Decision No. 180-P-A-2002

April 17, 2002

April 17, 2002

IN THE MATTER OF a complaint by Jayme Benson concerning the $614 fare offered by Air Canada on or about August 11, 2000 for round-trip travel between Saskatoon, Saskatchewan, and Toronto, Ontario.

File No. M4370/A74/00-275


COMPLAINT

On August 11, 2000, Jayme Benson filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

By letter dated August 21, 2000, both Mr. Benson and Air Canada were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the 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 subsection 66(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint. In that same letter, Air Canada was requested to provide the Agency and Mr. Benson with its answer concerning the preliminary issue raised by the complaint, that is, whether Air Canada was the only person providing a domestic service between Saskatoon and Toronto on or about August 11, 2000 within the meaning of section 66 of the CTA.

On September 13, 2000, Air Canada requested an extension until September 29, 2000 to file its answer to this aspect of the complaint and, by Decision No. LET-P-A-276-2000 dated September 19, 2000, the Agency granted Air Canada the requested extension. On September 29, 2000, Air Canada filed its answer to this aspect of the complaint. Mr. Benson did not reply to Air Canada's answer.

On October 20, 2000, Air Canada was requested to provide the Agency and Mr. Benson with its answer to the fare-related issues raised in the complaint, including the information outlined in subsection 66(3) of the CTA. On November 20, 2000, Air Canada requested an extension until December 20, 2000 to file its answer to the fare-related issues raised in the complaint and, in a letter filed on December 19, 2000, Air Canada requested a further extension until January 12, 2001. Further, on November 24, 2000, in addition to the 10 days already granted by the Agency, Mr. Benson requested an extension of 20 days to file his reply after receipt of Air Canada's answer. By Decision No. LET-P-A-398-2000 dated December 22, 2000, the Agency granted both Air Canada and Mr. Benson their respective requested extensions. On January 12, 2001, Air Canada filed its answer to the fare-related issues raised in the complaint. Mr. Benson filed his reply to Air Canada's answer on February 16, 2001.

Pursuant to subsection 29(1) of the CTA, the Agency is required to make its decision no later than 120 days after the application is received, unless the parties agree to an extension. In this case, the parties have agreed to an indefinite extension of the deadline.

PRELIMINARY MATTER

Although Air Canada's response to the Agency's October 20, 2000 letter requesting an answer to the fare-related issues raised in the complaint was received after the prescribed deadline, the Agency, pursuant to section 6 of the National Transportation Agency General Rules, SOR/88-23, accepts the submission as being relevant and necessary to its consideration of this matter.

ISSUES

The issues to be addressed are:

  1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was the only person providing a domestic service between Saskatoon and Toronto on or about August 11, 2000 within the meaning of section 66 of the CTA; and, if so,
  2. whether the fare published or offered by Air Canada in respect of its service between Saskatoon and Toronto on or about August 11, 2000, which is the subject of the complaint, was unreasonable.

POSITIONS OF THE PARTIES

Mr. Benson submits that the lowest fare quoted by Air Canada's on-line reservation system on or about August 11, 2000 for round trip travel between Saskatoon and Toronto during the fall of 2000 was $614, excluding taxes. He further submits that he was quoted the same fare even after accepting all of the terms and conditions of carriage related to the fare, including booking two weeks in advance of departure and ensuring that his travel period included a minimum Saturday night stay, and after identifying travel dates in September, October and November 2000. He also submits that one could travel round trip between Toronto and international destinations such as London, Paris or Amsterdam on Canada 3000 for $399, excluding taxes. Mr. Benson states that it should not cost less to travel to Europe than to travel within Canada. He attributes the difference in the fares offered for international and domestic travel to the fact that only Air Canada operates a service between Saskatoon and Toronto. He believes that the fare for travel between Saskatoon and Toronto should be approximately $400, excluding taxes. Mr. Benson states that "the Air Canada monopoly is hurting tourism and in a way Canadian unity". He adds that "ticket prices are simply too high".

In its answer to the preliminary issue raised by the complaint, Air Canada submits that it "was the only person providing a domestic service between Saskatoon and Toronto, within the meaning of Section 66 of the Canada Transportation Act" at the time of Mr. Benson's complaint. However, Air Canada revised its position in its answer to the fare-related issues raised in the complaint, and advises that "[t]o the best of its knowledge, Air Canada was not the only person providing a domestic service between Saskatoon and Toronto at the time of the complaint". The carrier submits that since March 2000, WestJet Airlines Ltd. (hereinafter WestJet) has provided service between Toronto and Saskatoon, operating from the John C. Munro Hamilton International Airport. Air Canada states that, promoted as Toronto's "Hassle-Free Alternative", the John C. Munro Hamilton International Airport is easily accessible to the Greater Toronto Area and is less than an hour away from downtown Toronto.

The carrier submits that the service provided by WestJet operating from the John C. Munro Hamilton International Airport was not an unreasonable alternative to the service provided by Air Canada operating from the Toronto-Lester B. Pearson International Airport, taking into account the factors listed in subsection 66(4) of the CTA.

With respect to the fare-related issue raised in the complaint, Air Canada submits that the round-trip fare of $614, exclusive of applicable taxes, it offered in respect of its domestic service between Saskatoon and Toronto was not unreasonable. The carrier states that, while the specific fare of $614 was not found in its records for sales on or about August 11, 2000, the closest fare for round-trip travel between Saskatoon and Toronto was Air Canada's QHCANADA fare of $599, exclusive of applicable taxes and charges. According to Air Canada, its QHCANADA fare was non-refundable with a $100 change fee, and required a 14-day advance purchase and a minimum Saturday night stay.

The carrier further submits that a year earlier when it competed with Canadian Airlines International Ltd. carrying on business under the firm name and style of Canadian Airlines International or Canadi*n Airlines or Canadi*n (hereinafter Canadi*n) on the route, Air Canada offered its QHCANADA fare at $579 for round-trip travel between Saskatoon and Toronto, and that the nominal 3.5 percent increase from August 11, 1999 to August 11, 2000 was part of a general fare increase introduced to offset higher fuel costs.

With respect to the inadequacy of the range of fares offered, Air Canada submits that it offered the entire range of fare classes in respect of its service between Saskatoon and Toronto and that the same range of fares was offered on August 11, 1999 and 2000. Air Canada adds that since its acquisition of Canadi*n in January 2000, it has launched five seat sales. It adds that in addition to these seat sales, lower fares were available throughout the year and that "subject to general economic and industry seasonality conditions, the inventory levels have remained similar year-to-year."

In response to Air Canada's submission that WestJet's service between Hamilton and Saskatoon provides a reasonable alternative to Air Canada's service on the Saskatoon-Toronto route, Mr. Benson submits that travelling from Hamilton to Toronto is very inconvenient for the business or leisure traveller.

ANALYSIS AND FINDINGS

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

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 subsection 66(1) 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 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.

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, 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 carriage 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.

Preliminary issue

Whether Air Canada was the only person providing a domestic service between Saskatoon and Toronto on or about August 11, 2000 within the meaning of section 66 of the CTA

The Agency has reviewed the information available to it with respect to the domestic service offered between Saskatoon and Toronto and has also considered Air Canada's position that WestJet's service between Hamilton and Saskatoon constitutes a reasonable alternative domestic service to that provided by Air Canada between Saskatoon and Toronto because the John C. Munro Hamilton International Airport is easily accessible to the Greater Toronto Area and that it is less than an hour away from downtown Toronto.

Pursuant to section 66 of the CTA, the Agency may inquire into complaints concerning passenger fares and cargo rates published or offered in respect of certain domestic services provided "between two points". The word "point" is not defined in the CTA. However, The Canadian Oxford Dictionary defines "point" as "a specific place or position" and, in its mathematical sense, as "that which is conceived as having a position, but no extent, magnitude, or dimension". The denotation of the word "point", therefore, is very specific. The Agency has considered whether interpreting the word "point" in section 66 of the CTA in some other manner, such as "area" would be consistent with the spirit and intent of the CTA as a whole and notes that the word "point" is used frequently in the CTA. The Agency also notes that The Canadian Oxford Dictionary defines "area" as "the extent or measure of a surface, a region or tract, or a space allocated for a specific purpose." Accordingly, the parameters of an "area" are not very well defined and may be quite subjective. The Agency is therefore of the opinion that interpreting the word "point" in section 66 of the CTA as "area" could lead to inconsistency and ambiguity.

Accordingly, the Agency is of the opinion that the word "point", as it is used in section 66 of the CTA, refers to an individual origin or destination city rather than an area.

In light of the foregoing, the Agency finds that the John C. Munro Hamilton International Airport is not the same point as the Toronto-Lester B. Pearson International Airport for the purposes of section 66 of the CTA. Accordingly, the service provided by WestJet between Hamilton and Saskatoon is not a reasonable alternative to the service Air Canada provides between Saskatoon and Toronto.

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 those two points provides a reasonable alternative taking into consideration the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.

The Agency is of the opinion that, on or about August 11, 2000, in addition to being served by Air Canada, the Saskatoon-Toronto route was served by Royal Aviation Inc. carrying on business as Royal and/or Conifair (hereinafter Royal).

From the information available to the Agency, Air Canada's service between Saskatoon and Toronto during the week of August 11, 2000 consisted of:

  • approximately 42 flights per week: 35 direct, non-stop flights and 7 direct, one-stop flights;
  • service provided every day of the week;
  • a total weekly capacity of approximately 5,404 seats;
  • large aircraft, as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR), used on all flights; and
  • a total travel time between Saskatoon and Toronto of approximately three hours and twenty minutes for the non-stop flights and four hours and eighteen minutes for the one-stop flights.

Available information also indicates that Royal's service between Saskatoon and Toronto during the week of August 11, 2000 consisted of:

  • approximately 2 flights per week: 1 direct, non-stop flight and 1 direct, one-stop flight;
  • service provided only on Wednesday;
  • a total weekly capacity of approximately 444 seats;
  • large aircraft, as defined in the ATR, used on all flights; and
  • a total travel time between Saskatoon and Toronto of approximately three hours for the non-stop flight and four hours and fifty minutes for the one-stop flight.

The Agency has carefully examined and analyzed the services provided by both Air Canada and Royal between Saskatoon and Toronto during the week of August 11, 2000 and, on the basis of the factors set out in subsection 66(4) of the CTA, both individually and collectively, is of the opinion that Royal's service did not provide travellers with a reasonable alternative to that offered by Air Canada.

In light of the foregoing, the Agency has determined that Air Canada was the only person providing a domestic service between Saskatoon and Toronto on or about August 11, 2000 within the meaning of section 66 of the CTA. Accordingly, the complaint falls within the purview of section 66 of the CTA.

Fare-related issue

Whether the $614 fare published or offered by Air Canada in respect of its service between Saskatoon and Toronto on or about August 11, 2000 was unreasonable

In addition to the material and information described above, the Agency, as required by subsection 66(3) of the CTA, has considered historical data respecting fares applicable to domestic services offered between Saskatoon and Toronto and 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. The Agency notes that although Air Canada was given the opportunity to identify fares applicable to similar domestic services offered by Air Canada and one or more other licensees, as well as the number of seats available at those fares, the carrier did not provide the Agency with such information.

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

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 very limited, competition are offered fares which are broadly comparable in level and range to those offered to travellers on competitive routes. In determining whether a particular service between two points is similar to the service which 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 which 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.

With respect to the service which is the subject of the section 66 complaint, the Agency has determined that:

  1. on August 11, 2000, Air Canada operated its domestic service between Saskatoon and Toronto using large aircraft, as defined in the ATR;
  2. according to the OAG, the distance between Saskatoon and Toronto is approximately 1,382 air miles; and
  3. the origin-destination passenger volume between Saskatoon and Toronto was approximately 85,680 passengers in 1999 (the last complete year for which such information is available).

The Agency conducted the same analysis in respect of several domestic services to identify the services which have characteristics similar to those of the service between Saskatoon and Toronto. Based on its consideration of the factors outlined above, the Agency has determined that, on or about August 11, 2000, the service which was most similar to that offered by Air Canada between Saskatoon and Toronto within the meaning of paragraph 66(3)(b) of the CTA was Air Canada's service between Ottawa and Winnipeg for the following reasons:

  1. Royal and WestJet operated domestic services between Ottawa and Winnipeg, in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Ottawa and Winnipeg using large aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Ottawa and Winnipeg is approximately 1,048 air miles; and
  4. the origin-destination passenger volume between Ottawa and Winnipeg was approximately 115,500 passengers in 1999.

Data respecting fares applicable to domestic services between Saskatoon and Toronto and between Ottawa and Winnipeg

The Agency's research has identified that the $614 fare, which is the subject of the complaint, is the sum of the QHCANADA fare of $599 and the $15 NAV CANADA surcharge. Of these components, the Agency will conduct its analysis and make its determination with respect to the $599 QHCANADA fare only, which will be analyzed below.

In conducting its analysis, the Agency considered the QHCANADA fare offered by Air Canada in relation to the other fares offered by the carrier on the Saskatoon-Toronto route and to the fares offered by Air Canada on the Ottawa-Winnipeg route, as well as the discounts off the full economy Y1 round-trip fare which the fares represented, the year-over-year changes in the fares, and the terms and conditions of carriage applicable to the fares on each of the routes.

The Agency has reviewed the fares offered by air carriers in respect of the domestic services operated between Saskatoon and Toronto on August 11, 1998, 1999 and 2000, that is, from a point in time when this route was served by both Air Canada and Canadi*n, including their affiliates, and also by Royal, to the date of the complaint. The Agency has also reviewed the fares offered by Air Canada on the Ottawa-Winnipeg route for those dates.

1. General overview

An overview of the fares published by Air Canada in respect of its domestic services between Saskatoon and Toronto and between Ottawa and Winnipeg on August 11, 1998, 1999 and 2000 shows that Air Canada offered a selection of fares on each route. Most were non-refundable, round-trip fares which required an advance purchase and were discounted off the Y1 round-trip fare by varying percentages.

The Agency's analysis shows that on August 11 in each of the years 1998, 1999 and 2000, in general, the fares offered by Air Canada on the Ottawa-Winnipeg route were less expensive and more deeply discounted off the Y1 round-trip fare than those it offered on the Saskatoon-Toronto route. However, the fares which were available on both routes were similarly discounted off the Y1 round-trip fare.

Air Canada offered fewer discounted, round-trip fares on the Saskatoon-Toronto route than on the Ottawa-Winnipeg route on August 11 in each of the three years. On the Ottawa-Winnipeg route, Air Canada offered, each year, a mid-range fare, discounted at between 62 and 64 percent off the Y1 round-trip fare. This fare was not offered on the Saskatoon-Toronto route. In addition, on August 11, 1998, Air Canada offered one low-end "NITE" fare discounted at 75 percent off the Y1 round-trip fare and, on August 11, 1999, it offered a second low-end "NITE" fare discounted at 71 percent on the Ottawa-Winnipeg route, neither of which was offered on the Saskatoon-Toronto route. However, by August 11, 2000, the carrier offered both of these "NITE" fares on the two routes, but the fares offered on the Ottawa-Winnipeg route were more deeply discounted by approximately 5 percent than those offered on the Saskatoon-Toronto route. On both routes, Air Canada offered other fares discounted at both greater and lesser percentages. Otherwise, there were no notable differences between the two routes with respect to the fares offered by Air Canada for round-trip travel.

Royal offered fares on the Saskatoon-Toronto route on each of the dates under review. On August 11, 1998 and 1999, Canadi*n also offered fares on the Saskatoon-Toronto route.

2. The QHCANADA fare

The Agency's research shows that the QHCANADA fare was one of the discounted, round-trip, non-refundable fares requiring an advance purchase. A QHCANADA fare was available on both the Saskatoon-Toronto and Ottawa-Winnipeg routes on each of the dates under review. The terms and conditions of carriage applicable to the QHCANADA fare were identical on both routes.

On August 11, 1998 and 1999, the QHCANADA fare offered by Air Canada on the Saskatoon-Toronto route was higher than that offered on the Ottawa-Winnipeg route. When Air Canada competed on the route with Canadi*n on August 11, 1998 and 1999, the QHCANADA fare it offered on the Saskatoon-Toronto route was, respectively, 25 and 16 percent higher than that offered on the Ottawa-Winnipeg route. The difference in the level of the QHCANADA fare that Air Canada offered on both routes remained at the 1999 level of 16 percent on August 11, 2000 when it was the only person providing a domestic service between Saskatoon and Toronto, within the meaning of section 66 of the CTA.

In addition, on August 11, 1998, the QHCANADA fare offered by Air Canada on the Saskatoon-Toronto route was discounted off the Y1 round-trip fare at 68 percent, while that offered on the Ottawa-Winnipeg route was discounted at 71 percent. On August 11, 1999 and 2000, the QHCANADA fare offered on both routes was discounted off the Y1 round-trip fare at the same rate, that is, at 69 percent.

From August 11, 1998 to August 11, 2000, the QHCANADA fare offered by Air Canada on the Saskatoon-Toronto route was increased by 13 percent. Over the same time period, the QHCANADA fare offered by Air Canada on the Ottawa-Winnipeg route was increased by 23 percent. Air Canada increased the QHCANADA fare it offered on the Ottawa-Winnipeg route by 18 percent from 1998 to 1999, while the QHCANADA fare it offered on the Saskatoon-Toronto route was increased by 9 percent. From 1999 to 2000, Air Canada increased the QHCANADA fare it offered on both routes by approximately 4 percent.

3. Review of fares offered by other carriers on the Saskatoon-Toronto route

Agency investigations into fare-related complaints include the examination of fares offered by other carriers that provided a service on the route which is the subject of the complaint. On the dates under review, Royal also offered fares for travel between Saskatoon and Toronto.

On August 11, 1998 and 1999, Air Canada offered the same fares and the same range of fares on the Saskatoon-Toronto route as Canadi*n. On each of the three dates under review, Air Canada offered a wider range of fares than Royal, and while Air Canada's fares were higher than those of Royal, they were discounted at a much higher percentage off the Y1 round-trip fare than were Royal's.

4. Summary

The Agency has carefully examined and analyzed the QHCANADA fare published by Air Canada in respect of its domestic services between Saskatoon and Toronto and between Ottawa and Winnipeg on August 11, 1998, 1999 and 2000. On the basis of the foregoing analysis, the Agency is of the opinion that the QHCANADA fare offered to travellers on both routes had the same terms and conditions of carriage and was discounted off the Y1 round-trip fare by similar percentages. The Agency further notes that the QHCANADA fare was consistently lower on the Ottawa-Winnipeg route, reflecting, among other things, the difference in the length of the route. However, the Agency also notes that the QHCANADA fare offered by Air Canada on the Saskatoon-Toronto route was treated more favourably with respect to year-over-year changes in fare level on the three dates under review than that offered on the Ottawa-Winnipeg route. Lastly, the Agency observes that the amount of the fare differential between the two routes in 2000 did not increase from 1999 when Air Canada was not the only person providing a domestic service between Saskatoon and Toronto. On the basis of the foregoing analysis and the factors set out in subsection 66(3) of the CTA, the Agency is therefore of the opinion that, in terms of discounts off the Y1 round-trip fare which the QHCANADA fare represented, the year-over-year changes in the fare, and the terms and conditions of carriage applicable to the fare offered on each of the routes, Air Canada treated the QHCANADA fares offered on the Saskatoon-Toronto and Ottawa-Winnipeg routes in a similar manner on the dates under review.

5. Agency findings

In light of the foregoing, the Agency finds that the $599 QHCANADA fare published or offered by Air Canada in respect of its service between Saskatoon and Toronto on or about August 11, 2000 was not unreasonable.

CONCLUSION

Based on the above findings, the Agency hereby dismisses the complaint.

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