A couple of weeks ago, the United States Department of Transportation (DOT) announced it would pursue a $25.5 million civil penalty against Air Canada for refusing to provide customers with refunds during the pandemic, when flights between the United States and Canada were canceled or had significant schedule changes.
The DOT requires airlines to provide cash refunds in these situations, and Air Canada was among the worst airlines during the pandemic when it came to adhering to that. The company was notified multiple times throughout 2020 and 2021 that it wasn’t following the DOT’s rules. Air Canada only recently started retroactively issuing refunds, as a condition of accepting aid from the Canadian government.
Air Canada has now written a 46-page response to the Department of Transportation, requesting that the penalty be dismissed. Air Canada’s defense is… all over the place.
In this post:
Air Canada’s defense for not providing refunds
Air Canada’s summary of why the DOT’s enforcement complaint should be dismissed argues the following:
- The Department has failed to allege specific facts, and cannot establish that Air Canada’s policy of providing flight vouchers to customers constituted an unfair practice
- Air Canada’s Contractual Refund Policy was not only fair, but was entirely consistent with its General Terms and Conditions of Carriage and International Tariff, which govern the contractual relationship between Air Canada and its passengers
- Air Canada’s Contractual Refund Policy complied with all applicable DOT regulations in effect at the time, the Canadian Transportation Agency’s policies, and the CTA’s Air Passenger Protection Regulations
The arguments that Air Canada uses to support the above points are fascinating. While some points may have some validity, the airline is also really grasping at straws:
- Air Canada argues that it was “forced to cancel many transborder flights,” inferring that the cancelations were outside the carrier’s control; while travel restrictions were indeed put into place for passengers, there were never any actual bans of flights between the United States and Canada, so the airline chose to cancel those flights for commercial reasons
- Air Canada argues that customers weren’t substantially harmed by not being refunded, and that the harm is not outweighed by benefits to consumers or competition; essentially the argument is that vouchers made people whole, and non-refundable fares with no flexibility are in consumers’ best interest, as they allow airlines to offer lower fares
- Air Canada argues that consumers could have avoided these refund issues by purchasing refundable tickets, which was an option available to them
- Air Canada acknowledges that before the pandemic it would refund customers when flights were canceled as a “goodwill customer service policy,” but since “Air Canada did not ever publicize or commit to its goodwill policy or give any assurance that it would remain in force,” “customers had no basis for relying on this”
- Also, Air Canada sure gets sassy in this filing — “The Department asserts that Air Canada’s Contractual Refund Policy was ‘unfair,’ without even purporting to engage in the required thorough, well-reasoned analysis or, frankly, any analysis” (the folks at the DOT can hold their own when it comes to feistiness, so I can’t wait to see the response to this)
I want to stop for a moment and appreciate Air Canada’s logic about how customers could have avoided this by purchasing refundable tickets. Take a Toronto to New York flight next week, where the cheapest economy fare is 324 CAD.,
Meanwhile the cheapest refundable fare is
Yeah, c’mon folks, you should have paid three times as much so that you can get refunded the next time there’s a pandemic and a company decides to keep your money without providing you the service you paid for. Is that too much to ask?!
Perhaps most significantly, Air Canada argues that the DOT has no basis for requiring airlines to refund passengers in cash for canceled flights. It’s argued that since regulations in the United States don’t mandate how long of a delay is required for a refund to be issued, “DOT properly has left these matters to the discretion of carriers in establishing refund policies and procedures.”
Air Canada states that if the DOT wanted to mandate refunds for canceled flights, it should have made that requirement explicit, but that wasn’t done. Rather this “leaves matters of commercial ticket pricing to the marketplace.” It’s also stated that the DOT’s refund policy was merely “guidance,” and “does not have the force and effect of law and is not meant to bind the regulated entities in any way.” Air Canada states that the DOT’s “wishful thinking does not change the facts or the law.”
This is gong to get interesting…
It’s not surprising to see Air Canada trying to get this dismissed. I think we all saw that coming. Only time will tell how this ends, ranging from Air Canada paying the full penalty, to Air Canada and the DOT settling somewhere in the middle, to the penalty being dismissed altogether.
Personally I commend the DOT for standing up for consumers here. Obviously Air Canada was in a tough financial spot during the start of the pandemic, but so were many individual consumers who had their money tied up by Air Canada.
As a non-lawyer, here’s my take on Air Canada’s response:
- While some points are more valid than others, Air Canada is really pushing it with some of these arguments
- Suggesting that customers should purchase refundable tickets if they want a refund in the event that the airline cancels their flight is a little much
- Some of Air Canada’s arguments are disingenuous at best, like suggesting that cancelations were outside the carrier’s control; the airline chose to cut its schedule due to lack of demand, to conserve cash, and to minimize operations costs, all while keeping peoples’ money
- I think the big question is how enforceable the DOT’s refund guidance actually is — one would think it’s binding, because “suggesting” that airlines offer cash refunds when they don’t want to doesn’t accomplish a whole lot, so I wonder if there’s legally any merit to Air Canada’s claim there?
Bottom line
Air Canada is (unsurprisingly) fighting back against the Department of Transportation’s $25.5 million civil penalty over not providing refunds. The airline is serving up a variety of justifications, arguing everything from it being in the best interest of consumers not to be refunded, to the DOT not actually having the legal authority to require refunds based on current regulations.
I can’t wait to see the DOT’s response, because this should get good…
What do you make of Air Canada’s response to the DOT?
I love your new format.
I wrote a reply calling your article hypocritical and you have not published it. Censorship because we disagree?
The US Airlines did not refund any fares until they received a bail out from the Feds. That was OK and when the bail out moneys were given the airlines then refunded fares.
The same thing happened in Canada but the Liberal Government refused to bail out Air Canada and Westjet. They...
I love your new format.
I wrote a reply calling your article hypocritical and you have not published it. Censorship because we disagree?
The US Airlines did not refund any fares until they received a bail out from the Feds. That was OK and when the bail out moneys were given the airlines then refunded fares.
The same thing happened in Canada but the Liberal Government refused to bail out Air Canada and Westjet. They had a choice - refund and go bankrupt or soldier on. (Same as the US airlines before the bail out).
The bail out was given and now the refunds are flowing.
Why not apply the same standards to US AIRLINES? They did EXACTLY THE SAME THING. Where are the FINES against AA and UA?
This is total nonsense. The DOT should be ashamed.
This is patently false, at least as it pertains to your repeated insistence that AA refused refunds that were due under DOT rules. Right from the beginning, and before the bailouts started, this very blog wrote about how properly American was acting in providing prompt refunds:
https://onemileatatime.com/american-airlines-refund-bonus/
"I’ll be the first to rag on American when they screw up, but overall I have to give the airline a lot of credit for how they’ve handled...
This is patently false, at least as it pertains to your repeated insistence that AA refused refunds that were due under DOT rules. Right from the beginning, and before the bailouts started, this very blog wrote about how properly American was acting in providing prompt refunds:
https://onemileatatime.com/american-airlines-refund-bonus/
"I’ll be the first to rag on American when they screw up, but overall I have to give the airline a lot of credit for how they’ve handled changes and refunds in light of coronavirus. While airlines like United have tried to force customers into accepting vouchers, American has:
Maintained their original policy on cash refunds in light of schedule changes and cancellations
Has actually fairly proactively offered cash refunds to those who are entitled to them; of course they’ve encouraged passengers to maintain a travel credit instead, but frontline employees are empowered to start the cash refund process as well
They deserve a lot of credit for that, since it’s in stark contrast to what United is doing, and also in stark contrast to what most airlines around the world are doing."
I don’t really understand why people are so pressed. A travel voucher is a type of refund, and Air Canada has been lenient with extending the validity of these vouchers. If you cannot afford to travel, you shouldn’t be buying airline tickets? Also yes, buying refundable tickets is important, buying non-refundable tickets is a risk, that these consumers all chose to take. The company is not stealing their money. They have their vouchers. They wanted...
I don’t really understand why people are so pressed. A travel voucher is a type of refund, and Air Canada has been lenient with extending the validity of these vouchers. If you cannot afford to travel, you shouldn’t be buying airline tickets? Also yes, buying refundable tickets is important, buying non-refundable tickets is a risk, that these consumers all chose to take. The company is not stealing their money. They have their vouchers. They wanted to travel in 2020, well they can travel in 2022.
Also, instead did the DOT expect air Canada to operate all these flights, with nearly 0 passengers due to boarder restrictions, then refuse to refund passengers because they no-showed for the flight, and then also go bankrupt for how wasteful those flights would be? These people have no logic. The Canadian government only recently started giving Airlines loans.
Let them fly to the US, then repo their airplanes, valuing each one at $100,000, we should be able to take 5 or ten of them. Once they pay their 25m fine, they can come pickup their planes (for which fuel will need to be prepaid). Then send them back to the cold, dark north.
Freaking Canadians...
According to a WSJ article published today "...U.S. consumers have filed more than 6,300 complaints [against Air Canada] since the pandemic started..." for failure to pay out refunds owed. It goes on to say "In April...Air Canada announced it would offer refunds. The airline said it estimated there were about $1.6 billion in U.S. dollars in vouchers that fliers could now cash in for refunds, but because consumers must request the refund, the airline expected...
According to a WSJ article published today "...U.S. consumers have filed more than 6,300 complaints [against Air Canada] since the pandemic started..." for failure to pay out refunds owed. It goes on to say "In April...Air Canada announced it would offer refunds. The airline said it estimated there were about $1.6 billion in U.S. dollars in vouchers that fliers could now cash in for refunds, but because consumers must request the refund, the airline expected the amount redeemed to be 'substantially less.' The deadline for applying for a refund is July 12."
I don't think Air Canada realizes who they are up against with their snarky arguments for not paying refunds.
"This is gong to get interesting"
Garbage airline. Always has been.
Horrible on the ground (lowest OTP in North America <50%). horrible in the air - constantly deflating J seats. And proven horrible with customer service in the refunds debacle.
Just stop flying this garbage!
I personally wasn’t affected by AC’s horrendous conduct during the pandemic but I have friends and family who were and in some cases forfeited the money for their flights, not be being to access Canada as Americans to use the vouchers. The word got out and no one I know will ever book another flight with Air Canada. Regardless of how this DOT matter gets resolved, the damage to AC will last a long time....
I personally wasn’t affected by AC’s horrendous conduct during the pandemic but I have friends and family who were and in some cases forfeited the money for their flights, not be being to access Canada as Americans to use the vouchers. The word got out and no one I know will ever book another flight with Air Canada. Regardless of how this DOT matter gets resolved, the damage to AC will last a long time. People will not soon forget how they were treated by companies, bad or good, during the pandemic.
"no one I know will ever book a flight with Air Canada".
I bet you ten thousand dollars and a pony, here in writing, before witnesses, if you're a Canadian resident, you're wrong.
If the Government of Canada had forced Canadian airlines to issue refunds, they would have, including to American customers. Air Canada is accustomed to pushing the government around, so they don't understand the context they operate under in the US: DOT is...
"no one I know will ever book a flight with Air Canada".
I bet you ten thousand dollars and a pony, here in writing, before witnesses, if you're a Canadian resident, you're wrong.
If the Government of Canada had forced Canadian airlines to issue refunds, they would have, including to American customers. Air Canada is accustomed to pushing the government around, so they don't understand the context they operate under in the US: DOT is not their lapdog. AC doesn't know how to suck up to an actual Transportation Authority. They don't know they should fear the DOT.
Still, as a Canadian taxpayer, I'm not enthused about my tax dollars going to Executive Bonuses and American fines.
I’m not a Canadian and my friends and family who were burned are not Canadians. And I’ll bet a million US dollars, that I am correct, guaranteed they will NEVER book with Air Canada again.
THE worst airline on REFUNDS due to cancelled Covid flights:
WestJet!!
No doubt about it!
Since last year July, i'm waiting on refund or even a notice . . . on my request.
NOTHING!
(July 2021 by now!! almost 12 months later)
This would almost be funny if so many people were not affected by Air Canada's greed.
My flights out of YYZ with Aer Lingus and British Airways were cancelled due to Covid travel restrictions in April/May 2021.
In both cases, I received a full refund within 14 days.
That's because BA and EI are subject to the EU261 / UK261 regulation which requires a refund when a flight is cancelled if that's what you as the passenger want.
But the US does not have such a law or regulation and this is why AC think the DoT is wrong in trying to fine them.
ACs argument is basically - How can we be fined for supposedly breaking the law when there is no actual or speficic law for us to break. Youre mere guidance isn't the law.
As a Canadian, I'm completely fine with Air Canada suffering over how they treated us during this pandemic, and honestly, even before this. Air Canada has consistently led the pack in service reductions and cabin space reductions for the last few years: they ran a 777 UHD (ultra-high density) that was so bad, business class passengers were lining up to access the one bathroom at the front of the plane, and economy had the one...
As a Canadian, I'm completely fine with Air Canada suffering over how they treated us during this pandemic, and honestly, even before this. Air Canada has consistently led the pack in service reductions and cabin space reductions for the last few years: they ran a 777 UHD (ultra-high density) that was so bad, business class passengers were lining up to access the one bathroom at the front of the plane, and economy had the one bathroom in the back. It was also one of the first 777s to be 3-4-3 in economy. AC is why we have 10 abreast economy on 777 as the industry standard instead of 9 now.
I'm not sure who's responsible for the 9 abreast economy on the 787 though. It was originally designed for 8 abreast: 2-4-2, which is significantly more comfortable.
As a Canadian I agree. This is a horrible airline even before the pandemic.
Horrible product in J and especially in Y.
If I remember correctly, they also pioneered unbundling i.e. having to pay separate for what was once included in the airfare: checking luggage, seat assignment etc. It is a near governmental entity, with the same respect and consideration for customers that of the New Jersey DMV. I refuse to fly them.
I'm not defending Air Canada, but to be fair, Air France had 10 abreast on their 777 serving Montreal-Paris well before Air Canada did.
I’m a lawyer, and I would see these arguments are . . . Not good.
The main argument is really that the DOT did not explicitly adopt a regulation stating that customers are requiring to provide cash refunds, therefore they are not required. While DOT essentially told airlines in informal guidance to provide cash refunds, it did not follow the formal procedures for making that a separate regulation. The problem with this argument is that...
I’m a lawyer, and I would see these arguments are . . . Not good.
The main argument is really that the DOT did not explicitly adopt a regulation stating that customers are requiring to provide cash refunds, therefore they are not required. While DOT essentially told airlines in informal guidance to provide cash refunds, it did not follow the formal procedures for making that a separate regulation. The problem with this argument is that there *are* customer service regulations that require “prompt refunds” and they explicitly state credit card or cash or check refunds. That’s really enough. Plus, even if DOT had *no* regulations at all, there’s a statute passed by Congress that says DOT can prohibit any “unfair practice” by an airline (and impose a penalty of up to $5,000 each time an airline engages in an “unfair practice”). So procedurally, if DOT concludes in these proceedings that failing to provide a cash refund is an “unfair practice” within the meaning of the statute, they have the power to fine Air Canada. They don’t need a separate regulation requiring cash refunds to do that.
When Lucky says they talk about how customers could have bought refundable tickets — what they’re really saying is that, “hey, we didn’t violate any of our fare rules or our contract with customers. We did everything we were required under the contract.” That’s probably undisputed as far as it goes, but it’s irrelevant. What DOT is saying is that, if you cancel a flight, you *have* to provide a refund even if your contract doesn’t require that — because failing to provide a refund is an “unfair practice.” The mere fact that they complied with their contract/fare rules doesn’t exonerate them because DOT isn’t alleging breach of contract. It’s saying that DOT views failure to provide refunds for a cancelled flight as an unfair practice, *even if* it’s allowed by the contract.
The point about lack of sufficient facts is just silly. That’s really a concept that only applies when you go into federal court with a half-baked lawsuit and no facts to back it up — for example, there are cases where people sue the FBI and allege that they conspired with aliens to conduct survelliance on them in violation of their civil rights. While courts will dismiss really speculative allegations, the DOT is not bound by those procedural rules — and no court is going to say that DOT doesn’t have enough facts to support its allegations. The basic facts are essentially undisputed, so it’s just silly.
Last argument about lack of consumer harm really is attacking the idea that failure to provide cash refunds is an “unfair practice.” Air Canada is saying it’s not “unfair” because it doesn’t harm consumers. That’s really a policy argument to DOT, but I think DOT essentially has authority — within some limits — to decide what practices is “unfair.” I don’t think any court will find DOT went too far in saying that it’s “unfair” not to provide a cash refund option when you cancel a flight.
So, I would say, they threw up a few points but nothing terribly persuasive. Also note that this is not a court proceeding — DOT just decides the issue through its internal adjudication process. Once DOT imposes penalties, Air Canada can then sue in court to challenge DOT’s decision — but the court reviews under a deferential standard, basically just looking at whether DOT violated any legal requirements when it imposed the penalties or if its decision was “arbitrary and capricious” (a difficult standard for Air Canada to meet).
@Santastico that would be very stupid for US to do... Air Canada is Canada's only full service carrier... they are extremely important to the country... Canada will defend the airline... Canada would immediately increase overflight fees for us airlines that could see majority of International traffic crash with the great possibility of some legacy carriers going bankrupt... also tens of thousands of jobs would be lost which im sure any administration of our country would...
@Santastico that would be very stupid for US to do... Air Canada is Canada's only full service carrier... they are extremely important to the country... Canada will defend the airline... Canada would immediately increase overflight fees for us airlines that could see majority of International traffic crash with the great possibility of some legacy carriers going bankrupt... also tens of thousands of jobs would be lost which im sure any administration of our country would not be for lol
That is allowing the US consumer to be held hostage because of potential harm to US airlines.
If Air Canada doesn’t want to play by US air transport rules then consumers can’t pay the price.
The US and Canada have a good relationship overall but one side can’t unilaterally change the rules.
For all the world, the DOT can’t back down. No one gets a pass
Tim I somewhat agree but also important to note American Airlines and Hasn't paid its fines from the GTAA and TC dating back years tens of millions... United paid immediately (Air Canada partnership is to thank and also a much lower amount) but they should still pay it but they haven't... if history tells us anything its the US and Canada allow each others companies to get away with stuff other countries wouldn't thats not...
Tim I somewhat agree but also important to note American Airlines and Hasn't paid its fines from the GTAA and TC dating back years tens of millions... United paid immediately (Air Canada partnership is to thank and also a much lower amount) but they should still pay it but they haven't... if history tells us anything its the US and Canada allow each others companies to get away with stuff other countries wouldn't thats not related to a trade war... and if they do have to truly fine each other its by a minor amount a fraction of the original price
Right now, Air Canada Comfort class economy tickets are fully refundable, in addition to Latitude.
On a YYZ-LGA flight where Standard is $325, Comfort is only $467, compared to $929 for Latitude.
TAP Air Portugal was also horrible about refunding money and deserves DOT scrutiny . I had a refundable ticket that they would not refund for a cancelled flight. I eventually did a charge back. But I expect other customers were not as savvy about getting their money back.
TAP is notorious for it's poor response to refund requests.
Surprising though, is that when I cancelled our trip to the Azores in February, they refunded our money within 21 days.
At the beginning of the pandemic, they waited a couple of months initially refusing refunds, but EU law is quite clear, so eventually after a bit of pressure, they did begin to offer. Several airlines and politicians in several EU countries tried to band together and get them to ignore the law, but that didn't last very long for most of them.
Just ban them from flying into the US. Case dismissed.
Why would we want to ban them from flying to the U.S., as opposed to letting them continue to fly but enforcing the rules against them?
The point of the rule is to protect consumers who buy tickets. If we ban them, a bunch of other consumers who have tickets for future flights would be harmed (now they can’t take their flights — and good luck getting a refund out of them once the airline is just banned completely!).
Did you read that they will fight against the rules? Instead of just going forever in a lawsuit that just cost money and goes forever, it is time to take harder decisions so companies will see there is no bending rules here.
Here is a great business example on how things are done. Back in 2009, Coca-Cola refused to refused to give Costco the price they wanted (Costco has a very strict model for margins...
Did you read that they will fight against the rules? Instead of just going forever in a lawsuit that just cost money and goes forever, it is time to take harder decisions so companies will see there is no bending rules here.
Here is a great business example on how things are done. Back in 2009, Coca-Cola refused to refused to give Costco the price they wanted (Costco has a very strict model for margins made on products). Costco simply responded by pulling all Coca-Cola products from their shelves. Guess what? Coca-Cola went back to the negotiating table and a month later their products were back on Costco shelves.
Applying the same to Air Canada, ban them from flying into the US and you will see if they won’t comply with the rules.
They won'T!
Instead, they would send ROUGE on there US routes and just don't give a damn about the DOT charges.
Simple as that.
If they were banned from the United States by government action, they would have the right to challenge that in court. Costco can carry whatever products it wants — Coca-Cola can’t sue and demand to be on the shelves at Costco. The government does not work that way. Governemtn agencies can’t just go around arbitrarily banning people for leverage reasons.
Imagine if Biden could just “ban” any business that does not support his re-election campaign....
If they were banned from the United States by government action, they would have the right to challenge that in court. Costco can carry whatever products it wants — Coca-Cola can’t sue and demand to be on the shelves at Costco. The government does not work that way. Governemtn agencies can’t just go around arbitrarily banning people for leverage reasons.
Imagine if Biden could just “ban” any business that does not support his re-election campaign. Or the DOT threatens to “ban” any airline that does not go to lobby Congress for DOT’s budget to be doubled. Government officials have to follow due process of law, etc. So a “ban” wouldn’t accomplish anything except actually increase litigation. It definitely would not result in *less* litigation.
The US government certainly has the right to ban airlines that refuse to follow the US law. Not really sure your comparisons make much sense...
Just tell them their landing rights to the US are suspended until the case is settled
I hope the DOT screws Air Canada! The sass alone merits a good thrashing.
AC minus transborder travel = OOB. Pay the fine and STFU or good night and good luck.
I hope this penalty sticks. They held my money for over a year and wouldn’t even guarantee me a later flight in the same class of service.
Canada is a potential dictatorship so not surprising. The Prime Minister has far more power than the President of the United States.
he literally has a minority government... if he wants to pass anything it is subject to another party for approval as they need their vote to pass it... our president holds much more "office space"
Sadly not true. There are 4 parties and Trudeau only needs the support of the NDP to pass ANYTHING he wants to pass into law. And he is taking full advantage of this.
The article is hypocritical.
The US airlines did NOT REFUND FARES until the government gave a bail-out with the condition it be used to refund customers. That took almost a year or at least 6 months. The airlines had a choice -...
Sadly not true. There are 4 parties and Trudeau only needs the support of the NDP to pass ANYTHING he wants to pass into law. And he is taking full advantage of this.
The article is hypocritical.
The US airlines did NOT REFUND FARES until the government gave a bail-out with the condition it be used to refund customers. That took almost a year or at least 6 months. The airlines had a choice - refund fares and go bankrupt or refuse refund and stay in operation until financially able to pay. The DOT should have fined AA etc the same amount or more for doing the same thing.
The Trudeau government splashed Billions on stupid corrupt deals with no results but eventually gave a bail out to Air Canada spring 2021. Air Canada is now refunding the fares. I am still waiting myself. The delay was totally Trudeau and the Laurentian Elite who don't like airplanes unless they are taking 3 to an international conference in Davos for example.
If the DOT was at all legitimate then they would fine EVERY airline in the world that did not refund fares initially which includes the big three in the US. So this is just plain discrimination and hypocritical.
10:1 this article reply does not get past 'moderation'
With no effective judiciary to curb his tyranny.