Do DOT Rules Apply to Foreign Airlines? Air Canada Challenges DoT on Refunds

Do DOT Rules Apply to Foreign Airlines? Air Canada Refund Test Case


Do Department of Transportation (DOT) Rules Apply to Foreign Airlines? A Case Against Air Canada could test DOT willingness to enforce consumer protections. Specifically, the DOT told airlines to refund passengers within 7 days of a refund request, in cases where airlines (U.S. or foreign) cancelled a flight.

The DOT's April 2 enforcement notice, which applies to all U.S. and foreign carriers that operate at least one aircraft that has 30 or more seats on a scheduled flight from or to the U.S., reminded airlines that they have a “longstanding obligation to provide a prompt refund to a ticketed passenger when the carrier cancels the passenger's flight…and the passenger chooses not to accept the alternative offered by the carrier.”

Importantly, the notice went on to conclude, bolding ours: “the Department continues to view any contract of carriage provision or airline policy that purports to deny refunds to passengers when the carrier cancels a flight…a violation of the carrier's obligation that could subject the carrier to enforcement action.

Air Canada may be a test case of whether the DoT will enforce its consumer-friendly refund rules.

Air Canada recently provided its answer to a DoT complaint brought by Canadian citizen Charles Cervinka claiming that Air Canada had failed to abide by the DoT's April enforcement notice, by failing to issue Cervinka a refund for his May 10, 2020 Montreal to Chicago flight, which Air Canada cancelled.

In a nutshell, Air Canada asserts that the DoT has no jurisdiction (contract between a Canadian citizen on a Canadian site, for a purchase denominated in CAD) ; that even if the DoT had jurisdiction Air Canada's lack of refund is not unfair since the fare was a non-refundable fare and Air Canada's Contract of Carriage does not provide for a refund where the cancellation was due to something (such as a pandemic) outside Air Canada's control; that the DoT policy and U.S. case law have traditionally given deference to an air carrier's Conditions of Carriage; and that the DoT's Enforcement Notice is guidance only, and does not have the force of law.

Unfortunately, the Canadian Transportation Agency (CTA) has taken the opposite approach of the U.S. DOT and the European Commission (see EC 261/2004 Coronavirus Cancellations: Passenger Rights), which both mandate full refunds to passengers for flights that airlines cancelled. Instead, the CTA stated that forced vouchers (instead of a cash refund) were acceptable, if the vouchers were valid for 24 months or more.

In so doing, the CTA showed it was more concerned with protecting Air Canada's survival than ensuring Canadians and Air Canada's other customers weren't forced to extend interest-free loans to keep Canada's national carrier afloat.

The aspect to watch is whether the DoT will fight Air Canada's claim that DoT enforcement notices are simply guidance, that foreign carriers can choose to ignore without any repercussions. While foreign carriers have certainly grumbled and not been happy to provide refunds for flights airlines cancelled during Covid-19, we haven't yet seen any of them assert, as Air Canada has, that the DoT's enforcement notice with respect to refunds lacks legal force. After all, the DoT's Final Rule on Enhancing Airline Passenger Protections went into effect August 23, 2011 and includes this discussion, bolding ours:

“We find it to be manifestly unfair for a carrier to fail to provide the transportation contracted for and then to refuse to provide a refund if the passenger finds the offered rerouting unacceptable (e.g., greatly delayed or otherwise inconvenient) and he or she no longer wishes to travel. Since at least the time of an Industry Letter of July 15, 1996 the Department's Aviation Enforcement Office has advised carriers that refusing to refund a non-refundable fare when a flight is canceled and the passenger wishes to cancel is a violation of 49 U.S.C. 41712 (unfair or deceptive practices) and would subject a carrier to enforcement action.

The 2011 rules did not carve out an exception for airline cancellations due to circumstances outside an airline's control; rather, the required refund of even non-refundable tickets was based on basic contract law and fairness: the passenger did not get what s/he contracted for, so should be due a full refund. The failure to provide the contracted for flight voids the contract, such that the passenger should have the option to receive his/her money back, regardless of what the airline's Contract of Carriage says.

Interestingly, Canada's CTA reached the same conclusion itself back in 2014 in the Lukács v. Porter case, in paragraph 88, bolding ours:

“The Agency agrees with Mr. Lukács, and finds that it is unreasonable for Porter to refuse to refund the fare paid by a passenger because of its cancellation of a flight, even if the cause is an event beyond Porter’s control.

In the meantime, we recommend NOT booking any flights with Air Canada. If you had the misfortune to do so and Air Canada cancelled your flight during the pandemic without providing a refund, file a DoT complaint, but also initiate a credit card chargeback and let your credit card company dispute it with Air Canada.

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3 years ago

My family had flights scheduled w/Air Canada July 9th for a European vacation. We booked through Citicard travel to use our reward points. Our credit card now refuses to do a charge back bcuz we used their travel agency. We haven’t agreed to the voucher but it looks like we will have to if we want to see anything come of our $3000, even tho we hv no reason to travel anymore. Our cruise was refunded back to us, so the airline shld do the same. I say if Air Canada doesn’t follow DOT, then take away their license and… Read more »

3 years ago

We had flight scheduled with Air Canada for Aug 22 from San Jose to Vancouver and it was canceled. I’m disputing the charge with Bank of America now since Air Canada refused the refund.
They have even removed the ability to reach out to a person via the telephone instead directing consumers to their website.

I agree that Air Canada should be held responsible for their blatant act of defiance against US DOT’s notice. Their license to fly to/from the US should be revoked.