Facing dozens of customer complaints to the US Department of Transportation, Air Canada is fighting back. While the carrier has only filed one response publicly so far the contents suggest that passengers may well come up short in their efforts to get their money back. Not only does the airline intend to not provide refunds to passengers on flights it canceled, but it now also suggests that the DOT should not and can not regulate such policies.
The Enforcement Notice and the Department’s COVID-19 Refund FAQS are guidance documents only; they were not promulgated through a formal rulemaking process under the Administrative Procedures Act, and they do not have the effect of law.– Part of Air Canada’s defense against not providing refunds to passengers
In response to a complaint filed by Charles Cervinka regarding a trip from
Toronto Montreal to Chicago. The flight was cancelled by the carrier but rather than provide a refund, as was typically the carrier’s policy, Air Canada changed its rules on 19 March 2020. Refunds were no longer an option. Instead, only credits are to be granted. In insisting that the US DOT butt out of such policy enforcement the carrier cites a four-pronged argument:
- Air Canada is complying with its published Contract of Carriage and fare tariffs
- The DOT’s “reminder” to airlines to pay out refunds isn’t really law
- The policy is neither unfair nor deceptive
- The DOT holds no authority to enforce any regulations on this transaction
The Contract of Carriage
Air Canada’s policy for non-refundable tickets does not allow for refunds. Not surprising, of course, but also not uniformly enforced. Indeed, Air Canada acknowledges that it historically did provide full refunds to passengers in similar situations. But that was “a goodwill gesture” that the carrier “generously” offered to passengers, not a requirement. And when the carrier chose to stop extending that goodwill it was simply reverting to the letter of the contract, not its more generous typical behavior.
Certain customers with reservations for flights that were cancelled due to events outside of Air Canada’s control (including COVID-19) before March 19, 2020 may, as a goodwill gesture, have generously been offered a refund despite having booked reservations at a non-refundable fare. This approach was established as a matter of goodwill for customers, but was at no time required under Air Canada’s Conditions of Carriage, Tariff, Canadian Transportation Agency (“CTA”) regulations or, in the case of non-refundable tickets, the applicable fare rules.
Moreover, Air Canada claims that the decision to cancel the flight from Toronto to Chicago was outside of its control. As such, Canada’s Air Passenger Protection Regulations (“APPR”) require only that the airline provide alternate travel arrangements, not a refund. It is unclear if the argument that the cancellation was a non-controllable event holds water, but Cervinka did not explicitly state that in the complaint so Air Canada appears to be getting away with that claim.
In this manner the airline suggests that the policy is reasonable and well known; as such, no enforcement action is warranted.
The DOT points out that for its policy, “The focus is not on whether the flight disruptions are within or outside the carrier’s control, but rather on the fact that the cancellation is through no fault of the passenger. Accordingly, the Department continues to view any contract of carriage provision or airline policy that purports to deny refunds to passengers when the carrier cancels a flight, makes a significant schedule change, or significantly delays a flight to be a violation of the carriers’ obligation that could subject the carrier to an enforcement action.”
In other words, the DOT believes such CoC clauses are a violation as written. That the airline seeks to enforce them, therefore, should be actionable by the DOT. But executing that enforcement might be harder than the DOT wants it to be.
DOT policies cannot and should not be enforced
Air Canada further points out that the DOT Enforcement Notice and the Refunds FAQ are merely guidance documents, not new regulations. As such they cannot supersede existing policies. And Air Canada claims that existing policies support its position. As such, they should not require a refund be issued.
The carrier also cites an Executive Order issued on 19 May 2020 that suggests “Agencies should address this economic emergency by rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery…” The airline believes its need to hold on to that cash rather than pay out refunds to consumers should qualify for this exemption, should the DOT disagree with its initial claim that the policy requiring refunds does not really exist.
Further, Air Canada argues that the transaction is outside the purview of DOT regulators. The passenger in question is a Bermudan citizen and the ticket was purchased from Air Canada’s Canadian website. That is happens to be for a flight to the USA is, to the airline, inconsequential.
To the extent the transaction did not occur in the United States or via a website that was marketed to U.S. consumers, any attempt to apply the Enforcement Notice or 49 U.S.C. § 41712 to Mr. Cervinka’s purchase would be an unwarranted extraterritorial application of U.S. law.
The carrier goes further to point out “there are no international agreements nor is there any Presidential or Congressional action that authorizes the Department to regulate foreign air carriers in this manner.”
Other complaints filed by passengers may not have the benefit of the foreign point-of-sale argument, but that is significant in the carrier’s position here.
This last argument could have much broader impact than just on the need for airlines to issue refunds on canceled flights. Since the policies on full-fare advertising and a 24-hour “cooling off period” for purchases took effect airlines around the globe – including Air Canada – have accepted that they are obligated to follow those rules on flights to or from the USA, regardless of the point of sale. Indeed, many other airlines responded to the US DOT’s guidance with a softer stance, allowing refunds on those cancelled flights. But not Air Canada.
This may be the first time an airline is choosing to fight back against the DOT in this manner, raising the stakes well beyond a few hundred or thousand dollars owed to affected passengers, beyond the millions of dollars that adds up to in aggregate.
Should the DOT concede this point it could have much broader reaching implications on the overall state of airfare policies related to US-bound travels.