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Department of Transport Wins Biggest Ever Settlement From Air Canada In No-Refund Lawsuit

Department of Transport Wins Biggest Ever Settlement From Air Canada In No-Refund Lawsuit

The U.S. Department of Transport’s consumer protection office has won the biggest ever settlement made against an airline after Air Canada agreed to pay the federal government $4.5 million to settle a dispute over the Montreal-based carrier’s no refund policy.

The DOT’s Office of Aviation Consumer Protection had originally sought a mammoth $25.5 million fine over Air Canada’s failure to issue pandemic-related refunds in a timely manner. The case has, however, been resolved without it needing to go to court.

More than 6,000 complaints had been made to the DOT about Air Canada over its refusal to refund tickets for flights between the United States and Canada that were either cancelled or significantly altered as a result of pandemic-related travel restrictions.

Air Canada originally argued it was under no obligation under Canadian law to refund non-refundable tickets. When the pandemic struck, most airlines tried to hold onto as much cash as possible and altered refund policies to keep money from bleeding out.

Consumers are protected with a legally enforced refund guarantee for international flights to or from the United States that are cancelled or significantly altered. Refunds must normally be paid out within 20 days but the DOT cut airlines some slack during the pandemic due to the huge pressure they were under.

When the DOT eventually reminded airlines that refunds still needed to be paid, Air Canada instead ignored the warning and kept its no-refund policy for nearly a year.

Under the settlement agreement, $2.5 million of what Air Canada has agreed to pay with be credited back to the airline by the federal government to help the airline refund passengers who bought nonrefundable tickets.

The consumer rules only protect passengers whose flights are cancelled or altered and is not designed to guarantee refunds for consumers who simply choose not to fly because of the pandemic.

The DOT is, though, looking to introduce a rulemaking that would protect consumers who are hit when travel restrictions are brought in by a government that prevents them from traveling.

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