Ottawa developing new refund regulations for large-scale flight cancellations

The federal government is developing new regulations to protect passengers in the event of another catastrophic event that results in large-scale flight cancellations. 

"The ongoing COVID-19 pandemic has highlighted a gap in the air passenger protection framework, which did not foresee the potential for large-scale and lengthy flight cancellations and groundings of air carrier fleets not only in Canada but globally," Transport Minister Marc Garneau said in a statement. 

"In the event of a future situation that causes similar large-scale flight cancellations, this gap needs to be closed so that travellers are treated fairly."

Garneau said he has directed the Canadian Transportation Agency to develop new regulations around the issuing of refunds to passengers that will apply to future flights that are cancelled for reasons outside an airline's control.

It will impact airlines that are not able to complete a passenger's Itinerary "within a reasonable time" because of a major event such as a pandemic. 

"This updated regulation should be made in a manner that is fair and reasonable to passengers, and to the extent possible not impose an undue financial burden on air carriers that could lead to their insolvency," Garneau said.  

Conservative MP Stephanie Kusie said the announcement does not address the existing problem of outstanding passenger refunds from flights that have been cancelled during the pandemic so far. 

"The sector still requires a plan that puts airlines in a position where they can provide refunds to passengers who deserve them," she said on Twitter. 

Bloc Québécois Transport Critic Xavier Barsalou-Duval argues the law in Quebec is clear that companies that do not render a service must reimburse customers. 

"The minister must be firm and demand that companies respect consumer rights," Barsalou-Duval said in a news release in French. "In addition, his new regulation would change absolutely nothing for them because it would only apply to future cases."

The federal government is currently developing a financial assistance program for Canadian airlines, airports and the aerospace sector.

Garneau said the package is being developed with "strict conditions to protect Canadians and the public interest, including issuing refunds for flights cancelled as a result of the COVID-19 pandemic."

Refunds before assistance: Garneau

For months during the pandemic, Garneau had said forcing airlines to refund passengers billions of dollars for cancelled flights could have a devastating effect on the sector and cause some airlines to fail.

But on Nov. 8, he changed his messaging and said that as airlines start talks with the government for an industry-specific support package, airlines must commit to refunding passengers first. 

"We said very clearly no — until they commit in writing to refund passengers, they will not get a cent from the Canadian government," he told CBC News earlier this month.

So far, the federal government has spent $1.4 billion helping Canadian airlines pay up to 75 per cent of employee wages during the pandemic, according to the federal government's fall economic update.

Air Canada has reported that it collected $492 million in public funds through the Canada emergency wage subsidy (CEWS) to pay its employees over a period ending Sept. 30, according to regulatory filings.

Air Canada's third-quarter results report to investors shows the dramatic impact COVID-19 has had on the company. The airline says it saw an 88 per cent drop in passenger traffic due to the pandemic and travel restrictions.

The airline reported total revenues of $757 million in the third quarter; that represents an 86 per cent drop of $4.7 billion from its revenues in the same time period in 2019.

Bleeding cash, Air Canada took what it called "the painful step" of cutting half its workforce in June — 20,000 jobs — and indefinitely suspended 30 domestic regional routes.

The carrier also retired some planes early and postponed or cancelled the delivery of some new aircraft, according to the company's financial records.