Air Canada and the US Department of Transportation agreed to a $4.5 million fine related to the airline’s failure to provide timely refunds to passengers after cancelling flights in the height of the COVID-19 pandemic. The deal represents slightly less than 20% of the initial penalty the DOT sought, and is actually lower than the headline number.
Today, the US Department of Transportation’s OACP is holding airlines accountable by ensuring that they treat passengers fairly when flights are significantly changed or cancelled. The Department is committed to protecting airline consumers and ensuring that all passengers receive the timely refunds to which they are entitled.– U.S. Transportation Deputy Secretary, Polly Trottenberg
The DOT initially proposed a $25 million fine over the summer. The airline objected to that penalty and entered into negotiations with the Department.
The deal, agreed to by the Office of Aviation Consumer Protection (OACP) now must be approved by the Administrative Law Judge overseeing the case. It is the largest penalty ever assessed by the department, though a tiny fraction of the initial $5,000 per incident initially sought.
Under the agreement the airline’s $4.5 million penalty will be reduced by $2.5 million, the amount the company eventually refunded to travelers. The actual penalty to be paid is only $2 million.
That’s a tiny sum even relative to the 2020 revenues of C$5.83 billion.
The DOT believes the penalty sufficient to “deter Air Canada and other carriers from committing similar violations in the future.”
In July 2020 the Department’s Office of Aviation Consumer Protection (OACP), based on complaints coming in from jilted passengers, notified Air Canada that the no refund policy was an unfair practice per US regulations. That formal communiqué did not influence Air Canada’s policy.
Instead, the complaints continued to roll in. OACP identified just over 5,000 potential violations, including 89 formal complaints, tied to pending refunds. Air Canada eventually relented, issuing refunds. But only after the Canadian government stepped in to provide the cash to support those refunds.
Separately, the Department notes plans to issue a new rule addressing 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.
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