It took more than a year, but the US Department of Transportation is ready to pursue regulatory actions against Air Canada. Citing a lack of progress in resolving the issue through an agreed consent order assessing a civil penalty, the DOT filed a formal complaint against the airline, seeking more the $25 million in damages.
From March 2020 to April 2021, Air Canada adopted a policy that it would not offer refunds to passengers for flights that Air Canada cancels or significantly changes. This unlawful no-refund policy imposed significant harm to consumers and benefited Air Canada at the expense of other airlines that did comply with U.S. law.
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.
Where this gets very ugly for Air Canada is in the calculation of the penalty. OACP views an appropriate civil penalty for each failure to provide a prompt refund in violation of 49 U.S.C. 41712 and 14 CFR 259.5, to be $5,000 per violation, which OACP views as high enough to have a deterrent effect.
Using this formula, OACP is seeking a civil penalty of $25,550,000 (based on $5,000 times 5,110 violations).
The DOT did not state what the proposed Consent Decree penalty would be, but presumably it was lower than the full price penalty now being sought.
Air Canada will almost certainly appeal the amount and a settlement will be reached. But the $25 million starting point is rough.
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