment out of the equation, which makes total sense.

    @Justin

    Plane’s the same, it’s regulations that can make or break a system. Canada is safer, not because they are naturally superior, but because their regulations works more in the direction of safety. Had they not added the “big catch” in this case, it could go the other way, contrary to Lucky’s hope that “airlines would have higher safety standards than to cut corners”. Canada may have a greater margin of safety compared to Indonesia, but sometimes it just takes a bit reduction in the margin to trigger an incident.

  16. If you think airlines should pay a fee for the customer if there is a delay, open an airline that does that. In a free society the government enforces the rules between two party’s. The government doesn’t make the rules.
    In the end the cost will get passed on to the consumer, and more regulations will drive out samller companies from buissnes altogether.

  17. @Usher — ridiculous! Europe is a highly competitive marketplace and has the world’s cheapest airfares, despite EU261.

  18. Canada’s MPs are famously buyable (as are US congresspersons), so I suspect a stitch-up with airline lobbyists is what softened the blow for the big two. Some years back the US had pretty decent passenger compensation policies for delays — what happened?

  19. Don’t forget that mechanical was also an initial exemption from EU261 as were delays but the ECJ ruled that mechanical wasn’t extraordinary (other than in limited circumstances) and delays did qualify for compensation and not just duty of care.

    Switzerland does follow EU261 but on ex Switzerland flights not all the provisions apply as they don’t always accept ECJ rulings.

  20. @Indopithecus: I don’t think your statement that Canada’s MPs are “famously buyable” and comparable to US congresspersons is at all true. Canada has very strict campaign finance laws. No union or corporate donations are allowed and there are low limits to personal donations and caps on spending. The election cycle for MPs is (usually) 4 years versus 2 years for U.S. congresspersons meaning Canadian MPs spend half the amount of time thinking about their re-election. The electoral systems are very very different. The total personal limit donation allowed in Canada is $1,575 per year. The Canadian party system also requires very strict party discipline (MPs vote with their party on major legislation almost all the time). That makes it VERY difficult to buy a Canadian MP.

  21. They will say “mechanical issue” for everything. Passengers don’t have chance to check it out.
    For now, every cancellation is “weather related”, even though it’s just a lie.
    This law will increase ticket prices but doesn’t change anything.

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