Air Canada agrees to pay $4.5M for delays in giving out U.S. COVID-19 refunds

Air Canada has agreed to pay $4.5 million US to the U.S. Department of Transportation for extreme delays in providing refunds to thousands of consumers who had their flights to or from the U.S. either cancelled or significantly changed during the pandemic.

Through its Office of Aviation Consumer Protection (OACP), the agency had been seeking $25 million US from the airline after receiving more than 5,000 complaints from customers who flew on the airline since March 1, 2020.

According to the agency, the airline took anywhere between five and 13 months to issue refunds for cancelled flights.

For cross-border flights, airlines are supposed to make credit card refunds within seven days, rising to 20 days for tickets bought with cash. 

The U.S. Transportation Department said it allowed more time for refunds last year because of the surge in cancelled flights, provided an airline was making an effort to return the money. However, it said in a previous release on the matter that Air Canada had failed to make a good-faith effort to process its refunds more quickly.

WATCH | Why the U.S. government is seeking $25 million from Air Canada:

In a statement issued Monday, the agency said the fine is the largest ever assessed against an airline by the OACP.

The fine shows the department is "holding airlines accountable by ensuring that they treat passengers fairly when flights are significantly changed or cancelled," deputy secretary Polly Trottenberg said in the statement.

"The Department is committed to protecting airline consumers and ensuring that all passengers receive the timely refunds to which they are entitled," she said.

Of the $4.5 million, $2.5 million will be credited to Air Canada for refunding passengers who purchased a nonrefundable ticket for a flight to or from the United States that the passenger ultimately decided not to take. The remaining $2 million will go to the U.S. Treasury. In addition to the fine, the department said the airline will "agree going forward to refund airfare to passengers who purchase nonrefundable tickets to or from the United States whose flights are cancelled or significantly changed by the carrier."

While both sides have agreed to the settlement, the agreement is now pending approval by the administrative law judge presiding over the case, according to the Transportation Department.

In a statement to CBC News, the airline noted that the settlement with the Department of Transportation comes "without prejudice or any finding of wrongdoing.

"This agreement was entered into to avoid protracted litigation as Air Canada focuses, together with all stakeholders, on rebuilding following the pandemic," spokesman Peter Fitzpatrick said, adding that the U.S. government agency is currently updating its regulations to ask carriers to voluntarily offer customers refunds "something Air Canada began doing prior to the start of this action in June."

"We changed our policy so that as of April 13, 2021 customers who buy a non-refundable ticket can get a refund if their flight is cancelled or delayed by more than three hours."