Canadian airlines could 'fail' if forced to refund passengers, says transport minister

Transport Minister Marc Garneausays that Canadian airlines could go bankrupt if the ailing industry is compelled to refund passengers billions of dollars for flights cancelled due to the pandemic.

"I have said many times that I have enormous sympathy for those who would have preferred to have a cash refund in these difficult circumstances. It is far from being an ideal situation," Garneau told a press conference earlier today.

"At the same time, if airlines had to immediately reimburse all cancelled tickets, it would have a devastating effect on the air sector, which has been reeling since the COVID 19 pandemic started."

Garneau was doubling down on a message he delivered to the House of Commons' pandemic committee on Thursday, when hewarned MPsthat if airlines "had to reimburse at this time, some of them could fail."

The minister said today it'shis responsibility to help Canada's airlines survive the pandemic.

"It is so essential for this country," he said."This is the second largest country on Earth, with its distances and remote areas, and we expect and need an airline industry in this country."

Watch | Reporters question MarcGarneauabout airline ticket refunds

Garneau questioned about airline ticket refunds

4 years ago

Duration 1:27

Federal transport minister spoke with reporters during a webcast from Montreal.

But his response isn't sitting well with Canadians struggling financially during the pandemic who argue it's their right asconsumers to get theirmoney back for flights they never took.

"It's very disappointing and frustrating," said Tammie Fang, ahealth care essentialworker in B.C. "My rights as a consumer have been put aside to help balance the airline industry."

Fang works ata New Westminster hospital assisting with open-heart surgeries. She said she spends much ofher spare time calling and emailing Air Transat seeking arefund ofroughly $500 for a flight to Toronto she never took. She describes it as an extra burden during an already stressful and financially challenging time.

"It's disheartening," she said. "It's unbelievable how much effort we have to put in."

Airlines' survival versus consumers' rights

Canada's airline industry has been hit particularly hard by the pandemic, and most ofthe country's airline fleet is sitting idle at airports across the country. Airlines are losing 90 per cent of their normal revenue streamsand some have put their operations completely on pause.

At the same time, pressure is mounting on the federal government to step in and force airlines to pay back passengers who also are struggling financially.Two petitions with more than 30,000 signatures combined have been submitted to Parliament in recent weeks calling on the government to demand that airlinestapping into taxpayer-fundedgovernment supports reimburse grounded passengers.

Billions tied up in refunds

For the most part, Canadianairlines are offering those passengers travel vouchers redeemable for two years. Air Canada also announced last week that it's allowing people to transfer their tickets to others,which could permit ticket holdersto sell them. The Canadian Transportation Agency has said offering vouchers could be a reasonable measure in the current circumstances.

Garneau's office said it wouldcost airlines billions of dollars to refund customers. When CBC asked Transport Canadafor specific numbers, it was told the figures the government receivesfrom airlines amount to proprietary information that it isn't authorized to release.

Air Canada's books are open, since it's a publicly traded company. It has about $2.6 billion tied up in ticket sales for future travel over the next year.

On March 16, the airline said its current liquidity level was $6.3 billion a record level and its balance sheet was solid. Since then, Air Canada has said it's burning $22 million a day in operating costs and plans to reduce its workforce by 50 to 60 per cent. The company said a dramatic drop in demand during the pandemic caused the airline to slash its flight capacity by95 per cent.

Government in talks with airlines and consumers

Outside Rideau Cottage today, Prime Minister Justin Trudeaurepeated a message he's deliveredin the past that thegovernment has to strike the right balance between keeping airlines afloat and preserving consumers'rights.

"I hear clearly the concerns that Canadians have around their air tickets,"said Trudeau. "We will continue to work with the industry and with concerned groups of Canadians to ensure that we find a fair way through this.

"But I know Canadians at the same time want to make sure we continue to have an airline industry after this very difficult pandemic."

The government is in talks with airlines and is looking to see what other countries have done with travel refunds. It's expected to deliveran update on the file in the coming weeks.