The US Department of Transportation is fining Air Canada US$25.5 million (~AU$34 million) for “extreme delays in providing required refunds” during the COVID-19 pandemic.
According to US law, airlines are legally required to refund customers for cancelled or significantly changed flights to, from, within or via the United States within seven days. But from the beginning of the pandemic, Air Canada refused to refund most customers – even when it was legally required to.
In April 2021, Air Canada finally offered to refund customers who had previously only been offered credits. Affected Air Canada customers were initially given a deadline of 12 June 2021 to apply for a refund. This deadline was later extended by a further month until 12 July. Air Canada also said in April that it would change its refund policy going forward.
Since then, Air Canada says that approximately 40% of eligible customers have requested a refund, and 92% of claims submitted have now been processed. The airline said that the number of claims was lower than expected.
But the US Department of Transportation (DOT) asserts that over 5,000 customers who complained to the US government department were forced to wait anywhere from 5 to 13 months to receive refunds owed by Air Canada.
The US$25,550,000 civil penalty “is based on a variety of factors, such as the consumer harm caused by the violations”. It’s also designed to deter other airlines from breaking the law in the future.
In May 2020, the US government announced that it would offer a bit more leniency to airlines struggling to cope with the high volume of refund requests, provided airlines were acting in good faith. But “Air Canada did not make such good faith efforts,” the DOT said.
“Instead, for almost one year after the announcement of the May 2020 enforcement notice, Air Canada continued its no-refund policy in violation of U.S. law.”
Air Canada now has 15 days to respond to the DOT’s allegations.
Could this happen in Australia?
In this case, Air Canada is being fined because its actions significantly breached US law, which normally requires refunds to be paid out for cancelled flights within 7 days. But there is no such law in Australia.
The Australian Competition & Consumer Commission (ACCC) does have some power to act if an airline – or any business – is in breach of Australian Consumer Law. However, Australian Consumer Law does not force airlines to provide refunds for flights cancelled due to events outside their control, such as COVID-related border closures. In Australia, airlines may choose to provide a travel credit instead if the cancellation was for reasons beyond the carrier’s control.
If an airline’s Conditions of Carriage states that a refund will be offered in the event of a cancelled flight, the ACCC can enforce this. Last year, the ACCC did call out Qantas and Etihad Airways for being tricky with refunds that customers were entitled to based on their contract with the airline.
But Virgin, Jetstar and Air New Zealand, to give a few examples, do not promise refunds for flights cancelled due to events outside the airline’s control. So the ACCC has no power to force those airlines to give refunds.
In Australia, even if customers are legally owed a refund, there is also no mandated maximum timeframe for this to be processed. Indeed, many Qantas customers have reported waiting well over 8 weeks for a refund. There are no laws forcing Qantas to process refunds for flights bought in Australia any quicker than this. (Although, anecdotally, if you’ve already been waiting at least 8 weeks, you can call Qantas and they’ll process your refund on the spot.)
What about other countries?
The United States isn’t the only country with stronger laws regarding refunds than Australia.
Europe’s EC261/2004 laws also require airlines in the European Union and UK to refund cancelled flights within seven days – although there are some exceptions which airlines often try to use. This applies to any flight departing from the European Union or UK on any airline, as well as any flight to the European Union/UK on a European/UK airline.
Argentina, Brazil, mainland China, South Korea and Taipei also have relevant laws affecting flights in those jurisdictions.
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