Description: Air Canada has been offering disgruntled customers cash or vouchers to settle their claims for travel interruptions. Thousands of Canadians have taken their disputes with Air Canada to the Canadian Transportation Agency (CTA), piling up a backlog of over 60,000 claims for compensation for disrupted travel and other matters. Air Canada maintains it pays customers who have legitimate claims and that is making these current offers to address the huge queue in the system. An Edmonton, Alberta university student, Samantha Smith, described Air Canada’s offer to her as “insulting,” noting she “felt very angry and just really dismayed” at what she saw as a low-ball offer from the airline.
Date: October 27, 2023
Source: cbc.ca
Link: https://www.cbc.ca/news/business/air-canada-compensation-claims-1.7008860
Discussion points:
1) Have you or your classmates ever filed a claim with the CTA about a disappointing airline experience?
2) What do you think about Air Canada’s strategy on this issue? Will it help them in the marketplace?
3) Pages 10-9 through 10-11 of Wiley’s Financial Accounting: Tools for Business Decision-Making discusses the subject of provisions and contingencies. What type of financial statement treatment do you think Air Canada should use regarding these claims at the CTA?
Mishael Mathew, Colby A. Cormier, Christopher-James Valenti, Jaimie O. Gallant | Group 2
1) Yes, a team member has filed for a claim regarding their lost baggage and damaged luggage, when flying via Air Canada, The airline resolved by giving discounted vouchers on their next flights that are booked via Air Canada.
2) We think Air Canada’s strategy of offering cash or vouchers to settle claims with disgruntled customers is a common approach in the airline industry. It helps airlines manage their liabilities and clear backlogs of claims more quickly. While this strategy may help in the short term by resolving outstanding claims and improving customer satisfaction, airlines need to strike a balance between cost control and customer relations. Ultimately, the success of Air Canada’s strategy will depend on how well they handle customer complaints, the fairness of their compensation offers, and their overall customer service.
3) The treatment of provisions and contingencies in financial statements is a complex accounting matter that involves recognizing potential liabilities and estimating their financial impact. In the case of Air Canada’s claims at the CTA, According to our discussions, they should follow accounting standards and principles to determine how to treat these claims in their financial statements. This may involve recognizing a provision (a liability) on their balance sheet if it is probable that a future payment will be made and the amount can be reliably estimated. The actual treatment would depend on the specific circumstances, the likelihood of the claims being successful, and the amount of compensation expected to be paid. Air Canada should consult with their auditors and follow accounting standards to make these determinations.
Andrew Leslie, Jessie Kpai, Samuel Johnson, Presley Warren-Daigle
1) Yes, some of us have had flights delayed in recent months and filed a claim.
2) This may help Air Canada in the short-term by reducing the amount of dissatisfied customers. However, the amount of bad press for Air Canada caused by this swell in claims may be harmful for attracting new customers. The Airline needs to better address their delays and cancellations in the future if they want to keep their current customers and gain new ones.
3) Air Canada should use refund liability provisions as they claim they are only reimbursing customers that they feel have “valid” claims filed with the CTA, and they are able to estimate an approximate amount to pay.