By late September 2026, the queue of Canadians waiting for the federal government to resolve an airline dispute reached 97,000 unresolved cases. On October 8, 2026, the Standing Senate Committee on Transport and Communications tabled its review of Division 17 of Part 4 of Bill C-31, an omnibus budget implementation act that fundamentally rewrites passenger rights in Canada. The committee discovered that instead of clearing the two-year administrative bottleneck within the Canadian Transportation Agency, Cabinet drafted legislative amendments to strip the tribunal of its regulatory powers, hand the dispute backlog to an outside contractor, and permit airlines to select and pay the private firms that adjudicate claims against them.
The scale of the gridlock had already broken the federal apparatus. In testimony before the Senate committee, senior officials from the Canadian Transportation Agency acknowledged that resolving a consumer dispute now takes an average of two years, a timeline the regulator’s own leadership conceded was unacceptable. The Agency manages to process roughly 45,000 complaints a year, but new claims continue to arrive faster than case officers can close them. Nearly 62 percent of the files stacked inside the backlog stem from flight disruptions, followed by 26 percent concerning basic quality of service, 5 percent over damaged or lost baggage, and 2 percent involving passengers who were denied boarding or refused transport.
For travelling Canadians, the wait has turned statutory rights into an endurance test. Under the Air Passenger Protection Regulations enacted in 2019, passengers whose flights are cancelled or delayed within an airline’s control are entitled to fixed cash compensation. In practice, obtaining that compensation requires surviving an administrative marathon. When an airline rejects a passenger claim, the traveller’s only recourse is to file an application with the federal tribunal. With 97,000 files in the intake pipeline, the statutory promise of timely relief has collapsed into an administrative waiting room that outlasts the lifespan of most household credit card statements.
The Budget Omnibus Manoeuvre
Rather than introducing standalone legislation to address the failure, the federal government placed the overhaul deep inside Bill C-31, titled A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025. Division 17 amends the Canada Transportation Act to execute five structural shifts: it transfers authority to make air passenger regulations away from the independent Agency and places it directly under the Minister of Transport; it authorizes Cabinet to transfer the 97,000-case backlog to an outside organization; it establishes a new alternative dispute resolution scheme for future disputes; it lifts statutory confidentiality rules on complaint proceedings; and it increases maximum corporate fines forty-fold, raising administrative monetary penalties from $25,000 to $1,000,000.
The legislative mechanics drew immediate rebukes from the Senate committee. In its formal observations, the committee objected to placing non-budgetary regulatory changes inside an omnibus finance bill, noting that the practice restricts parliamentary scrutiny and public testimony. The warning echoed concerns raised months earlier by the Senate National Finance Committee. The Minister of Transport also did not appear before the committee to explain why regulatory independence was being removed from an arm’s-length tribunal or how outside contractors would be supervised.
Transport Canada officials defended the intervention as an urgent operational necessity. They informed the committee that the existing framework had reached an irreversible impasse, leaving the government with no choice but to modernize the intake architecture. Once the regulatory changes take effect, the Minister will have three administrative pathways for handling future complaints: leaving them with the Agency, shifting them into Transport Canada, or routing them to private third-party organizations approved by the department but hired by the carriers. Transport Canada argued that shifting to outside dispute resolution would streamline enforcement, cut waiting times, and impose stricter accountability on major airlines through seven-figure corporate fines.
The Airline-Funded Tribunal
The most contentious element of the overhaul centres on who will adjudicate future passenger claims, and who will sign their paycheques. Under Division 17, air carriers would be permitted to select and pay private alternative dispute resolution contractors to hear customer grievances. While Transport Canada stated that third-party firms would be pre-screened for bilingual capacity and accessibility standards, the bill establishes no statutory criteria for evaluating the independence, legal expertise, or dispute-resolution qualifications of those private entities.
Witnesses and legal experts who appeared before the Senate committee warned that allowing commercial carriers to choose and finance their own dispute providers creates an immediate institutional conflict of interest. Consumer rights advocates emphasized that private firms dependent on airline contracts for their operational revenue face a structural incentive to deliver corporate-friendly rulings. Moreover, dispersing dispute resolution across multiple commercial vendors risks creating inconsistent decisions across provinces, fracturing national standards that took years of regulatory hearings to establish.
The risk of prolonged litigation will not disappear with privatization. Under newly enacted section 85.24 of the Canada Transportation Act, decisions rendered by an alternative resolution provider will be legally binding on both the passenger and the airline. Because the legislation provides no internal administrative appeal body for dissatisfied consumers, experts warned that the only remaining legal remedy for passengers who receive an adverse ruling from an airline-hired arbitrator will be to file an application for judicial review in the Federal Court of Canada. For ordinary travellers fighting over a few hundred dollars in flight delay compensation, hiring legal counsel to bring an application before the federal bench is an impossible barrier.
The Push for Passenger Filing Fees
While airlines pushed to move dispute resolution outside the federal civil service, their industry association sought an additional barrier to curb the volume of consumer claims. In its submissions to the committee, the National Airlines Council of Canada argued that forcing air carriers to fund the entire cost of the new private resolution system was unfair. The airline council lobbied Parliament to introduce a mandatory filing fee for passengers seeking to open a dispute.
The industry group maintained that requiring passengers to pay an upfront fee would give complainants what it termed a reasonable stake in the proceedings, discouraging frivolous filings and mirroring practices in formal judicial systems. The council suggested that the fee could be modest and refunded if the passenger ultimately prevailed. The Senate committee accepted that line of reasoning, recommending in its final observations that the federal government consider establishing a nominal, refundable filing fee to discourage abuse of the complaints process.
Consumer advocates told senators that the narrative of passenger abuse is unsupported by the record. With 62 percent of complaints driven by flight disruptions and cancellations, the overwhelming majority of claims stem from documented airline operational failures. Passenger advocacy groups pointed out that travellers already contend with a massive information asymmetry: airlines possess internal flight logs, maintenance dockets, and crew scheduling data, while stranded passengers are left with terminal gate announcements. Imposing a financial toll to access statutory dispute resolution, advocates argued, simply prices delayed passengers out of enforcing their rights.
At the same time, the airline lobby protested the government’s decision to increase corporate administrative penalties to $1,000,000 per violation. The National Airlines Council argued that seven-figure fines were grossly disproportionate for service standard infractions, contending that operational delays often stem from cascading weather systems and airport infrastructure beyond an individual carrier’s control.
The Shelved Regulations
The fundamental paradox uncovered by the Senate committee is that the federal government already had a mechanism to eliminate the 97,000-complaint backlog, and chose not to use it. In December 2024, Ottawa published draft regulations in Part I of the Canada Gazette that would have overhauled the Air Passenger Protection Regulations. Those draft rules simplified dispute categories, eliminated vague operational loopholes that allowed carriers to deny compensation for safety-related disruptions, and established a framework for automatic passenger compensation.
Under an automatic compensation model, airlines would have been legally required to disburse fixed refunds and compensation directly to ticket holders whenever flight disruption thresholds were breached, without requiring passengers to submit individual claims or endure administrative hearings. The draft regulations would have rendered the vast majority of the 97,000 pending files obsolete by shifting the administrative burden of proof and payment squarely onto the carrier.
Instead, the regulatory modernization process stalled, and the December 2024 draft regulations were never brought into force. The Senate committee voiced frustration over the government’s retreat, explicitly questioning why ministers abandoned a completed regulatory package that provided automatic compensation in straightforward cases in favour of a budget bill that privatizes adjudication and explores passenger fees.
The committee called on Cabinet to reconsider automatic compensation, mandate interest penalties on carriers that fail to pay claims on time, and ensure that if third-party dispute providers are introduced, initial appeals must remain with the Canadian Transportation Agency rather than forcing citizens into Federal Court. For now, Division 17 remains anchored inside Bill C-31. Ninety-seven thousand Canadian passenger files remain frozen in the queue, waiting for a resolution mechanism that may soon be owned and operated by the very airlines that left them sitting on the tarmac.
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Source Documents
Standing Senate Committee on Transport and Communications. (2026, October 8). Sixth Report: Subject matter of those elements contained in Division 17 of Part 4 of Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 (45th Parliament, 1st Session). Senate of Canada.
Parliament of Canada. (2026, May 6). Bill C-31: A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025 (First reading). House of Commons.
So very much wrong with this “solution” - starting with embedding the changes in a Budget.
I’d love to have choice of arbitrator in an argument.
Mike - thanks once again!
FFS