The U.S. Transportation Department said on Tuesday it was seeking a $25.5 million fine from Air Canada (AC.TO) over the carrier’s failure to provide timely refunds requested by thousands of customers for flights to or from the United States.
The department said it filed a formal complaint with a U.S. administrative law judge over flights Air Canada canceled or significantly changed. The penalty is “intended to deter Air Canada and other carriers from committing similar violations in the future,” the department said, adding Air Canada continued its no-refund policy in violation of U.S. law for more than a year.
Air Canada said it believes the U.S. government’s position “has no merit.” It said it “will vigorously challenge the proceedings.”
Air Canada obtained a financial aid package this spring that gave the carrier access to up to C$5.9 billion ($4.84 billion) in funds through a loan program.
The carrier said it has been refunding nonrefundable tickets as part of the Canadian government’s financial package. Since April 13 eligible customers have been able to obtain refunds for previously issued nonrefundable tickets, it said.
The Transportation Department disclosed it is also “actively investigating the refund practices of other U.S. and foreign carriers flying to and from the United States” and said it will take “enforcement action” as appropriate.
The administration said the Air Canada penalty sought was over “extreme delays in providing the required refunds.”
Refund requests spiked during the COVID-19 pandemic.
Since March 2020, the Transportation Department has received over 6,000 complaints against Air Canada from consumers who said they were denied refunds for flights canceled or significantly changed. The department said the airline committed a minimum of 5,110 violations and passengers waited anywhere from five to 13 months to receive refunds.
Last month, a trade group told U.S. lawmakers that 11 U.S. airlines issued $12.84 billion in cash refunds to customers in 2020 as the coronavirus pandemic upended the travel industry.
In May, Democratic Senators Edward Markey and Richard Blumenthal called on carriers to issue cash refunds whether flights were canceled by the airline or traveler.
($1 = 1.2195 Canadian dollars)