Air Travel Dictionary: Compensation, Fine, Penalty, and Refund
Four Things Airlines Are Loath to Pay

January 8, 2023

Air passenger rights and the chronic lack of their enforcement have adversely affected Canadians, and are likely to be the subject of public discourse in the months to come.

Airlines are equally loath to pay compensation, fines, penalties, and refunds; these terms, however, have substantially different meanings, and they are not interchangeable. For example, compensation and refunds are payable to passengers, while fines and penalties are payable to the public purse.

Whether one deals with an airline directly, writes a letter to the editor of a newspaper, or speaks to a Member of Parliament, it is equally important that we use clear and correct terminology to describe the issues.


A refund is the return of the passenger’s payment in part or in whole for services the passenger had paid for but the airline did not deliver the service that was promised, irrespective of the reasons.

  • If an airline cancels a flight for any reason, the airline must offer passengers a choice between alternative transportation and a refund in the original form of payment.
  • If the airline still operates a flight, but the passenger nevertheless chooses to no longer travel, then the airline’s terms and conditions determine whether the passenger gets a refund.
  • If the airline downgrades the passenger into a lower class of service, then the airline must refund the passenger the fare difference.
  • If a passenger’s checked baggage is damaged or lost, the airline must refund the baggage fees paid for that piece of baggage.

Accepting a refund for a flight means the airline no longer has to transport the passenger to their destination; however, the airline may have to provide transportation free of charge to the passenger’s point of origin if the travel no longer serves a purpose because of the cancellation.

Most importantly, accepting a refund does not automatically relieve the airline from the obligation to pay compensation in addition to a full or partial refund.


A compensation is a form of recompense the airline pays to the passenger for the flaws in the performance of the services that were promised. Depending on the circumstances, compensation may be owed for damages incurred by the passenger, such as out-of-pocket expenses, inconvenience, and lost wages.

  • If the passenger’s checked baggage is delayed, lost, or damaged, the airline must compensate the passenger for their losses, subject to certain liability limitations set out in the law.
  • If the airline cancels a flight and the passenger is not notified at least 14 days in advance, the airline may have to pay a standardized amount of compensation for the passenger’s inconvenience in some cases.
  • In international travel governed by the Montreal Convention, if a passenger arrives later than their scheduled arrival time, the airline may be liable for the passenger’s losses, including but not limited to:
    • out-of-pocket expenses;
    • prepaid services the passenger was unable to use; and
    • lost wages.

Passengers may be eligible for both a refund and compensation. For example, if the airline cancels a flight and the passenger exercises their right to a refund, they may also be entitled to a standardized amount of compensation in certain cases (APPR, s. 19(2)).

Penalty or Fine

A penalty or fine means an amount of money an airline is required to pay to the public purse for contraventions of laws and regulations, such as the APPR.

  • Any contravention of the Canada Transportation Act and regulations made under the Act is an offence punishable on summary conviction by a fine of up to $25,000 for corporations and $5,000 for individuals (Act, s. 174).
  • Provisions of the Canada Transportation Act and regulations made under it may also be designated for enforcement by way of penalties (Act, s. 177(1)).
  • Violations of most provisions of the APPR are designated as carrying a maximum penalty of $25,000 for corporations and $5,000 for individuals (APPR, Schedule).
  • A separate penalty may be assessed for each violation. Each affected passenger may be counted as a separate violation.

There are some subtle differences between penalties and fines.

  • Penalties are assessed in notices of violation issued by enforcement officers designated by the Canadian Transportation Agency (Act, s. 180). The violation has to be proven on a balance of probabilities.
  • Summary conviction offences would normally be dealt with in provincial courts, similarly to speeding tickets. Guilt has to be proven beyond a reasonable doubt.

One More Thing

If an airline does not pay a compensation or a refund owed to passengers, it must pay a penalty or a fine to the public purse—on top of what is owed to travellers.

The unfortunate fact that this does not happen in practice explains the sorry state of passenger rights in Canada.