Canada Transport Minister Defends Making Passengers Give Risky Interest-Free Loans To Airlines

Air Canada, along with other Canadian airlines, hasn’t been refunding tickets when they cancel flights. The Canadian government has backed them, though for flights to or from the U.S. it’s a clear violation of U.S. law.

I’ve argued that U.S. consumers should file a DOT complaint, a credit card chargeback, and finally sue in small claims court as a last resort when a Canadian airline cancels a flight under these circumstances and refuses a refund though Air Canada at least offers some lucrative ‘refund alternatives’.

When an airline cancels a flight they do not render the service the contracted for. Telling customers they can only have a voucher, to use later, is effectively an interest-free loan (they hold onto the money until they earn it later) and a risky one (risk that the customer will have an opportunity to fly, and that the airline will still be in business).

Canada’s Transport Minister defends requiring an airline’s customers to provide these subsidies.

  • He says “airlines have been financially devastated by the pandemic and he’s trying to avoid the companies from collapsing.” In other words, customers are required to prop up insolvent airlines without even the protection of a bankruptcy process.

  • And that “airlines have been hammered by this pandemic. Some of them are not operating at all, and some of them are operating at below 10 per cent, and yet they’re still facing serious fixed costs.” Which of course means that the opportunity to actually use flight credit in the near term is limited at best.

  • Canada, he claims, isn’t out of step with “Europe and the United States” which is true if you treat that phrase as a mass noun. They’re very much out of step with the U.S., which has aggressively required airlines to refund cancelled tickets. Europe, meanwhile, has simply re-affirmed airline obligations to do so but enforcement mechanisms are slow and weak. So since they’re completely out of step with only the U.S., they are not completely out of step with Europe and the U.S.

The Canadian government is supporting business’ theft from consumers, keeping money for services not provided. Another way of looking at it is they’re requiring people to prepay now for flights they’ll effectively have to take later. Either way it’s a subsidy for airlines that isn’t being provided by the government or all of the people, just past ticket purchasers who had been foolish enough to book in advance.

When you see governments doing this, and realize they’re in the pocket of businesses, it shouldn’t then surprise you when calls for greater regulation wind up benefiting incumbent businesses.

(HT: Tyler K.)

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. Thanks for covering this sore topic. I have been battling Air Canada for 3 months for canceling my flights and refusing to refund the money on the pretext that US DOT don’t apply to a foreign airline even if the flight originates in the US. Also, sent a complaint to the DOT a few weeks ago but no response yet. Qatar, United, Aeroflot and Norwegian canceled some of my other flights and all of them agreed to refund money. Please continue writing about this.

  2. Continue writing about Air Canada – they outright deny DOT applies to them.

    Its time for DOT to ban AC from US airspace until everyone is refunded.

  3. Like the man has said multiple times, contact your credit card company for a chargeback against AC. They are in clear violation of U.S. law (if flight segment(s) are in U.S.

  4. Another route to take is your local small claims court. Several years ago we took a flight to Europe from Seattle. The ticket stock (literally) was on Northwest paper. European legs were on KLM. Long story, short. A bag was misplaced and miss sent by KLM. When returned home, we asked for monetary support for purchases necessary until our bags were returned. Northwest said go after KLM. We said no, because we paid you.

    I took them to small claims court for the out of pocket expenses, plus costs associated with filing the claim. Northwest didn’t show. We won, and Northwest was forced to pay up.

  5. @Alan – you do realize that asking for a credit card refund doesn’t mean you will get it. They don’t have a pocket of money to reimburse people. They simply go to the vendor and press the issue (likely with better leverage). If the vendor denies the reversal the credit card company will not simply reimburse you!

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