Airline regulator argues it has no authority to require airlines to refund passengers for cancelled flights

MPs question Canadian Transportation Agency’s impartiality to decide refund issue

The Chair of the Canadian Transportation Agency says politicians – and not his agency – are to blame for the lack of refunds for any airline passenger whose flight was cancelled due to COVID-19. Scott Streiner told MPs that his agency might well have forced airlines to refund passengers for cancelled flights, if only the law allowed.

Streiner testified Tuesday before the Commons Transport Committee. He defended his agency’s work, saying it has received an “unprecedented tsunami” of complaints over the past year – 11,000 since mid-March.

The issue of refunds for cancelled flights continues to fester. When the pandemic hit, airlines cancelled thousands of flights as borders closed and people stayed home. But instead of automatically refunding their money, most airlines offered vouchers for future flights. Flights that people no longer wanted to take. An untold number are out hundreds of thousands of dollars each. Some in government estimate it could be in the billions.

The issue has become such a political hot potato that, Transport Minister Marc Garneau has made refunds a condition on any government money to prop up the airline industry.

“We now get more complaints every two to four weeks than we used to get per year,” Streiner testified. The CTA is Canada’s airline regulator.

“We’re being told by the government that these Canadian citizens who purchased these airfares are not able to get a refund,” said NDP MP Taylor Bachrach.

The fault lies not with the regulator, Streiner told the committee, but rather with the law.

No obligation for passenger refunds

“On the topic of refunds,” said Streiner, “it’s important to understand the reason the APPR don’t include a general obligation for airlines to pay refunds when flights are cancelled for reasons outside their control is because the legislation only allows the regulations to require the airlines ensure passengers can complete their itineraries.”

The argument gets a bit complicated here, and MPs had to ask several questions in a bid to understand.

Bloc Québécois MP Xavier Barsalou-Duval led the charge.

“If you read it carefully,” said Barsalou-Duval, the law requires “refunds for services purchased but not used, whether in whole or in part, either as a result of the client’s unwillingness or inability to continue or the air carrier’s inability to provide the service for any reason.”

“That section and that regulation requires airlines to elaborate its terms of service,” replied Streiner. “It does not require a certain term of service. That means there is no minimum obligation in the law to reimburse clients in that situation.”

In other words, the airline has to explain if it will refund fares, not that it will.

“I think we’re playing with words,” Barsalou-Duval shot back.

Passengers who wanted refunds would first have to take it up with their airline, said Streiner.

Who approved it?

MPs hammered away at another issue dogging the regulator – a statement published early in the pandemic. In it, the CTA said vouchers were an acceptable way to make sure passengers at least got some value for their flights, given the circumstances. The agency has come under fire – and been sued in court – for the advisory. Streiner called the publication a “suggestion, but it is not a decision.”

But MPs wanted to know who approved the unsigned document.

“Who approved it?” Asked the NDP’s Bachrach.

Streiner didn’t answer directly, saying instead it was the CTA’s position.

“Ultimately every statement like this is an expression for the organization’s guidance,” said Streiner. He said the guidance was issued “to protect passengers from ending up with nothing at all as a result of this situation.”

“Don’t you think the positions taken by the CTA call into question is impartiality?” asked Basalou-Duval.

“Not at all,” replied Streiner.

“We did it to reduce the risk that passengers find themselves without compensation,” said Streiner.

Ultimately, the regulator said any passenger complaint over refunds will be decided on its merits.

“Any passenger entitlements in this regard depend on the wording of each airline’s applicable tariff,” he said.

So far, only Westjet has promised refunds to every passenger whose flight was cancelled because of the pandemic. The airline expects the process to take several months.

A gap in the law

Streiner said the controversy over refunds for passengers has nothing to do with the regulations he helped create. Instead, he said, the pandemic exposed a gap in the law.

“No one realized at the time just how important this gap was,” said Streiner. “No one saw mass worldwide flight cancellations that would see passengers seeking refunds frustrated, airlines facing major liquidity issues, and tens of thousands of airline employees without jobs.”

Following Streiner’s logic, if the regulations don’t say that airlines must refund passengers, politicians need only look in the mirror.

“And to be clear, the gap stems from the legislation,” he said. “The legislation gave the CTA the authority to make the air passenger regulations. If you read the relevant section, related to cancellations that are outside of airlines’ control, it constrains our ability to make regulations to only requiring that airlines make sure that passengers can complete their itineraries. Frankly, if the section had been more permissive, we might well have established a refund obligation.

“If and when the CTA is given the authority to fix that gap, we’ll act quickly.”

Clarification: this story has been updated from its original publication to clarify that the Canadian Transportation Agency’s passenger advisory was an acceptable means of ensuring passengers at least got some value for their cancelled flights, given the circumstances.