Canadian Transportation Agency Forced To Clarify Their “Statement On Vouchers” Following Legal Action By Advocacy Group

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The Canadian Transportation Agency (CTA) Canada’s regulator for aviation, has been sued by a consumer advocacy group and forced to issue clarification on their position about airline vouchers during COVID-19 interruptions.

Canada’s regulator for aviation published a statement late Match which appeared to sanction the issuance of voucher in lieu of cash for cancelled flights and served as a blueprint for airlines such as Air Canada and Westjet to refuse cash refunds.

This opinion by the CTA lead many to interpret that Canadian customers could find themselves at the short end in their disputes with airlines which cancelled their flights.

Airlines around the globe have in under fire in recent weeks for refusing to refund customers the cash paid for their flights that were cancelled directly by the airline.

You can access the original statement here.

Statement on Vouchers

The COVID-19 pandemic has caused major disruptions in domestic and international air travel.

For flight disruptions that are outside an airline’s control, the Canada Transportation Act and Air Passenger Protection Regulations only require that the airline ensure passengers can complete their itineraries. Some airlines’ tariffs provide for refunds in certain cases, but may have clauses that airlines believe relieve them of such obligations in force majeure situations.

The legislation, regulations, and tariffs were developed in anticipation of relatively localized and short-term disruptions. None contemplated the sorts of worldwide mass flight cancellations that have taken place over recent weeks as a result of the pandemic. It’s important to consider how to strike a fair and sensible balance between passenger protection and airlines’ operational realities in these extraordinary and unprecedented circumstances.

On the one hand, passengers who have no prospect of completing their planned itineraries with an airline’s assistance should not simply be out-of-pocket for the cost of cancelled flights. On the other hand, airlines facing huge drops in passenger volumes and revenues should not be expected to take steps that could threaten their economic viability.

While any specific situation brought before the CTA will be examined on its merits, the CTA believes that, generally speaking, an appropriate approach in the current context could be for airlines to provide affected passengers with vouchers or credits for future travel, as long as these vouchers or credits do not expire in an unreasonably short period of time (24 months would be considered reasonable in most cases).

The CTA will continue to provide information, guidance, and services to passengers and airlines as we make our way through this challenging period.

Air Canada, Westjet and Porter have been offering passengers a credit valid for 24 months and since the CTA has issued the statement above airlines have actively referred to it as an opinion of the government that they don’t have to issue cash refunds.

This is a problematic development in multiple ways. For one, the Canadian Transportation Agency makes a statement in which it leaves the door open that this is a legally binding opinion when it in fact isn’t.

Basically this statement is nothing more than the result of some brainstorming, just an idea that CTA decided to put in writing and publish it. I wouldn’t even go as far as calling this a white paper.

Following this publication, the consumer rights group Air Passenger Rights Canada has sent the CTA a Cease and desist letter to which the agency has not responded. The group then took legal action in court.

Yesterday the CTA has updated the FAQ with details about the universal value of their statement, although has not modified the statement itself or removed it from the website.

The FAQ read:

What is the purpose of the Statement on Vouchers?

The Statement on Vouchers, although not a binding decision, offers suggestions to airlines and passengers in the context of a once-in-a-century pandemic, global collapse of air travel, and mass cancellation of flights for reasons outside the control of airlines.

This unprecedented situation created a serious risk that passengers would simply end up out-of-pocket for the cost of cancelled flights. That risk was exacerbated by the liquidity challenges faced by airlines as passenger and flight volumes plummeted.

For flights cancelled for reasons beyond airlines’ control, the Air Passenger Protection Regulations, which are based on legislative authorities, require that airlines ensure passengers can complete their itineraries but do not obligate airlines to include refund provisions in their tariffs.

The statement indicated that the use of vouchers could be a reasonable approach in the extraordinary circumstances resulting from the COVID-19 pandemic, when flights are cancelled for reasons outside airlines’ control and passengers have no prospect of completing their itineraries. Vouchers for future travel can help protect passengers from losing the full value of their flights, and improve the odds that over the longer term, consumer choice and diverse service offerings — including from small and medium-sized airlines — will remain in Canada’s air transportation sector. Of course, as noted in the statement, passengers can still file a complaint with the CTA and each case will be decided on its merits.

At least the CTA finally admits that the original statement is merely an opinion and not a binding decision or law although at this point plenty of damage has already been done.

I don’t see the basis for “a risk of passengers ending up out of pocket for cancelled flights” unless an airline has to file for bankruptcy as the result of the COVID-19 cash crunch. This statement by the CTA is once again misleading.

The Canadian carriers Air Canada, WestJet and Porter are (at this point) healthy enough to first process the refunds and go into liquidation afterwards should that be a requirement some months down the road.

Why did the CTA talk about vouchers when US and EU regulators have said that airlines should give refunds?

The American and European legislative frameworks set a minimum obligation for airlines to issue refunds when flights are cancelled for reasons outside their control. Canada’s doesn’t. That’s the reason for the difference in the statements.

Some jurisdictions have relaxed the application or enforcement of requirements related to refunds in light of the impacts of the COVID-19 pandemic, including European countries that have approved the issuance of vouchers instead of refunds.

Canada’s legislation is pretty much in favor of the airlines and so is the CTA as regulating agency. When one looks at the decisions handed down by the CTA in recent years it becomes evident that the agency doesn’t serve as a regulator but more as a boot licker of the industry.

It’s also false that European countries have individually approved and signed into law legislation that allows airlines to replace cash refunds with vouchers. In fact even the EU Transport Commissioner has clarified just recently that cash refunds are due when airlines cancelled on their passengers.

Do I have to accept a voucher if I think I’m owed a refund?

The Statement on Vouchers suggests what could be an appropriate approach in extraordinary circumstances, but doesn’t affect airlines’ obligations or passengers’ rights.

Some airline tariffs might not provide for a refund and others might include force majeure exceptions to refund provisions.

If you think that you’re entitled to a refund for a flight that was cancelled for reasons related to the COVID-19 pandemic and you don’t want to accept a voucher, you can ask the airline for a refund.

Sometimes, the airline may offer a voucher that can be converted to a refund if the voucher hasn’t been used by the end of its validity period. This practice reflects the liquidity challenges airlines are facing as a result of the collapse of air travel while giving passengers added protection in the event that they ultimately can’t take advantage of the voucher.

If you think you are entitled to a refund and the airline refuses to provide one or offers a voucher with conditions you don’t want to accept, you can file a complaint with the CTA, which will determine if the airline complied with the terms of its tariff. Each case will be decided on its merits.

Entering into arbitration with the CTA is absolutely useless and even though it’s free of charge I’d recommend passengers to rather attempt the following ways of receiving a cash refund:

  • Attempt a chargeback through your credit card company and see the result ;
  • Proceed to file a claim at Small Claims Court to pursue the refund ;
  • Consult a licensed attorney in your jurisdiction for all civil litigation questions

Airline tariffs alone aren’t the ultimate keystone to decide whether the passenger is entitled to a refund and much depends on local legislation as well. An Air Canada flight to/from the U.S. or Europe would likely fall under the laws there if a suit is filed in a local court.

Meanwhile even in Canada, multiple class action lawsuits have been filed against Canadian airlines who refuse cash refunds.

Conclusion

The Canadian Transportation Agency continues to muddy the waters here, trying to provide grounds to airlines to refuse cash refunds. It’s insane how such a biased agency can be tasked with regulating an industry in an obviously corrupt manner.

Having dealt frequently with the CTA as well as many other national enforcement bodies over the last two decades it’s not too much to compare them to a toothless tiger at best and a boot licker at worst. Both the U.S. DOT and the EU Commission have consistently reglemented and fined their airlines for violating the law yet Canada has apparently no desire to do so.

In any case I recommend consumers in Canada to follow Air Passenger Rights on their website and on Facebook to follow the discussion and better understand your legal position.

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