Airline Refunds: Address to the House of Commons Finance Committee
Speaking notes of Dr. Gábor Lukács

House of Commons April 15, 2021

Mr. Chair, Honourable Members, thank you for the privilege to be here today.

Air Passenger Rights is Canada's independent nonprofit organization of volunteers, devoted to empowering travellers.

We take no government or business funding, and we have no business interest in the travel industry.

We speak for passengers whom we help daily in their struggle to enforce their rights.

We recognize that the aviation sector is important not only to passengers, but also to aviation workers, who have also experienced considerable hardship over the past year.

The pandemic brought to the forefront systemic issues that have plagued the aviation sector for nearly a decade: Airlines not respecting and the government not enforcing passenger rights.

The refund controversy exemplifies these anomalies.

It is a cornerstone of every transaction that if the consumer does not receive the goods or services they paid for in advance, the vendor must refund all moneys paid.

Air travel is no different.

Passengers have a right to a refund for flights cancelled by an airline, even if the reason is outside the carrier's control.

In 2013, this was coined a "fundamental right" by the federal regulator.

Yet, since March 2020, we have witnessed an unprecedented assault on passengers' private property and the collapse of consumer protection.

Airlines whose revenues were decimated by the pandemic have helped themselves to passengers' money, and pocketed airfares paidin advance without providing any services in return.

For more than a year now, the government has taken no enforcement action against airlines that violated passengers' fundamental right to a refund for flights the airlines cancelled.

Instead, the government turned passengers' legal right to a refund into a bargaining chip in bailout negotiations.

This was wrong.

First, in a democracy, the laws must be enforced against citizens and corporations alike. Otherwise, we risk creating a two-tiered society where, as George Orwell put it, "all animals are equal but some animals are more equal than others."

Second, the failure to force airlines to promptly refund passengers has undermined consumer confidence and goodwill, which is the lifeblood of the entire travel industry.

The Air Canada bailout suffers from the same flaws.

It lacks any enforcement mechanism to ensure that passengers are indeed refunded.

Instead of Air Canada's shareholders, who previously reaped the profits, it is taxpayers who are footing the bill for refunds.

The bulk of the bailout is in the form of unsecured loans. This means that no assets could be seized if Air Canada is unable to repay the loan. Unsecured loans tend to become grants.

Taxpayers assume only a token 6% equity stake in Air Canada. For comparison, Germany assumed a 20% stake in Lufthansa.

In addition, the sweatheart deal with Air Canada skews the market, and undermines fair competition.

The Air Canada bailout is not only a bad deal; it also overlooks that it is not possible to cure the aviation sector's chronic illness by throwing billions of dollars at the current symptoms.

Air Canada's new refund policy is an example in point.

On April 13, within hours after the bailout was announced, Air Canada added to its terms and conditions an exception to its obligation to refund passengers for cancelled flights.

The purpose of the exception is to legitimize refusing to refund airfares in the event of a new wave or a new pandemic.

It is unclear whether Deputy Prime Minister Freeland and Transport Minister Alghabra were aware of Air Canada's plan to add this exception or whether they were misled.

Either way, Canadian taxpayers were shortchanged. They paid billions of dollars, and the systemic issues of lack of consumer protection have just gotten worse.

Addressing these systemic issues is a vital interest of passengers, aviation workers, travel agents, and the entire travel industry.

Consumers will pay for services in advance only if they have confidence that they will receive the services they paid for, or, ifthe services are not provided, a full refund of their hard-earned money.

If Canada provides no such assurances, consumers will take their business elsewhere, to airlines based in jurisdictions that do offer such guarantees, like the US or the EU.

Canada therefore needs a declaratory legislation, such as Bill C-249, to protect passengers' right to a refund, and to restore consumer confidence.

In the absence of such legislation, no amount of taxpayers' money will save our travel industry.

Thank you.