Mr. Chair and honourable members, thank you for the privilege of appearing here today.
Air Passenger Rights is Canada's independent, non-profit organization of volunteers devoted to empowering travellers. We accept 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.
The last time we testified before this committee, we cautioned that the Canadian Transportation Agency had lost its independence and its consumer protection activities had been compromised. The COVID-19 pandemic has confirmed the magnitude of these anomalies.
Since March, we have witnessed an unprecedented assault on passengers' private property and the collapse of consumer protection in Canada. Airlines whose revenues were decimated by the pandemic have helped themselves to passengers' money. They have pocketed airfares paid in advance without providing any services in return. During the pandemic, airlines have perfected the scheme. They kept selling tickets, just to cancel flights at the last minute and keep passengers' money. For instance, between September 25 and October 31, Air Canada cancelled about 75% of its flights scheduled for November.
Let's look at the numbers: 3,870,000 affected passengers is a conservative estimate for the number of outstanding tickets on Canadian airlines as of September 30; about 2.3 million are Air Canada customers. Instead of protecting consumers, the Canadian Transportation Agency mounted a disinformation campaign on its Twitter and on its own website.
On March 25, the agency published its statement on vouchers. The statement told the public, without any basis or authority, that airlines don't have to refund cancelled flights but may provide IOUs instead. The agency's position can be summarized as follows.
First, it says that an airline can cancel a flight for reasons outside a carrier's control and keep passengers' money so long as the ticket was marked non-refundable. Second, the agency blames you, lawmakers, for ostensibly tying its hands and taking away its power to order airlines to refund passengers. These are pseudo-legal arguments that conflate a refund with compensation for inconvenience. Refund means the repayment of the price paid for services or goods. For example, if you order an item on the Internet but you don't get what you paid for, the seller must give you a refund. Airline tickets are no different.
In 2004, when the agency was still independent and impartial, it made a binding legal decision recognizing a passenger's right to a refund for flights cancelled by an airline, even if the reason is outside the carrier's control. The agency reaffirmed this principle in three subsequent decisions in 2013 and 2014, and coined it “a fundamental right of passengers”. These legally binding decisions are based on statutes and regulations that are still in force today. There is no gap in the law on refunds. The Transportation Modernization Act imposed additional obligations on airlines to pay compensation for inconvenience for flight cancellations that are within the carrier's control, but it did not alter passengers' fundamental right to a refund. It is not the law that has changed but the agency's willingness to act independently and impartially and to enforce the law as written. The agency's misleading statement has caused significant harm to the public and to the entire travel industry.
Not only the airlines, but also travel agents, credit card issuers and even travel insurers used the agency's statement as an excuse to deprive passengers of refunds for flights that the airlines themselves cancelled. The agency's conduct has undermined consumers' confidence in the Canadian travel industry and the government to respect private property and protect consumer rights. The loss of confidence will slow the entire sector's recovery.
Our core values and respect for the rule of law cannot be swept aside just because a major Canadian industry may suffer financially. The law must always prevail.