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Transport minister pledges to close passenger compensation loophole used by airlines

MONTREAL — Transport Minister Omar Alghabra said Tuesday the federal government will close a loophole that allows airlines to deny customers compensation for cancelled flights.
Transport Minister Omar Alghabra says the federal government will close a loophole that allows airlines to deny customers compensation for cancelled flights. Travellers wait on hold as they try and speak with their respective airlines at Toronto Pearson International Airport, as a major winter storm disrupts flights in and out of the airport, in Toronto, Saturday, Dec. 24, 2022. THE CANADIAN PRESS/Cole Burston

Transport Minister Omar Alghabra said Tuesday the federal government will close a loophole that allows airlines to deny customers compensation for cancelled flights.

The reform will come as part of an overhaul of passenger rights to be tabled in Parliament this spring, he said at a press conference.

Asked whether he would end the exemption that lets carriers reject compensation claims by citing safety issues, Alghabra answered in the affirmative.

"The short answer is yes. We are working on strengthening and clarifying the rules to ensure that we make a distinction," he said.

"Obviously we don't want planes to fly when it's unsafe to do so. But there are certain things that are within the control of the airlines, and we need to have clearer rules that puts the responsibility on the airlines when it's their responsibility."

Alghabra's pledge came during a press conference at Toronto's Pearson airport Tuesday morning, where he promised an additional$75.9 million over three years to reduce the backlog of complaints at the Canadian Transportation Agency (CTA).

The money will allow the transport regulator to hire 200 more employees who can chip away at the 42,000 complaints currently filed there, he said.

"The backlog is huge."

The announcement comes after the government topped up the agency's funding by $11 million last year — shortly before travel chaos erupted over the summer as flight demand surged, prompting another wave of complaints.

Gabor Lukacs, president of the Air Passenger Rights advocacy group, expressed skepticism that the new cash will make a big dent in the backlog.

"The government is throwing good money after bad," he said. "It will not improve lack of enforcement on its own."

Alghabra hinted at other changes upcoming in a revamped passenger rights charter, including potential reforms to the regulator's role as an investigative and enforcement body.

"We are looking at strengthening the rules, as I said, and perhaps looking at increasing the authorities that the CTA has. But I leave it up to the CTA to exercise its judgment and when and how to impose these fines," Alghabra told reporters.

The agency has a dual mandate as a tribunal handling complaints and a regulatory authority, though advocates say it has not gone far enough to punish violations under the latter.

They also note that the compensation loophole in Canada's Air Passenger Protection Regulations does not exist under European rules.

European Union regulations require compensation — distinct from refunds — for flight cancellations or significant delays, except under "extraordinary circumstances which could not have been avoided" such as extreme weather and war.

In Canada, a flight cancelled within 14 days of departure or delayed by three hours or more that is caused by an event within the airline's control also triggers compensation of between $400 and $1,000 for large carriers — but not in the case of safety-related reasons. 

John Lawford, executive director of the Public Interest Advocacy Centre, said Canada needs to adopt the European framework.

"The European model basically says if you delay someone, you cancel their flight or deny them boarding, unless you can show that a volcano erupted or there was an earthquake and the runway broke in half, you're paying compensation," he said.

Alghabra said another piece of the passenger rights overhaul will see Ottawa create an "incentive" for airlines to deal directly with customer complaints rather than simply turning them down in hopes the traveller gives up rather than escalating the complaint process.

"There will be a disincentive for the airlines ... to defer to the CTA," he said, adding that specifics will emerge with the legislation this spring.

As it stands, airlines have more to gain from resisting compensation claims, since even if they're ultimately found in the wrong by the regulator, the agency has issued only a handful of small penalties for violations, Lawford said.

"They should be fined for every claim they (wrongfully) denied up to $25,000 a claim, and I don't see (the CTA) doing that," he said, qualifying that there have been some enforcement actions since the fall.

"That has to be done systematically, or else it's more profitable to pay the few squeaky wheels who maybe prove their case at the CTA 18 months later than it is to pay for compensation for everyone on that flight."

The average wait time between when a complaint is submitted and when it's reviewed is more than 18 months, the agency said Tuesday.

The newly announced $76-million top-up will "increase substantially the CTA’s capacity to process complaints and to tackle the existing backlog," it said in an email.

Airlines are just beginning to emerge from a drawn-out financial drubbing due to travel restrictions during the COVID-19 pandemic. Air Canada turned a profit in the quarter ended Dec. 31 for the first time since 2019, as demand for domestic and foreign trips continued to ramp up.

Carriers found themselves unprepared for the surge last summer as well as over the winter holidays, with a labour shortage in positions ranging from pilots to baggage handlers and security screeners exacerbating the airport upheaval — and prompting still more passenger complaints.

This report by The Canadian Press was first published March 14, 2023.

— With files from Maan Alhmidi in Toronto.

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Christopher Reynolds, The Canadian Press