The U.S. Transportation Department is seeking to fine Air Canada $25.5 million for what it calls excessive delays in refunding thousands of passengers whose flights across the U.S.-Canada border were cancelled or rescheduled.
Since March 2020, the department has received complaints from more than 6,000 consumers in response to claims by Air Canada to have cancelled or changed their flights and then taken five to thirteen months to issue a refund.
Air Canada vowed to challenge the proposed fine. The airline said the Transportation Department’s enforcement notice about refunds amounted to guidance, not formal and enforceable regulations that go through a period of public notice and comment.
Air Canada said it has credited more than $1.2 billion in credit for refundable tickets to eligible customers and has been paying refunds to people who purchased non-refundable tickets with credits from $1.4 billion in credit provided by the Canadian government.
The potential fine is the latest fallout from thousands of flights that airlines cancelled during the early months of the coronavirus pandemic as air travel plunged. The Transportation Department said it is investigating the handling of refunds at other airlines, including U.S. ones.
Federal regulations require airlines to provide refunds when passengers request them if the airline cancels or significantly changes the schedule of a flight. For cross-border flights, airlines are supposed to make credit card refunds within seven days, rising to 20 days for tickets bought with cash.
The Transportation Department said that it allowed more time for refunds last year because of the surge in cancelled flights if the airline was making an effort to return the money. The department said, however, that Air Canada failed to make a good-faith effort to process refunds more quickly.
The agency said that it arrived at the size of the civil penalty by considering factors including the harm to consumers and also as a deterrent to delaying refunds in the future.
In many cases, passengers who cancelled their reservations on North American airlines have received vouchers instead of cash. As a result, the airlines are sitting on billions of dollars worth of tickets, some of which will likely never be used. That did not appear to be the case with the Air Canada refunds.
The Transportation Department’s complaint will go to an administrative law judge.