Decision No. 15-P-A-2012

January 13, 2012

COMPLAINT by Deryk Jackson against Jazz Air LP, as represented by its general partner, Jazz Air Holding GP Inc. carrying on business as Air Canada Jazz, Jazz and Jazz Air.

File No.: 
M4120-3/10-50314

COMPLAINT

[1] On December 16, 2010, Deryk Jackson filed a complaint with the Canadian Transportation Agency (Agency) alleging that the fares applied by Jazz Air LP, as represented by its general partner, Jazz Air Holding GP Inc. carrying on business as Air Canada Jazz, Jazz and Jazz Air (now Jazz Aviation LP, as represented by its general partner, Aviation General Partner Inc. carrying on business as Air Canada Jazz, Jazz, Jazz Air and Thomas Cook Canada) [Air Canada Jazz] for transportation between Toronto and Timmins, Ontario are significantly higher than for other small communities.

[2] In Decision No. LET-P-A-24-2011 dated March 2, 2011, Mr. Jackson and Air Canada Jazz, the operating carrier, were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA) sets out the Agency’s jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. More particularly, both parties were advised that, pursuant to subsections 66(1) and (2) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint.

[3] In addition, the Agency advised both parties of the results ensuing from the completion of its preliminary analysis of alternative domestic services between Toronto and Timmins, as well as the domestic services that are similar (i.e., services on the routes Rouyn-Noranda-Montréal, Quebec; Winnipeg, Manitoba-Thunder Bay, Ontario; Cranbrook-Vancouver, British Columbia; and Calgary-Grande Prairie, Alberta) to those operated by Air Canada Jazz between Toronto and Timmins, and requested the carrier to provide the Agency, and Mr. Jackson, with its answer to the complaint, as well as its concurrence with the Agency’s preliminary findings, or to suggest alternatives for the Agency’s consideration.

[4] In a submission dated March 24, 2011, Air Canada filed its comments regarding the Agency’s preliminary analysis and its answer to the complaint, in particular, on who should have received the complaint. Mr. Jackson filed its reply on March 31, 2011.

[5] As part of its answer, Air Canada filed a statement by Professor William Baumol that it claimed to be confidential and also claimed confidentiality of Professor Baumol’s curriculum vitae which was already on file with the Agency. By Decision No. LET-P-A-44-2011, the Agency reminded Air Canada that it cannot rely on material previously filed on unrelated cases or on rulings made in those cases with respect to confidentiality. On April 4, 2011, Air Canada filed its request for confidentiality.

[6] By Decision No. LET-P-A-67-2011 dated June 20, 2011, the Agency denied Air Canada’s claim for confidentiality and, pursuant to paragraph 24(2) of the Canadian Transportation Agency General Rules, SOR/2005-35, placed Professor Baumol’s statement and curriculum vitae on the public record. By letter dated June 22, 2011, Mr. Jackson filed its comments in respect of Professor Baumol’s statement and curriculum vitae. On June 24, 2011, Air Canada filed its reply.

PRELIMINARY MATTERS

Who is the respondent in this matter?

[7] Air Canada states that it is a party to an amended and restated capacity purchase agreement (CPA) with Air Canada Jazz under which Air Canada purchases the greater part of Air Canada Jazz’s fleet capacity. Air Canada determines the schedules, route, fares, service standards and other commercial matters related to flights operated by Air Canada Jazz for Air Canada pursuant to the CPA. All transportation of passengers on domestic flights operated by Air Canada Jazz pursuant to the CPA, which on December 16, 2010 included the Toronto-Timmins route, is performed under Air Canada’s domestic licence. The passengers carried on flights operated by Air Canada Jazz pursuant to the CPA are Air Canada passengers and have purchased travel from Air Canada, and such passengers have their contract of carriage directly with Air Canada. Air Canada Jazz’s responsibility is to operate the aircraft in a safe and efficient manner. Air Canada Jazz currently does not operate any scheduled service pursuant to its own licences and therefore is not currently setting any prices for or selling directly to the public.

[8] Based on this information, the Agency finds that the appropriate licensee providing a domestic service on the Toronto-Timmins route is Air Canada. Therefore, the respondent in this decision is Air Canada.

Whether the complaint is valid

[9] With respect to the allegation of unreasonable fare, Air Canada is of the opinion that the Agency erred in interpreting Mr. Jackson’s general complaint as a complaint in respect of “a fare” under subsection 66(1) of the CTA as the Agency’s jurisdiction under subsection 66(1) is only triggered when a complaint is made in relation to a particular fare. Air Canada states that it is impossible to know which fare group Mr. Jackson is challenging as he does not provide details to support a claim that a fare was unreasonable.

[10] Based on the documents on file, the Agency is of the opinion that Mr. Jackson did not provide evidence to support a complaint with respect to an unreasonable fare as no fare was specifically identified. Therefore, the Agency rejects this part of the complaint on the basis of lack of evidence.

[11] With respect to the allegation of inadequate range of fares, Air Canada indicates that the complaint is vague and that Air Canada is not required to address vague complaints. Air Canada argues that the Agency erred in interpreting Mr. Jackson’s complaint as raising the issue of an inadequate range of fares as Mr. Jackson provides no details on the range of fares that would be inadequate.

[12] The Agency finds that the complaint has sufficient details to be addressed. Mr. Jackson states that he has concerns with the fares Air Canada charges in its monopoly service between Toronto and Timmins. According to Mr. Jackson, these fares often exceed the ones for transatlantic flights and are significantly higher than for other small communities, such as Sudbury and Thunder Bay, for which a monopoly does not exist. These details are clear enough for the Agency to investigate whether the range of fares is inadequate.

[13] Furthermore, the complaint is within the intent of section 66 of the CTA which is to ensure that travellers on routes on which there is no, or very limited, competition are offered fares that are broadly comparable in level and range to those offered to travellers on competitive routes. The Agency is of the opinion that it has jurisdiction to determine if the range of fares offered between Toronto and Timmins was inadequate and that sufficient evidence and facts have been filed for the Agency to consider this aspect of the complaint. As subsection 66(2) of the CTA gives the Agency the power to take remedial action where it finds that a licensee is offering an inadequate range of fares, the Agency is of the opinion that it has jurisdiction to review each fare offered by Air Canada for transportation on the Toronto-Timmins route.

ISSUES

[14] The issues to be addressed are:

  1. Whether Air Canada was the only person providing a domestic service between Toronto and Timmins within the meaning of section 66 of the CTA on December 16, 2010; and, if so,
  2. Whether the range of fares offered by Air Canada in respect of its service between Toronto and Timmins was inadequate on December 16, 2010.

THE LAW

[15] Section 66 of the CTA sets out the Agency’s jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. Pursuant to subsections 66(1) and (2) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that:

  1. the air carrier who published or offered the fare which is the subject of the complaint is a licensee who, including its affiliated licensees, is the only person providing a domestic service between two points; and
  2. the fare published or offered by the licensee in respect of the service is unreasonable; and/or
  3. the licensee is offering an inadequate range of fares in respect of that service.

[16] Pursuant to subsection 66(4) of the CTA, the Agency’s jurisdiction over complaints concerning fares may be extended to domestic routes served by more than one licensee where the Agency is of the opinion that none of the other services between two points provides a reasonable alternative. In assessing such reasonable alternatives, the Agency takes into consideration the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.

[17] Further, pursuant to subsection 66(3) of the CTA, when determining whether a fare published or offered in respect of a domestic service between two points is unreasonable or that a licensee is offering an inadequate range of fares in respect of a domestic service between two points, the Agency shall consider the following factors:

  1. historical data respecting fares applicable to domestic services between the two points;
  2. fares applicable to similar domestic services offered by the licensee and one or more other licensees using similar aircraft, including terms and conditions of transportation and the number of seats available at those fares; and
  3. any other information that may be provided by the licensee, including information that the licensee provides under section 83 of the CTA.

POSITIONS OF THE PARTIES

General

[18] Mr. Jackson states that his complaint was initiated as a result of fares booked for a flight departing Toronto for Timmins on December 25, 2010 and returning to Toronto on January 1, 2011. He adds that the flights were direct. Mr. Jackson alleges that the fares that Air Canada charges in its monopoly service between Toronto and Timmins, a very short and well used route, often exceed those on transatlantic flights and are significantly higher than other similar communities such as Sudbury and Thunder Bay. Mr. Jackson states that it would be cheaper to travel from Toronto to London or Paris than it would be to Timmins even though the travel time is less by 15 percent and the corresponding fuel used is much less. Mr. Jackson is of the opinion that Air Canada is gouging consumers on its Toronto-Timmins service.

[19] Air Canada states that while Mr. Jackson attributes the pricing discrepancy to Air Canada’s alleged “monopoly” in servicing Toronto to Timmins, the Agency is well aware of the industry’s variable pricing models and the differences in economics in filling large aircraft.

[20] Air Canada notes that some factual assertions made are incorrect. For example, Mr. Jackson asserts that Thunder Bay and Sudbury are “similar-sized” communities, but Statistics Canada data confirms that Timmins has less than half the population of Thunder Bay and less than one third the population of Sudbury.

Section 66 of the CTA

[21] Air Canada maintains that the Agency’s jurisdiction under section 66 of the CTA should be guided by the following principles: (1) Canada’s transportation policy; (2) key principles of economics and competition in the context of the air transport industry; and (3) the market realities of the Canadian domestic air transport industry.

[22] With respect to the transportation policy, Air Canada asserts that in accordance with section 5 of the CTA, which sets out the national transportation policy, the Agency should refrain from exercising its powers under section 66 of the CTA in situations where market forces serve to constrain prices.

[23] With respect to the principles of economics and competition, Air Canada refers to a statement by Professor Baumol, submitted by Air Canada, which maintains that:

  • Suppressing fare differences between routes distorts market signals on the supply side.
  • The effect of differences in the competitive characteristics of allegedly competitive routes cannot be suppressed by regulatory fiat.
  • It is essential that an incumbent carrier be allowed, indeed encouraged, to reduce fares on a particular route to compete legitimately.
  • Differential pricing in an industry such as air passenger transportation is widespread, and is forced upon air carriers by market pressures because without such pricing, carriers cannot recover their fixed, sunk and common costs.

[24] Mr. Jackson submits that the majority of Professor Baumol’s statement focuses on the economic arguments for differential pricing. Mr. Jackson indicates that it is clear that Air Canada engages in differential pricing on the Toronto-Timmins route as well as on the similar domestic routes selected by the Agency. Mr. Jackson indicates that his complaint is not that Air Canada does not provide differential pricing, but that it specifically charges higher fares on the Toronto-Timmins route than it otherwise would in a competitive market.

[25] Mr. Jackson states that Professor Baumol’s statement does address the possibility of the airline fares, presumably lower, on competitive routes and not on non-competitive ones, but in the context of “wake of entry” of competitors who adopt “low inaugural fees.”

[26] Air Canada submits that the Agency should be mindful of the potential negative impact that an inflexible approach to its mandate under section 66 of the CTA could have on Air Canada’s ability to compete effectively and to serve smaller communities throughout Air Canada’s network. Air Canada also notes that its prices are influenced by other modes of transportation (e.g., car and bus), and that such modes serve to prevent Air Canada from offering unreasonable fares for transportation between Toronto and Timmins.

[27] Air Canada submits that it is of the utmost importance that the Agency recognize that Air Canada is not obligated to serve any destination in Canada, and will not do so where there is no commercial rationale. Air Canada notes that it has continued to serve many communities which would not have air service but for Air Canada.

Reasonable alternative domestic service between Toronto and Timmins

[28] Air Canada notes that Bearskin Lake Air Service LP, as represented by its general partner, Bearskin GP Inc. carrying on business as Bearskin Airlines (Bearskin Airlines) operates a flight from Timmins to Kitchener-Waterloo, connecting in Sudbury and Ottawa. Further, Air Canada submits that in responding to a complaint filed with the Agency (Decision No. 484-P-A-2005 refers), Air Canada noted that many stakeholders in the industry recognize that Canadians travel by road to save money on flights and are willing to drive to more distant airports to take advantage of cheaper flights. However, based on the interpretation of “point” made by the Agency in Decision No. 484-P-A-2005, with which Air Canada disagrees, Air Canada acknowledges that it was the only air carrier operating a domestic service between Toronto and Timmins on December 16, 2010.

Similar domestic services

[29] Mr. Jackson indicates that the four comparable routes that the Agency presents as similar domestic services represent the best comparison for the Toronto-Timmins route.

[30] Air Canada indicates that in the context of Decision No. 484-P-A-2005, Air Canada noted that the four factors identified by the Agency in determining similar routes, even if appropriately analyzed, were insufficient to determine a similar domestic service. Air Canada states that, instead, the Agency should also consider other relevant factors, including (without limitation) population basis (size of catchment area), total number of flights per day operating out of the airports in question, passenger mix, network contribution and a comparison of the trend of fares on the routes being examined. Air Canada believes that the criteria the Agency has used in its review in the past are insufficient to provide a reasonable determination of “similar” domestic services. However, Air Canada recognizes that the Agency rejected this approach in Decision No. 484-P-A-2005. Air Canada adds that based on the Agency’s interpretation of what constitutes a similar domestic route (with which Air Canada does not agree), Air Canada submits that the Agency’s selection of routes appears appropriate.

Inadequacy of range of fares between Toronto and Timmins

[31] Mr. Jackson submits that Air Canada is gouging consumers on the Toronto-Timmins route. According to Mr. Jackson, this route is a monopoly run and similarly sized communities have many more attractive fares as they are competitive routes. Mr. Jackson indicates that, although the population of Timmins, Sudbury and Thunder Bay differ, they are all small Ontario cities located in the north. He adds that however, unlike Timmins, Sudbury and Thunder Bay have competitive services.

[32] Air Canada states that the range of fares offered on the Toronto-Timmins route should be considered, prima facie, adequate, as it is the same range of fares as the one Air Canada offers on all other domestic routes in Canada that do not support aircraft with “Business Class” seating.

[33] Air Canada submits that its domestic routes feature at least three classes of fares (Latitude, Tango Plus and Tango) which offer consumers the unique ability to select the specific fare class and the benefits they desire for the type of journey they are planning. Air Canada also indicates that routes that support aircraft with business class seating have five fare classes. Air Canada adds that it offers flight passes which help individuals and businesses control the predictability of pricing while allowing flexible travel plans.

[34] Air Canada submits that the Agency should not require Air Canada to offer an identical range of fares in both competitive and non-competitive routes as doing so would create regulatory uncertainty for carriers, which would ultimately harm consumers. Air Canada further submits that there are legitimate reasons for having lower fares on certain routes, such as consumer behaviour, travel patterns, demographics and market segmentation strategies, market size and seasonality.

ANALYSIS AND FINDINGS

[35] In making its findings in respect of the preliminary and fare-related issues raised in the complaint, the Agency has considered all of the evidence submitted by the parties during the pleadings. As well, the Agency has considered information available both publicly and within the Agency concerning air services provided on the Toronto-Timmins route and the fares published or offered by Air Canada in respect of its service between these two points, including on the Internet, in the Official Airline Guide (OAG), in published flight schedules and in airline tariffs published by the Airline Tariff Publishing Company.

[36] In interpreting section 66 of the CTA, Air Canada suggests that the Agency take into account Professor Baumol’s statement. The Agency is of the opinion that the statement contains no information relevant to the complaint. In fact, it was specifically prepared in response to an unrelated issue that took place more than a decade ago. The statement sets out basic principles in respect of competition and economic analysis concerning regulation of air fares in general. Air Canada does not make any link between the statement and its application to the case, such as the principles applicable to the particular facts of this case. Also, the statement includes an argument on differential pricing which is not the issue of this case.

[37] Finally, the theoretical arguments in Professor Baumol’s statement do little to elucidate the CTA, which it is the Agency’s duty to administer. Had Parliament accepted the arguments raised here, it might not have worded the CTA in the manner it did. As such arguments are not new to the field of regulatory theory, the Agency must conclude that Parliament had other public purposes in mind. Accordingly, the Agency gives no weight to Professor Baumol’s statement.

Reasonable alternative domestic services

Whether Air Canada was the only person providing a domestic service between Toronto and Timmins within the meaning of section 66 of the CTA on December 16, 2010

[38] The Agency has reviewed the information available to it with respect to the domestic service on the Toronto-Timmins route on December 16, 2010.

[39] Air Canada submits that Bearskin Airlines operates a flight from Timmins to Kitchener-Waterloo, connecting in Sudbury and Ottawa. However, Air Canada states that, based on the interpretation of “point” made by the Agency in Decision No. 484-P-A-2005, Air Canada acknowledges that it was the only air carrier operating a domestic service between Toronto and Timmins on December 16, 2010. Therefore, there is no need for the Agency to pursue its analysis, given Air Canada’s admission.

[40] The Agency finds that Air Canada was the only person providing a domestic service between Toronto and Timmins on December 16, 2010, within the meaning of section 66 of the CTA. Accordingly, the Agency finds that the complaint falls within the purview of section 66 of the CTA.

Fare-related issues

Whether the range of fares offered by Air Canada in respect of its service between Toronto and Timmins was inadequate on December 16, 2010

[41] In addition to the material and information mentioned above, the Agency, as required by subsection 66(3) of the CTA, has considered historical and current data respecting fares applicable to domestic services offered on the Toronto-Timmins route as well as the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft, including terms and conditions of carriage.

Similar domestic services offered by Air Canada and one or more licensees

[42] Section 66 of the CTA requires a comparison of the subject carrier’s fares offered on routes on which there is no, or only limited, competition, with the fares that the same carrier offers on similar competitive routes. The Agency is of the opinion that the intent of section 66 of the CTA is to ensure that travellers on routes on which there is no, or only limited, competition are offered fares that are broadly comparable in level and range (not “identical” as alleged by Air Canada) to those offered to travellers on similar competitive routes.

[43] In determining whether a particular service between two points is similar to the service that is the subject of a section 66 complaint within the meaning of paragraph 66(3)(b) of the CTA, the Agency will consider the following factors:

  1. whether there are other licensees offering a domestic service between the two points;
  2. the type of aircraft used by the licensee that is the subject of the section 66 complaint to operate its service between the two points;
  3. the air mileage between the two points; and
  4. the origin-destination passenger volume between the two points.

[44] With respect to the service that is the subject of this complaint, the Agency has determined that:

  1. on December 16, 2010, Air Canada Jazz operated its domestic service between Toronto and Timmins using medium aircraft;
  2. according to the OAG, the distance between Toronto and Timmins is approximately 566 km; and
  3. the origin-destination passenger volume between Toronto and Timmins was approximately 58,470 passengers.1

[45] The Agency conducted the same analysis with respect to nearly 20 domestic services to identify domestic services on which Air Canada Jazz competes with one or more air carriers and which have characteristics similar to those of the service Air Canada Jazz provided between Toronto and Timmins. Based on its consideration of the factors outlined above, the Agency has determined that on December 16, 2010, four such services were similar to that offered by Air Canada between Toronto and Timmins within the meaning of paragraph 66(3)(b) of the CTA. These include Air Canada’s services between:

  1. Rouyn-Noranda and Montréal;
  2. Winnipeg and Thunder Bay;
  3. Cranbrook and Vancouver; and
  4. Calgary and Grande Prairie.

[46] The determination of similarity is based on the following reasons:

  1. In addition to the service operated by Air Canada Jazz on December 16, 2010, using medium aircraft:
    • Pascan Aviation Inc. operated a domestic service between Rouyn-Noranda and Montréal using small aircraft;
    • Bearskin Airlines and WestJet operated domestic services between Winnipeg and Thunder Bay using small and large aircraft respectively;
    • Pacific Coastal Airlines Limited operated a domestic service between Cranbrook and Vancouver using small aircraft; and,
    • WestJet operated a domestic service between Calgary and Grande Prairie using large aircraft.
  2. According to the OAG, the distance between Toronto and Timmins is approximately 566 km; and:
    • the distance between Rouyn-Noranda and Montréal is approximately 498 km;
    • the distance between Winnipeg and Thunder Bay is approximately 598 km;
    • the distance between Cranbrook and Vancouver is approximately 537 km; and
    • the distance between Calgary and Grande Prairie is approximately 555 km.
  3. It should be noted that the Toronto-Timmins route is approximately:
    • 14 percent longer in distance than the Rouyn-Noranda-Montréal route;
    • 5 percent shorter in distance than the Winnipeg-Thunder Bay route;
    • 5 percent longer in distance than the Cranbrook-Vancouver route; and
    • 2 percent longer in distance than the Calgary-Grande Prairie route.
  4. The 1999 origin-destination passenger volume between:
    • Rouyn-Noranda and Montréal was approximately 39,850 passengers;
    • Winnipeg and Thunder Bay was approximately 22,160 passengers;
    • Cranbrook and Vancouver was approximately 31,860 passengers; and
    • Calgary and Grande Prairie was approximately 34,960 passengers.

[47] The Agency, in relating to Air Canada the results of its preliminary analysis, asked the carrier to comment on the Agency’s selection of the services operated on the Rouyn-Noranda-Montréal, Winnipeg-Thunder Bay, Cranbrook-Vancouver and Calgary-Grande Prairie routes as similar domestic services.

[48] Air Canada notes that the four factors identified by the Agency in determining similar routes, even if appropriately analyzed, are insufficient to determine a similar domestic service. Air Canada also states that, instead, the Agency should also consider other relevant factors, including (without limitation) population basis (size of catchment area), total number of flights per day operating out of the airports in question, passenger mix, network contribution and the comparison of the trend of fares on the routes being examined. However, Air Canada acknowledges that, based on the Agency’s interpretation of what constitutes a similar domestic route (with which Air Canada disagrees), the Agency’s selection of routes appears appropriate. Otherwise, Air Canada did not comment on the Agency’s choice of Air Canada’s Rouyn-Noranda-Montréal, Winnipeg-Thunder Bay, Cranbrook-Vancouver and Calgary-Grande Prairie services as services that are similar to its Toronto-Timmins service nor did it propose a service which it considers to be more appropriate for comparison purposes.

[49] In Decision No 484-P-A- 2005, the Agency indicated that it was of the opinion that the inclusion of additional factors in determining what constitutes similar domestic services would either severely limit the domestic services that could possibly meet the more restrictive criteria or conclude that each domestic service offered by a carrier is essentially unique and, therefore, that there are no truly comparable services. The Agency was of the opinion that the four factors it had chosen to consider in analysing similar domestic services represent the basic characteristics of a domestic service taken into consideration by the air travel consumer and provide the Agency with a consistent standard against which all domestic services can be assessed. Accordingly, the Agency was of the opinion, and still is of the opinion, that the above-noted factors are appropriate for determining similar domestic services within the meaning of paragraph 66(3)(b) of the CTA.

[50] Consequently, the Agency’s analysis of the range of fares offered on the Toronto-Timmins route will include a comparison to the fares published by Air Canada for the four routes identified above.

Data respecting fares applicable to domestic services between Toronto and Timmins and on the similar domestic routes

1.General overview

[51] The Agency analyzed the range of fares offered by Air Canada in respect of its service on the Toronto-Timmins route on December 16, 2010 and compared the range of fares with that offered by Air Canada on the Rouyn-Noranda-Montréal, Winnipeg-Thunder Bay, Cranbrook-Vancouver and Calgary-Grande Prairie routes on the basis of the: span of fares, number of fares offered, distribution of discounts off the Y-class fare, fare booking classes offered and historical range of fares.

2. Span of fares

[52] The following tables compare the difference between the highest and lowest fare over three years on each route and the difference in relative value between the Toronto-Timmins route and each of the similar domestic routes in terms of fares, revenue per kilometre (RPK) and percentage. The fares are base fares submitted by Air Canada.

December 16, 2008

Route

Highest fare

Lowest fare

Range of fare

Difference in highest fare on the Toronto-Timmins route vs. similar route

Difference in
lowest fare on the Toronto-Timmins route vs. similar route

Difference in
span of fare on the
Toronto-Timmins route vs. similar route

Fare

RPK

Fare

RPK

Fare

Fare

RPK

Fare

RPK

Toronto-Timmins
(Section 66 route)

$897

$1.58

$202

$0.36

$695

Thunder Bay-
Winnipeg

$735

$1.23

$99

$0.17

$636

$162 22%

$0.35
29%

$103 104%

$0.19
116%

$59
9%

Vancouver-
Cranbrook

$843

$1.57

$75

$0.14

$768

$54
6%

$0.01
1%

$127 169%

$0.22
156%

-$73
-10%

Grande Prairie-Calgary

$745

$1.34

$99

$0.18

$646

$152 20%

$0.24
18%

$103 104%

$0.18
100%

$49
8%

Rouyn-Noranda-
Montréal

$686

$1.38

$163

$0.33

$523

$211 31%

$0.20
15%

$39 24%

$0.03
9%

$172
33%

*RPK = Revenue ($) per kilometre

December 16, 2009

Route

Highest fare

Lowest fare

Range of fare

Difference in highest fare on the Toronto-Timmins route vs. similar route

Difference in
lowest fare on the Toronto-Timmins route vs. similar route

Difference in
span of fare on the
Toronto-Timmins route vs. similar route

Fare

RPK

Fare

RPK

Fare

Fare

RPK

Fare

RPK

Toronto-Timmins
(Section 66 route)

$907

$1.60

$221

$0.39

$686

Thunder Bay-
Winnipeg

$745

$1.25

$99

$0.17

$646

$162 22%

$0.35
29%

$122 123%

$0.22
136%

$40
6%

Vancouver-
Cranbrook

$813

$1.51

$103

$0.19

$710

$94
12%

$0.09
6%

$118
115%

$0.20
104%

-$24
-3%

Grande Prairie-Calgary

$755

$1.36

$99

$0.18

$600

$152
20%

$0.24
18%

$122 123%

$0.21
119%

$86
14%

Rouyn Noranda-
Montreal

$696

$1.40

$176

$0.35

$520

$211
30%

$0.20
15%

$45 26%

$0.04
10%

$166
32%

*RPK = Revenue ($) per kilometre

December 16, 2010

Route

Highest fare

Lowest fare

Range of fare

Difference in highest fare on the Toronto-Timmins route vs. similar route

Difference in
lowest fare on the Toronto-Timmins route vs. similar route

Difference in
span of fare
on the Toronto-Timmins route vs. similar route

Fare

RPK

Fare

RPK

Fare

Fare

RPK

Fare

RPK

Toronto-Timmins
(Section 66 route)

$964

$1.70

$281

$0.50

$683

Thunder Bay-
Winnipeg

$816

$1.36

$119

$0.20

$697

$148 18%

$0.34
25%

$162 136%

$0.30
149%

-$14
-2%

Vancouver-
Cranbrook

$814

$1.52

$99

$0.18

$715

$150
18%

$0.18
12%

$182 184%

$0.32
169%

-$32
-4%

Grande Prairie-Calgary

$836

$1.51

$149

$0.27

$687

$128 15%

$0.19
13%

$132 89%

$0.23
85%

-$4
-1%

Rouyn-Noranda-
Montréal

$778

$1.56

$236

$0.47

$542

$186
24%

$0.14
9%

$45 19%

$0.03
5%

$141
26%

*RPK = Revenue ($) per kilometre

[53] Based on the above tables, the difference between the span of fares offered by Air Canada on the Toronto-Timmins route and the four similar routes has remained relatively stable between December 16, 2008 and December 16, 2010. In absolute terms, the span of fares on the Toronto-Timmins route is close to the span of fares offered on the other similar routes. However, it is noted that overall, the fares offered by Air Canada on the Toronto-Timmins route are higher than the fares offered on similar routes. Generally, the lower fares reflect a significant difference. Even if these lower fares are compared on a fare-per-kilometre basis, the difference remains significant on three of the similar domestic routes (i.e., Thunder Bay-Winnipeg, Vancouver-Cranbrook and Grande Prairie-Calgary). This indicates that the differences in distance between the routes are not significant and do not justify the higher fares observed on the Toronto-Timmins route.

3. Number of fares

[54] The following table compares the total number of fares offered by Air Canada on the Toronto-Timmins route and on each of the similar domestic routes on December 16 of each of 2008, 2009 and 2010.

Route

Dec. 16, 2008
Number of fares

Dec. 16, 2009
Number of fares

Dec. 16, 2010
Number of fares

Toronto-Timmins
(Section 66 route)

15

13

12

Thunder Bay-Winnipeg

16

15

14

Vancouver-Cranbrook

16

13

14

Grande Prairie-Calgary

16

15

14

Rouyn-Noranda-Montréal

14

13

12

[55] As indicated in the above table, the numbers of fares offered on the Toronto-Timmins route and the similar domestic routes are not significantly different.

4. Distribution of discounts off the Y-class fare

[56] The following table compares the percentage of discounts offered off of the highest Latitude fare (Y-class fare) offered by Air Canada on the Toronto-Timmins route and each of the similar domestic routes.

Dec. 16, 2008

Dec. 16, 2009

Dec. 16, 2010

Highest discount off
(Y-class fare)

Lowest discount off
(Y-class fare)

Highest discount off
(Y-class fare)

Lowest discount off
(Y-class fare)

Highest discount off
(Y-class fare)

Lowest discount off
(Y-class fare)

Route

%

%

%

%

%

%

Toronto-Timmins
(Section 66 route)

77

4

76

8

71

6

Thunder Bay-Winnipeg

87

7

87

5

85

6

Vancouver-Cranbrook

91

6

87

5

88

6

Grande Prairie-Calgary

87

7

87

5

82

6

Rouyn-Noranda-Montréal

76

9

75

4

70

6

[57] Over the three years under consideration, the distribution of discounts for the Y-class fare was almost identical on the Toronto-Timmins route and the Rouyn-Noranda-Montréal route. However, on the other similar domestic routes, the lowest fares, in the range of discounted fares, were lower than on the Toronto-Timmins route. For example, on December 16, 2010, the lowest fares offered by Air Canada were discounted by 88 percent, 82 percent and 85 percent off the Y-class fare on the Vancouver-Cranbrook, Grande Prairie-Calgary and Thunder Bay-Winnipeg routes, respectively, and by only 71 percent on the Toronto-Timmins route.

5. Fare booking classes

[58] In each of the years under review, Air Canada offered three categories of fares: Latitude, Tango Plus and Tango. The table below shows the number of classes of fares on December 16 of each of the years 2008, 2009 and 2010.

Dec.16, 2008

Dec.16, 2009

Dec. 16, 2010

Route

No. of classes: (Latitude)

No. of classes: (Tango Plus)

No. of classes:
(Tango)

No. of classes: (Latitude)

No. of classes: (Tango Plus)

No. of classes:
(Tango)

No. of classes: (Latitude)

No. of classes: (Tango Plus)

No. of classes:
(Tango)

Toronto-Timmins
(Section 66 route)

3

6

6

2

7

4

2

7

3

Thunder Bay-Winnipeg

2

7

7

2

8

5

2

8

4

Vancouver-Cranbrook

2

7

7

2

7

4

2

8

4

Grande Prairie-Calgary

2

7

7

2

8

5

2

8

4

Rouyn-Noranda-Montréal

2

6

6

2

7

4

2

7

3

[59] The variety of classes offered on the Toronto-Timmins route and the similar domestic routes are comparable. For the fares common to all routes, the terms and conditions of carriage associated with each fare appear similar and, thus, equally restrictive on all similar domestic routes. However, Air Canada offered an additional distinctive lower Tango Plus and Tango fare on each of the Thunder Bay-Winnipeg, Vancouver-Cranbrook and Grande Prairie-Calgary routes which are significantly discounted in comparison to the lowest Tango Plus and Tango fares offered on the Toronto-Timmins route.

[60] For example, on December 16, 2010, the lowest Tango Plus fare was significantly higher on the Toronto-Timmins ($346) route than the one offered on the Thunder Bay-Winnipeg ($184, a difference of $162 or 88%), Vancouver-Cranbrook ($164, a difference of $182 or 111%) and Grande Prairie-Calgary ($214, a difference of $132 or 62%) routes. Similarly, on December 16, 2010, the lowest Tango fare was significantly higher on the Toronto-Timmins ($281) route than the one offered on the Thunder Bay-Winnipeg ($119, a difference of $162 or 136%), Vancouver-Cranbrook ($99, a difference of $182 or 184%) and Grande Prairie-Calgary ($149, a difference of $132 or 89%) routes.

6. Historical ranges of fares

[61] The following table sets out the percentage of change in the highest and lowest fares offered by Air Canada on the Toronto-Timmins route and each of the similar domestic routes between the dates of December 16, 2008 and December 16, 2010.

Dec. 16, 2008

Dec. 16. 2010

2010 vs. 2008

Route

Highest fare

Lowest fare

Highest fare

Lowest fare

Change in highest fare

Change in lowest fare

Toronto-Timmins
(Section 66 route)

$897

$202

$964

$281

7%

39%

Thunder Bay-
Winnipeg

$735

$99

$816

$119

11%

20%

Vancouver-
Cranbrook

$843

$75

$814

$99

-3%

32%

Grande Prairie-Calgary

$745

$99

$836

$149

12%

51%

Rouyn-Noranda-
Montréal

$686

$163

$778

$236

13%

45%

[62] As indicated in the above table, over the three-year period under review, the changes to the highest and lowest fares offered by Air Canada on the Toronto-Timmins route were comparable to the changes observed in the highest and lowest fares on the similar domestic routes.

7. Summary

[63] Air Canada offered a slightly greater number of fares on three of the four similar domestic routes (Thunder Bay-Winnipeg, Vancouver-Cranbrook and Grande Prairie-Calgary).

[64] All of the fares offered by Air Canada on the Toronto-Timmins route were higher than those offered on all of the four similar domestic routes.

[65] The deep discount Tango Plus and Tango fares were significantly lower on the majority of the similar domestic routes (Thunder Bay-Winnipeg, Vancouver-Cranbook and Grande Prairie-Calgary).

[66] The distribution of discounts off the Y-class fare is significantly more advantageous on three of the similar domestic routes (Thunder Bay-Winnipeg, Vancouver-Cranbook and Grande Prairie-Calgary).

[67] The differences in distance between the Toronto-Timmins route and the other similar domestic routes are not significant and would not justify in itself the higher fares observed on the Toronto-Timmins route.

[68] The year-over-year increases in the levels of fares are not significantly different between the Toronto-Timmins route and the other similar domestic routes.

8. Agency findings

[69] In light of the foregoing, the Agency finds that the range of fares offered by Air Canada in respect of its service between Toronto and Timmins on December 16, 2010 was inadequate.

CONCLUSION

[70] Based on the above finding, the Agency partially grants the complaint. The Agency directs Air Canada, pursuant to subsection 66(2) of the CTA, to amend its tariff to increase the range of fares by offering one additional fare at the low end of each of its current Latitude, Tango Plus and Tango fare classes. Each new fare must be at the following levels:

Latitude

[71] Air Canada must introduce one additional Latitude fare that is at least 16 percent lower than its current lowest Latitude fare offered on the Toronto-Timmins route. This percentage is based on the fare difference on December 16, 2010 between the lowest Latitude fare offered by Air Canada on the Toronto-Timmins route ($908) and the average lowest fare offered by Air Canada on the four similar domestic routes ($763) considered by the Agency.

Tango Plus

[72] Air Canada must introduce an additional Tango Plus fare that is at least 37 percent lower than its current lowest Tango Plus fare offered on the Toronto-Timmins route. This percentage is based on the fare difference on December 16, 2010 between the lowest Tango Plus fare offered by Air Canada on the Toronto-Timmins route ($346) and the average lowest fare offered by Air Canada on the four similar domestic routes ($216) considered by the Agency.

Tango

[73] Air Canada must introduce an additional Tango fare that is at least 46 percent lower than its current lowest Tango fare offered on the Toronto-Timmins route. This percentage is based on the fare difference on December 16, 2010 between the lowest Tango fare offered by Air Canada on the Toronto-Timmins route ($281) and the average lowest fare offered by Air Canada on the four similar domestic routes ($151) considered by the Agency.

Period

[74] Air Canada must amend its tariff to offer the above-noted lower fares no later than 30 days from the date of this Decision and provide the Agency with a copy of the new tariff. The new fares must remain in effect for one year.

1 The origin and destination figures are based on the most recent data available to the public from the Air Passenger Origin and Destination, Domestic Report, 1999 (Ottawa, Canada: Minister of Industry for Statistics Canada, 2001).

Member(s)

Jean-Denis Pelletier, P.Eng.
Raymon J. Kaduck
Date modified: