Air Canada Fights To Keep Your Money

In what has been a fascinating back-and-forth, Air Canada continues to insist it has a legal right to deny refunds on cancelled flights. I give Air Canada credit for being bold…but not for understanding law.

Background

A Bermuda resident purchased a ticket from Montreal to Chicago in March for travel in April. On the day of his flight, he received an email from Air Canada that his flight was cancelled. Rather than accept a rebooking at a time that did not work for him, the man requested a refund. He was denied and instead offered a voucher valid for 24-months. He lodged a complaint with the U.S. Department of Transportation, alleging that Air Canada’s violation of a refund was in contravention of U.S. law. Air Canada has aggressively defended its action. This case is just a sample of thousands like it.

Air Canada’s Legal Arguments

Certainly the art of arguing any legal case is taking facts and law and trying to best twist them into your favor. Air Canada does so in four ways, asserting:

1. Air Canada’s Contract of Carriage and fare rules do not compel a refund
2. DOT’s enforcement action to airlines does not carry the force of law
3. Air Canada’s refund policy is neither unfair nor deceptive
4. DOT has no jurisdiction in this case

First, Air Canada contends this flight cancellation and others like it was outside of it control due to COVID-19. Thus, per its contract of carriage, it is not required to offer a refund.

As for its policy of issuing refunds in similar situations for years, Air Canada insists it was a goodwill gesture, not a legal requirement:

“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.”

Second, Air Canada says that DOT mandates concerning refunds to do not carry the force of law.

“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.”

Third, Air Canada says its refund policy is transparent and a perfectly reasonable response to the pandemic.

Finally, Air Canada case is out of the jurisdictional reach of the United States because it was purchased by in Bermuda (where the passenger lives) using Air Canada’s Canadian website.

Let’s take a look at all four arguments. There are others, by the way, that Air Canada makes, but we’ll focus on these four.

Air Canada’s Legal Arguments Come Up Short

The question is not what Air Canada’s contract of carriage requires refund, but what type of cancellation was this: voluntary or involuntary? The plaintiff argues that this was an involuntary cancellation (on his part) and I agree. Per the contract of carriage:

Air Canada claims it cancelled the flight due to COVID-19 and thus the decision was beyond its control. First, Air Canada operated dozens of transborder flights on April 22, so canceling that particular flight was not due to a government order. Furthermore, whatever reason Air Canada cancelled the flights falls under an involuntary refund (AC either cancelled the flight because it made commercial sense to do [“within its control”] or for safety reasons). In either case, a refund should be provided.

Second, Air Canada’s claim that the DOT’s promulgation of its rulemaking ability does not carry the force of law is also troubling. While the DOT cannot compel Air Canada to refund the passenger’s ticket, it can fine Air Canada for violating U.S. law. Congress has given the DOT broad regulatory authority to enact rules concerning the purchase of air travel and DOT acts within its lawful role when issuing guidance documents interpreting regulations.

Third, Air Canada’s refund policy is hardly transparent when it contravenes years of precedent and the highlighted section of the Contract of Carriage above seems to suggest a different outcome when a passenger finds his flight cancelled and no other suitable options available.

Fourth, the jurisdictional argument is absurd…but also the most dangerous. The DOT has jurisdiction because it is a trip that touches U.S. soil. That has long been the standard and to argue otherwise would upturn years of consistent jurisdictional interpretation. The goal of DOT’s consumer protection relegation is not simply to protect U.S. citizens, but to protect all passengers traveling to/from/via the USA.

Generally, I find the Air Canada arguments totally disingenuous. For example, it tries to distinguish between refundable and non-refundable fares, warning of the risk of purchasing non-refundable tickets:

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