[Air Canada Settles With DOT, DOT Will Issue New Regulations About COVID-19 Refunds] Don’t Mess With The DOT! DOT Proposes $25.5 Million Fine Against Air Canada For Refund Shenanigans!

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Update, 11/22: Air Canada has settled with the DOT for $4.5 million, though the actual fine paid to the US treasury will be $2 million. It’s the largest enforcement action from the DOT to date, though it seems like just a slap on the wrist compared to what Air Canada tried to get away with.

The DOT notes in the settlement that they are still going after domestic and foreign carriers who violated their rules on offering timely refunds.

The DOT says that they plan to shortly issue a rule for consumers who were not able to travel due to government restrictions. The DOT also put out a call to airlines to voluntarily offering refunds or non-expiring vouchers for people who didn’t fly due to the pandemic.

Update, 7/2: Air Canada has responded with a motion to dismiss the enforcement action. In it they say that they retain the right to refuse refunds on non-refundable tickets, even if they cancel flights. They write that the DOT can’t take enforcement action against them as they did not violate any laws and DOT guidance is not legally binding or enforceable. Now the case heads to the courts where it will be a big test for the DOT’s power to issue fines. What do you think will happen?

Update, 6/15: The DOT has put out this release about the enforcement action. Air Canada now has 15 days to respond. The DOT also writes that they are “actively investigating the refund practices of other U.S. and foreign carriers flying to and from the United States.  Enforcement action will be taken in those cases as appropriate.”

Air Canada has been one of the worst actors with COVID-19 refunds.

While other airlines were stingy, they generally paid up when a passenger filed a DOT complaint for a refund due to a flight cancelled by the airline. But not Air Canada.

The Canada Transportation Agency ruled last year that they don’t have the ability to force Canadian airlines to refund passengers holding tickets on flights that Air Canada cancelled, despite enforcing refunds in the past. No other transportation agency in the world decided to shaft consumers like that.

The CTA was more concerned about making sure I spelled the name of their agency correctly than about getting refunds for Canadians. I noted there that I hoped the DOT would hit Air Canada with enforcement action for their anti-consumer policies.

In May 2020, Air Canada wrote to people who filed DOT complaints that they were in compliance with US law, without explaining how they are in compliance with the DOT clearly stating that airlines had to provide timely refunds.

In July 2020, Air Canada issued this response to a formal US DOT complaint from a Canadian citizen that was flying from Montreal to Chicago.

In it, they admitted that they used to provide refunds for cancelled flights, but that they did so out of goodwill, not because their contract of carriage required them to do so. As of March 19th, 2020 they removed their goodwill policy, so they didn’t actually change the official policy after the ticket purchase.

Air Canada’s biggest claim was that the DOT’s COVID-19 guidance and enforcement notice aren’t actually enforceable, as it’s only guidance and not actual law.

I wrote last July that “If the DOT lets Air Canada get away with this, it may create a precedent that non-US airlines don’t need to abide by DOT rules. It may also have an effect on airlines around the world complying with local regulations.”

And sure enough, the DOT is taking decisive action.

In this enforcement complaint filed today the DOT says they do have the authority to create guidance and enforce that guidance with fines. The DOT says they require airlines to refund passengers for flights cancelled by the airline within 7 days, but allowed additional time if airlines made a good faith effort to provide refunds.

The DOT calls out Air Canada for failing to make good faith efforts to provide refunds as the airline refused to offer refunds for nearly a year after the DOT instructed the airline to provide refunds.

Air Canada only started offering refunds after they used it as a negotiating tactic to get a bailout from the Canadian government in April 2021.

The DOT received over 6,000 informal complaints and 89 formal complaints against Air Canada’s no-refund policy for flights that were to or from the US. Passengers can make informal and/or formal complaints to the DOT when they feel wronged by an airline if travel is to, from, or through the US.

The DOT investigated the 89 formal complaints and found that 85 complaints were meritorious. They also found that at least 5,110 total violations were meritorious.

As such, the DOT says they can fine Air Canada up to $34,184 per violation, for a total maximum fine of $174,680,240.

The DOT says they will actually seek a penalty of $5,000 per violation, or $25.5 million.

In this notice of administrative action filed today the 85 formal complaints found meritorious are listed. Interestingly, the DOT notes that Air Canada offered some of them expedited refunds if they agreed to withdraw their DOT complaints. The DOT notes that they consider all meritorious formal and informal complaints that point of violations of US law even if they are later withdrawn.

They also note that penalties are owed to the US Treasury, not to individual complainants, so a withdrawn complaint doesn’t have an effect on penalties as the complainant can’t waive the rights to a penalty that wouldn’t go to them anyway, though they still have the right to a refund as per US law.

I’m sure that Air Canada will appeal the size of the fine, but it’s great to see the DOT enforcing their laws and guidance that were made to protect consumers!

I think there were a couple big reasons for the big fine.

First of all, Air Canada really poked the bear by responding to an formal complaint by saying the DOT didn’t have the legal right to enforce their guidance.

Second, 89 formal complaints is a ton. Most airlines didn’t get any formal complaints, so a number like that is sure to attract the DOT’s attention. Most of these formal complaints appear to be against Air Canada and WestJet.

It’s a good reminder that filing a formal complaint will make sure your case sees the light of day.

Do you think the DOT will go after any other airlines that refused refunds during the pandemic? Are you still waiting for any refunds for flights that were cancelled or changed by the airline?

HT: chff