Air Canada reaches US$4.5M settlement over delayed U.S. refunds

The U.S. Department of Transportation has reached a US$4.5 million settlement with Air Canada (AC.TO) over the airline's delays in providing refunds to thousands of American passengers.

The department said in a statement released Monday that its Office of Aviation Consumer Protection (OACP) had reached a settlement agreement with Air Canada in relation to its investigation over the company's "extreme delays" in providing refunds to thousands of customers who had flights to or from the U.S. cancelled or significantly changed.

The settlement, which the Department of Transportation says is the highest amount assessed against an airline, still needs to be approved by an administrative law judge. Under the terms of the proposed agreement, Air Canada will be credited US$2.5 million for refunding passengers and will pay another US$2 million to the U.S. Treasury.

OACP initially filed a formal complaint with a U.S. administrative law judge in June, seeking a US$25.6 million penalty against Air Canada for failing to provide refunds to thousands of American passengers in a timely manner. At the time, OACP said it had received more than 6,000 complaints about Air Canada on its complaints portal since March 2020, and that the airline had committed at least 5,110 violations as passengers waited between five and 13 months to receive refunds.

Air Canada spokesperson Peter Fitzpatrick said in an emailed statement that the airline and Department of Transportation agreed to settle the matter "without prejudice or any finding of wrongdoing."

"This agreement was entered into to avoid protracted litigation as Air Canada focuses, together with all stakeholders, on rebuilding following the pandemic," Fitzpatrick said, noting that the airline's policy has changed so that as of April 13, customers who buy a non-refundable ticket can get a refund if their flight is cancelled or delayed by more than three hours.

The Department of Transportation had previously said it would accommodate airlines that needed more time to process refunds because of delays caused by the COVID-19 pandemic, it would do so "as long as airlines were making a good faith effort." OACP said Air Canada failed to do so. Air Canada had pushed for the case to be dismissed and said the Department's position had "no merit."  

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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