Highlights of Proposed Airline Refund Requirements

Introduction

The COVID-19 pandemic and subsequent collapse of global air travel has revealed a gap in Canada's air passenger protection framework that affects passengers whose flights are delayed or cancelled due to situations outside the airline's control.

The Minister of Transport issued a direction giving the Canadian Transportation Agency (CTA) the authority to establish an obligation for airlines to provide a refund when there is a flight cancellation, or a lengthy delay, for reasons outside of the airline's control and the airline cannot complete the passenger's itinerary within a reasonable time.

The CTA developed the proposed Regulations Amending the Air Passenger Protection Regulations, which would establish new refund requirements, taking into account input received from the public, consumer rights organizations, and the airline industry during the consultation held from December 21, 2020 to March 1, 2021. These proposed regulations were published in Part I of the Canada Gazette for public review and comment on July 2, 2021.

Overview of the new refund requirements

The proposed refund requirements for flight delays and cancellations that are outside airline control would be added to the Air Passenger Protection Regulations (APPR). That means they would apply to all future flights to, from and within Canada, including connecting flights (once the new requirements come into force). The proposed regulations would not affect refund-related complaints for previous flights cancelled or delayed as a result of the COVID-19 pandemic.

New refund requirements

Under the APPR, when there is a flight delay of three hours or more or a cancellation that is outside their control, all airlines must rebook affected passengers on the next available flight operated by them or a partner airline.

Under the proposed requirements, if the airline cannot provide the passenger with a confirmed reservation on a flight leaving within 48 hours of the departure time on the passenger's original ticket, the airline would have to either:

• Provide a refund; or
• Rebook passengers who do not wish to be refunded on the next available flight
  • Large airlines would have to rebook the passenger on the next available flight of any airline, including competitors.

Passengers would be free to change their decision and choose a refund at any time before being provided a confirmed reservation on an alternate flight.

Refund coverage

When a passenger chooses to receive a refund, the airline would have to refund the unused portion of their ticket. This would include any unused add-on services the passenger paid for (such as preferred seat selection or additional checked luggage).

If the passenger is no longer at their point of origin, and their travel no longer serves a purpose, the airline would have to refund the ticket, including any unused additional services, and book the passenger on a flight back to their point of origin.

Method of refund

The proposed regulation would require that the airline issue all refunds under the APPR to the person who originally purchased the ticket, using that person's original payment method (for example, a return on the person's credit card).

The airline would be allowed to offer the refund in other forms as well (for example, vouchers or credits). However, they would only be allowed to provide a refund in another form if:

• It is worth more than the ticket and does not expire;
• The airline informs the person in writing of the value of the ticket and their right to receive a refund in that amount by the original payment method; and
• The person confirms in writing that they have been informed of their right to a refund by the original method of payment and instead have chosen the other form of refund.

Refund deadline

The proposed regulation would require airlines to provide all refunds under the APPR:

• Within 7 days for tickets purchased by credit card;
• Within 20 days for tickets purchased by other forms (for example, cash, cheque, travel points).

These timelines would begin as soon as the airline's obligation to provide a refund is triggered.

Next Steps

The proposed regulations have been published in Part I of the Canada Gazette for public review and comment. All the input received will be given careful consideration, and the CTA may propose adjustments based on this feedback. Once approved by CTA Members and the Governor in Council (Cabinet), final regulations will be published in Part II of the Canada Gazette. The CTA aims to finalize the Regulations as soon as possible, targeting late 2021.