Decision No. 184-P-A-2003

April 3, 2003

April 3, 2003

IN THE MATTER OF a complaint by Carol Kulesha, on behalf of the Queen Charlotte/Skidegate Landing Management Committee, concerning the $510.39 fare offered by Air Canada on March 31, 2001 for round-trip travel between Sandspit and Vancouver, British Columbia.

File No. M4370/A74/01-596


COMPLAINT

On April 5, 2001, Carol Kulesha, on behalf of the Queen Charlotte/Skidegate Landing Management Committee (hereinafter the Committee), filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

By letter dated April 20, 2001, both Ms. Kulesha 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, under certain circumstances, take certain remedial action following receipt of a complaint. In that same letter, Air Canada was requested to provide the Agency and Ms. Kulesha with its answer to the complaint, including the information outlined in subsection 66(3) of the CTA.

On May 16, 2001, Air Canada requested an extension until June 8, 2001 to file its answer to the complaint. By Decision No. LET-P-A-248-2001 dated May 22, 2001, the Agency granted Air Canada the requested extension. On June 8, 2001, Air Canada filed its answer to the complaint and, with respect to a portion of the information included in its filing, made a claim for confidentiality which the Agency accepted by Decision No. LET-P-A-316-2001 dated July 9, 2001.

On June 19, 2001, Air Canada filed a copy of its answer to the complaint with the Committee. On June 25, 2001, Ms. Kulesha, on behalf of the Committee, requested an extension until July 28, 2001 to file a reply to Air Canada's answer. By Decision No. LET-P-A-297-2001 dated June 28, 2001, the Agency granted the Committee the requested extension until July 30, 2001.

On July 24, 2001, Ms. Kulesha, on behalf of the Committee, filed a reply to Air Canada's answer.

On August 3, 2001, Air Canada filed with the Agency a response to the Committee's reply. By Decision No. LET-P-A-368-2001 dated August 9, 2001, both parties to the complaint were advised that in order to assist in the consideration of this matter, the Agency accepted Air Canada's response. In the same Decision, the Committee was invited to provide the Agency and Air Canada with its comments on the additional information submitted by the carrier. On August 10, 2001, Ms. Kulesha, on behalf of the Committee, filed comments on Air Canada's August 3, 2001 submission.

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.

ISSUES

The issues to be addressed are:

  1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was, on or about March 31, 2001, the only person providing a domestic service between Sandspit and Vancouver 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 Sandspit and Vancouver on March 31, 2001, which is the subject of the complaint, was unreasonable.

POSITIONS OF THE PARTIES

Ms. Kulesha submits that the Committee, the locally-elected governance for the community of Queen Charlotte/Skidegate Landing, is "greatly concerned" that the cost of air travel on Air Canada's services to the Queen Charlotte Islands/Haida Gwaii is excessive. She states that a recent survey of businesses on the Queen Charlotte Islands reported that "the high cost of air transportation is believed to discourage tourism for the islands".

Ms. Kulesha also submits that from 1998 to 2000, there was a dramatic reduction in the number of visitors to the Queen Charlotte Islands/Haida Gwaii from 12,600 visitors in 1998 to 8,924 visitors in 2000. She adds that, over the past 8 years, the economic structure of the community has changed from being a resource-based to a service-based economy, with 74 percent of its population employed in the service-based sector at last report.

Ms. Kulesha submits that the high fares for travel on Air Canada's service between Sandspit and Vancouver discourage visitors to the Queen Charlotte Islands' communities and are an added hardship for those living on the islands who have suffered economically due to the resultant decline in tourism, an industry on which the area relies heavily. She states that the fares offered by Air Canada for travel between the Queen Charlotte Islands and Vancouver, a distance of 468 miles, are approximately 30 to 50 percent higher than the fares with the same advance purchase requirement offered by the carrier from other northern British Columbia communities with comparable distances to Vancouver such as Prince Rupert, Terrace and Prince George. She notes that the $510.39 Sandspit-Vancouver fare offered by Air Canada at the time was the lower rate which came into effect on March 31, 2001. Prior to that time, she submits that the fare was $620.60, twice as much as the fares offered by Air Canada for travel from the other northern British Columbia communities. Ms. Kulesha submits that these fares, which were obtained from Masset Travel, include applicable taxes and were for departure 14 days after booking.

Ms. Kulesha also submits that the fares offered by Air Canada for round-trip travel on its services between Sandspit and Kelowna and between Sandspit and Edmonton, both connecting at Vancouver, are less expensive than the fares offered by the carrier for travel between Sandspit and Vancouver, using the same aircraft. She states that this raises the question of accountability for the cost of flights.

Ms. Kulesha adds that should the residents of Sandspit want to take advantage of lower air fares, they must do so from Prince Rupert, which requires a 6 to7 hour round-trip ferry ride between the Queen Charlotte Islands and Prince Rupert.

Ms. Kulesha states that lowering the fares for travel between Sandspit and Vancouver would encourage increased travel to and from the Queen Charlotte Islands. The Committee recommends that a more standardized and equitable rate system be established.

Air Canada submits that the issue raised in the complaint is moot as a result of its introduction, in March 2001, of the N7SPRG1 round-trip fare of $449 and commencing in May 2001, the introduction of the L7WEST round-trip fare of $369. Both fares exclude taxes and applicable charges. Air Canada states that the fare which is the subject of the complaint, the V14SNR fare, is still being offered on the route; however, the thrust of the complaint involved Ms. Kulesha's request for "lowering the rates for the Vancouver-Sandspit flight...". Air Canada believes that since it had introduced lower-priced seat sale fares at different times during 2001," there is no "live issue" for the Agency to consider ". In addition, as Air Canada has already introduced two lower-priced seat sale fares for return travel between Sandspit and Vancouver, the remedial options prescribed under section 66 of the CTA, if put into effect, would undermine the purpose of the legislation.

In its answer to the preliminary issue raised by the complaint, Air Canada submits that it was not the only carrier providing a domestic service between Sandspit and Vancouver. It submits that the options provided by a combination of the services operated between Sandspit and Prince Rupert by Harbour Air Limited carrying on business as Harbour Air Seaplanes (hereinafter Harbour Air) or the British Columbia Ferry Corporation (hereinafter BC Ferries), and the services operated by Hawkair Aviation Services Ltd. (hereinafter Hawkair) and by Air Canada between Prince Rupert and Vancouver, are not unreasonable alternatives to Air Canada's service between Sandspit and Vancouver, taking into account the factors listed in subsection 66(4) of the CTA.

In addition, Air Canada submits that travellers have other options for travel between Sandspit and Vancouver, using either the services operated 4 times a week by Kelowna Flightcraft Air Charter Ltd. (hereinafter Kelowna Flightcraft) between Sandspit and Vancouver or the two Dash 7 aircraft from Voyageur Airways Limited (hereinafter Voyageur Airways) hired by the West Coast Fishing Resort, who were offering a service between Sandspit and Vancouver.

Furthermore, Air Canada submits that citizens of the Queen Charlotte Islands are also served by the Masset airport, located in the city of Masset,108 kilometres from Sandspit. Air Canada submits that travellers dissatisfied with the fares it offers for travel between Sandspit and Vancouver have the option of using the services provided by Harbour Air or Montair Aviation Inc. (hereinafter Montair) between Masset and Vancouver. Air Canada submits that these also constitute reasonable alternatives to its service between Sandspit and Vancouver.

Air Canada submits that the fare which is the subject of the complaint, the V14SNR round-trip fare of $462, excluding applicable taxes and charges, is not unreasonable when considering historical data, population size (size of catchment area) and origin-destination passenger volumes. Specifically, the carrier indicates that from March 1999 to March 2000 when Canadian Airlines International Ltd. and its affiliates (hereinafter Canadi*n) provided service on the route, Canadi*n increased the H7SNR fare from $478 to $533, excluding applicable taxes and charges. Air Canada adds that in April 2001, it offered its H7SNR fare for round-trip travel between Sandspit and Vancouver at $564. The carrier further adds that, as part of a continuing process of "fine tuning" all domestic routes, on April 20, 2001, it introduced the V14SNR year-round excursion fare for round-trip travel between Sandspit and Vancouver at $462 and maintained the H7SNR round-trip fare at $564. Air Canada states that the lowest priced year-round fare, therefore, has decreased since Canadi*n operated the route prior to being acquired by Air Canada. The carrier further submits that in late March 2001, it offered an N7SPG1 round-trip fare for $449, exclusive of applicable taxes and charges, for tickets issued before April 3, 2001, and that in May 2001, it introduced a $369 L7WEST fare, exclusive of applicable taxes and charges, for round-trip travel between Sandspit and Vancouver until June 30, 2001.

Air Canada provided statistics which illustrated that the population of Sandspit is much smaller than that of Prince Rupert, Terrace and Prince George and that the number of passengers carried on these routes is at least twice as large as the number of passengers carried on the Sandspit-Vancouver route. Further, Air Canada submits that the "substantially" smaller population and traffic volume of Sandspit is, on its own, a reasonable explanation for the Sandspit-Vancouver fares being higher than corresponding Prince Rupert/Terrace/Prince George-Vancouver fares. Air Canada states that as smaller population centres generally have higher fixed costs per passenger, Sandspit's smaller population would be indicative of higher fares.

Furthermore, Air Canada also submits that economic theory justifies fare differentials from route to route, and submits a statement prepared by Professor William J. Baumol, "a pre-eminent economist from New York University with extensive experience relating to the economics of the airline industry" in support of its position. Professor Baumol maintains that differential pricing is widespread and is not to be interpreted as a manifestation of monopoly power exercised as a means to obtain excessive profits, and that it is not unreasonable, from an economic perspective, for an air carrier to publish and apply a fare on one route (e.g., a competitive route), but not to apply the same fare on another route (e.g., a non-competitive route).

In reply to Air Canada's answer to the preliminary issue raised by the complaint, Ms. Kulesha maintains that Air Canada is the only person providing a domestic service between Sandspit and Vancouver. She states that the options proposed by Air Canada show very little understanding of geography. She submits that Harbour Air operates its 12-seat seaplane three days a week during the summer and twice a week during the winter, weather and passenger loads permitting, to the seaplane terminal in Prince Rupert. She submits that a traveller must transfer from the seaplane terminal to the airport in Prince Rupert in order to connect to Hawkair. Ms. Kulesha submits that, in light of the $1,577 total cost of this proposed option for a round-trip, including ground transportation, these services cannot be deemed to be either a reliable or realistic option for a trip by air from the Queen Charlotte Islands to Vancouver.

She adds that the BC Ferries option proposed by Air Canada would cost a total of $576 and require a 7-hour ferry ride across the Hecate Straits. According to Ms. Kulesha, the ferry ride "does NOT by any stretch of the imagination provide access to an alternate carrier".

In reply to Air Canada's submission of August 3, 2001, Ms. Kulesha submits that West Coast Fishing Resort's Dash 7 aircraft were available from May 22 to September 11 only, and that her telephone inquiry of August 7, 2001 confirmed that the company was no longer selling southbound seats. Ms. Kulesha also submits that Kelowna Flightcraft provides a service to fishing lodges only between the months of May and September and that the service is not available to the general public.

In reply to Air Canada's answer to the fare-related issues raised by the complaint, Ms. Kulesha states that as Canadian Regional Airlines Ltd. (hereinafter Canadian Regional) also introduced seat sales when it operated the service between Sandspit and Vancouver, Air Canada's point that seat sales have been introduced in the market since the date of the complaint is "unremarkable".

ANALYSIS AND FINDINGS

In making its findings in respect of the preliminary and fare-related issues raised by the complaint, the Agency has carefully reviewed and 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 Sandspit and Vancouver 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 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.

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.

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, 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, on or about March 31, 2001, the only person providing a domestic service between Sandspit and Vancouver 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 Sandspit and Vancouver. The Agency has also considered Air Canada's position that a combination of the services provided by Harbour Air between Sandspit and Prince Rupert and by Hawkair or Air Canada between Prince Rupert and Vancouver constitutes a reasonable alternative domestic service to that provided by Air Canada between Sandspit and Vancouver, taking into consideration the factors listed in subsection 66(4) of the CTA.

The Agency is of the opinion that two distinct domestic air services would constitute a reasonable alternative to the domestic service provided by Air Canada only if they offered a joint fare to the traveller, that is, if a traveller could: make arrangements with one carrier for domestic travel from origin through to destination; make changes to the travel itinerary with the carrier with whom the original travel arrangements had been made, regardless of which carrier is operating the flight on a particular leg of the trip; reasonably expect to have baggage transferred between carriers by the carriers themselves; and, in the event of the cancellation or a delay of a flight prior to the last leg of a trip, rely upon the cooperation of the carrier who cancelled or caused the delay to assist in rebooking the next flight at no cost to the traveller.

The Agency's research has revealed that, on or about March 31, 2001, Harbour Air, Hawkair and Air Canada each offered separate domestic services and did not have a joint-fare arrangement with one another in place at the time of the complaint. In such circumstances, a traveller would have to make travel arrangements with, and purchase a ticket from, each carrier separately. Any changes to travel arrangements would have to be made with the appropriate carrier, and the traveller, rather than one of the carriers, would have to transfer the baggage from one carrier to the other. In the event of a flight cancellation or delay prior to the last leg of a trip, the traveller would not have been protected with respect to the remainder of the trip, as would have been the case on a flight where a joint fare was used. The entire onus for rebooking travel arrangements for the remainder of the trip would rest with the traveller who could potentially lose the cost of the fare for the missed portion of the journey if the ticket for that portion were non-refundable, or incur a fee for making changes to flight arrangements. Also, in the event of a cancellation or delay of a flight, a traveller would have to be concerned with the availability of a continuing flight which would depend on the frequency of the service offered by the carrier to be used on the next leg of the trip. As such, it is the Agency's opinion that a combination of the services provided by Harbour Air between Sandspit and Prince Rupert and by Hawkair or Air Canada between Prince Rupert and Vancouver cannot, as suggested by Air Canada, be considered as an alternative to the service provided by Air Canada between Sandspit and Vancouver within the meaning of subsection 66(4) of the CTA.

The Agency has considered Air Canada's position that the services offered by Harbour Air or Montair between Masset and Vancouver constitute reasonable alternatives to its service between Sandspit and Vancouver. Masset is located at the northern end of Graham Island of the Queen Charlotte Islands. Although part of the Queen Charlotte Islands, Sandspit is located 108 kilometres south of Masset at the northeastern tip of Morseby Island. A trip between Masset and Sandspit requires a total travel time (using both car and ferry) of at least one hour and forty minutes.

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". This complaint concerns the fares published or offered in respect of Air Canada's domestic service between Sandspit and Vancouver.

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". 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.

In light of the foregoing, the Agency finds that Masset is not the same point as Sandspit. Accordingly, the services provided by Harbour Air and Montair between Masset and Vancouver are not reasonable alternatives to the service Air Canada provides between Sandspit and Vancouver.

Air Canada also proposes, as an alternative to its service between Sandspit and Vancouver, a combination of services provided by BC Ferries between Sandspit and Prince Rupert and those provided by Hawkair between Prince Rupert and Vancouver. Pursuant to section 66 of the CTA, the Agency may inquire into a complaint concerning passenger fares and cargo rates published or offered in respect of a "domestic service" provided between two points. Section 55 of the CTA defines "domestic service" as:

"an air service between two points in Canada, from and to the same point in Canada or between Canada and a point outside Canada that is not in the territory of another country".

An "air service" is defined in section 55 of the CTA as:

"a service, provided by means of an aircraft, that is publicly available for transportation of passengers or goods, or both".

Accordingly, in order for a transportation service to be considered as an alternative domestic service between two points within the meaning of subsection 66(4) of the CTA, the service must be provided by means of an aircraft. The Agency is therefore of the opinion that the type of service which Air Canada suggests as an alternative to its domestic service between Sandspit and Vancouver which involves the use of some mode of transport other than by air between Sandspit and Vancouver is not an alternative domestic service within the meaning of subsection 66(4) of the CTA.

Air Canada also proposes, as an alternative to its domestic service between Sandspit and Vancouver, the services operated by Voyageur Airways on behalf of the West Coast Fishing Resort. The Agency's research identifies that West Coast Fishing Resort chartered two Dash 7 aircraft from Voyageur Airways specifically to transport its clients between the Sandspit Airport and the South Terminal at the Vancouver International Airport during the 2001 fishing season. Reservations were accepted only from its fishing lodge clients and were not normally available to the general public. However, West Coast Fishing Resort found that although its combined passenger and cargo (fish) load was sufficient on the southbound flights, there would sometimes be empty seats and cargo space available on the northbound flights. On these occasions, West Coast Fishing Resort advertised the availability of its unused capacity to the general public through fliers sent to the museum in Sandspit. It is important to note that seats on its charter aircraft were normally restricted to West Coast Fishing Resort's clients and only made available to the general public on these special occasions.

Air Canada also proposes, as an alternative to its domestic service between Sandspit and Vancouver, the services operated into Sandspit by Kelowna Flightcraft. The Agency's research identifies that Kelowna Flightcraft operates fishing lodge "entity charters" for its client on a seasonal basis between Sandspit and Vancouver. In 2001, it operated flights from May 21 to September 3. Other than chartering the entire aircraft by its fishing lodge client, Kelowna Flightcraft did not accept individual reservations from the general public. Accordingly, the Agency is of the opinion that the services operated by Kelowna Flightcraft were not available to most of the residents and visitors to Sandspit.

In light of the foregoing, the Agency has determined that Air Canada was the only person providing a domestic service between Sandspit and Vancouver within the meaning of section 66 of the CTA on or about March 31, 2001. Accordingly, the complaint falls within the purview of section 66 of the CTA.

Fare-related issue

Whether the $510.39 fare published or offered by Air Canada was unreasonable in respect of its service between Sandspit and Vancouver on March 31, 2001

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 Sandspit and Vancouver as well as the fares applicable to similar domestic services offered by Air Canada and one or more licensees using similar aircraft including terms and conditions of carriage.

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 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 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 March 31, 2001, Air Canada operated its domestic service between Sandspit and Vancouver using medium aircraft, as defined in the Air Transportation Regulations, SOR/88-58 as amended (hereinafter the ATR);
  2. according to the OAG, the distance between Sandspit and Vancouver is approximately 466 air miles; and
  3. the origin-destination passenger volume between Sandspit and Vancouver was approximately 19,680 passengers in 1999 (the last complete year for which information is available).

Ms. Kulesha suggested that the domestic services offered by Air Canada between Prince Rupert and Vancouver, Terrace and Vancouver and Prince George and Vancouver were similar to the service Air Canada offered between Sandspit and Vancouver. Accordingly, the Agency analyzed Air Canada's services between Prince Rupert and Vancouver, Terrace and Vancouver and Prince George and Vancouver as of March 31, 2001. On the basis of its consideration of the factors set out above, the Agency has determined that:

  1. Hawkair operated a domestic service between Prince Rupert and Vancouver and between Terrace and Vancouver using medium aircraft, as defined in the ATR, in addition to the service operated by Air Canada;
  2. WestJet operated a domestic service between Prince George and Vancouver using large aircraft, as defined in the ATR, in addition to the service operated by Air Canada;
  3. Air Canada operated its service between Prince Rupert and Vancouver, between Terrace and Vancouver and between Prince George and Vancouver using medium aircraft, as defined in the ATR;
  4. the distance between Prince Rupert and Vancouver is 469 air miles, the distance between Terrace and Vancouver is 431 air miles and, the distance between Prince George and Vancouver is 325 air miles; and
  5. the origin-destination passenger volume between Prince Rupert and Vancouver is 37,700 passengers in 1999, the origin-destination passenger volume between Terrace and Vancouver is 58,600 passengers in 1999 and, the origin-destination passenger volume between Prince George and Vancouver is 133,400 passengers in 1999.

The Agency is of the opinion that Air Canada's services between Prince Rupert and Vancouver and between Terrace and Vancouver are not similar to the service it operates between Sandspit and Vancouver when taking into account passenger volume. The Agency is also of the opinion that Air Canada's service between Prince George and Vancouver is not similar to the service it operates between Sandspit and Vancouver when taking into account distance and passenger volume.

The Agency conducted the same analysis in respect of nearly 170 domestic services offered by Air Canada to identify the domestic services which have characteristics similar to those of the service Air Canada provided between Sandspit and Vancouver. Based on its consideration of the factors outlined above, the Agency has determined that, on or about March 31, 2001, the service which was most similar to that offered by Air Canada between Sandspit and Vancouver within the meaning of paragraph 66(3)(b) of the CTA was Air Canada's service between Goose Bay and St. John's for the following reasons:

  1. Labrador Airways Limited carrying on business as Air Labrador and Provincial Airlines Limited operated domestic services between Goose Bay and St. John's, in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Goose Bay and St. John's using medium aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Goose Bay and St. John's is approximately 517 air miles; and
  4. the origin-destination passenger volume between Goose Bay and St. John's was approximately 25,040 passengers in 1999.

Data respecting fares applicable to domestic services between Sandspit and Vancouver and between Goose Bay and St. John's

The Agency's research has identified that the $510.39 fare which is the subject of the complaint is the sum of Air Canada's $462 V14SNR base fare for round-trip travel between Sandspit and Vancouver, the $15 round-trip surcharge Air Canada applied to the V14SNR base fare to cover the fees that it pays for the operation of Canada's air navigation system and, the Goods and Services Tax of $33.39. Air Canada's V14SNR base fare will be analyzed below.

The Agency's research has also identified that since 2000, Air Canada has been operating its domestic service between Sandspit and Vancouver through a code share arrangement with Canadian Regional. On March 31, 1999, a year prior to the date on which Ms. Kulesha undertook her fare research on behalf of the Committee, Canadi*n, through a code share arrangement with Canadian Regional, operated the same domestic service between Sandspit and Vancouver. As such, the Agency analyzed the fares offered by air carriers in respect of the domestic services operated between Sandspit and Vancouver on March 31, 1999, 2000 and 2001, that is, from a point in time when Canadi*an operated the domestic service on the route to the date of the complaint. The Agency has also reviewed the fares offered by Air Canada on the Goose Bay-St. John's route for those same dates.

In conducting its analysis, the Agency considered the V14SNR fare in relation to the other fares offered by Air Canada on the Sandspit-Vancouver route, and to the fares it offered on the Goose Bay-St. John's route, as well as the discounts off the full economy Y1 fare calculated on a round-trip basis (hereinafter Y1 round-trip fare) which the fares represented, the year-over-year increases in the fares, and the terms and conditions of carriage applicable to the fares on each of the routes.

1. General overview

An overview of the fares published by air carriers in respect of domestic services between Sandspit and Vancouver and between Goose Bay and St. John's on March 31 in 1999, 2000 and 2001 shows that a selection of fares were offered by air carriers with respect to the services operated on each route. Air Canada's fare structure on each route included the full economy Y1 fare on which the price levels of the other fares offered on the route are based. The Y1 fare is the economy-type fare for one-way travel which allows passengers the most flexibility with respect to booking or cancelling reservations or making changes to their itinerary; however, it is the most expensive economy-type fare. With the exception of an M-class fare and a premium, business-type (J-class) fare, most of the other fares offered by Air Canada on the Sandspit-Vancouver and Goose Bay-St. John's routes were discounted off the Y1 round-trip fare and were non-refundable, round-trip fares which required an advance purchase.

The Agency's analysis shows that, on March 31 in 1999, 2000 and 2001, the Y1 fare offered on the Sandspit-Vancouver route was 10-15 percent lower than the Y1 fare offered by Air Canada on the Goose Bay-St. John's route. This difference is attributable in part to the fact that the Sandspit-Vancouver route is 10 percent shorter in length than the Goose Bay-St. John's route.

There were fewer discounted fares offered on the Sandspit-Vancouver route than on the Goose Bay-St. John's route on the date under review in 1999, 2000 and 2001. However, the fares which were available on both routes were lower on the Sandspit-Vancouver route than on the Goose Bay-St. John's route. The Agency notes that, on March 31, 2001, Air Canada offered twice as many fares in respect of the Sandspit-Vancouver service as had been offered on the same date in 1999 by Canadi*n when it operated the service between the two points.

2. V14SNR fare

The Agency's research shows that the $462 V14SNR fare offered by Air Canada was a discounted, round-trip, non-refundable fare which required: a 14-day advance purchase, ticketing to be completed within 7 days of purchase, a minimum Saturday night stay and a maximum stay at destination of 365 days. The Agency's research also shows that the V14SNR fare was only introduced by Air Canada in respect of its service between Sandspit and Vancouver on March 30, 2001. Air Canada did not offer any fare on the Sandspit-Vancouver route on March 31 of 1999 or 2000 with terms and conditions of carriage similar to those of the V14SNR fare. In addition, the V14SNR fare or a V-class fare with similar terms and conditions of carriage was not offered by the carrier in respect of its service between Goose Bay and St. John's on any of the dates under review. Although it did not offer a V-class fare on the Goose Bay-St. John's route on March 31. 2001, Air Canada offered a Q-class, fare on the route with most of the same terms and conditions of carriage as the V14SNR fare offered on the Sandspit-Vancouver route. As exceptions, the Q14NR fare offered on the Goose Bay-St. John's route required that ticketing be completed within 1 day of purchase and permitted a maximum stay at destination of 60 days. These are slight differences in the terms and conditions of carriage applied to the two fares. As such, the Agency's following comparative analysis will consider the Q14NR fare offered on the Goose Bay-St. John's route on March 31, 2001 only.

The Agency's analysis shows that on March 31, 2001, the V14SNR fare offered by Air Canada on the Sandspit-Vancouver route was not as deeply discounted off the Y1 round-trip fare as was the Q14NR fare that the carrier offered on the Goose Bay-St. John's route. The V14SNR fare was discounted by 55 percent off the Y1 round-trip fare offered on the Sandspit-Vancouver route whereas the Q14NR fare was discounted by 60 percent off the Y1 round-trip fare offered on the Goose Bay-St. John's route. However, the V14SNR fare offered on the Sandspit-Vancouver route was less than 1 percent ($3) higher than the Q14NR fare offered on the Goose Bay-St. John's route.

Information available to the Agency shows that on March 31, 2001, the V14SNR and Q14NR fares were the lowest fares published by Air Canada that were available year round and applicable for travel on the carrier's services between Sandspit and Vancouver and between Goose Bay and St. John's, respectively. Prior to Air Canada's March 30, 2001 introduction of the V14SNR fare on the Sandspit-Vancouver route, the lowest year-round fare offered by Air Canada on the Sandspit-Vancouver route was the $565 H7SNR fare. As such, Air Canada's introduction of the V14SNR fare reduced the difference in the lowest year-round fares available on the two routes from 23 percent to less than 1 percent.

The Agency's research also identifies that the V14SNR fare offered by Air Canada on the Sandspit-Vancouver route is 13 percent lower than the lowest year-round fare of $533 offered by Canadi*n when it last operated the service between the two points in December 1999.

3. Review of the fares offered by other carriers on the Sandspit-Vancouver route

Agency investigations into fare-related complaints include an examination of the fares offered by other carriers who provided a service on the route which is the subject of the complaint. Since the Agency analyzed the fares offered by air carriers in respect of the domestic services operated between Sandspit and Vancouver on March 31 of 1999, 2000 and 2001, the same review dates were used to identify all carriers other than Air Canada that provided a service on the route.

The Agency's research identified that, on the dates under review, Canadi*n was the only other carrier that provided a service on the route, operating a domestic service between Sandspit and Vancouver on March 31, 1999 through a code share arrangement with Canadian Regional. On that date, in addition to a full economy Y1 fare and a premium, business-type (J-class) fare, Canadi*n offered 2 discounted fares which were available for travel year round on its service between Sandspit and Vancouver. The lowest of these year-round fares, the H7SNR fare, was offered at $478 and was discounted at 46 percent off the Y1 round-trip fare.

4. Summary

The Agency has carefully examined and analyzed the V14SNR fare offered by Air Canada in respect of its domestic service between Sandspit and Vancouver on March 31, 2001 as well as the Q14NR fare offered in respect of its domestic service between Goose Bay and St. John's on the same date. On the basis of the foregoing analysis and based on the factors set out in subsection 66(3) of the CTA, the Agency is of the opinion that, on March 31, 2001, in addition to being more advantageous to travellers because of less restrictive maximum stay and booking requirements, the V14SNR fare offered by Air Canada on the Sandspit-Vancouver route was only $3 higher than the Q14SNR fare offered by the carrier on the Goose Bay-St. John's route. The Agency is also of the opinion that Air Canada's introduction of the $462 V14SNR fare provided travellers on the Sandspit-Vancouver route with a lower year-round excursion-type fare than was offered by Canadi*n when it last operated its service on the route.

5. Agency findings

In light of the foregoing, the Agency finds that the $462 V14SNR round-trip base fare published or offered by Air Canada in respect of its domestic service between Sandspit and Vancouver on March 31, 2001, which was the subject of the complaint, was not unreasonable.

CONCLUSION

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

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