Air Canada Told The DOT It Was Ok To Commit Fraud, The U.S. Government Response Was Brutal

The U.S. government proposed to fine Air Canada $25.55 million for selling tickets to customers, cancelling their flights, and refusing to issue refunds. When customers complained to the Department of Transportation, Air Canada claimed they weren’t subject to U.S. law. And Air Canada sought to dismiss the fine arguing that, despite U.S. government claims, the law doesn’t require refunding customers when an airline fails to provide the paid-for service anyway.

The response from the Department of Transportation to this nonsense is brutal, in typical understated legal-speak of course.

Air Canada attempts to argue that its practice was indeed fair, and that the Office of Hearings cannot possibly find otherwise as a matter of law. To reach this remarkable conclusion, Air Canada relies on three arguments:

(1) OACP relied on nonbinding guidance;
(2) OACP brought this case without adequate notice; and
(3) Air Canada’s no-refund policy is consistent with Canadian law and its own contract of carriage.

These first two arguments are false and have no foundation or basis in fact, and the third argument is irrelevant and is used by the carrier to divert attention away from how the carrier harmed consumers by deciding to keep their money without providing the service that they paid for.

Air Canada is now looking to come to a settlement with the U.S. government. Expect them to agree that they’re subject to U.S. law when they fly to the U.S. and sell tickets to consumers in the U.S. (duh), that refunds are required when they cancel flights (anything else is fraud), but that the amount they actually pay in fines will be substantially lower.

They’ll no doubt get credit for the refunds they’ve actually provided to customers, something they did only after the Canadian government shelled out subsidies to them much larger than the refund amounts and made refunds a condition of picking taxpayer pockets up North.

At this point what matters is a recognition that defrauding customers may be acceptable under Canadian law but it’s not ok here, and that customers need to remember and be reminded that Air Canada was a bad actor throughout the pandemic. Of course United was as well – but they buckled under pressure from the DOT.

(HT: @travel33t)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Simple solution is fine them heavily and ban them from flying to the US for a certain time period.

  2. The reopening of Canada to vaccinated Americans was done so that Air Canada can get enough ticket sales to pay the fine.
    Or start the “we don’t do refunds” process all over when Canada changes its mind.

  3. There’s an interesting legal argument in there that DOT doesn’t fully refute but which could get some traction in court. Apparently, there is a regulation that specifically gives DOT the right to cancel provisions in international conditions of carriage that are unfair. DOT did not do that here. Air Canada contends that this amounts to a waiver and that DOT cannot now selectively argue that the conditions of carriage as applied require fines.

    My hunch is DOT has pretty broad authority here and it would ultimately turn on the actual language of the regulations but it’s interesting that DOT relegates this argument to a footnote and the most they can say is that the “find no authority” supporting AC’s position, which is a pretty good telltale that it’s not an insubstantial argument. I was actually a little surprised that DOT accepted for purposes of argument that AC’s conditions of carriage actually did permit them to do what they did. I would have thought they might fight harder on that but I guess they still can.

    DOT also concedes that at trial AC is freely entitled to argue that in the long run not fining AC will work to the benefit of competition.

    None of this actually going to go to trial. The entire point here is for DOT to get past a motion to dismiss and then they will argue about how strong or not strong AC’s arguments are to set up a compromise. But if AC were to take it all the way this is not a slam dunk.

    (I am not a transportation lawyer. This is not legal advice.)

  4. I wish DOT would ban AC from all US operations for a period of time to make an example out of them. Plus issue these fines. The legalese won’t make much mass market news outside of the travel industry, but if DOT kicked Air Canada to the curb, that would be huge sensational tv news. It would be an action that is easily enough understood for the tv networks to get it in to the condensed story format that is seemingly used now. And it would be simple for people to understand.

  5. I hope all the ‘Smaller government! Less regulation!’ people read this. Especially that last paragraph.

  6. Ban the scum. Simple.

    Horrible airline in the air, and on the ground

    But they sell enough cheap tickets (hello Asia for 400) that people will fly them again.

  7. They’re not going to be banned from U.S. airspace over this. Just hope the fine is high enough they don’t play these games again.

  8. They should ban Air Canada from flying over US airspace like the EU did to the Bielarus Airline!

  9. How long until there’s a “19 Reasons Why to Get the Air Canada Shiny Bit of Plastic” post all over BoardingArea?

    It’s ALL about the conversions…

  10. @GringoLoco Aeroplan miles are great. Air Canada’s Signature Suite lounges are great (and you can now access those on awards when you redeem for it), their refund policy was atrocious.

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