Carrier being sued over cancelled flight policies during the pandemic

Executives at Transat, one of the world’s largest tour operators, tied the company’s willingness and ability to refund passengers to government aid for the industry. Air Transat is just one of the Canadian carriers under fire for offering passengers vouchers for their cancelled flights, instead of outright refunds.

“To begin with, I think that the travel credit, which is valid for 24 months, is a satisfactory option for most of our customers,” said Transat President and Chief Executive Officer Jean-Marc Eustache in an investor conference call. “That said, we fully understand that some of them have no intention or no ability to travel and would like a refund. We would also like to be able to offer it to them provided the burden is not excessive.”

Transat grounded its planes April 1, throwing the travel plans of thousands of Canadians into doubt and leaving a trail of frustrated and increasingly furious passengers.

Instead of refunding people their money, the airline offered vouchers good for 24 months, a policy in line with most other Canadian carriers. Passengers have launched at least two class-action lawsuits, demanding their money back.

The airline reported Thursday the credits are worth $416 million.

“This exposes the Corporation to litigation and enforcement measures by legislative and regulatory authorities, including class action suits, which the Corporation intends to contest in good faith and with good reason,” the company said in its second quarter financial statement.

Authorities in the United States and Europe have ordered airlines to reimburse passengers for cancelled flights. In Canada, regulators and politicians have taken a more hands-off approach. Canada’s Transport Minister, Marc Garneau, has said refunds could force some carriers out of business.

“What is overlooked is that the government demand has been accompanied by assistance plans that are out of all proportion to what we have seen in Canada,” said Eustache, his voice growing increasingly insistent with each sentence. “For most of the large companies, government assistance plans, whether in the form of a loan or a grant, have amounted to billions of dollars or Euros.

“Canada has yet to come up with any specific support plan for the airline industry.,” he said. “So I say clearly to the various levels of government, help us find a solution that is acceptable to all stakeholders and we are all for it.”

Westjet announced last week it would offer refunds to some passengers booked on cancelled flights to Europe and the United States, while Flair said it would refund passengers after it cancelled expansion plans to Ottawa and Atlantic Canada.

Eustache downplayed critics’ contention that airlines are already being propped up by government wage subsidies and emergency loans during the pandemic. Wage subsidies pay up to $847 a week for employees. But Eustache said if that support didn’t exist, 85% of his staff would have been laid off and not on Transat’s payroll.

“We’re happy to collect the remaining 15% on the salaries of our employees who are actually at work,” said Eustache. “But that’s a pretty small amount compared to the needs of an airline.”

Transat’s Chief Financial Officer said the company had been spending $15 million a month, to pay the few remaining salaries and the lease on its fleet of aircraft. But very little has gone to passengers.

“No real reimbursements were paid up to now,” said Denis Pétrin, Transat’s Chief Financial Officer.

With Transat set to restart flights on July 23, the issue may not be completely set to rest. The airline may find itself in the same position if borders don’t re-open to tourists.

“Most of them require [policy] change before we are able to operate our flights,” said Transat Chief Operating Officer Annick Guérard.

“The first one that we are expecting and waiting for impatiently is Canada,” she said. “We hope that Canada will position itself over the next few weeks, and as we see borders being released, we will adapt our programme.”

And if those borders aren’t reopened? Flights will be cancelled and passengers will be offered a travel credit.