Decision No. 45-P-A-2007

January 29, 2007

January 29, 2007

IN THE MATTER OF a complaint filed by Gerald Newhook on behalf of his daughter, Judy Newhook, concerning the $328 U0LTA LATITUDE and the $171 G7TPA TANGO one-way Air Canada fares that Ms. Newhook purchased on March 5, 2006 for travel between St. John's and Gander, Newfoundland and Labrador, departing from St. John's on March 7, 2006 and returning from Gander on March 16, 2006, as well as the range of fares offered by Air Canada for travel between the two points.

File No. M4370/06-02121


Complaint

[1] On March 24, 2006, Gerald Newhook, on behalf of his daughter, Judy Newhook, filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title. Additional documents related to the complaint were filed by Ms. Newhook on July 4, 2006.

[2] In Decision No. LET-P-A-184-2006 dated July 12, 2006, both Mr. Newhook 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 addition, the Agency advised both parties of the results ensuing from the completion of its preliminary analyses of alternative domestic services between St. John's and Gander as well as the domestic services that are similar to those operated by Air Canada between these two points, and requested the carrier to provide the Agency and Mr. Newhook with its answer to the complaint as well as its concurrence with the Agency's findings or to suggest alternatives for the Agency's consideration.

[4] On August 11, 2006, Air Canada filed its comments regarding the Agency's preliminary analyses and its answer to the complaint. Mr. Newhook did not reply.

[5] 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 extension of the deadline until February 1, 2007.

Issues

[6] The issues to be addressed are whether:

  1. Air Canada, including its affiliated licensees (hereinafter Air Canada), was the only person providing a domestic service between St. John's and Gander within the meaning of section 66 of the CTA on March 5, 2006; and, if so,
  2. the $328 U0LTA LATITUDE and the $171 G7TPA TANGO fares published or offered by Air Canada in respect of its service between St. John's and Gander, which are the subject of the complaint, were unreasonable, and
  3. the range of fares offered by Air Canada in respect of its service between St. John's and Gander, which is the subject of the complaint, was inadequate.

Positions of the parties

[7] Mr. Newhook submits that as a result of Provincial Airlines Limited's (hereinafter Provincial Airlines) discontinuance of its service at Gander effective March 6, 2006, Jazz Air LP, as represented by its general partner, Jazz Air Holding GP Inc. carrying on business as Air Canada Jazz (hereinafter Air Canada Jazz) is now the only air carrier operating a domestic service between St. John's and Gander. Consequently, his daughter, Judy Newhook, had no other option but to book flights on Air Canada Jazz's services for round trip travel between St. John's and Gander, departing St. John's on March 7, 2006 and returning from Gander on March 16, 2006. According to Mr. Newhook, Air Canada Jazz's service between the two points, a distance he submits is approximately 200 miles by road, was operated by Exploits Valley Air Services Ltd. carrying on business as EVAS Air (hereinafter EVAS Air) in a 19-passenger Beechcraft aircraft. It is Mr. Newhook's position that the total cost of his daughter's Air Canada Jazz flights of $740 was "an outrageous price".

[8] Ms. Newhook identified herself as the one to whom her father, Gerald Newhook, referred in the complaint he filed with the Agency and indicated that she is "the person that paid the OUTRAGEOUS amount of 640.95 to fly" with Air Canada Jazz. Ms. Newhook confirmed that the amount reported on her credit card statement for the flights taken was $640.95 and not $740 as reported by her father. In addition, she confirmed that the fares were initially researched online; they were, however, purchased on March 5, 2006 under her name, by telephone through an Air Canada flight reservation agent.

[9] In its answer to the preliminary issue raised in the complaint, Air Canada is of the position that the Agency does not have jurisdiction to take any remedial action in this matter. Specifically, Air Canada submits that although the service offered by Provincial Airlines on March 5, 2006 "was inferior in terms of flexibility and convenience to that offered by Air Canada", such differences cannot be used to argue that the service provided by Provincial Airlines was not a reasonable alternative to that offered by Air Canada on the route. Air Canada maintains that the service provided by Provincial Airlines, even though it was being offered at a reduced frequency, was an alternative to that offered by Air Canada.

[10] Air Canada acknowledges that the Agency has regulatory oversight over domestic fares under the provisions of section 66 of the CTA when no other carrier offers travellers a reasonable alternative to that offered by the dominant carrier. However, Air Canada is of the opinion that even when this condition is met, the Agency is mandated to consider Canada's transportation policy which encourages competition between different modes of transportation, as set out in section 5 of the CTA. In that regard, Air Canada submits that the road transportation service provided by motor carrier companies such as DRL Coachlines Ltd. (hereinafter DRL) is a reasonable alternative to the domestic air service provided by Air Canada. As an example, Air Canada submits that DRL offers daily coach service between St. John's and Gander and advertises its one-way adult ticket for $50, including taxes. The carrier notes that although the travel time by coach (approximately 4 hours and 48 minutes) is "slightly longer" than the travel time by air (approximately forty-five minutes), a round trip bus ticket costs less than the airfare paid by Ms. Newhook.

[11] Air Canada claims that if it were ordered by the Agency to restructure its fares substantially, companies offering alternative modes of transportation, such as DRL, might find themselves unable to compete for passengers. As such, it is Air Canada's position that the Agency's intervention would impede, rather than encourage, competition between alternative modes of transportation.

[12] In response to the Agency's request for comments on the findings of its preliminary analysis that indicated that Air Canada's services between Edmonton and Fort McMurray (hereinafter Edmonton/Fort McMurray) and between Montréal and Québec (hereinafter Montréal/Québec) appeared to be similar to the one it offered between St. John's and Gander (hereinafter St. John's/Gander) within the meaning of paragraph 66(3)(b) of the CTA, it is Air Canada's position that St. John's/Gander is not similar to any other route. The carrier submits that the large differences in passenger volume and population bases among the three routes support its position that Edmonton/Fort McMurray and Montréal/Québec cannot be considered similar to St. John's/Gander. According to Air Canada, the large differences in passenger volumes "detract significantly from the utility of comparing the fares offered on each of the routes" and the Agency should expect greater variations in the fares offered on the different routes.

[13] Air Canada also submits that unlike Edmonton/Fort McMurray and Montréal/Québec which the carrier operates using its own small and medium aircraft and which enjoy sufficient passenger volumes to support competition with other domestic air services, it was required to enter into a special contractual arrangement with EVAS Air, which operates the service on St. John's/Gander for Air Canada using an 18-passenger Beechcraft 1900D aircraft, in order to accommodate the route's extremely low passenger volume.

[14] Air Canada further submits that Montréal/Québec is particularly unsuitable for comparison with St. John's/Gander given that Montréal and Québec are both important urban centres and important origins and destinations for both provincial and national air traffic. According to Air Canada, the nature of travel between these two cities is significantly different from the travel that takes place between St. John's and the smaller town of Gander.

[15] In answer to the fare-related issues raised in the complaint, Air Canada advises that its own research confirmed the Agency's finding that the base fares that were the subject of the complaint were the $328 LATITUDE category fare (U0LTA booking class) and the $171 TANGO category fare (G7TGA booking class). However, the carrier notes that the fares that are the subject of the complaint were purchased only two days prior to Ms. Newhook's departure. The carrier states that, while Ms. Newhook "chose" the more expensive LATITUDE fare on the 5:40 p.m. flight on March 5, 2006, had she been more flexible with regard to the time and day of travel, she could have taken advantage of the availability of a lower priced (i.e., $265 R-1 class) fare that Air Canada offered for the 10:20 p.m. flight on March 7, 2006. As the price of Air Canada's new fare types are based on "built-in benefits", the carrier is of the opinion that, in assessing the reasonability of Air Canada's fares, these benefits, especially the flexibility in day and time of travel, should be taken into consideration.

[16] Air Canada also submits that the subject fare is not unreasonable when considering how the word "unreasonable" is commonly defined, Parliament's intentions with respect to the objective of section 66 of the CTA and the interpretation of the word in similar regulatory contexts. The carrier also submits that the objective of section 66 is to prevent "price gouging". However, the carrier is of the position that the use of a strong word such as "gouging" supports its view that there must be stringent tests imposed for finding a fare to be "unreasonable". It is also the carrier's position that a test of unreasonableness must consider Air Canada's interests and that section 66 should not be used to impose parity of fares across routes, particularly when those routes may be distinguished on the basis of characteristics such as population basis (size of catchment area), total number of flights per day operating out of the airports in question, type of aircraft being used, and network contribution.

[17] Air Canada submits that the specific fares that are the subject of the complaint were not unreasonable. According to Air Canada, the $171 TANGO fare it offered on St. John's/Gander on March 5, 2006 was lower than it was the previous year when Provincial Airlines was operating its full service. Air Canada submits that when comparing the sum of the subject fares offered on that route with the sum of the similar fares offered on Edmonton/Fort McMurray and Montréal/Québec, the fare differences (which range from $40 to $127) cannot be considered to be unreasonable, especially in light of the differences between the routes themselves that were previously noted. It is Air Canada's position that, given the great differences between Edmonton/Fort McMurray and Montréal/Québec and St. John's/Gander, differences between the fares on all three routes are to be expected. The carrier also notes that the difference between the fares on Edmonton/Fort McMurray and Montréal/Québec confirms that the price differences between these routes and St. John's/Gander are reasonable.

[18] The carrier notes that, while there have been fare differences among St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec, the differences between St. John's/Gander and Edmonton/Fort McMurray actually declined between March 5, 2005 and March 5, 2006.

[19] In its answer to the second fare-related issue raised in the complaint, i.e., the range of fares, Air Canada is of the opinion that the range of fares it offered for travel on St. John's/Gander was not inadequate. Air Canada submits that, in October 2004, it took a significant step towards simplifying its fare structure and moved to five simple fare groups: TANGO, FUN, LATITUDE, FREEDOM and EXECUTIVE CLASS. As the five fare groups are offered on every North American route where Air Canada provides a service, the carrier concludes that "Air Canada's range of fares on the St. John's-Gander route should now be considered, prima facie, to be adequate".

[20] Air Canada also claims that subsection 66(2) of the CTA requires an "inadequate" range of fares. Given its ordinary meaning in law, Air Canada concludes that it is clear that "inadequate" is not synonymous with "identical". As such, it is the carrier's opinion that the purpose of subsection 66(2) of the CTA is not to ensure that the fares offered to passengers on allegedly "non-competitive" routes (e.g., St. John's/Gander) are identical to those offered on "competitive" routes (e.g., Edmonton/Fort McMurray).

[21] In addition, according to Air Canada, historical data reveals that the carrier is offering an adequate range of fares on St. John's/Gander when compared to that it offered on Edmonton/Fort McMurray and Montréal/Québec.

Analysis and findings

[22] In making its findings in respect of the preliminary and fare-related issues raised in the complaint, the Agency has considered all of the evidence submitted by the parties during the pleadings, as well as information available both publicly and within the Agency concerning air services provided on St. John's/Gander 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.

[23] 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:

  • 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
  • the fare published or offered by the licensee in respect of the service is unreasonable; and/or
  • the licensee is offering an inadequate range of fares in respect of that service.

[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:

  • historical data respecting fares applicable to domestic services between the two points;
  • 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
  • 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 March 5, 2006, the only person providing a domestic service on St. John's/Gander within the meaning of section 66 of the CTA

[25] The Agency has reviewed the information available to it with respect to the domestic services offered on St. John's/Gander on March 5, 2006.

[26] 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 air 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."

[27] The Agency's analysis of Air Canada's domestic service on St. John's/Gander indicates that both Air Canada and Provincial Airlines provided a domestic service between the two points on March 5, 2006.

[28] From the information available to the Agency, Air Canada's service on St. John's/Gander during the week of March 5, 2006 consisted of:

  • approximately 79 direct, non-stop flights (40 flights westbound and 39 flights eastbound);
  • service provided every day of the week;
  • the use of small aircraft, specifically Beechcraft 1900D, as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR), on all flights;
  • a total weekly seating capacity of approximately 1,422 seats; and
  • a total travel time between St. John's and Gander ranging from 42 to 46 minutes.

[29] Information available to the Agency indicates that, on February 17, 2006, Provincial Airlines announced that, effective March 19, 2006, it would no longer operate scheduled air services on St. John's/Gander. In the interim, however, the carrier undertook to continue operating those services on a reduced schedule. Thus, as confirmed by Provincial Airlines, from February 17 to March 19, 2006, the operation of its domestic service on this route was reduced from flights on Monday through Friday and Sunday to flights on Sunday only.

[30] From the information available to the Agency, Provincial Airlines' service on the same route during the week of March 5, 2006 consisted of:

  • two weekly direct, non-stop flights, one in each direction;
  • service provided only on Sunday, March 5, 2006;
  • the use of small aircraft, specifically SAAB 340, as defined in the ATR, on each flight;
  • a total weekly seating capacity of approximately 60 seats; and
  • a total travel time between St. John's and Gander of approximately 40 minutes.

[31] The Agency has carefully examined and analyzed the services provided by both carriers on St. John's/Gander during the week of March 5, 2006 and is of the opinion that, while the domestic service offered by Provincial Airlines on that route was an alternative as noted by Air Canada, it did not provide travellers with a "reasonable" alternative to that offered by Air Canada, taking into consideration, as required pursuant to subsection 66(4) of the CTA, factors such as the frequency of the service and the number of seats offered.

[32] Air Canada also proposed, as an alternative to its domestic service on St. John's/Gander, the services provided by different modes of transport, including motor coaches such as the service offered by DRL.

[33] 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 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.

[34] 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 the transportation of passengers or goods, or both.

[35] 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 that Air Canada suggests as being an alternative to its domestic service on St. John's/Gander, and which would involve the use of some mode of transport other than air, is not an alternative domestic service within the meaning of subsection 66(4) of the CTA.

[36] In light of the foregoing, the Agency has determined that, on March 5, 2006, Air Canada was the only person providing a domestic service on St. John's/Gander within the meaning of section 66 of the CTA. Accordingly, the Agency finds that the complaint falls within the purview of section 66 of the CTA.

Fare-related issues

Whether the $328 LATITUDE and $171 TANGO fares published or offered by Air Canada were unreasonable and whether the range of fares offered by Air Canada was inadequate in respect of its service on St. John's/Gander on March 5, 2006

[37] In addition to the material and information described above, the Agency, as required by subsection 66(3) of the CTA, has considered historical and current data respecting fares applicable to domestic services offered on St. John's/Gander as well as the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft, including terms and conditions of carriage.

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

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

[39] 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:

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

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

  • on March 5, 2006, Air Canada operated its domestic service on St. John's/Gander using small aircraft, as defined in the ATR;
  • according to the OAG, the distance between St. John's and Gander is approximately 124 air miles; and
  • the origin-destination passenger volume on St. John's/Gander was approximately 14,890 passengers in 1999 (the last complete year for which such information is available).

[41] The Agency conducted the same analysis it undertook with respect to St. John's/Gander in respect of nearly 170 domestic services to identify the domestic services on which Air Canada competed with one or more other licensees that had characteristics similar to those of the service the carrier provided on St. John's/Gander. After careful analysis and based on its consideration of the factors outlined above, the Agency found that, on March 5, 2006, the services on which Air Canada competed with one or more other licensees that had similar characteristics as St. John's/Gander were Air Canada's services on Edmonton/Fort McMurray and on Montréal/Québec for the following reasons:

  1. WestJet operated domestic services on Edmonton/Fort McMurray in addition to the services operated by Air Canada on that route;
  2. Air Inuit Ltd., Québecair Express Inc. and Labrador Airways Limited carrying on business as Air Labrador, operated domestic services on Montréal/Québec in addition to the services operated by Air Canada on that route;
  3. Air Canada operated its services on Edmonton/Fort McMurray using a combination of small and medium aircraft, as defined in the ATR;
  4. Air Canada operated the majority of its services on Montréal/Québec using small aircraft, as defined in the ATR;
  5. according to the OAG, the distance between Edmonton and Fort McMurray is approximately 231 air miles and the distance between Montréal and Québec City is approximately 132 air miles; and,
  6. in 1999, the origin-destination passenger volume on Edmonton/Fort McMurray was approximately 33,420 passengers and on Montréal/Québec it was approximately 49,910 passengers.

[42] The Agency recognizes that, while the passenger volumes on Edmonton/Fort McMurray and Montréal/Québec and the type of aircraft used on Edmonton/Fort McMurray differ from those on St. John's/Gander, these are the services with characteristics closest to those on St. John's/Gander. Consequently, the Agency's analysis of the reasonableness of the fares offered on St. John's/Gander will include a comparison to the fares published by Air Canada on Edmonton/Fort McMurray and Montréal/Québec.

Data respecting fares applicable to domestic services on St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec

[43] The Agency's research, as confirmed by Air Canada, has identified that the base fares that are the subject of the complaint are the $328 U0LTA LATITUDE fare and the $171 G7TGA TANGO fare. The U0LTA and G7TGA fares are the ones with respect to which the Agency will conduct its analysis and make its determination. The Agency also analyzed the range of fares offered by Air Canada in respect of its service on St. John's/Gander.

[44] As Provincial Airlines only introduced its service on St. John's/Gander in February 2005, the Agency analyzed the fares offered by air carriers in respect of the domestic services operated on this route on March 5, 2005 and March 5, 2006, that is, from a date on which Air Canada competed with Provincial Airlines for traffic on the route to the date on which Ms. Newhook purchased her fares. The Agency also reviewed the fares offered by Air Canada on Edmonton/Fort McMurray and Montréal/Québec on the same dates.

[45] In conducting its analysis, the Agency considered the U0LTA and the G7TGA fares in relation to the fares offered by Air Canada on St. John's/Gander, and on the similar Edmonton/Fort McMurray and Montréal/Québec routes; the discounts off the full economy one-way Y-class fare; the March 5, 2005 to March 5, 2006 changes in the fares; and the terms and conditions related to the fares on each of the routes.

[46] The range of fares that Air Canada offered on St. John's/Gander was compared to that it offered on the similar Edmonton/Fort McMurray and Montréal/Québec routes with respect to: the span of fares; the number of fares; the distribution of discounts off the Y-class fare; the similarity of fare booking classes offered on the routes; the terms and conditions associated with each fare; and historical ranges, including the levels of the fares themselves and the March 5, 2005 to March 5, 2006 changes.

1. General overview

[47] An overview of the fares published by air carriers in respect of domestic services on St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec on March 5, 2005 and March 5, 2006 shows that a selection of fares was offered by carriers on all of the routes.

[48] Air Canada's fare structure for each route included an unrestricted economy Y-class fare on which the price levels of all the other fares offered on the route are based. The unrestricted economy Y-class fare is fully refundable and is the economy-type fare for one-way travel that allows passengers the maximum flexibility with respect to booking or cancelling reservations or making changes to their itinerary at no additional cost; however, it is the most expensive economy-type fare. Air Canada's Y-class fares are part of its LATITUDE PLUS fare category. The same terms and conditions apply to all fares in this category.

[49] Air Canada offered a Y0LPA fare on St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec on March 5, 2006, but did not offer an unrestricted economy Y-class fare with the exact same fare basis code on March 5, 2005 on any of these routes. Air Canada did, however, offer a Y0FRA fare, on March 5, 2005, with the same terms and conditions as those applied to the Y0LPA fare. Given the similarity between these two fares, they will be considered as being identical for the purposes of this analysis.

[50] On March 5, 2005, while the Y0FRA fare for St. John's/Gander was $251, the same fare for Edmonton/Fort McMurray and Montréal/Québec was $287 and $329, respectively.

[51] Therefore, on that date, the Y0FRA fare on St. John's/Gander was $36 (or 12.5 percent) lower than the Y0FRA fare offered by Air Canada on Edmonton/Fort McMurray and $78 (or 23.7 percent) lower than the Y0FRA fare offered on Montréal/Québec.

[52] A year later, on March 5, 2006, the Y0LPA fare on St. John's/Gander had increased by $97 (or 38.6 percent) to $348. The Y0LPA fares on Edmonton/Fort McMurray and Montréal/Québec had also increased from March 5, 2005 to March 5, 2006, by $52 (or 18.1 percent) to $339 and by $21 (or 6.4 percent) to $350, respectively. As a result, the Y0LPA fare offered on St. John's/Gander was $9 (or 2.7 percent) higher than the Y0LPA fare offered on Edmonton/Fort McMurray and $2 (or 0.6 percent) lower than the same fare offered on Montréal/Québec.

[53] Most of the discounted fares offered by Air Canada on all three of these routes on March 5, 2006 were non-refundable fares requiring an advance purchase. Many of the fares offered on St. John's/Gander and Edmonton/Fort McMurray were only available for travel on specific days of the week. All fares were applicable for one-way travel only.

2a) U0LTA fare

[54] The terms and conditions applied to Air Canada's U0LTA fare were similar to those applied to the Y0LPA and Y0FRA fares. The U0LTA fare was a fully refundable, economy-type fare for one-way travel, which could be purchased at any time. It allowed passengers to make unlimited changes to their reservation and to their itinerary at no extra cost. This fare offered passengers a discount off the most expensive economy-type Y-class fare.

[55] Air Canada offered a U0LTA fare on St. John's/Gander and Edmonton/Fort McMurray both on March 5, 2006, the incident date, and on March 5, 2005, but did not offer the same U0LTA fare on Montréal/Québec on those dates. Air Canada did, however, offer a fully refundable, discounted one-way U0LTE fare which did not require an advance purchase, on Montréal/Québec on both dates. As confirmed by Air Canada, its U-booking class fares were LATITUDE fare products to which the same terms and conditions are applied. Given the similarity between these two fares, they will be considered as being identical for the purposes of this analysis.

[56] On March 5, 2005, the U0LTA fare on St. John's/Gander was $250. The price of the same fare on Edmonton/Fort McMurray and Montréal/Québec was $273 and $243, respectively. Therefore, the U0LTA fare on St. John's/Gander was $23 (or 8.4 percent) lower than the same fare on Edmonton/Fort McMurray and $7 (or 2.9 percent) higher than that on Montréal/Québec.

[57] From March 5, 2005 to March 5, 2006, the U0LTA fare increased by $78 (or 31.2 percent) to $328 on St. John's/Gander. It increased by $46 (or 16.8 percent) to $319 on Edmonton/Fort McMurray and by $17 (or 7.0 percent) to $260 on Montréal/Québec. As a result of these increases, the U0LTA fare on St. John's/Gander on March 5, 2006 was 2.8 percent (or $9) higher than that offered on Edmonton/Fort McMurray and 26.2 percent (or $68) higher than the U0LTE fare on Montréal/Québec.

[58] The Agency notes that the same fare differentials existed months earlier when both Air Canada and Provincial Airlines operated full schedules on St. John's/Gander. The Agency finds that these fare differentials were not therefore a direct result of Provincial Airlines' reduction of its domestic service on St. John's/Gander.

[59] While the discount off the Y-class fare was not as deep for the U-class fare offered on St. John's/Gander as it was for the U0LTA or U0LTE fares offered on Edmonton/Fort McMurray and Montréal/Québec on the date under review in 2005, it was comparable to the U0LTA fare offered on Edmonton/Fort McMurray in 2006.

[60] On March 5, 2005, the U0LTA fare offered on St. John's/Gander represented a 0.4 percent discount off the Y-class fare. The U0LTA fare offered on Edmonton/Fort McMurray and the U0LTE fare offered on Montréal/Québec represented, respectively, a 4.9 and a 26.1 percent discount off the Y-class fare. On March 5, 2006, the U0LTA fare was discounted at 5.7 percent off the Y-class fare on St. John's/Gander while being discounted at 5.9 and 25.7 percent off the Y-class fare on Edmonton/Fort McMurray and Montréal/Québec, respectively.

2b) G7TGA fare

[61] The terms and conditions applied to Air Canada's G7TGA fare were considerably more restrictive than the U0LTA or Y-class fares. The G7TGA fare was a deeply discounted, non-refundable economy-type fare for one-way travel which had to be purchased at least seven days in advance of departure. Changes to reservations and to the itinerary were permitted and could be made by the passenger, subject to availability, for a fee. Changes made any time before the date of departure were subject to a fee of $30 plus the additional difference in fare if the new fare purchased was of higher value than the original fare and changes made at the airport on the date of departure were subject to a flat fee of $150, with no additional charges for fare differences.

[62] The G7TGA fare was only available on St. John's/Gander on March 5, 2006. While this specific G-class fare was not offered on all of the routes on the dates under review, similar G-class fares were available. A G0NTGA fare was offered on Edmonton/Fort McMurray on March 5, 2006; a G10TGA fare was offered on St. John's/Gander and Edmonton/Fort McMurray on March 5, 2005; and a G7TGE fare was offered on Montréal/Québec on March 5, 2005.

[63] The terms and conditions of carriage applicable to these fares were identical with the exception of an advance purchase requirement: the G0NTGA did not require an advance purchase whereas the G7TGA and G7TGE fares required a seven day advance purchase and the G10TGA fare required a 10 day advance purchase.

[64] Air Canada's G-class fares are part of its TANGO fare category. The same terms and conditions apply to all fares in this category, except that an advance purchase requirement may apply to some fares. Therefore, the Agency's analysis will include a comparison of these G-class fares which were available on each of the routes under review on March 5, 2006 or March 5, 2005. Air Canada compared the same fares in its answer to the fare-related issues raised in the complaint.

[65] On March 5, 2005, the price of the G-class fare on St. John's/Gander was $180. The price of the similar G-class fare on Edmonton/Fort McMurray and Montréal/Québec was $104 and $105, respectively. Therefore, the price of the G-class fare offered on St. John's/Gander was $76 (or 73.1 percent) and $75 (or 71.4 percent) higher than the similar G-class fares offered on Edmonton/Fort McMurray and Montréal/Québec.

[66] From March 5, 2005 to March 5, 2006, the level of the G-class fare on St. John's/Gander decreased by $9 (or 5.0 percent) to $171. Over the same period, the G-class fare increased by $36 (or 34.6 percent) to $140 on Edmonton/Fort McMurray and by $7 (or 6.7 percent) to $112 on Montréal/Québec. As a result of these increases, the G-class fare on St. John's/Gander on March 5, 2006 was $31 (or 22.1 percent) higher than the G-class fare on Edmonton/Fort McMurray and $59 (or 52.7 percent) higher than the G-class fare on Montréal/Québec.

[67] As previously noted, the same fare differentials existed when both Air Canada and Provincial Airlines operated full schedules on St. John's/Gander.

[68] While the discount off the Y-class fare was not as deep for the G-class fare on St. John's/Gander as it was for the G-class fares offered on Edmonton/Fort McMurray and Montréal/Québec on the date under review in 2005, it was comparable to that applied to the G-class fare on Edmonton/Fort McMurray on March 5, 2006. On March 5, 2005, the G-class fare on St. John's/Gander represented a 28 percent discount off the Y-class fare whereas the comparable fare on Edmonton/Fort McMurray and Montréal/Québec represented a 64 and a 68 percent discount off the Y-class fare, respectively. By March 5, 2006, the G-class fare was discounted at 51 percent off the Y-class fare on St. John's/Gander while being discounted at 59 and 68 percent off the Y-class fare on Edmonton/Fort McMurray and Montréal/Québec, respectively.

2c) Summary

[69] The Agency has carefully examined and analyzed the U0LTA and G7TGA fares published by Air Canada in respect of its domestic services on St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec on March 5 in 2005 and 2006. In light of the foregoing analysis, the Agency is of the opinion that, although the price of the U0LTA and G7TGA fares offered by Air Canada on St. John's/Gander on both dates were higher than similar U- and G-class fares offered on Edmonton/Fort McMurray and Montréal/Québec, the differentials can be explained by the differences in the passenger volume, the type of aircraft used to operate the service and the contractual arrangement undertaken by Air Canada to continue to operate the service on St. John's/Gander.

[70] Furthermore, as the differences in the St. John's/Gander fare levels were the same as they had been when Provincial Airlines competed with Air Canada on the route months earlier, there is no evidence to support the conclusion that the U0LTA and G7TGA fares offered by Air Canada on St. John's/Gander on March 5, 2006, when the carrier was the only person providing a domestic service on the route, were unreasonable.

4. Range of fares

[71] The range of fares Air Canada offered on St. John's/Gander was compared to the range it offered on Edmonton/Fort McMurray and Montréal/Québec with respect to: the span of fares; the number of fares offered; the distribution of discounts off the Y-class fare; the fare booking classes offered; and, on a historical basis, the levels of fares and the period-over-period changes in those fares. The following is the Agency's analysis of the range of fares offered on each of the two routes on March 5, 2005 and on March 5, 2006.

[72] For those fare basis codes common to all three routes, the terms and conditions of carriage associated with each fare were identical and thus were equally restrictive on both routes.

4a) Span of fares

[73] On March 5, 2005, the price of the most expensive fare on St. John's/Gander (the Y0FRA fare) was $36 (or 13 percent) and $78 (or 24 percent) lower than the Y-class fare on Edmonton/Fort McMurray and Montréal/Québec, respectively. By March 5, 2006, the date on which Ms. Newhook purchased her fare from Air Canada, it was $9 (or 3 percent) higher than the Y-class fare on Edmonton/Fort McMurray and $2 (or 1 percent) lower than the Y-class fare on Montréal/Québec.

[74] At the opposite end of the range, the price of the lowest fare on St. John's/Gander on March 5, 2005 was $66 (or 67 percent) and $81 (or 98 percent) higher than the lowest fare on Edmonton/Fort McMurray and Montréal/Québec, respectively. A year later on March 5, 2006, it was $79 (or 91 percent) and $54 (or 58 percent) higher than the lowest fare on Edmonton/Fort McMurray and Montréal/Québec, respectively.

[75] On St. John's/Gander, the difference between the Y-class one-way fare and the lowest one-way fare increased from $76 on March 5, 2005 to $182 on March 5, 2006, an increase of 139 percent. On the Edmonton-Fort McMurray route, the difference between the Y-class one-way fare and the lowest one-way fare increased slightly from $237 on March 5, 2005 to $257 on March 5, 2006, an increase of 8 percent. On Montréal/Québec, the difference between the same two fares increased slightly from $235 on March 5, 2005 to $238 on March 5, 2006, an increase of 1 percent. In all three cases cited, the fare booking class for the lowest fare was not the same in both years.

4b) Number of fares

[76] On St. John's/Gander on March 5, 2005, Air Canada offered 23 generally-available, year-round fares discounted off the Y-class fare. By March 5, 2006, on the same route, the carrier had slightly reduced the number of generally-available, year-round fares discounted off the Y-class fare to 22.

[77] On Edmonton/Fort McMurray, Air Canada offered 24 generally-available, year-round fares discounted off the Y-class fare on March 5, 2005 and 27 such fares on March 5, 2006. In addition, Air Canada offered two premium-class fares on both dates under review, for a total of 26 fares in 2005 and 29 fares in 2006.

[78] On Montréal/Québec on March 5, 2005, Air Canada offered 10 generally-available, year-round fares discounted off the Y-class fare and 11 such fares on March 5, 2006. Air Canada also offered two premium-class fares on Montréal/Québec on both dates for a total of 12 fares in 2005 and 13 fares in 2006.

4c) Distribution of discounts off the Y-class fare

[79] On the two dates under review, Air Canada only offered one-way fares discounted off the applicable Y-fare for year-round travel on all three routes.

[80] On March 5, 2005, the discounts applied by Air Canada to fares on St. John's/Gander ranged from 5.2 percent to 34.3 percent. In comparison, Air Canada discounted fares on Edmonton/Fort McMurray and Montréal/Québec from 4.9 percent to 82.6 percent and from 26.1 percent to 71.4 percent, respectively.

[81] On March 5, 2006, the discounts applied by the carrier to fares on St. John's/Gander were deeper than they were in 2005, ranging from 5.7 percent to 52.3 percent, while discounts to the Y-fare on Edmonton/Fort McMurray and Montréal/Québec remained fairly consistent, ranging from 5.9 percent to 74.3 percent and from 25.7 percent to 68.0 percent, respectively.

4d) Fare booking classes

[82] Fares offered by Air Canada on St. John's/Gander, Edmonton/Fort McMurray and Montréal/Québec on the dates under review included the following fare types: LATITUDE PLUS (Y booking class), LATITUDE (M and U booking classes), TANGO PLUS ( B, H, V, Q, L and A booking classes) and TANGO (I, R, N, G, P, E, T and K booking classes). In addition, the fares offered by the carrier on Edmonton/Fort McMurray and Montréal/Québec included EXECUTIVE CLASS type (J and C booking classes) fares.

[83] On March 5, 2005, Air Canada offered discounted fares in almost the same booking classes on St. John's/Gander as on Edmonton/Fort McMurray; however, the carrier offered more booking classes on the western route than it did on Montréal/Québec. Specifically, on both St. John's/Gander and Edmonton/Fort McMurray, Air Canada offered fares in the same 10 booking classes for discounted fares (i.e., the U, B, V, Q, L, A, R, I, N, and G booking classes). Air Canada also offered fares in one additional booking class attributed to discounted fares - the E booking class. In comparison, on Montréal/Québec, Air Canada offered discounted fares in five booking classes: the U, B, V, Q and R booking classes. As previously noted, in addition to the discounted fares it offered on both Edmonton/Fort McMurray and Montréal/Québec, Air Canada also offered EXECUTIVE CLASS type fares (i.e., fares in the J and C booking classes) on these routes.

[84] On March 5, 2006, Air Canada offered discounted fares in the same booking classes on St. John's/Gander as it did on Montréal/Québec, however there were fewer booking classes on Montréal/Québec than on Edmonton/Fort McMurray. On St. John's/Gander and Montréal/Québec, Air Canada offered discounted fares in the same nine booking classes (U, B, H, V, Q, R, N, G and K). In addition to these booking classes, on Edmonton/Fort McMurray, Air Canada offered fares in the L, A, P and E booking classes. Furthermore, on both Edmonton/Fort McMurray and Montréal/Québec, Air Canada offered premium-class fares in the J and C booking classes.

4e) Historical range

(i) Levels of fares

The Agency's examination of the range of fares offered for travel by Air Canada on St. John's/Gander compared to the range it offered on the similar, competitive Edmonton/Fort McMurray and Montréal/Québec routes on both dates shows that the fares common to both routes were sometimes higher and sometimes lower on St. John's/Gander than they were on the other routes.

On March 5, 2005, these fares ranged from $36 lower to $76 higher on Edmonton/Fort McMurray and from $78 lower to $7 higher on Montréal/Québec. On March 5, 2006, these fares ranged from $9 to $50 higher on Edmonton/Fort McMurray and from $2 lower to $59 higher on Montréal/Québec.

(ii) Changes

The fares offered by Air Canada on March 5, 2006 on St. John's/Gander were 13-31 percent higher than they had been on March 5, 2005. They were 4-37 percent higher and 3-7 percent higher during the same period on Edmonton/Fort McMurray and Montréal/Québec respectively. On March 5, 2006, these fares ranged from $36 lower to $76 higher on Edmonton/Fort McMurray and from $78 lower to $7 higher on Montréal/Québec, respectively.

4f) Summary

[85] With respect to the range of fares offered by Air Canada, the Agency is of the opinion that an ample selection of fares was offered on St. John's/Gander by March 5, 2006. While the fares themselves were higher at each end of the range on St. John's/Gander than on Edmonton/Fort McMurray and on Montréal/Québec, the range of fares offered on St. John's/Gander were not inadequate when compared to that offered on the other two routes on the dates under review for the following reasons:

  • a similar number of, or more, fares were available for sale on St. John's/Gander;
  • the distribution of the discounts off the Y-class fares had increased on St. John's/Gander; and,
  • the fares offered were in similar fare booking classes on St. John's/Gander.
5. Review of the fares offered by other carriers on St. John's/Gander

[86] Agency investigations into fare-related complaints include the examination of fares offered by other carriers who provided a service on the route that is the subject of the complaint. The Agency's research identified that between March 5, 2005 and March 5, 2006, in addition to Air Canada's year-round service, Provincial Airlines operated a domestic service on St. John's/Gander.

[87] Between March 5, 2005 and March 5, 2006, Provincial Airlines offered one-way economy class fares that did not require a minimum stay at destination. On March 5, 2006, Provincial Airlines offered four one-way fares, ranging in value from a discounted, non-refundable $65 K booking class fare to a fully refundable $249 Y booking class fare. The fares offered by Provincial Airlines on the route on March 5, 2006 were the same as those offered by the carrier on March 5, 2005.

6. Agency findings

[88] In light of the foregoing, the Agency finds that the $328 U0LTA (LATITUDE) and $171 G7TGA (TANGO) one-way base fares published or offered by Air Canada in respect of its service between St. John's and Gander on March 5, 2006, which are the subject of the complaint, were not unreasonable.

[89] The Agency also finds that the range of fares offered by the carrier in respect of its service between St. John's and Gander on March 5, 2006 was not inadequate.

Conclusion

[90] Based on the above findings, the Agency hereby dismisses the complaint.

Members

  • Guy Delisle
  • Baljinder Gill
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