The U.S. Department of Transportation is seeking a US$25.6 million penalty from Air Canada over its "extreme delays" in refunding American passengers – a move the airline says "has no merit."
The department's Office of Aviation Consumer Protection (OACP) announced Tuesday that it has filed a formal complaint with a U.S. administrative law judge against Air Canada for failing to provide refunds in a timely manner to thousands of customers who had flights to or from the U.S. cancelled or significantly changed.
OACP announced last May that it would accommodate airlines that needed more time to process refunds, given the spike in the number of requests during the COVID-19 pandemic, "as long as airlines were making a good faith effort." The Department of Transportation said Air Canada failed to do so.
"Instead, for almost one year after the announcement of the May 2020 enforcement notice, Air Canada continued its no-refund policy in violation of U.S. law," the government said in a news release.
Air Canada spokesperson Peter Fitzpatrick said in an emailed statement that the company "believes that the Department's position in these enforcement proceedings has no merit." The airline said the Department's enforcement notice and COVID-19 Refund documents are considered "guidance documents, as opposed to properly issues regulations" and so "it does not have the force and effect of law and is not meant to bind the regulated entities in any way."
In a response filed with the Department of Transportation in October, the airline said the enforcement notice and the Department's COVID-19 Refund documents "should not be treated as and do not constitute binding authority" and recommended the complaint be dismissed.
"Air Canada remains firm on its position and will vigorously challenge the proceedings," Fitzpatrick said.
OACP said it received more than 6,000 complaints about Air Canada on its complaints portal since March 2020, and an additional 89 complaints through the department's online portal. The department said Air Canada has committed at least 5,110 violations, as passengers waited between five months and 13 months to receive refunds.
OACP said in a notice of enforcement that Air Canada had argued that it was not required to provide refunds for flights it had cancelled or significantly changed given the COVID-19 pandemic. OACP said it notified Air Canada "multiple times" through 2020 and 2021 of its view that "Air Canada's position lacks merit."
"Despite these efforts, Air Canada refused to change its policy until approximately April 13, 2021," the notice of enforcement states.
"Air Canada’s new refund policy does not change the fact that Air Canada committed thousands of violations of U.S. law prior to that time. Moreover, in the absence of an order directing Air Canada to cease and desist from future similar violations, there remains the possibility that Air Canada could revive its no-refund policy in the future."
As part of a financial aid package deal reached with the federal government, Air Canada agreed to provide refunds starting April 13 for passengers who purchased non-refundable tickets but did not travel due to COVID-19 since February 2020.
The $25.6 million civil penalty the department is seeking was determined based on a variety of factors, the government said, including consumer harm caused by the delays. The fine is also intended "to deter Air Canada and other carriers from committing similar violations in the future."
Air Canada is now required to file an answer to OACP's complaint within 15 days.
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.