The U.S. Department of Transportation has been in an ongoing legal dispute with Air Canada concerning thousands of refunds the carrier withheld from passengers during and after the peak of the pandemic.
In July the DOT levied a $25.5 Million fine against Air Canada for failure to comply with the law but this case has now been settled with the carrier paying just $2 Million to the U.S. treasury as a penalty.
There has been a lot of back and forth in this case as usual during legal proceedings and Air Canada appears to have gotten a pretty good deal out of this that probably emboldens airlines to just ignore the law again in the future.
In June the U.S. Department of Transportation said that it was seeking a fine of $25.5M from Air Canada after they delayed or refused refunds from more than 6,000 passengers who had already filed consumer complaints with the DOT.
John wrote about it in mid-June (access here).
Here is the original docket with the proposed fine that was served to Air Canada:
Air Canada then filed for dismissal with some pretty adventurous stuff in the brief.
This is my article from July:
Yesterday the Department of Transportation published a notice that they have settled with Air Canada for the amount of $4.5 Million of which only $2 Million will be a cash fine to the U.S. Treasury.
As we head into the holiday travel season, the U.S. Department of Transportation’s Office of Aviation Consumer Protection (OACP) announced it has filed an agreement for a $4.5 million settlement with Air Canada. The settlement would resolve OACP’s action against the carrier for its extreme delays in providing refunds to thousands of consumers for flights to or from the United States that the carrier canceled or significantly changed. The agreement is now pending approval by the Administrative Law Judge presiding over the case.
“Today, the U.S. Department of Transportation’s OACP is holding airlines accountable by ensuring that they treat passengers fairly when flights are significantly changed or cancelled,” said U.S. Transportation Deputy Secretary, Polly Trottenberg. “The Department is committed to protecting airline consumers and ensuring that all passengers receive the timely refunds to which they are entitled.”
The agreement marks the highest amount OACP has ever assessed against an airline. In addition to the $4.5 million settlement, Air Canada would agree going forward to refund airfare to passengers who purchase nonrefundable tickets to or from the United States whose flights are cancelled or significantly changed by the carrier. Of the $4.5 million assessed, $2.5 million would be credited to Air Canada for refunding passengers who purchased a nonrefundable ticket for a flight to or from the United States that the passenger ultimately decided not to take. The remaining $2 million would be paid to the U.S. Treasury.
Airlines and other sellers of airline tickets have a legal obligation to refund consumers if the airline cancels or significantly changes a consumer’s flight. The Department’s current regulations do not mandate refunds when passengers no longer wish to travel due to the COVID-19 pandemic; however, the Department plans to issue a rulemaking soon to address protections for consumers who are unable to travel due to government restrictions. The Department calls on airlines to voluntarily make refunds or offer vouchers that are valid indefinitely for flights not taken on account of the COVID-19 pandemic.
OACP filed the complaint against Air Canada in June of this year. OACP believes that this settlement is in the public interest, and that it serves to deter Air Canada and other carriers from committing similar violations in the future.
OACP is actively investigating the refund practices of other U.S. and foreign carriers flying to and from the United States. Enforcement action will be taken in those cases as appropriate.
The proposed settlement agreement and other related materials can be found at www.regulations.gov, docket DOT-OST-2021-0073.
Air Canada had a very muddy policy of not refunding customers at all or offering vouchers as most other carriers did. That the DOT is now rewarding Air Canada for the fact that they eventually did provide refunds as a way to mitigate their fine is ridiculous.
The remaining amount is a mere $2 Million that Air Canada pays as a fine to the U.S. treasury. The OACP received 6000+ complaints pertaining to Air Canada’s criminal practices that allowed the carrier to withhold tens, if not hundreds of millions of dollars from U.S. customers alone for close to a year.Keep in mind for every one passenger that complains to the regulator many many more don’t because they’re unfamiliar with the process. You can easily add 2-3 zero’s to the number of people who were impacted by Air Canada’s bad business practices.
Each year the DOT analyzes violations of carriers, both foreign and domestic, and then decides about imposing fines where appropriate. It’s common for airlines to negotiate these fines down but this is an unusually large discount on the original amount.
Paying just $2 Million interest on this in form of a fine is a great deal I’d say. Only a government bailout with completely free money can beat this.
The U.S. DOT has originally fined Air Canada $25.5M for the violation of refund practices and eventually settled with the carrier for a cash fine of $2M and cash refunds to customers of $2.5M.
This represents just a tiny fraction of the original fine. In fact, I wonder if it comes even close to sufficiently paying the U.S. government for all the manpower that went into the processing of these complaints and the enforcement action. Can you imagine a private law firm accepting a mere $2 Million settlement after pouring thousands of hours into this case? No way!
It hardly serves as a deterrent. Air Canada got an extremely cheap loan by violating the law and instead of being punished, they got rewarded for it. If you did this as a private citizen, a business owner, or a company you’d already be in bankruptcy court or worse. This is a pretty sad day for passenger rights no matter how the DOT likes to hail their “success” in this case.