U.S. seeking $25M from Air Canada for being slow to refund customers

The U.S. Department of Transportation is seeking a $25.5 million US penalty against Air Canada for "failing to provide consumers prompt refunds" after cancelling their flights amid the COVID-19 pandemic. The airline vowed to challenge the proposed fine.

Airline vows to challenge proposed fine, says notice not enforceable regulations

The U.S. Department of Transportation is seeking $25 million US in damages on behalf of U.S. customers of the airline who paid for tickets and didn't get their money back fast enough when the flights were cancelled. (Bing Guan/Bloomberg)

The U.S. Department of Transportation is seeking a $25.5 million US penalty against Air Canada for "failing to provide consumers prompt refunds" after cancelling their flights amid the COVID-19 pandemic.

In a "notice of enforcement proceeding" issued by the department on Tuesday, the Office of Aviation Consumer Protection (OACP) said Air Canada "unlawfully failed to provide timely refunds" for flights between the United States and Canada that were cancelled or significantly changed.

The agency said it received more than 6,000 refund complaints since March 1, 2020, and has notified Air Canada multiple times over the past year of its view that the airline's stance "lacks merit."

"OACP asserts that Air Canada has committed a minimum of 5,110 violations and passengers waited anywhere from five months to 13 months to receive refunds," the department said in a release.

It said Air Canada has argued it is not required to provide reimbursement, citing the unique circumstances of the pandemic.

Air Canada vowed to challenge the proposed fine. The airline said the Transportation Department's enforcement notice about refunds amounted to guidance, not formal and enforceable regulations that go through a period of public notice and comment.

Air Canada agreed in April to refund passengers whose flights were cancelled as part of a federal aid package worth up to $5.9 billion. The airline said in a statement that it has refunded more than $1.2 billion to eligible customers who bought refundable tickets and has been paying refunds to people, including Americans, with non-refundable tickets from $1.4 billion in credit provided by the Canadian government.

Gabor Lukacs, president of the non-profit organization Air Passenger Rights, said the notice from the Transportation Department is "warmly welcomed, but not surprising."

"What the U.S. is saying, essentially, is that you cannot steal consumers' money with impunity. If you have stolen consumers' money, you will be facing a penalty," Lukacs told CBC's Alison Northcott.

"And that is a lesson that Canadian authorities, the Canadian Transportation Agency, should have imparted itself on the airlines."

Fallout from pandemic's impact on industry

The potential fine is the latest fallout from thousands of flights that airlines cancelled during the early months of the pandemic as air travel plunged. The Transportation Department said it is investigating handling of refunds at other airlines, including U.S. ones.

U.S. federal regulations require airlines to provide refunds when passengers request them if the airline cancels or significantly changes the schedule of a flight. For cross-border flights, airlines are supposed to make credit card refunds within seven days, rising to 20 days for tickets bought with cash.

The Transportation Department said that it allowed more time for refunds last year because of the surge in cancelled flights if the airline was making an effort to return the money. The department said, however, that Air Canada failed to make a good-faith effort to process refunds more quickly.

The agency said that it arrived at the size of the civil penalty by considering factors including the harm to consumers and also as a deterrent to delaying refunds in the future.

The Transportation Department's complaint will go to an administrative law judge.

With files from CBC's Alison Northcott and The Associated Press