Decision No. 477-P-A-2002

August 26, 2002

August 26, 2002

IN THE MATTER OF a complaint by John Buda concerning the $1,049 fare offered by Air Canada on September 25, 2000 for one-way travel from Toronto to Calgary, on November 13, 2000.

File No. M4370/A74/00-605


COMPLAINT

On September 27, 2000, John Buda filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

By letter dated December 4, 2000, both Mr. Buda and Air Canada were advised that section 66 of the Canada Transportation Act (hereinafter the CTA) sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. More particularly, both parties were advised that, pursuant to subsection 66(1) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint.

In that same letter, Air Canada was requested to provide the Agency and Mr. Buda with its answer to the complaint, including the information outlined in subsection 66(3) of the CTA. On January 4, 2001, Air Canada requested an extension until January 19, 2001 to file its answer to the complaint and, by Decision No. LET-P-A-13-2001 dated January 11, 2001, the Agency granted Air Canada the requested extension. On January 19, 2001, Air Canada filed its answer to the complaint. Mr. Buda did not reply to Air Canada's answer.

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

ISSUES

The issues to be addressed are:

  1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was, on or about September 25, 2000, the only person providing a domestic service between Toronto and Calgary within the meaning of section 66 of the CTA; and, if so,
  2. whether the fare published or offered by Air Canada in respect of its service between Toronto and Calgary on September 25, 2000, which is the subject of the complaint, was unreasonable.

POSITIONS OF THE PARTIES

Mr. Buda submits that on September 25, 2000, he was quoted a fare of $1,049, excluding applicable charges and taxes, by his travel agent for one-way travel on Air Canada's service from Toronto to Calgary, departing Toronto and arriving in Calgary on November 13, 2000. He adds that on the same day, he was quoted a fare of $550 for round-trip travel between Toronto and Calgary for the same time frame. He maintains that it would be reasonable for the price of the one-way fare to be 50 to 66 percent of the full return fare, however he states that twice the price is "totally unreasonable".

In its answer to the preliminary issue raised by the complaint, Air Canada submits that it is not the only person providing a domestic service between Toronto and Calgary. The carrier advises that, in addition to its daily service, Canada 3000 Airlines Limited (hereinafter Canada 3000) also operates a service on the Toronto-Calgary route five times a week. Furthermore, Air Canada states that another licensee, WestJet, provides service to "the Greater Toronto Area". According to Air Canada, WestJet offers three one-stop week day and three weekend flights from Calgary to Hamilton using large aircraft.

With respect to the fare-related issue raised in the complaint, Air Canada maintains that the fare it offered in respect of its domestic service between Toronto and Calgary was not unreasonable. The carrier states that, while the specific one-way fare of $1,049 was not found in its records for sales on or about September 25, 2000, the closest one-way fare for travel between Toronto and Calgary was the Y class fare (Y1) of $1,214, excluding applicable taxes and charges. It adds that the Y class fare is Air Canada's economy class fare and that this type of fare offers the traveller a great deal of flexibility since the ticket is fully refundable, with no advance purchase requirements.

Air Canada further submits that a year earlier when it competed with Canadian Airlines International Ltd. (hereinafter Canadi*n) on the route, Air Canada offered a similar Y class fare for the same time period, at $1,179, and that the nominal price increase of 3 percent from September 25, 1999 to September 25, 2000 represented part of a general fare increase, primarily due to higher fuel costs.

Lastly, Air Canada notes that at the time of Mr. Buda's prospective purchase, there were a number of return fares available for travel on its services between Toronto and Calgary at lower prices, such as the HLCANADA fare of $693, the QLCANADA fare of $514 and the LL7NITE fare of $398. However, according to Air Canada, these fares contained conditions relating to minimum advance purchases, minimum/maximum stays, and cancellations/charges.

ANALYSIS AND FINDINGS

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

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

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

Pursuant to subsection 66(3) of the CTA, when determining whether a fare published or offered in respect of a domestic service between two points is unreasonable, the Agency shall consider the following factors:

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

Preliminary issue

Whether Air Canada was, on or about September 25, 2000, the only person providing a domestic service between Toronto and Calgary within the meaning of section 66 of the CTA

The Agency has reviewed the information available to it with respect to the domestic service offered between Toronto and Calgary and has also considered Air Canada's position that WestJet is another person that operates a service between Calgary and "the Greater Toronto Area", namely, Hamilton.

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

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

In light of the foregoing, the Agency finds that Hamilton is not the same point as Toronto for the purposes of section 66 of the CTA. The Agency is therefore of the opinion that, within the meaning of section 66 of the CTA, the service provided by WestJet between Hamilton and Calgary cannot be considered as an alternative domestic service to that provided by Air Canada between Toronto and Calgary.

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

The Agency is of the opinion that, on or about September 25, 2000, in addition to being served by Air Canada, the Toronto-Calgary route was served by Canada 3000 and Air Transat A.T. Inc., carrying on business as Air Transat (hereinafter Air Transat).

From the information available to the Agency, Air Canada's service between Toronto and Calgary during the week of September 25, 2000 consisted of:

  • approximately 207 direct, non-stop flights per week;
  • service provided every day of the week;
  • a total weekly capacity of approximately 43,090 seats;
  • large aircraft, as defined in the Air Transportation Regulations (hereinafter the ATR), used on all flights; and
  • a maximum total travel time between Toronto and Calgary of approximately four hours and eight minutes for all flights.

Available information also indicates that Canada 3000's service between Toronto and Calgary during the week of September 25, 2000 consisted of:

  • approximately 10 flights per week: 6 direct, non-stop flights and 4 direct flights with one intermediate stop;
  • service provided only Monday to Friday;
  • a total weekly capacity of approximately 1,932 seats;
  • large aircraft, as defined in the ATR, used on all flights; and,
  • a maximum total travel time between Toronto and Calgary of approximately four hours and ten minutes for non-stop flights and five hours and thirty minutes for the one-stop flights.

Available information also indicates that Air Transat's service between Toronto and Calgary during the week of September 25, 2000 consisted of:

  • approximately 4 flights per week: 3 direct, non-stop flights and, 1 direct flight with one intermediate stop;
  • service provided only on Wednesday and Thursday;
  • a total weekly capacity of approximately 888 seats;
  • large aircraft, as defined in the ATR, used on all flights; and,
  • a maximum total travel time between Toronto and Calgary of approximately four hours and five minutes for non-stop flights and five hours and fifteen minutes for the one-stop flight.

The Agency has carefully examined and analyzed the services provided by Air Canada, Canada 3000 and Air Transat between Toronto and Calgary during the week of September 25, 2000 and, on the basis of the factors set out in subsection 66(4) of the CTA is of the opinion that Canada 3000 and Air Transat, both individually and collectively, did not provide travellers with an alternative service to that offered by Air Canada which was reasonable.

In light of the foregoing, the Agency has determined that on or about September 25, 2000, Air Canada was the only person providing a domestic service between Toronto and Calgary within the meaning of section 66 of the CTA. Accordingly, the complaint falls within the purview of section 66 of the CTA.

Fare-related issue

Whether the $1,049 fare published or offered by Air Canada in respect of its service between Toronto and Calgary on September 25, 2000 was unreasonable

In addition to the material and information described above, the Agency, as required by subsection 66(3) of the CTA, has considered historical data respecting fares applicable to domestic services offered between Toronto and Calgary 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 the $1,049 fare, exclusive of applicable charges and taxes, which is the subject of Mr. Buda's complaint, was neither published nor available for purchase on September 25, 2000 for one-way travel on Air Canada's service from Toronto to Calgary on November 13, 2000. Information before the Agency concerning the fares offered by Air Canada on September 25, 2000 for travel between Toronto and Calgary indicates that the only fare that was applicable for one-way travel on the route was the full economy Y1 fare of $1,214. Therefore, the Agency concludes that the fare which is the subject of the complaint is the Y1 fare of $1,214. Accordingly, the Agency's analysis will focus upon the full economy Y1 one-way fare of $1,214 offered by Air Canada.

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

The Agency is of the opinion that the intent of section 66 of the CTA is to ensure that travellers on routes on which there is no, or very limited, competition, are offered fares which are broadly comparable in level and range to those offered to travellers on competitive routes. In determining whether a particular service between two points is similar to the service which is the subject of a section 66 complaint within the meaning of paragraph 66(3)(b) of the CTA, the Agency will consider the following factors:

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

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

  1. on September 25, 2000, Air Canada operated its domestic service between Toronto and Calgary using large aircraft, as defined in the ATR;
  2. according to the OAG, the distance between Toronto and Calgary is approximately 1,681 air miles; and
  3. the origin-destination passenger volume between Toronto and Calgary was approximately 583,290 passengers in 1999 (the last complete year for which such information is available)

The Agency conducted the same analysis in respect of nearly 170 domestic services offered by Air Canada to identify the domestic services which have characteristics similar to those of the service Air Canada provided between Toronto and Calgary. Based on its consideration of the factors outlined above, the Agency has determined that the service that was most similar to that offered by Air Canada between Toronto and Calgary within the meaning of paragraph 66(3)(b) of the CTA on or about September 25, 2000 was Air Canada's service between Toronto and Vancouver for the following reasons:

  1. Canada 3000, Air Transat, and Royal Aviation Inc. (hereinafter Royal) operated domestic services between Toronto and Vancouver in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Toronto and Vancouver using large aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Toronto and Vancouver is approximately 2,089 air miles; and
  4. the origin-destination passenger volume between Toronto and Vancouver was approximately 947,350 passengers in 1999.

Data respecting fares applicable to domestic services between Toronto and Calgary and Toronto and Vancouver

As identified above, the full economy one-way Y1 fare of $1,214 fare, exclusive of applicable charges and taxes, is the subject of the complaint. The Y1 fare will be analyzed below.

In conducting its analysis, the Agency considered the Y1 fare offered by Air Canada on the Toronto-Calgary route in relation to the Y1 fare it offered on the Toronto-Vancouver route as well as the year-over-year increases in those fares.

The Agency has reviewed the fares offered by air carriers for travel in respect of the domestic services operated between Toronto and Calgary on September 25 in 1998, 1999 and 2000, that is, from a point in time when this route was served by both Air Canada and Canadi*n, including their affiliates, and also by Canada 3000 and Air Transat, to the date of the complaint. The Agency has also reviewed the fares offered by Air Canada on the Toronto-Vancouver route for those dates.

1. General overview

An overview of the fares published by Air Canada in respect of its domestic service between Toronto and Calgary and between Toronto and Vancouver on September 25 in 1998, 1999 and 2000 shows that a selection of fares were offered by Air Canada with respect to the service operated on each route. All fares offered by Air Canada on both routes were economy-type fares with the exception of the carrier's offering of a premium, unrestricted business (i.e., J class) fare on both routes.

Most of the economy-type fares were non-refundable, round-trip fares which required an advance purchase as well as a minimum stay and were discounted off the full economy Y1 round-trip fare by varying percentages. On these routes, the Y1 fare is the economy fare which allows passengers the most flexibility to book or cancel reservations or make changes in the itinerary; however, it is the most expensive economy-type fare. Air Canada's Y1 fare serves as the basis for determining the price levels of other fares offered on the route.

The Agency's review indicates that on September 25, 1998, 1999 and 2000, Air Canada offered the same number of full and discounted fares on the Toronto-Calgary and Toronto-Vancouver routes and offered fares with the same fare basis codes on both routes. On the dates under review, the fares offered on the Toronto-Calgary route were lower than the fares offered on the Toronto-Vancouver route. Fares offered on both routes were similarly discounted off the full economy Y1 round-trip fare.

2. Y1 fare

The Agency's research shows that a Y1 fare was available on both the Toronto-Calgary and Toronto-Vancouver routes on the dates under review.

The Agency's analysis shows that on the dates under review, the Y1 fare offered by Air Canada for travel on the Toronto-Calgary route was consistently 16 percent lower than the one offered on the Toronto-Vancouver route reflecting, among other things, the difference in the length of the route.

The Agency's research shows that between September 25, 1998 and 2000, the Y1 fare offered by Air Canada on the Toronto-Calgary and Toronto-Vancouver routes increased by 18 percent. The Y1 fare offered on both routes was increased by 15 percent between September 25, 1998 and 1999 and by a further 3 percent between September 25, 1999 and 2000. Information available to the Agency indicates that this 18 percent increase in the Y1 fare offered by Air Canada on the two routes was fully attributable to the series of increases that it applied when Air Canada, Canadi*n, Canada 3000 and Air Transat all offered services on the two routes.

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

Agency investigations into fare-related complaints include the examination of fares offered by other carriers that provided a service on the route which is the subject of the complaint.

On the dates under review, Canadi*n, Canada 3000, and Air Transat also offered fares for travel between Toronto and Calgary.

On September 25, 1998, and 1999, Air Canada offered fares at the same level and offered the same selection of fares with respect to the applied terms and conditions of carriage and levels of discounts on the Toronto-Calgary route as did Canadi*n. On each of the three dates under review, Air Canada offered a wider range of fares than Canada 3000 and Air Transat, and while Air Canada's fares were higher, they were discounted at a much higher percentage off the unrestricted full economy fare than were Canada 3000's or Air Transat's.

4. Summary

Historically, the Y1 fare offered by Air Canada on the Toronto-Calgary route was lower than the one offered on the Toronto-Vancouver route. From the point in time when services on the Toronto-Calgary route were operated by Air Canada, Canadi*n, Canada 3000 and Air Transat to the date of the complaint, Air Canada offered its Y1 fare at a price that was 16 percent lower than the one it offered on the Toronto-Vancouver route. In addition, between September 25, 1998 and 2000, Air Canada applied the same year-over-year increases to the Y1 fare offered on the two routes.

The Agency has carefully examined and analyzed the Y1 fare offered by Air Canada in respect of its domestic services between Toronto and Calgary and between Toronto and Vancouver on September 25, 1998, 1999 and 2000. On the basis of the foregoing analysis and based on the factors set out in subsection 66(3) of the CTA, the Agency finds that, on the dates under review, the Y1 fare offered on the Toronto-Calgary route was lower than the one Air Canada offered on the Toronto-Vancouver route, reflecting among other things, the difference in the length of the route. Furthermore, the Agency notes that before and after Air Canada took over the operation of the services on the Toronto-Calgary and Toronto-Vancouver routes from Canadi*n in the year 2000, each of the two routes were treated similarly with respect to year-over-year changes.

5. Agency findings

In light of the foregoing, the Agency finds that the $1,214 Y1 one-way fare published or offered by Air Canada in respect of its domestic service between Toronto and Calgary on September 25, 2000 was not unreasonable.

CONCLUSION

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

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