Decision No. 37-P-A-2006

January 25, 2006

January 25, 2006

IN THE MATTER OF a complaint by Trevor Kier, Economic Commissioner for the City of Williams Lake, on behalf of the City of Williams Lake, concerning the $220-$270 "best" fares, the $229 senior citizen fare, the $100 youth fare, the $257 child fare and the range of fares offered by Air Canada on July 25, 2000, for travel between Williams Lake and Vancouver.

File No. M4370/A74/00-516


COMPLAINT

[1] On September 13, 2000, Trevor Kier, Economic Commissioner for the City of Williams Lake, on behalf of the City of Williams Lake (hereinafter the City), filed with the Air Travel Complaints Commissioner the complaint set out in the title. Due to the regulatory nature of the complaint, it was referred to the Canadian Transportation Agency (hereinafter the Agency).

[2] In a letter dated October 18, 2000, both the City 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 subsections 66(1) and 66(2) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint.

[3] In that same letter, Air Canada was requested to provide the Agency and the City with its answer to the complaint. On November 17, 2000, Air Canada requested an extension until November 30, 2000 to file its answer to the complaint. In its Decision No. LET-P-A-342-2000, the Agency granted the requested extension and on November 30, 2000, Air Canada filed its answer, and, with respect to a portion of the information included in its filing, made a claim for confidentiality.

[4] In a letter dated December 12, 2000, the City requested an extension of sixty (60) days to file its reply to Air Canada's answer, stating that, as a number of community representatives were involved in the process, it was unable to provide a co-ordinated response within the ten-day time frame set out in the Agency's letter of October 18, 2000. In its Decision No. LET-P-A-396-2000 dated December 21, 2000, the Agency granted the extension until February 9, 2001, and on that date, the City filed its reply.

[5] In its Decision No. LET-P-A-324-2001 dated July 10, 2001, the Agency accepted Air Canada's claim for confidentiality.

[6] 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.

[7] On April 1, 2003, the Ontario Superior Court of Justice issued a stay order in respect of Air Canada and certain of its subsidiaries (collectively referred to as "Air Canada") under subsection 11(3) of the Companies' Creditors Arrangement Act, R.S.C., 1985, c. C-36 (hereinafter the CCAA). The stay order had the effect of staying all proceedings against or in respect of Air Canada before the Agency, including proceedings concerning the unreasonableness of the fares which are the subject of the present complaint. The City was advised of the status of its complaint in this respect.

[8] On August 23, 2004, Mr. Justice Farley of the Ontario Superior Court of Justice issued an Order pursuant to the CCAA (hereinafter the Sanction Order) which governed Air Canada's emergence from bankruptcy protection and lifted the stay order as of October 1, 2004.

[9] In January 2005, Air Canada took the position that all applications before the Agency against Air Canada and its subsidiaries in relation to incidents which occurred on or before April 1, 2003 (hereinafter the affected applications), including this application, were extinguished by the Sanction Order.

[10] The Agency was of the opinion that Air Canada's position was incorrect and took action to have the issue resolved by Mr. Justice Farley as expeditiously as possible by seeking an interpretation of the Sanction Order as to whether the affected applications were extinguished, as argued by Air Canada. As a result, the affected applications, including this application, were subsequently stayed for a second period of time pending Mr. Justice Farley's decision on the matter.

[11] The Agency subsequently decided that the best way to deal with the affected applications was for the Agency to proceed with its consideration of the applications and, as such, on June 30, 2005, the Agency determined that it would not continue with its motion before Mr. Justice Farley for an interpretation of the Sanction Order. While a resolution on the dispute surrounding the scope of the Sanction Order has yet to be reached, the Agency has determined that it will proceed with its processing of the affected applications, including the present one.

ISSUES

[12] The issues to be addressed are:

  1. whether Air Canada, including its affiliate licensees, was, on or about July 25, 2000, the only person providing a domestic service between Williams Lake and Vancouver within the meaning of section 66 of the CTA; and, if so,
  2. whether the fares published or offered by Air Canada in respect of its service between Williams Lake and Vancouver on or about July 25, 2000, which are the subject of the complaint, were unreasonable; and
  3. whether the range of fares offered by Air Canada in respect of its service between Williams Lake and Vancouver on or about July 25, 2000, was inadequate.

POSITIONS OF THE PARTIES

[13] The complaint concerns the $257 one-way child fare, the $229 round-trip senior citizen fare, the $100 one-way youth fare and the $220-$270 "best" round-trip fares, as well as the range of fares, offered by Air Canada in respect of its domestic service between Williams Lake and Vancouver on or about July 25, 2000. The City compares these fares to those offered by Air Canada on its Kamloops-Vancouver and Prince George-Vancouver routes which, it states, are similar to the Williams Lake-Vancouver route in terms of flight times. It submits that the "best" round-trip fares were $138-$158 on the Kamloops-Vancouver route and $170-$210 on the Prince George-Vancouver route; the round-trip senior citizen fare was $94 on the Kamloops-Vancouver route and 10 percent off the "best" fare on the Prince George-Vancouver route; the one-way youth fare was $47 on the Kamloops-Vancouver route and $89 on the Prince George-Vancouver route; and, the child's one-way fare was $83 on the Kamloops-Vancouver route. It contends that the flight time was one hour and five minutes for travel between Williams Lake and Vancouver, one hour for travel between Kamloops and Vancouver and one hour and ten minutes for travel between Prince George and Vancouver. It asks whether the competition present at larger centres is solely responsible for the cheaper fares, whether Williams Lake should be penalized for lacking the competition that is found in larger centres, and whether travellers on routes involving Williams Lake are paying more to subsidize other routes.

[14] In its answer to the complaint, Air Canada submits that the Agency does not have the jurisdiction to initiate an investigation pursuant to section 66 of the CTA because the City's letter of July 25, 2000, is not a complaint: it is a letter sent by the City to the Minister. Air Canada further submits that a complaint, to be valid, must reflect the wording of section 66 of the CTA by alleging that a fare is "unreasonable" or that a range of fares is "inadequate", and that the City's letter does not make such specific allegations.

[15] Despite its contention that the Agency lacks the jurisdiction to investigate the complaint, Air Canada's answer addresses the fare-related issues raised by the complaint. The carrier submits that the fares it offered on the Williams Lake-Vancouver route were not unreasonable and that the range of fares it offered was not inadequate. Air Canada maintains that economic theory justifies fare differentials from route to route and that requiring it to offer the same fares or range of fares on its Williams Lake-Vancouver route as it does on other routes would act as a disincentive to competition which would have a harmful impact on consumers. In support of this position, Air Canada 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". 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).

[16] Air Canada submits that from September 5, 1999 to September 5, 2000, prices generally increased by "no more than 3 percent" on the Williams Lake-Vancouver route, which, Air Canada states, is comparable to the increases in fares offered on its Prince George-Vancouver and Kamloops-Vancouver routes during that same period. However, Air Canada adds that the exceptions are the H7SNR and QSKYRDR fares which were increased to maintain their "usual place within the overall structure". Air Canada points out that the increases in these fares resulted from the introduction in 1999 of the lower-priced V-RBST and Q-RBST fares and concludes that such increases cannot be deemed to be unreasonable.

[17] Air Canada also submits that fares on the Kamloops-Vancouver route are somewhat lower than those offered on the Williams Lake-Vancouver route, and explains that Williams Lake is much farther away from Vancouver than is Kamloops and that Williams Lake is much smaller than Kamloops: in 1999, Kamloops had an estimated population of 81,958 and the population of Williams Lake was only 11,917. Air Canada claims that the smaller population of Williams Lake is a reasonable explanation for the higher fares offered there because smaller population centres have higher fixed costs per passenger. Air Canada submits that the overall average fare increase on the Williams Lake-Vancouver route from September 5, 1999 to September 5, 2000 was 2.4 percent and on the Kamloops-Vancouver route, it was 2.6 percent.

[18] Air Canada also maintains that Kamloops benefits from the impact of a competitive environment: Kamloops is only 163 kilometres (101 miles) from Kelowna which is served by both Air Canada and WestJet, so that travellers can compare the fares of the air carriers serving both centres. Air Canada claims that there are "sound business reasons" why fares are lower where competition exists and why the serving carrier should be allowed to "respond selectively and in a measured manner to such competition".

[19] Air Canada also states that the fares on the Prince George-Vancouver route and the Williams Lake-Vancouver route are generally comparable, and that where the same fare classes were offered on both routes, some were lower on the Williams Lake-Vancouver route than on the Prince George-Vancouver route and therefore could not be unreasonable.

[20] With respect to the second fare-related issue raised by the complaint – that is, the range of fares – Air Canada submits that it was not offering an inadequate range of fares between Williams Lake and Vancouver. It claims that the range of fares Air Canada offered on September 5, 2000 was unchanged from the range of fares it offered on September 5, 1999 when it competed on the route with Canadian Airlines International Ltd. (hereinafter Canadi*n). Further, Air Canada claims that the range of fares it offered on the Williams Lake-Vancouver route was comparable to the range of fares it offered on the Prince George-Vancouver route and that on the Williams Lake-Vancouver route it offered 14 fares, on the Prince George-Vancouver route it offered 12 fares, and it offered 19 fares on the Kamloops-Vancouver route, but adds that, in general, the additional fares offered on the Kamloops-Vancouver route are "those directed at a narrow segment of consumers" (e.g., senior citizens and passengers whose flights originate outside of North America for travel within North America).

ANALYSIS AND FINDINGS

[21] In making its findings in respect of the preliminary issues and the fare-related issues raised by 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 Williams Lake 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.

[22] 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 66(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.

[23] 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.

[24] 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 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 issues

Whether the City's letter constitutes a complaint within the meaning of section 66 of the CTA

[25] In its answer dated November 30, 2000, Air Canada submitted that the City's letter does not constitute a complaint in writing to the Agency as contemplated by subsections 66(1) and (2) of the CTA as it is a letter to the Minister of Transport rather than a complaint letter to the Agency.

[26] The current proceedings flow from a letter sent by the City of Williams Lake to Mr. Bruce Hood who was then the Air Travel Complaints Commissioner. The provisions of the CTA dealing with the Air Travel Complaints Commissioner are found in section 85.1 of the CTA. Subsection 85.1(3) of the CTA provides that the:

Commissioner, or a person authorized to act on the Commissioner's behalf, shall review and attempt to resolve every complaint filed under subsection (2) for which no other remedy exists and may, if appropriate, mediate or arrange for the mediation of a complaint filed under that subsection. (emphasis added)

[27] As a remedy for the concerns raised in the City's letter to the Air Travel Complaints Commissioner existed under the CTA, the City's letter was transferred to the Agency for formal regulatory examination. While the Agency acknowledges that the City's letter did not fully comply with section 42 of the National Transportation Agency General Rules, SOR/88-23 (hereinafter the General Rules) in that it failed to refer to a specific section of the CTA and to detail the specific remedy requested, there is no question that the Agency has the power to vary these General Rules and hence, accept an otherwise defaulted letter as a proper complaint before it.

[28] In the case at hand, the City's letter addressed the question of the reasonableness of the fares offered by Air Canada on a route within Canada where the carrier is alleged to be the only one providing a domestic air service. As the Agency clearly has the authority to investigate these kinds of allegations under the provisions of section 66 of the CTA and as substance should always prevail over form, the Agency accepts the City's letter as a valid complaint against Air Canada.

[29] The Agency notes that in the alternative of the receipt of a valid complaint, under the provisions of subsection 66 of the CTA, it had the temporary authority to use the City's letter as the impetus to initiate its own investigation into the unreasonableness of the fares offered by Air Canada on the Williams Lake-Vancouver route.

Whether Air Canada was, on or about July 25, 2000, the only person providing a domestic service between Williams Lake and Vancouver within the meaning of section 66 of the CTA

[30] The Agency has reviewed the information available to it with respect to the domestic service offered between Williams Lake and Vancouver and finds that Air Canada was the only person providing a domestic service between Williams Lake and Vancouver on or about July 25, 2000 within the meaning of section 66 of the CTA.

Fare-related issues

Whether the specified fares offered by Air Canada were unreasonable and whether the range of fares offered by Air Canada was inadequate in respect of its service between Williams Lake and Vancouver on or about July 25, 2000

[31] 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 Williams Lake and Vancouver 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 licensees

[32] 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.

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

  1. on July 25, 2000, Air Canada operated 95 percent of its domestic service between Williams Lake and Vancouver using medium aircraft and operated the remaining 5 percent using small aircraft, as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR);
  2. according to the OAG, the distance between Williams Lake and Vancouver is approximately 213 air miles; and
  3. the origin-destination passenger volume between Williams Lake and Vancouver was approximately 16,320 passengers in 1999 (the last complete year for which such information is available).

[34] The City suggests that the domestic services offered by Air Canada between Kamloops and Vancouver and between Prince George and Vancouver are similar to the service Air Canada offered between Williams Lake and Vancouver in terms of flight times. Accordingly, the Agency analyzed Air Canada's services between Kamloops and Vancouver and between Prince George and Vancouver as of July 25, 2000. On the basis of its consideration of the factors set out above, the Agency has determined that:

  1. the total travel time for all flights between Kamloops and Vancouver, between Prince George and Vancouver and between Williams Lake and Vancouver is between one hour and one hour and ten minutes;
  2. only Air Canada operated a domestic service between Kamloops and Vancouver using medium aircraft, as defined by the ATR;
  3. WestJet operated a domestic service between Prince George and Vancouver using medium aircraft, as defined by the ATR, in addition to the service operated by Air Canada;
  4. according to the OAG, the distance between Kamloops and Vancouver is approximately 162 air miles and the distance between Prince George and Vancouver is approximately 469 air miles; and
  5. the origin-destination passenger volume between Kamloops and Vancouver was approximately 47,480 passengers in 1999 and the origin-destination passenger volume between Prince George and Vancouver was approximately 133,430 passengers in 1999.

[35] The Agency concurs with the City's suggestion that the services offered between Kamloops, Prince George and Williams Lake and Vancouver are similar in terms of total travel times; however, the Agency is of the opinion that the services between Kamloops and Vancouver and between Prince George and Vancouver are not similar to the service between Williams Lake and Vancouver when taking into account distance and passenger volume.

[36] The Agency conducted the same analysis in respect of nearly 170 services offered within Canada to identify the services provided by Air Canada and one or more other licensees and which have characteristics similar to those of the service Air Canada provided between Williams Lake and Vancouver. Based on its consideration of the factors outlined above, the Agency has determined that, on July 25, 2000, the service which was most similar to that offered by Air Canada between Williams Lake and Vancouver within the meaning of paragraph 66(3)(b) of the CTA was Air Canada's service between Kelowna and Victoria for the following reasons:

  1. WestJet operated a domestic service between Kelowna and Victoria, in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Kelowna and Victoria using medium aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Kelowna and Victoria is approximately 197 air miles; and
  4. the origin-destination passenger volume between Kelowna and Victoria was approximately 19,140 passengers in 1999.

Data respecting fares applicable to domestic services between Williams Lake and Vancouver and between Kelowna and Victoria

[37] The Agency's research has identified that the $257 fare which is the subject of the complaint was Air Canada's YCH child economy base fare; the $229 fare which is the subject of the complaint was its Q7CDSNR senior citizen base fare; the $100 fare which is the subject of the complaint was its Z youth standby base fare; and the $220-$270 fares which are the subject of the complaint were its QX14RBST and QW14RBST base fares, respectively. Each of these base fares will be analyzed separately below, as will the range of fares offered by Air Canada in respect of its service between Williams Lake and Vancouver.

[38] In conducting its analysis, the Agency considered the base fares which are the subject of the complaint in relation to the other fares offered by Air Canada on the Williams Lake-Vancouver route and in relation to the fares it offered on the Kelowna-Victoria route, as well as the discounts off the full economy Y1 base fare calculated on a round-trip basis (hereinafter the 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 each fare. The range of fares Air Canada offered on its Williams Lake-Vancouver route was compared to the range it offered on the Kelowna-Victoria route with respect to the span of fares, the number of fares, the distribution of discounts off the Y1 round-trip fare, the similarity of fare classes offered on the two routes, the terms and conditions of carriage associated with each fare, and historical ranges, including the levels of the fares themselves and the year-over-year changes. The analysis was undertaken using fares offered by Air Canada on the two routes on July 25 in 1998, 1999 and 2000.

1. General overview

[39] An overview of the fares published by Air Canada in respect of its domestic services between Williams Lake and Vancouver and between Kelowna and Victoria on July 25 in 1998, 1999 and 2000 shows that Air Canada offered a selection of fares on each route. The carrier's fare structure on each route included the Y1 fare on which the price levels of the other fares offered on the route are based. The Y1 fare is the full economy fare for one-way travel which allows passengers the most flexibility with respect to booking or cancelling reservations or making changes in their itinerary; however, it is the most expensive economy-type fare. Most of the other fares offered by Air Canada on the Williams Lake-Vancouver route and the Kelowna-Victoria route were discounted off the Y1 round-trip fare and were non-refundable, round-trip fares which required an advance purchase.

2. Fares which are the subject of the complaint

[40] The City complained about the levels of the YCH (fare for an accompanied child, aged 2-11 years), the Q7CDSNR (fare for a senior citizen, 60 years and over), the Z (youth aged 12-24 years, standby fare), and the generally-available QW14RBST and QX14RBST fares, as well as the range of fares.

2(a) The YCH, Q7CDSNR and Z fares

[41] Air Canada offered the YCH, Q7CDSNR and Z fares on July 25 in 1998, 1999 and 2000 on both the Williams Lake-Vancouver route and the Kelowna-Victoria route. The terms and conditions of carriage associated with each of the fares were the same on both routes.

[42] The YCH fare was a one-way, economy-type fare for an accompanied child. This fare was discounted at 10 percent off the Y1 fare on each of the dates under review. The YCH fare was consistently less expensive on the Williams Lake-Vancouver route than on the Kelowna-Victoria route: on July 25, 1998, it was 23 percent, or $142, cheaper; on July 25, 1999, it was 26 percent, or $178, cheaper; and on July 25, 2000, it was 11 percent, or $62, cheaper. All fare differences reflect one-way YCH fares purchased on a round-trip basis.

[43] The Q7CDSNR fare was a round-trip fare for senior citizens 60 years of age and older. It was consistently discounted at 60 percent off the Y1 fare on each of the dates under review and was consistently less expensive on the Williams Lake-Vancouver route than on the Kelowna-Victoria route: on July 25, 1998, the Q7CDSNR fare was 23 percent, or $62, cheaper; on July 25, 1999, it was 27 percent, or $80, cheaper; and on July 25, 2000, it was 11 percent, or $27, cheaper.

[44] The Z fare was a one-way, standby fare for youth aged 12-24 years. The Z fare was consistently discounted at 64-65 percent on each of the dates under review and was consistently less expensive on the Williams Lake-Vancouver route than on the Kelowna-Victoria route: on July 25, 1998, it was 22 percent, or $52, cheaper; on July 25, 1999, it was 27 percent, or $70, cheaper; and on July 25, 2000, the Z fare was 11 percent, or $24, cheaper. Fare differences reflect one-way Z fares purchased on a round-trip basis.

[45] With respect to year-over-year increases, from July 25, 1998 to July 25, 1999, Air Canada increased the YCH, Q7CDSNR and Z fares on the Williams Lake-Vancouver route by a lower rate than that on the Kelowna-Victoria route; from July 25, 1999 to July 25, 2000, Air Canada increased these fares by 3 percent on the Williams Lake-Vancouver route, and reduced them by 15 percent on the Kelowna-Victoria route. Despite this and the fact that the Williams Lake-Vancouver route is 8 percent longer than the Kelowna-Victoria route, the fares were cheaper on the Williams Lake-Vancouver route than on the Kelowna-Victoria route on each of the dates under review.

[46] 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, with respect to the fare levels, the levels of discount off the Y1 fare, the year-over-year changes and the terms and conditions of carriage, the YCH, the Q7CDSNR and the Z fares offered on July 25, 2000 on the Williams Lake-Vancouver route were not unreasonable when compared to the fares offered on the Kelowna-Victoria route.

2(b) The QX14RBST and QW14RBST fares

[47] The Agency's research shows that the QX14RBST and QW14RBST fares offered by Air Canada were similar round-trip fares with respect to the terms and conditions of carriage: each was a non-refundable, discounted fare which required a 14-day advance purchase, ticketing to be completed within one day of reservation being made or within 14 days before departure, whichever was earlier, and allowed a 10 percent discount for senior citizens 60 years of age or older. However, they differed with respect to the days of the week on which travel was permitted: the QX14RBST fare applied for travel on Monday, Tuesday, Wednesday and Saturday, and the QW14RBST fare was applicable for travel on Thursday, Friday and Sunday. Both fares required a minimum Saturday night stay at destination for travel originating on Saturday or a minimum two-day stopover at destination if travel originated Sunday through to Friday.

[48] The research also shows that Air Canada offered the QX14RBST and QW14RBST fares on both the Williams Lake-Vancouver and Kelowna-Victoria routes on July 25 in 1999 and 2000 but did not offer the same round-trip fares or fares in the same Q-class with similar terms and conditions of carriage for sale on the date under review in 1998 on either route. Air Canada did, however, offer non-refundable, discounted one-way QX14BEST and QW14BEST fares on the Kelowna-Victoria route which also required a 14-day advance purchase and ticketing to be completed within one day of purchase or within 14 days before departure, whichever was earlier; however, it did not offer a discount for senior citizens nor, because it was sold on a one-way basis, did it require a minimum stay at destination. As Air Canada did not offer any Q-class fares on the Williams Lake-Vancouver route on July 25, 1998 which are comparable to the Q-14BEST fares it offered on the Kelowna-Victoria route, the Agency's comparative analysis will be limited to the Q-14RBST fares offered by Air Canada on July 25, 1999 and 2000 on the two routes.

(i) The QX14RBST fare

[49] The QX14RBST fare was the least expensive, generally-available1 fare offered year-round on the Williams Lake-Vancouver and Kelowna-Victoria routes on July 25, 1999 and July 25, 2000. On July 25, 1999, the QX14RBST fare was 39 percent, or $62, higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. By July 25, 2000, the differential had decreased: the QX14RBST fare was 24 percent higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. In dollar terms, this difference amounted to $42.

[50] From July 25, 1999 to July 25, 2000, the level of the QX14RBST fare remained unchanged on the Williams Lake-Vancouver route, but was increased by 13 percent on the Kelowna-Victoria route. Although the QX14RBST fare was 24 percent higher on the Williams Lake-Vancouver route, if the Agency were to assume a one-to-one relationship between the differences in fares and mileages, this percentage would be reduced to approximately 16 percent.

[51] On July 25, 1999, the QX14RBST fare was discounted by 60 percent off the Y1 round-trip fare on the Williams Lake-Vancouver route and by 79 percent on the Kelowna-Victoria route. By July 25, 2000, the gap between these percentages had improved considerably: the discount applicable to the QX14RBST fare on the Williams Lake-Vancouver route had increased to 62 percent and had decreased to 72 percent on the Kelowna-Victoria route, thereby reducing the difference from 19 percent to 10 percent, if, again, the Agency were to assume a one-to-one relationship between the differences in fares and mileages.

[52] 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, with respect to fare levels, the discounts off the 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 each fare, the difference between the QX14RBST fare offered for travel between Williams Lake and Vancouver and that offered for travel between Kelowna and Victoria on July 25, 2000 could be explained, at least in part, by the difference in distance. Therefore, the Agency is of the opinion that the fare was not unreasonable.

(ii) The QW14RBST fare

[53] The QW14RBST fare was the second-to-least expensive, generally-available fare offered year-round on the Williams Lake-Vancouver and Kelowna-Victoria routes on July 25 in 1999 and 2000. On July 25, 1999, the QW14RBST fare was 50 percent, or $90, higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. By July 25, 2000, the differential had decreased; however, the QW14RBST fare was still 36 percent higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. In dollar terms, this difference amounted to $72.

[54] From July 25, 1999 to July 25, 2000, the level of the QW14RBST fare remained unchanged on the Williams Lake-Vancouver route, but was increased by 10 percent on the Kelowna-Victoria route. Despite this increase, the QW14RBST fare on the Williams Lake-Vancouver route remained 36 percent higher, and, even if the Agency were to assume a one-to-one relationship between the differences in fares and mileages, the difference would only be reduced to 26 percent.

[55] On July 25, 1999, the QW14RBST fare was discounted off the Y1 round-trip fare by 51 percent on the Williams Lake-Vancouver route but by 76 percent on the Kelowna-Victoria route. By July 25, 2000 the discount on the Williams Lake-Vancouver route had increased to 53 percent and the discount on the Kelowna-Victoria route had decreased to 69 percent. While these changes reduced the gap somewhat, it remained high at 16 percentage points.

[56] 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, with respect to fare level and to the discount off the Y1 round-trip fare which the fare represented, the difference between the QW14RBST fare offered for travel between Williams Lake and Vancouver and that offered for travel between Kelowna and Victoria on July 25, 2000 was greater than could be explained on the basis of the difference in distances. The Agency is therefore of the opinion that the fare was unreasonable.

3. Range of fares

[57] As mentioned earlier, the range of fares Air Canada offered on the Williams Lake-Vancouver route was compared to the range it offered on the Kelowna-Victoria route with respect to various factors. The analysis below was undertaken using fares offered on July 25 in 1998, 1999 and 2000.

3(a) Span of fares

[58] On the dates under review, Air Canada's Y1 fare was 11-26 percent less expensive on the Williams Lake-Vancouver route than on the similar Kelowna-Victoria route: it was $156 lower on July 25, 1998, $198 lower on July 25, 1999 and $68 lower on July 25, 2000. At the other end of the spectrum, the lowest year-round excursion fare available to the general public offered by Air Canada on July 25, 1998 was 87 percent, or $111, higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. However, by July 25, 1999, after the introduction of new fares on the Williams Lake-Vancouver route, the difference between the lowest fares on these routes had been reduced to 39 percent, or $62, and by July 25, 2000 it had been reduced to 24 percent, or $42.

[59] On the Williams Lake-Vancouver route, the difference between the Y1 round-trip fare and the cheapest discount fare increased from $281 on July 25, 1998 to $352 on July 25, 2000, an increase of 25 percent. This difference resulted from the combination of a 10 percent increase in the Y1 fare and Air Canada's introduction of a new fare at the low end of the range which was 8 percent cheaper than the previously-existing lowest fare.

[60] On the Kelowna-Victoria route, the difference between the Y1 round-trip fare and the cheapest discount fare decreased from $548 on July 25, 1998 to $462 on July 25, 2000, a reduction of 16 percent. This change was the combined result of a 5 percent decrease in Air Canada's Y1 fare over the period and an increase of 12 percent in the level of its lowest discount fare.

[61] Thus, on July 25, 2000, travellers on the Williams Lake-Vancouver route paid less than travellers on the Kelowna-Victoria route at the highest end of the range. At the lowest end of the range, although travellers paid somewhat more on the Williams Lake-Vancouver route, the difference was far less on July 25, 2000 than it had been on that date in 1998.

3(b) Number of fares

[62] Whereas Air Canada had offered fewer fares on the Williams Lake-Vancouver route than on the Kelowna-Victoria route on July 25 in 1998 and 1999, by July 25, 2000 it offered the same number of discounted fares on both routes.

3(c) Distribution of discounts

[63] On the date under review in 1998 and 1999, Air Canada offered four generally-available excursion fares on the Williams Lake-Vancouver route which were discounted off the Y1 round-trip fare. On July 25, 1998, the fares were discounted at 16, 23, 43 and 54 percent; on that same date in 1999, they were discounted at 15, 24, 38, and 56 percent. (Where two fares with similar fare codes were offered for travel on different days in the same week, the average discount is quoted). On July 25, 2000, Air Canada offered five such discounted fares. The applicable discounts were 20, 24, 30, 38, and 58 percent. Thus, by July 25, 2000, Air Canada had introduced a new fare on the route and had increased the overall level of discounts offered on the route. There was no apparent clustering of discounts at either the upper or lower end of the range.

[64] On the Kelowna-Victoria route on July 25, 1998, Air Canada offered five year-round fares discounted at 14, 42, 55, 68, and 80 percent. On July 25, 1999, the discounts applicable to the six fares offered were 15, 19, 42, 54, 68 and 78 percent, and on July 25, 2000, the discounts applicable to the five fares offered were 20, 40, 42, 60, and 71 percent. Thus, over the period under review, Air Canada increased the level of discount for the fare at the higher end of the range and decreased it at the lower end, thereby reducing the distribution of discounts on the Kelowna-Victoria route where, overall, the distribution of discounts was broader than on the Williams Lake-Vancouver route. As for the Williams Lake-Vancouver route, there was no apparent clustering of discounts at either the upper or lower end of the range.

[65] The Agency's analysis of the fares Air Canada offered for travel on the two routes shows that the levels of discounts applicable to the range of fares offered on the Williams Lake-Vancouver route did not change significantly for existing fares on the dates under review, but with the introduction of new fares, the percentage discount applicable to the cheapest generally-available fare increased from 54 percent on July 25, 1998 to 58 percent on July 25, 2000. On the Kelowna-Victoria route during that same period, the discount applicable to the lowest fare declined from 81 percent to 72 percent.

[66] The Agency's analysis thus reveals that, at the low end of the range of fares, the level of discount applicable to generally-available fares did improve by July 25, 2000 on the Williams Lake-Vancouver route and that, within the fare range, the distribution of discounts was not concentrated at either the upper or lower end of the range.

3(d) Fare classes

[67] On July 25 in 1998, 1999 and 2000, Air Canada offered the Y1 (full economy-type) fare on both routes and offered the J1 (premium business-type) fare on the Kelowna-Victoria route, but not on the Williams Lake-Vancouver route. The remainder of the fares offered on both routes were fares discounted off the Y1 fare.

[68] On July 25, 1998, Air Canada offered one discounted fare in each of the B, M, H, and L fare classes on the Williams Lake-Vancouver route; on the Kelowna-Victoria route, it offered one discounted fare in the B class, two in the H classes of fare, and one weekday/weekend fare in each of the Q and V classes. By July 10, 2000, on both the Williams Lake-Vancouver route and the Kelowna-Victoria route, Air Canada offered one discounted fare in the M class, two in the H class and one weekday/weekend fare in each of the Q and V classes.

[69] For those fares common to both routes, the terms and conditions of carriage associated with each fare were identical and thus were equally restrictive on both routes.

[70] Thus, the Agency's analysis shows that, by July 25, 2000, Air Canada offered the same number of generally-available fare classes on each of the two routes under review. Within each of the fare classes, the carrier also offered the same number of generally-available discounted fares on both routes.

3(e) Historical ranges

(i) Levels of fares

[71] The Agency examined those year-round, generally-available fares offered historically which were common to both routes, and found that on July 25, 1998 there was one such fare, and it was lower on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. On July 25, 1999, there were four fares (combination weekday and weekend fares were considered to be one fare) with the same fare codes offered on both routes; one of these was lower and the remainder were higher on the Williams Lake-Vancouver route than on the Kelowna-Victoria route. By July 25, 2000, there were four fares offered which were common to both routes, and these were higher on the Williams Lake-Vancouver route. Thus, while Air Canada offered a greater number of fares on July 25, 2000 than it had on July 25, 1998 on the Williams Lake-Vancouver route, the fares were more expensive than those on the Kelowna-Victoria route, reflecting, at least in part, the difference in distance between the two routes.

(ii) Year-over-year changes

[72] Fares available year-round to the general public on the Williams Lake-Vancouver route increased by 4-7 percent from July 25, 1998 to July 25, 1999 and by 0-3 percent from July 25, 1999 to July 25, 2000. On the Kelowna-Victoria route, these fares generally increased by 9-11 percent from July 25, 1998 to July 25, 1999, and in the year ending July 25, 2000, changes ranged from a reduction of 16 percent to an increase of 13 percent.

3(f) Summary

[73] To summarize, the Agency's analysis shows that, with respect to the range of fares offered on the two routes on July 25, 2000, travellers on the Williams Lake-Vancouver route paid less than travellers on the Kelowna-Victoria route at the upper end of the range; although they paid somewhat more at the lower end of the range, the lowest fare was considerably cheaper on July 25, 2000 than it had been on that date in 1998. Further, the difference between the Y1 fares offered on the Williams Lake-Vancouver route and the Kelowna-Victoria route declined, as did the difference between the lowest generally-available year-round fares on both routes. The same number of discounted fares was offered on both routes on July 25, 2000. At the low end of the range of fares, the level of discount off the Y1 round-trip fare increased slightly on the Williams Lake-Vancouver route while it decreased on the Kelowna-Victoria route. The Agency's analysis also shows that, by July 25, 2000, Air Canada offered the same number of generally-available fare classes on the two routes, and that, within each fare class, the same number of discounted fares was offered. Further, in general, travellers on the Williams Lake-Vancouver route were not significantly disadvantaged compared to those on the Kelowna-Victoria route with respect to year-over-year changes in fares.

4. Review of the fares offered by other carriers on the Williams Lake-Vancouver route

[74] Agency investigations into fare-related complaints include the examination of the fares offered by other carriers who provided service on the route which is the subject of the complaint. As the Agency analyzed the fares offered by Air Canada in respect of the domestic service operated between Williams Lake and Vancouver on July 25 of 1998, 1999 and 2000, the same review dates were used to identify all other carriers that provided a service on the route.

[75] Although in its answer to the complaint Air Canada submitted that, on July 25, 1999, Canadi*n competed with Air Canada on the Williams Lake-Vancouver route, the Agency's research of published timetable information has failed to identify any service on this route provided by Canadi*n or any of its affiliates nor any other carrier on that date or any of the other dates under review.

5. Agency findings

[76] In light of the foregoing, the Agency finds that:

  1. the $257 YCH child economy base fare, the $227 Q7CDSNR senior citizen base fare, the $100 Z youth standby base fare and the $220 "best" fare – that is, the QX14RBST base fare – published or offered by Air Canada in respect of its service between Williams Lake and Vancouver on or about July 25, 2000, which are the subject of the complaint, were not unreasonable; and
  2. the $270 "best" fare – that is, the QW14RBST base fare – published or offered by Air Canada in respect of its service between Williams Lake and Vancouver on or about July 25, 2000, which is the subject of the complaint, was higher than can be explained by the difference in distance between the two routes and therefore was unreasonable.

[77] The Agency also finds that the range of fares offered by Air Canada in respect of its service between Williams Lake and Vancouver on or about July 25, 2000, which is the subject of the complaint, was not inadequate.

CONCLUSION AND RECOMMENDATION

[78] Based on the above findings, it would have been the Agency's intention, pursuant to subsection 66(5) and paragraph 66(1)(b) of the CTA, to seek Air Canada's comments and consider directing Air Canada to amend its tariff by reducing the QW14RBST fare offered in respect of its service between Williams Lake and Vancouver.

[79] Since the date on which the complaint was filed, however, Air Canada has discontinued its service to Williams Lake such that it no longer provides a domestic service between Williams Lake and Vancouver. As a consequence, the Agency is of the opinion that there is no advantage to proceeding with directing Air Canada to amend its tariff as identified above.

Members

  • Marian L. Robson
  • Gilles Dufault
Date modified: