AC ticket stock
AC J metal on long-haul segment DEL-YYZ.
Ticket class P.
Feeder on AI to DEL (on the same ticket).

Downgraded by AI to economy, allegedly because Air Canada did not buy business class (or because P is not a valid fare mapping AC -> AI).

AC responds with a 50% refund solely on that segment calculated on a total trip per mile basis.

Is this fair/appropriate?

Sure, it's only a short segment (2~ hours) but it's a serious service failure on behalf of AC/AI.

Second, because the entire trip was so long, the refund works out to an incredibly pathetic amount.

Third, extrapolating out this policy, being invol downgraded on an AC flight, lets say YYZ-LHR, would mean a $5k P ticket being refunded only $2.5k with the privilege of enjoying what is essentially then a Tango fare.