Consultation paper: Development of new airline refund requirements

Introduction

The COVID-19 pandemic – and the global collapse of air travel that resulted in mass flight cancellations – have highlighted a gap in Canada's air passenger protection framework: the absence of a requirement for airlines to refund tickets when flights are cancelled, or where there is a lengthy delay, for reasons outside their control and it is not possible for the airline to complete the passenger's itinerary within a reasonable time.

The Canadian Transportation Agency (CTA) now has the authority, through a direction from the Minister of Transport, to make a new regulation to close that gap for future travel.

Many passengers have experienced frustration in recent months about not getting refunds for flights that were cancelled or seriously delayed for reasons beyond both their control and the control of airlines. The new regulation will help make sure that doesn't happen again, by establishing clear and consistent refund entitlements for passengers in such situations.

The CTA is seeking feedback from the public, consumer groups, airlines and experts on the specifics of the new regulation. The issues for this consultation are set out below.

The CTA's goal is to have a final regulation in place by summer 2021.

Canada's air passenger protection framework

Airlines' obligations towards passengers flying to, from, or within Canada are established through:

The APPR apply broadly – to all flights to, from and within Canada, including connecting flights. Airlines must follow the minimum conditions set out in the APPR or any more advantageous terms and conditions of carriage that an airline has decided to include in its tariff.

Each tariff applies only to the airline that issued it, or sometimes to a code share partner if one airline sells a ticket for a flight operated by another airline.

Passengers who believe an airline hasn't respected its obligations under a regulation or tariff – or who think a tariff term is unreasonable -- can complain to the CTA. The CTA offers informal dispute resolution services (facilitation and mediation). If these don't produce a solution, the CTA can issue a binding decision through adjudication.

Flight disruption provisions currently in the APPR

The APPR were finalized in 2019 on the basis of legislation passed by Parliament the previous year. That legislation included a framework for establishing regulatory requirements related to flight disruptions:

  • For disruptions outside the control of the airline, the regulations must require the airline to ensure passengers can complete their itinerary.
  • For disruptions within the control of the airline but required for safety, the regulations must set out minimum standards of treatment and require the airline to ensure passengers can complete their itinerary.
  • For disruptions fully within the control of the airline, the regulations must set out levels of compensation for the inconvenience experienced by passengers, as well as minimum standards of treatment, and require the airline to ensure passengers can complete their itinerary.
  • For all disruptions, the regulations must set out the airline’s obligation to provide timely information and assistance to passengers.

The APPR reflect this legislative framework. For all types of disruptions, they require the airline rebook passengers so they can finish their travel. For disruptions within the control of the airline, or within the control of the airline but required for safety, there is also a requirement for the airline to provide a refund if rebooking does not meet the passenger's needs.

But consistent with the legislation, the only current obligation when disruptions happen for reasons outside the airline's control (such as government advisories against travel or border closures due a pandemic, or a hurricane, volcanic eruption or security incident) is completion of the passenger's itinerary – that is, making sure the passenger gets to the destination on their ticket.

Recent events and the gap in the framework

The global collapse of air travel as a result of the pandemic highlighted a gap in Canada's air passenger protection framework: passenger entitlements when flights are cancelled or there has been a lengthy delay for reasons beyond airlines' control and the airline cannot rebook the passenger on another flight within a reasonable time. These events showed that simply requiring rebooking in such situations will sometimes be insufficient.

Although some airline tariffs provide for refunds for flight cancellations regardless of the reason, others do not. Some airlines offer refundable tickets, but because these are generally more expensive, many passengers choose to purchase tickets that are non-refundable. And even when airline tariffs do provide for refunds, many include force majeure clauses that airlines argue relieve them of these requirements in certain circumstances. This inconsistency in refund requirements has caused considerable confusion and frustration for passengers.

The CTA is in the process of reviewing the over 22,000 complaints received since the APPR came fully into force on December 15, 2019, more than half of which were filed after the pandemic struck. Of the latter group, over 6,500 are refund-related. Just five years ago, the CTA received less than 1,000 complaints per year. Such huge increases in complaint volumes are unheard of for most quasi-judicial tribunals. Complaints are treated in the order they’re received – and the CTA has been processing record numbers, mainly through informal facilitation and mediation approaches. Every complaint is reviewed impartially, based on its merits.

Fixing the gap

The CTA can only make a new regulation if given the legal authority to do so. For air passenger protection, the CTA can make regulations on topics set out by Parliament in legislation or on other topics set out in a direction from the Minister of Transport.

On December 18, 2020, the Minister of Transport wrote to the CTA's Chair and CEO to indicate that he intends to issue a Direction giving the CTA the authority to establish an obligation for airlines to provide a refund when there is a flight cancellation for reasons outside of the airline's control and the airline cannot complete the passenger's itinerary within a reasonable time. The letter also raised the possibility of extending this requirement to lengthy delays outside airlines' control.

In other words, with this direction, the CTA will be able to take action to fill the gap that became obvious after the onset of the pandemic and the collapse of air travel.

This new regulation will provide more clear and consistent refund rights for passengers than the current, tariff-based approach. For example, under the new regulation, the airline's obligation to provide a refund will apply regardless of the class of ticket or fare the passenger purchased from the airline.

The Minister of Transport's letter asked that the CTA design the regulation in a manner that is "fair and reasonable to passengers and, to the extent possible, does not impose an undue financial burden on air carriers that could lead to their insolvency."

Issues for Consultation

The CTA is seeking input on the following questions, which will help shape the regulation:

1. The entitlement to a refund will apply if the airline cannot complete the passenger's itinerary within a reasonable time. In the context of an event outside of an airline's control - such as a border closure, security incident, or volcanic eruption - what should be considered a "reasonable time" for completing a passenger's itinerary?

2. The entitlement to a refund could potentially apply not just in the context of a flight cancellation, but also a "lengthy delay." What should be considered a "lengthy delay" ?

3. What should a refund cover? For example:

  • The unused portion of the passenger's ticket;
  • Any additional services the passenger purchased, but did not use (for example, seat selection or extra baggage);
  • The full cost of the passenger's ticket, if their trip no longer serves a purpose because of the flight disruption.

4. How should airlines be required to refund passengers? For example:

  • Using the same method used to buy the ticket;
  • In monetary form (for example cash, cheque, or a bank account deposit);
  • Passenger's choice of money or other forms offered by the airline (such as vouchers or rebates).

5. How much time should airlines have to provide refunds to passengers under the new requirements?

6. a) Should there be greater flexibility in the requirements for certain types of airlines, or in certain situations? For example:

  • Based on airline size (smaller airlines may be, for example, less able to recover quickly after an event outside their control);
  • If an airline provides essential services (for example, to remote, regional or northern communities);
  • If the event is large-scale (as opposed to an isolated event like a collision with wildlife);
  • If the event could threaten an airline's financial viability (for example, one that results in operations being shut down for months).

b) If so, in what areas should flexibility be given? For example, should there be a different:

  • definition of "lengthy delay";
  • deadline to provide a refund to passengers.

7. Events since March have shown that some situations caused by a pandemic are outside of airlines' control, while others may be within airlines' control. An airline's business decision to consolidate flights during a pandemic could sometimes be considered within its control, while government travel restrictions, employee quarantine or self-isolation, and additional hygiene procedures are examples of pandemic-related situations the CTA considers outside airlines' control. Are there other, specific pandemic-related situations that you think should be considered either within or outside airlines' control?

8. The CTA will consider the legal frameworks in the European Union (EU) and the United States (US) in developing the new regulation on refunds. What particular aspects of these frameworks should the CTA consider?

The CTA welcomes input on the issues for discussion, as well as any comments on other air passenger protection issues brought to light by the COVID-19 pandemic.

Please submit your comments online. This consultation will close on March 1, 2021.

Next steps

Your feedback will help to shape the new regulation.

After reviewing all input provided, the CTA will move quickly to make regulatory provisions that close the gap in the air passenger protection framework.

There will be an opportunity to review and comment on a draft version of the new regulation before it is finalized. Our goal is to put the regulation in place by summer 2021.

Confidential information

If your input contains information you believe should be treated as confidential, you must give us two copies of it, as follows:

  1. One copy (the public version) from which the confidential information has been blacked out.
  2. One copy (the confidential version) in which:
    • each page is marked “contains confidential information” at the top; and
    • you highlight or otherwise identify on each page the confidential information that was blacked out in the first copy.

We will post the public version on our website, and keep the confidential one for our own use only. However, all input we receive is subject to the Access to Information Act and Privacy Act. We will protect the confidentiality of your information in accordance with these Acts, but those Acts can require us to release information if someone requests it and it is not covered by the exemptions and exclusions in the legislation.

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