Canadian airlines are set for a windfall. Sort of. Ottawa is teeing up a bailout package – one that could see carriers receive millions in taxpayer cash. They could certainly use it. The coronavirus pandemic has hit airline revenues hard with some carriers edging close to bankruptcy. Lawmakers need these companies to thrive, not fail. Air travel is after all, to our generation what horses and buggies were to previous ones.
But taxpayers want something too: refunds. As the pandemic cripples economies worldwide, thousands of Canadians remain stuck with tickets in hand and no place to go. I’m one of them. Air Canada promptly cancelled my flight last April citing coronavirus concerns. But rather than refunding my money, the carrier offered a travel voucher – one that could be used towards future travel.
The move doesn’t irk me. Airlines are cash-intensive businesses where expenses often exceed earnings. I would know. I spent years in the industry looking over balance sheets. I concur with the industrywide sentiment that “running an airline is like having a baby: fun to conceive, but hell to deliver.” That explains why I’m probably more willing than most to give airlines some leeway. A travel voucher is – I would argue - a reasonable alternative to a full refund.
That sentiment has since fizzled. Anticipating travel later this fall, I tried redeeming my voucher on Air Canada’s website. The airline’s response? “Please allow up to six weeks for processing.” In an e-mail, Air Canada acknowledged having my money and said I could use it for future travel. However, actually doing so would take time. I do wonder why. Is there an overelaborate voucher-redemption process airlines are held hostage to? Does cash need to be physically moved from one pile to another (hard to do during a pandemic, I know)? Is my money even really there? Of course, it is, I told myself. Air Canada will eventually pony up.
Except to date, that hasn’t happened. Some 10 months after my original flight was cancelled, and nearly two months after I first tried redeeming the voucher, I have nothing to show for my efforts. I have tried resolving this with the airline but was met with the following response. “We understand the time frame for having the vouchers issued was supposed to be six weeks, however with the volume of requests we’ve received this has pushed back the issue time.” For good measure, the agent noted, “I regret to say I’m unable to give you an issue date when the voucher will be emailed out to you” and that if I want to travel sooner, I should call Air Canada directly. I did and was told by a recorded message that the carrier is experiencing “high call volume.”
Since the pandemic hit, getting refunds has been all the rage. Then transport minister Marc Garneau says airlines will, “not get a cent from the Canadian government,” until they “commit in writing to refund passengers.” But this approach misses the mark. Canadian airlines have no legal obligation to hand out refunds (something Mr. Garneau well knows) and shouldn’t be cajoled into doing so (despite its political convenience).
What carriers should do is deliver on the promises they have made fliers. When Air Canada says a travel voucher, “can be used multiple times, is fully transferable and has no expiry date,” carrier execs should be held accountable to delivering on that promise. And when those promises falter, then – and only then – should government intervene. Put another way, I don’t fault Air Canada for not offering full refunds. I do fault the airline for making it near impossible to use the alternative that has been offered.
The industry is admittedly in a tough place. In a good year, airline profits on a per-passenger basis add up to about $8. And that’s after carriers’ nickel-and-dime fliers. But if the difference between success and failure comes down to charging for a soda pop, maybe it’s time carriers rethink their business model. Maybe pricing a product well below what it costs to actually produce that product isn’t a sound business strategy after all.
Which brings me back to those pesky vouchers. Ottawa has promised to pursue legislation that is “fair and reasonable to passengers, and to the extent possible, [does] not impose an undue financial burden on air carriers that could lead to their insolvency.” That’s nice. If the coronavirus pandemic prompts a change in how business is done, if Canadians can – courtesy of political muscle – walk away with new promises in stride, I’m all for it. But I’d settle for what has been promised so far.
Ashley Nunes is the director of competition policy at the R Street Institute and a research fellow at Harvard Law School.
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