Transport Committee on Dec. 8th, 2020

[The Chair, Liberal, Vance Badawey]

It's my pleasure to call this meeting to order and welcome all of you to meeting number 10 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Today's meeting is taking place in a hybrid format, pursuant to the House order of September 23. The proceedings will be made available via the House of Commons website. Just so that you are aware, webcasts will always show the person speaking rather than the entire committee. To ensure an orderly meeting, I would like to outline a few rules as follow.

Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice, at the bottom of your screen of the floor, or English or French. For members participating in person, proceed as you usually would when the whole committee is meeting in person in the committee room. Keep in mind the directives from the Board of Internal Economy regarding masking and health protocols. Before speaking, please wait until I recognize you by name. If you are on video conference, please click on the microphone icon to unmute yourself. For those in the room, your microphone will be controlled, as normal, by the proceedings and verification officer.

I remind you that all comments by members and witnesses should be addressed through the chair. When you are not speaking, your mike should be on mute. With regard to a speaking list, the committee clerk and I, as always, will do our best to maintain the order of speaking for all members, whether they be participating virtually or in person, albeit we do have the speakers list in front of us.

Pursuant to Standing Order 108(2), the committee today is meeting to continue its study of the impact of COVID-19 on the aviation sector.

I would like to welcome our witnesses here today. I have been told beforehand that there has been some agreement by the witnesses on the speaking order.

With us today we have from Air North, Mr. Joseph Sparling, president; from Air Passenger Rights, Mr. Gábor Lukács, president; from the Canadian Automobile Association, Ian Jack, vice-president, public affairs, and Jason Kerr, senior director, government relations; from Late Flight Claim Incorporated, Mr. Jacob Charbonneau, president and chief executive officer; from Options consommateurs, Sylvie De Bellefeuille, lawyer, budget and legal adviser; and, from the Public Interest Advocacy Centre, John Lawford, executive director and general counsel.

To all of you, welcome. The order that I was given prior to the meeting, which you all agreed upon, I assume from the way it was communicated to me, will be Dr. Gábor Lukács from Air Passenger Rights first, followed by Sylvie, John, Ian, Joseph and Jacob.

With that, we'll start off with Dr. Lukács for five minutes.

The floor is yours.

[Dr. Gábor Lukács, President, Air Passenger Rights]

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.

[The Chair, Liberal, Vance Badawey]

You have one minute left, Mr. Lukàcs.

[Dr. Gábor Lukács]

In the past months, we have seen lawlessness displace order and regulatory capture displace good government. It may fall upon the courts to restore order. However, it is your mandate as elected representatives to restore good government and to put an end to the agency's running amok.

Declaratory legislation such as Bill C-249 is needed to restore public confidence and the rule of law.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Lukács. That was actually bang on. Good for you.

I'll now go to Ms. De Bellefeuille.

The floor is yours for five minutes.

[Sylvie De Bellefeuille, Lawyer, Budget and Legal Advisor, Option consommateurs]

Good afternoon, Mr. Chair. Good afternoon, ladies and gentlemen members of the committee. Thank you for giving us this opportunity today to share our observations with you.

I have been working as a lawyer at Option consommateurs for 10 years. Created in 1983, Option consommateurs is a non-profit association whose mission is to help consumers and defend their rights. As such, we receive thousands of legal information requests every year from people experiencing difficulties with merchants, including in the travel industry.

Furthermore, since the beginning of the pandemic, we have received a record number of calls and emails from consumers not only from Quebec, but also from elsewhere in Canada, asking us for information to get their plane tickets refunded.

This is the situation we want to talk to you about today. To us, the situation is very clear: Canadian consumers whose flights were cancelled because of the pandemic must be reimbursed.

Although the pandemic has been difficult for everyone—both consumers and merchants—its impact is not the suspension of applicable laws. The solution offered by most airlines, travel credits, is unacceptable and unfair.

We think it is high time for federal authorities to play their role and protect Canadian consumers.

Under the pretext of force majeure, airlines have assumed the right to keep clients' money without providing them the service they paid for. So far, both the Canadian Transportation Agency and the government have limited themselves to maintaining that the Air Passenger Protection Regulations do not oblige airlines to reimburse their clients for cancelled flights.

However, it is important to specify that those regulations are not exclusive or comprehensive in their provision of all the obligations airlines have. Other laws and regulations impose restrictive obligations and grant the authorities the power to take action.

For example, the Transportation Act and its relevant regulations give the CTA the power to get involved, especially when a tariff contains an unreasonable condition. Yet we are struggling to see how, in a law society, it could be considered reasonable for a business to impose a condition on consumers whereby it can keep their money without being obliged to provide them with the service they paid for.

However, there is more to this. Airline contracts are also subject to provincial laws. In Quebec, where we are the most familiar with the legislation, both the Quebec Civil Code and the Consumer Protection Act contain provisions that make it clear that airlines have the obligation to refund their clients for flights that had to be cancelled because of the pandemic.

We don't understand why the government is silent on this issue. Both the government and the CTA must enforce the laws and regulations and force airlines to refund their clients.

What is more, a declaratory bill—in other words, Bill C-249—was recently introduced in the House of Commons. That bill reiterates passengers' right to be reimbursed for flights that are cancelled for reasons beyond the control of the carrier.

The travel credits offered by airlines in no case constitute a valid solution in the current context, where households' financial health is being tested.

Since the beginning of the crisis, we have received hundreds of calls from consumers who are worried, disappointed and irritated about being unable to get their money back—often in the thousands of dollars—while they need it. We have actually launched a petition to force airlines to reimburse consumers. That petition has garnered 32,000 signatures.

We are being told that airlines are facing revenue losses owing to the pandemic. We don't doubt that. However, this pandemic has also hit industries other than the air transportation industry. It is not up to consumers to fund airline companies.

Many consumers are struggling to keep their heads above water. The measures implemented to help families have certainly been a great help, but they do not ensure the financial health of households over the long term. People need their money, and they need it now.

It is clear that consumers are being manipulated in this case. On the one hand, airlines are saying they cannot refund tickets without government assistance. On the other hand, the government says it is prepared to negotiate assistance, but assistance that would be conditional on consumers being reimbursed. During this time, nothing has been happening. It is high time for things to change.

Thank you.

[The Chair, Liberal, Vance Badawey]

Good job. Thank you.

[Dr. Gábor Lukács]

Mr. Chair, we didn't receive any translation, unfortunately.

[The Chair, Liberal, Vance Badawey]

Mr. Clerk, did you want to check on the translation?

[The Clerk of the Committee, Mr. Michael MacPherson]

Yes. We have IT reaching out to him right now.

[The Chair, Liberal, Vance Badawey]

Great. Thank you, Mr. Lukács.

We're now going to move on to Mr. Lawford for five minutes. The floor is yours. Welcome.

[John Lawford, Executive Director and General Counsel, Public Interest Advocacy Centre]

Thank you, Mr. Chair.

Honourable members, my name is John Lawford. I'm the executive director and general counsel at the Public Interest Advocacy Centre, which is a non-profit and registered charity. We provide legal and research services on behalf of consumers, and in particular vulnerable consumers concerning important public services such as airlines, in a field we've been working for over 20 years.

PIAC has heard many complaints from consumers about the lack of cash-free funds for flight cancellations due to COVID-19. Our message is that COVID-19 is an exceptional situation and passengers deserve cash refunds. Consumers and citizens feel, given the circumstances of an unprecedented global panic disrupting all domestic and international travel, and the economic precariousness caused by the pandemic, and larger personal monetary losses suffered by many travellers, that receiving vouchers or any other option besides refunds is inadequate and unacceptable. They are correct.

Consumers know the general rules for normal times. They know that when they purchase a non-refundable ticket that they will not be refunded if they, not the airline, cancel. They know most airlines' policies are to provide only a voucher good for one year if the airline cancels a flight. This buyer-beware situation is not loved, but it is understood.

The federal government has brought airline cancellation and refund practice more into line with consumer desires in normal times with the air passenger protection regulations. The APPRs are a very good thing, but they're too complex to describe here. As you heard from Mr. Streiner, they had not anticipated a global travel crisis on such a scale as now.

Whether there should be a cash refund for all types of tickets, whether airlines or customers cancel the flight for such large-scale and system-wide shutdowns as COVID, and who bears the risk of paying for such a refund protection scheme are legitimate matters for debate. We think there should be some provision made, and we turn to that now.

One contingency plan that could be to have a compensation fund similar to the Ontario travel industry compensation fund. This fund is financed by registered travel agents and travel wholesalers in Ontario and administered by the Travel Industry Council of Ontario. It provides reimbursement for bankruptcy and insolvency of an Ontario registrant or an end-supplier airline or cruise line.

A similar compensation fund could be paid out of a small levy on all airline tickets, whether purchased directly from the airline on a website or through an online or in-person travel agent. It would require an administration and would likely result in a pass-through charge to consumers; but then, there would be a fund for a situation just like COVID.

Another method could be to introduce a formal legal mechanism that mandates that airlines must segregate funds that they receive from passengers for future flights and keep them separate until the passenger actually departs. This is simply keeping the consumer monies in trust until they travel, and it would equitably belong to the customer if travel were cancelled. Terms of this legal trust mechanism could limit it to payouts only in situations like the present, or be more generous.

Our understanding is that both solutions would be opposed by the industry.

However, even if we cannot protect consumers on this scale in the future, PIAC insists that for this crisis, it is only just and reasonable that all Canadians be fully refunded for having had travel cancelled or disrupted by COVID-19—and ignoring the niceties of refundable versus non-refundable or customer-initiated versus airline-initiated cancellation. We note that the transport minister appears to agree with us. Why? Because airlines are going to be bailed out with taxpayer money. The federal government must ensure that passengers get their refunds for flight cancellations because, otherwise, those taxpayers who did not get a refund will bail out airlines and be penalized twice.

[The Chair, Liberal, Vance Badawey]

You have one minute, Mr. Lawford.

[John Lawford]

A huge advantage to such a refund “jubilee” is that cash refunds will simply and significantly reduce the huge backlog of complaints at the Canadian Transportation Agency. Unsurprisingly, the majority of complaints since March concern refunds.

Thank you very much, Mr. Chair. I look forward to any questions from the committee.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Lawford. Well done.

We'll now go on to Mr. Jack for five minutes. The floor is yours.

[Ian Jack, Vice-President, Public Affairs, Canadian Automobile Association]

Thank you, Mr. Chair. I doubt I'll get a gold star, but I'll try my best.

[Voices]

Oh, oh!

[Ian Jack]

Thank you very much to the committee for this invitation this afternoon. CAA was founded in 1913 to represent the interests of motorists originally, but the world has evolved since then and so have we. We have 6.5 million members today from coast to coast, and the services we offer them extend well beyond emergency roadside assistance. We're very proud to be named one of Canada's top two most trusted brands three years in a row by the Gustavson School of Business at the University of Victoria.

Today, we're also one of Canada's largest leisure travel agencies, through our store network and online.

That said, we are still a not-for-profit, member-driven organization that is, at its heart, an advocate for the Canadian traveller.

At CAA we don't sell business travel, so prior to the pandemic our travel specialists worked with average Canadian air passengers every day. When the pandemic hit, they worked tirelessly to bring home our members who were stranded overseas.

This understanding of the business allowed us to take a strong, informed position as the air passenger right regime was being established in Canada.

Unfortunately, the pandemic hit soon afterwards, and we saw that the regime, the APPR, was inadequate to protect consumers. That's because the regime carves out events beyond a carrier's control from any requirement to provide a refund. In retrospect, this was a huge mistake.

Since March, CAA has been pushing for access to refunds for Canadians left holding the bag when their flights got cancelled due to COVID-19. Thousands of Canadians were left with multi-thousand-dollar holes in their finances, through no fault of their own.

Essentially, they were forced to provide interest-free loans to the carriers at a time when they could least afford it.

We welcome the government's commitment to getting passengers their money back. We will be watching closely to make sure this commitment is honoured and that passengers can get cash refunds quickly. Keep in mind that thousands of people have been out of pocket already for six months or longer. For those who have been hard hit economically by the pandemic, this is especially unfair.

At the same time, we recognize that the carriers are struggling and that Canadians need them to survive. In many other jurisdictions governments have already stepped in to make sure their carriers remain viable, but also that passengers are not left to finance them.

We are pleased the government of Canada has finally agreed to do the same thing.

While some carriers have refunded some fares, the vast majority of travellers affected by COVID cancellations have not received a penny. This patchwork, in which the wealthy and business travellers who can afford refundable tickets get better treatment than do average citizens, is exactly what the APPR was supposed to end.

CAA urges the federal government to ensure that refunds are made available in a timely fashion. COVID-19 has brought significant financial hardship upon average Canadian families, and it is only fair that they can get cash refunds if they want them.

We must remember that these flights were cancelled through no fault of the passenger.

We urge this committee to focus not just on rectifying this past injustice, however, but also on making sure it never happens again. This is for the benefit not only of passengers but of the economy as well. Getting Canadians back on planes in large numbers depends on health measures, absolutely, but also on consumer confidence about their purchase. What average Canadian would voluntarily spend thousands of dollars on tickets for their family today knowing they might forfeit all their money if there is another unpredictable lockdown at home or at their destination? The government should ensure that in the future, flights cancelled due to government health warnings or shutdowns are automatically refundable.

As mentioned, we're also a travel agency, and we know that travel agents should not lose out on commissions owed to them. Agents did their work, and in many cases the carriers have been holding their money since the spring. Consumers should be made whole, but we feel the government has responsibility to agents as well.

Finally, let me briefly outline CAA's other priorities for air passenger rights, which we urge you to consider. While the pandemic revealed a major shortcoming that should be fixed, it remains a fact that the APPR brought Canada its first industry-wide code of conduct for airlines.

Let us point out that the United States and the European Union already had similar regimes for a decade or more.

The regulations came into full force only in mid-December of last year. In the first three months, prior to the pandemic, 11,000 complaints were filed. While the lack of air travel performance data leaves us flying blind, we believe it's still too early to fully grade the regime. Most of the complaints filed haven't even been addressed. We need to let the APPR run for a further period and then grade it. We do not believe it needs to be reopened at this time, other than to address the COVID-19 refund situation.

Our other issues include the real cost of air travel to middle-class Canadians including, for example, airport fees and à la carte pricing; making sure the government lives up to its commitment to provide public air travel performance data in a useful and timely fashion; making sure the CTA has adequate resources to enforce the APPR; and CATSA reform so passengers can move more efficiently through security.

[The Chair, Liberal, Vance Badawey]

You have one minute, Mr. Jack.

[Ian Jack]

Honourable members of the committee, thank you for your time.

Thank you very much, sir.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Jack. I'm happy to inform you that you received your gold star. Well done.

[Ian Jack]

My work here is done.

[The Chair, Liberal, Vance Badawey]

Oh, oh!

Mr. Kerr, do you have any comments? I know that you're here with Mr. Jack.

[Jason Kerr, Senior Director, Government Relations, Canadian Automobile Association]

Thank you, Mr. Chair. I have nothing to add at this point in time. Thank you very much.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Kerr.

We're now going to Mr. Sparling.

Mr. Sparling, you have five minutes. Welcome.