Decision No. 484-P-A-2005

July 29, 2005

July 29, 2005

IN THE MATTER OF a complaint by George Burditt concerning the $217 Fun and the $187 Tango one-way Air Canada fares he purchased October 6, 2004 for travel on the carrier's services between Saint John, New Brunswick and Toronto, Ontario, departing from Saint John on January 2, 2005 and returning from Toronto on January 22, 2005 as well as the range of fares offered by Air Canada for travel between the two points.

File No. M4370/04-07369


COMPLAINT

[1] On February 14, 2005, George Burditt filed with the Canadian Transportation Agency (hereinafter the Agency), the complaint set out in the title.

[2] In Decision No. LET-P-A-98-2005 dated March 31, 2005, both Mr. Burditt 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 Saint John and Toronto as well as the domestic services that are similar to those operated by Air Canada between Saint John and Toronto, and invited the carrier to provide its concurrence with the Agency's findings or to suggest alternatives for the Agency's consideration.

[4] Lastly, Air Canada was requested to provide the Agency and Mr. Burditt with its answer to the complaint. On April 29, 2005, Air Canada filed its comments regarding the Agency's preliminary analyses and the carrier's answer to the complaint. Mr. Burditt 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 July 29, 2005.

ISSUES

[6] The issues to be addressed are whether:

  1. Air Canada, including affiliated licensees (hereinafter Air Canada), was the only person providing a domestic service between Saint John and Toronto within the meaning of section 66 of the CTA on October 6, 2004; and, if so,
  2. the $217 Fun and $187 Tango fares published or offered by Air Canada in respect of its service between Saint John and Toronto, 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 Saint John and Toronto, which is the subject of the complaint, was inadequate.

POSITIONS OF THE PARTIES

[7] Mr. Burditt submits that the lowest fares he was offered three months in advance of his departure for round-trip travel on Air Canada's service between Saint John and Toronto, were unjustifiably high, particularly when compared to the $233 all-inclusive fares he states that an air travel consumer could purchase one day in advance of departure for round-trip travel with I.M.P. Group Limited carrying on business as, among others, CanJet Airlines, a Division of I.M.P. Group Limited (hereinafter CanJet)'s service on the longer route between Moncton and Toronto. Specifically, his complaint concerns the one-way fares that he purchased on October 6, 2004 for travel between Saint John and Toronto: the $217 Fun fare he purchased for travel from Saint John to Toronto on January 2, 2005 and the $187 Tango fare he purchased for his return trip, from Toronto to Saint John on January 22, 2005. Mr. Burditt states that he purchased these fares through his travel agent. In addition, he claims that the selection of reasonable fares offered by Air Canada for travel between Saint John and Toronto was limited. Mr. Burditt also submits that he is 84 years of age and legally blind.

[8] In its answer to the preliminary issue raised by the complaint, Air Canada submits that the domestic service offered between Moncton and Toronto is a legitimate alternative for travellers seeking to travel from Saint John to Toronto. The carrier states that in October 2004, the Moncton-Toronto route was served with daily flights using jet aircraft by WestJet and CanJet. It is the carrier's position that Moncton, being only a 152-kilometre drive from Saint John, is a reasonable alternative to travellers living in Saint John, particularly given that Air Canada is under no obligation to provide service from Saint John.

[9] Air Canada also submits that domestic services between Moncton and Hamilton or Moncton and Toronto are in competition with, and substitutable for, domestic services between Saint John and Toronto. The carrier cites testimony provided by WestJet that was filed with the Competition Tribunal on April 4, 2001 in support of the Commissioner of Competition's application before the Tribunal concerning certain practices of anticompetitive acts by Air Canada in which WestJet submitted that the Hamilton-Moncton route competes with the domestic routes operated by Air Canada between Toronto and Moncton, Fredericton, Saint John and Charlottetown. Air Canada also cites the Commissioner of Competition who, in the same Competition Tribunal proceeding, stated that the domestic services between Toronto and Moncton are substitutes for and compete with the domestic services between Hamilton and Moncton and that Air Canada's domestic service between Toronto and airports in the Moncton Catchment Area (i.e., Moncton, Saint John, Fredericton and Charlottetown) are substitutes for, and compete with, flights offered by WestJet between Hamilton and Moncton.

[10] In response to the Agency's request for comments on the findings of its preliminary analysis that indicated that Air Canada's service between Moncton and Toronto appeared to be similar to the one it offered between Saint John and Toronto within the meaning of paragraph 66(3)(b) of the CTA, it is Air Canada's position that the criteria used by the Agency in its analysis is insufficient to provide a reasonable determination of "similar domestic services". According to the carrier, in addition to the factors that the Agency has considered, the Agency should consider other relevant factors, including, without limitation, population basis (size of catchment area), total number of flights per day operating out of the airports in question, passenger mix, network contribution and a comparison of the trend of fares on the routes being examined.

[11] In addition, Air Canada submits that the Agency's classification of aircraft as small, medium or large as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR) to compare similar aircraft is so general as to make it meaningless for the purposes of paragraph 66(3)(b) of the CTA. The carrier cites an example in which it states that a 120-seat Boeing 737 aircraft and a 50-seat Canadair regional jet (CL-65) aircraft (hereinafter CRJ) would both be considered medium aircraft for the purposes of the ATR. Air Canada is of the opinion that paragraph 66(3)(b) of the CTA requires a comparison of truly similar aircraft in terms of factors such as the number of seats, weight, fuel consumption, etc. According to the carrier, differences in these factors "renders the economics of flying the two aircraft, and at times, the attractiveness to consumers, quite distinct".

[12] In answer to the fare-related issues raised by the complaint, Air Canada submits that "[t]he 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. According to Air Canada, no matter how it is defined, the use of the word "unreasonable" imposes a stringent threshold that must be met before the Agency could take remedial action. The carrier is also of the opinion that the objective of section 66 was to prevent "price gouging" rather than to equalize price differentials between "non-competitive" and "competitive" routes. It is also the carrier's position that a test of unreasonableness must consider Air Canada's interests in earning the highest possible rate of return on its operations.

[13] Furthermore, Air Canada indicates that economic theory justifies fare differentials from route to route, and submitted a statement prepared by Professor William Baumol, "an economist with unmatched experience in transportation economics, regarding public interest standards and differential pricing in air transportation in Canada" in support of its position. Professor Baumol maintains that differential pricing in the airline industry 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).

[14] In answer to the first fare-related issue - the $217 Fun and $187 Tango fares - raised by the complaint, Air Canada submits that, as it did not respond to Jetsgo Corporation carrying on business as Jetsgo (hereinafter Jetsgo)'s withdrawal of its limited summer service between Saint John and Toronto in 2004 by substantially increasing the fares it offered on the route, the fares that Air Canada offered to Mr. Burditt in respect of its service between Saint John and Toronto were not unreasonable. According to Air Canada, the fares it offered with respect to its service between Saint John and Toronto in October 2004 were actually lower than those it offered on the route in March 2004.

[15] In addition, Air Canada submits that there was only a $15 difference in the fares in effect on October 6, 2004 with respect to travel on its services between Saint John and Toronto and between Moncton and Toronto. Air Canada claims that, in light of the stable pattern of pricing on the Saint John-Toronto route, a $15 fare differential cannot be considered to be unreasonable. Furthermore, the carrier notes that this fare differential is lower than the one that existed the previous year, on October 6, 2003.

[16] Air Canada further states that because the overhead costs in smaller centres such as Saint John are allocated among a smaller group of passengers, it is more expensive for an air carrier to operate flights out of Saint John than out of Moncton. Air Canada points out that the value of its operation of the Saint John-Toronto route is not in the point-to-point transportation of passengers, as is the case on the Moncton-Toronto route, but rather in getting passengers to Air Canada's hub in Toronto. Air Canada states that, even with its higher overhead costs, as a network carrier, it has been willing to provide a service between Saint John and Toronto because of the value of the route in getting passengers to the carrier's Toronto hub.

[17] Air Canada also submits that the fares it offered on the Saint John-Toronto route were reasonable when compared to the fares published by Jetsgo applicable to the summer 2004 service it provided on the route. According to the carrier, the one-way fares offered by Jetsgo at that time, which ranged from a $262 V booking class fare to a $596 Y booking class fare, were significantly higher than the $187 Fun and $217 Tango Air Canada fares that were purchased by Mr. Burditt.

[18] In answer to the second fare-related issue - the range of fares - raised by the complaint, Air Canada is of the opinion that the range of fares it offered for travel between Saint John and Toronto was not inadequate. Air Canada submits that, on May 20, 2003, the carrier introduced a new on-line domestic booking structure that greatly simplified travel booking with the introduction of new one-way fare categories: Fun, Latitude, Freedom, Econo and Flash. On October 17, 2004, Air Canada then eliminated the Econo fare category, along with the minimum stay and round-trip requirements for fares on all continental North American flights, and moved to five simple fare groups: Tango, Fun, Latitude, Freedom and Executive Class. According to Air Canada, the basis of the price of each fare group is its built-in benefits: flexibility, refundability, level of Aeroplan mileage accumulation, lounge access and priority check-in, boarding and baggage handling. It is the carrier's position that these changes make its fare structure "simpler and more responsive to consumer needs", allowing Air Canada customers the unique ability to choose the fare with the specific features they require every time they travel. As each of the fares is priced on a one-way basis and can be combined in whichever fashion the customer requires, and 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 domestic routes should now be considered, prima facie, to be adequate".

ANALYSIS AND FINDINGS

[19] In making its findings in respect of the preliminary and 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 Saint John and Toronto and the fares published or offered by Air Canada in respect of its service between these two points, including the Internet, the Official Airline Guide (hereinafter the OAG), published flight schedules and airline tariffs published by the Airline Tariff Publishing Company.

[20] 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.

[21] 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 domestic 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.

[22] 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 issue

Whether Air Canada was, on or about October 6, 2004, the only person providing a domestic service between Saint John and Toronto within the meaning of section 66 of the CTA

[23] The Agency has reviewed the information available to it with respect to the domestic services offered between Saint John and Toronto. The Agency has also considered Air Canada's position that the domestic service between Moncton and Toronto is a legitimate alternative for travellers seeking to travel from Saint John to Toronto.

[24] Pursuant to section 66 of the CTA, the Agency may inquire into complaints concerning passenger fares and cargo rates published or offered in respect of certain domestic services provided "between two points". This complaint concerns the fares published or offered in respect of Air Canada's domestic service between Saint John and Toronto. 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".

[25] The Agency has also considered Air Canada's position that services offered between Moncton and Hamilton or Moncton and Toronto are in competition with, and substitutable for, services offered between Saint John and Toronto. Section 66 provides that the Agency can take remedial action if it finds that a licensee is the only person providing "a domestic service between two points". The Agency is of the opinion that had Parliament wanted the Agency to consider the other domestic services that are not between the two points, such language would have been used in drafting the legislation. Accordingly, the Agency is of the opinion that the word "point", as it is used in section 66 of the CTA, refers to an individual origin or destination city. In light of the foregoing, the Agency finds that Moncton is not the same point as Saint John and that Hamilton is not the same point as Toronto. Accordingly, the services provided by WestJet and CanJet from Moncton to Toronto and by WestJet from Moncton to Hamilton are not domestic services between the points Saint John and Toronto.

[26] In light of the foregoing, the Agency has determined that Air Canada was the only person providing a domestic service between Saint John and Toronto within the meaning of section 66 of the CTA on or about October 6, 2004. Accordingly, the complaint falls within the Agency's jurisdiction under section 66 of the CTA.

Fare-related issues

Whether the $217 Fun and $187 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 between Saint John and Toronto on October 6, 2004

[27] 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 between Saint John and Toronto 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

[28] Section 66 of the CTA requires a comparison of the subject carrier's fares offered on routes on which there is no, or very limited, competition with the fares the carrier offered on similar competitive routes. Air Canada stated that the intention of section 66 of the CTA should not be interpreted as requiring that fares on similar routes be identical or that similar routes have identical fare structures. 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 similar competitive routes. As such, the Agency acknowledges Air Canada's position that it is not unreasonable, from an economic perspective, for an air carrier to publish and apply a fare on a competitive route but not to apply the same fare on a non-competitive route.

[29] 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.

[30] The Agency has considered Air Canada's position that, in addition to the above-noted factors, other relevant factors, such as size of catchment area, passenger mix, network contribution, etc., should be considered to provide a reasonable determination of similar domestic services. The Agency is of the opinion that the inclusion of additional factors would either severely limit the domestic services that could possibly meet the more restrictive criteria or conclude that each domestic service offered by a carrier is essentially unique and, therefore, that there are no truly comparable services. The Agency notes that although Air Canada was given the opportunity, it did not submit any information related to the factors it proposed. The Agency is of the opinion that the four factors it has chosen to consider in analysing similar domestic services represent the basic characteristics of a domestic service taken into consideration by the air travel consumer and provide the Agency with a consistent standard against which all domestic services can be assessed. Accordingly, the Agency is of the opinion that the above-noted factors are sufficient for determining similar domestic services within the meaning of paragraph 66(3)(b) of the CTA.

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

  1. on October 6, 2004, Air Canada operated its domestic service between Saint John and Toronto using medium aircraft, as defined in the ATR; specifically, CRJ aircraft;
  2. according to the OAG, the distance between Saint John and Toronto is approximately 674 air miles; and
  3. the origin-destination passenger volume between Saint John and Toronto was approximately 55,950 passengers in 1999 (the last complete year for which such information is available).

[32] The Agency has also considered Air Canada's position that the classification of aircraft as small, medium or large as defined in the ATR is so general as to make it meaningless for the purposes of paragraph 66(3)(b) of the CTA, and that the ATR would define both a 120-seat Boeing 737 aircraft and a 50-seat CRJ aircraft as medium aircraft.

[33] The ATR defines a medium aircraft to be:

an aircraft equipped for the carriage of passengers and having a certified maximum carrying capacity of more than 39 but not more than 89 passengers

[34] As such, the Agency is of the opinion that only the CRJ aircraft used in Air Canada's example would meet the ATR's definition of a "medium aircraft".

[35] The Agency conducted the same analysis it undertook with respect to the Saint John-Toronto service in respect of nearly 170 domestic services offered by Air Canada to identify the domestic services that had characteristics similar to those of the service Air Canada provided between Saint John and Toronto. Based on its consideration of the factors outlined above, the Agency's analysis indicates that, on October 6, 2004, the only Air Canada service that was similar to the one it offered between Saint John and Toronto within the meaning of paragraph 66(3)(b) of the CTA was Air Canada's service between Moncton and Toronto for the following reasons:

  1. WestJet and CanJet operated domestic services between Moncton and Toronto, in addition to the service operated by Air Canada;
  2. Air Canada also operated its service between Moncton and Toronto using medium aircraft, as defined in the ATR; specifically, CRJ aircraft;
  3. according to the OAG, the distance between Moncton and Toronto is approximately 738 air miles; and
  4. the origin-destination passenger volume between Moncton and Toronto was approximately 70,100 passengers in 1999.

Data respecting fares applicable to domestic services between Saint John and Toronto and between Moncton and Toronto

[36] The Agency's research, as confirmed by Air Canada, has identified that the $217 fare that is the subject of the complaint is actually the fare with the G7NRB fare basis code and that the $187 fare that is also the subject of the complaint is the one with the E10XNRB fare basis code. The G7NRB and E10XNRB 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 between Saint John and Toronto.

[37] The Agency's research has also confirmed that on May 20, 2003, Air Canada announced that it had "revolutionized the way it offers domestic fares" by simplifying its on-line domestic booking structure with the introduction of five new fare categories (i.e., Fun, Latitude, Freedom, Econo and Flash products) that permanently offered new low, competitive, best-value one way and return travel available on-line. As such, the Agency analyzed the fares offered by air carriers in respect of the domestic services operated between Saint John and Toronto on May 20, 2003 and on October 6, 2004, that is, on the date on which Air Canada simplified its on-line domestic booking structure and the date on which Mr. Burditt purchased his fares. The Agency also reviewed the fares offered by Air Canada on the Moncton-Toronto route on the same dates.

[38] In conducting its analysis, the Agency considered the G7NRB and the E10XNRB fares in relation to the fares offered by Air Canada on the Saint John-Toronto route, and to the fares it offered on the similar Moncton-Toronto route, as well as the discounts off the full economy one-way YRB fare, the May 20, 2003 to October 6, 2004 change in the fares, and the terms and conditions related to the fares on each of the routes.

[39] The range of fares that Air Canada offered on the Saint John-Toronto route was compared to the range it offered on the similar Moncton-Toronto route with respect to the span of fares, the number of fares, the distribution of discounts off the YRB fare, the similarity of fare booking classes offered on the two routes, the terms and conditions associated with each fare, and historical ranges, including the levels of the fares themselves and the May 20, 2003 to October 6, 2004 changes.

1. General overview

[40] An overview of the fares published by air carriers in respect of domestic services between Saint John and Toronto and between Moncton and Toronto on May 20, 2003 and on October 6, 2004 shows that a selection of fares was offered by carriers with respect to the services operated on each route. Information available to the Agency indicates that Air Canada managed two fare structures on each route: one which reflected the fares the carrier made available to the general public for domestic travel through the global distribution system (hereinafter GDS) and the other which reflected those fares it made available through its on-line booking system. Air Canada's GDS and on-line fare structures for each route included the unrestricted economy YRB fare on which the price levels of the other fares offered on the route are based. The unrestricted economy YRB fare is the economy-type fare for one-way travel that allows passengers the most flexibility with respect to booking or cancelling reservations or making changes to their itinerary; however, it is the most expensive economy-type fare.

[41] On May 20, 2003 and October 6, 2004, the YRB fares offered on the Saint John-Toronto route were 20 and 18 percent higher, respectively, than the YRB fares offered by Air Canada on the Moncton-Toronto route.

[42] Most of the discounted fares offered by Air Canada on the Saint John-Toronto and the Moncton-Toronto routes on May 20, 2003 were non-refundable fares that required an advance purchase and a minimum Saturday night stay over at destination. With a few exceptions, the discounted fares that were available through the GDS were applicable for round-trip travel whereas those offered through Air Canada's on-line booking system were applicable for one-way travel.

[43] While the majority of the discounted fares offered by the carrier on the Saint John-Toronto route on October 6, 2004 were also non-refundable fares that required an advance purchase and a minimum stay at destination, none of the discounted fares offered by Air Canada on the Moncton-Toronto route on that date required a minimum Saturday night stay at destination.

[44] The discounted fares offered by Air Canada on the Saint John-Toronto route on October 6, 2004 that were available through the GDS were applicable to round-trip travel whereas those that were available through the carrier's on-line booking system were applicable to one-way travel. In comparison, the discounted fares offered by Air Canada on the Moncton-Toronto route on October 6, 2004, whether available through the GDS or through the carrier's on-line booking system, were applicable for one-way travel.

[45] The Agency's research also shows that there were more discounted fares offered on the Saint John-Toronto route than on the Moncton-Toronto route on May 20, 2003 and on October 6, 2004.

2. G7NRB fare

[46] The Agency's research shows that a G7NRB fare was available on the Saint John-Toronto and Moncton-Toronto routes on both October 6, 2004 and May 20, 2003. The terms and conditions related to the G7NRB fare were identical on both routes. That is, the fare was a discounted, one-way, non-refundable fare that required a 7-day advance purchase. Information available to the Agency indicates that on the dates under review, this G-booking class fare was a Fun fare product.

[47] The Agency's analysis shows that the G7NRB fare offered by Air Canada on the dates under review was slightly higher on the Saint John-Toronto route than on the similar, competitive Moncton-Toronto route: it was 7 percent (or $15) higher on October 6, 2004 and 16 percent (or $27) higher on May 20, 2003.

[48] The Agency's research shows that, on the dates under review, the fare was discounted at a slightly higher rate off the YRB fare offered on the Saint John-Toronto route than that offered on the Moncton-Toronto route. On May 20, 2003, the G7NRB fare was discounted at 69 percent off the YRB fare offered on the Saint John-Toronto route while being discounted by 68 percent off the YRB fare offered on the Moncton-Toronto route. On October 6, 2004, the G7NRB fare offered on the Saint John-Toronto route represented a 69 percent discount off the YRB fare whereas the same fare offered on the Moncton-Toronto route represented only a 65 percent discount off the YRB fare.

[49] From May 20, 2003 to October 6, 2004, the G7NRB fare offered on the Saint John-Toronto route increased only 8 percent (or $16) whereas the same fare offered on the Moncton-Toronto route was increased by 16 percent (or $28).

[50] Thus, the Agency has carefully examined and analyzed the G7NRB fare published by Air Canada in respect of its domestic services between Saint John and Toronto and between Moncton and Toronto on May 20, 2003 and on October 6, 2004. Although the G7NRB fare offered by Air Canada on the Saint John-Toronto route on both dates under review was 7-16 percent higher than that offered on the Moncton-Toronto route, the $15-$27 difference in the level of the fare is not significant. 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 terms and conditions applicable to the G7NRB fare, the fare levels, the discounts off the YRB fare that the G7NRB fare represented, the May 20, 2003 to October 6, 2004 changes in the G7NRB fare, Air Canada treated the G7NRB fare offered on the Saint John-Toronto and Moncton-Toronto routes in a similar manner on the dates under review.

3. E10XNRB fare

[51] The Agency's research shows that of the two dates under review, the E10XNRB fare was only available on the Saint John-Toronto and on the Moncton-Toronto routes on October 6, 2004. The terms and conditions related to the E10XNRB fare were identical on both routes. That is, the E10XNRB fare was a discounted, non-refundable, one-way fare that required a 10-day advance purchase and was applicable for departures on specific days (i.e., Tuesday, Wednesday, Thursday and Saturday only).

[52] On May 20, 2003, Air Canada offered an E booking class fare on the Saint John-Toronto and Moncton-Toronto routes with most of the same terms and conditions applied to the E10XNRB fare offered on October 6, 2004. The E7XNRB fare offered on the two routes required that tickets be purchased seven days before departure, compared to within 10 days for the E10XNRB fare offered on October 6, 2004. As the E7XNRB fare is comparable with respect to the terms and conditions related to the E10XNRB fare, the Agency's analysis will be limited to the E7XNRB fare offered by Air Canada on the Saint John-Toronto and Moncton-Toronto routes on May 20, 2003 for comparative purposes only. Information available to the Agency indicates that on the dates under review, the E-booking class fares were Tango fare products.

[53] The Agency's analysis shows that on May 20, 2003, the E7XNRB fare offered by Air Canada on the Saint John-Toronto route was 43 percent (or $48) higher than on the similar, competitive Moncton-Toronto route. In addition, it was discounted at 75 percent off the YRB one-way fare offered on the Saint John-Toronto route whereas it was discounted at 79 percent off the YRB one-way fare offered on the Moncton-Toronto route.

[54] However, the Agency's analysis shows that by October 6, 2004, the E10XNRB fare offered by Air Canada on the Saint John-Toronto route was only 8 percent (or $15) higher than that offered on the Moncton-Toronto route. The analysis also shows that, while the EX10NRB fare offered on both routes was not as steeply discounted off the YRB fare as the E7XNRB fare offered on May 20, 2003, the EX10NRB fare offered on the Saint John-Toronto route was discounted by a slightly higher rate off the YRB fare than the EX10NRB fare offered on the Moncton-Toronto route: it was discounted by 73 percent on the Saint John-Toronto route as compared to 70 percent on the Moncton-Toronto route.

[55] The Agency has carefully examined and analyzed the E10XNRB fare offered by Air Canada in respect of its domestic service between Saint John and Toronto and between Moncton and Toronto on October 6, 2004 as well as the E7XNRB fare offered in respect of its domestic services between the two points on May 20, 2003. Although the E10XNRB fare offered by Air Canada on the Saint John-Toronto route on October 6, 2004 was 8 percent higher than that offered on the Moncton-Toronto route, the $15 difference in the level of the fare is not significant. 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 terms and conditions applicable to the fares and the level of fares, Air Canada did not treat the E10XNRB fare offered on the Saint John-Toronto and Moncton-Toronto routes in a significantly different manner on October 6, 2004.

4. Range of fares

[56] The range of fares Air Canada offered on the Saint John-Toronto route was compared to the range it offered on the similar Moncton-Toronto route with respect to the span of fares, the number of fares offered, the distribution of discounts off the YRB 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 May 20, 2003 and on October 6, 2004.

[57] For those fare basis codes common to both 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

[58] On May 20, 2003, the date on which Air Canada made significant changes to its on-line booking structure, the YRB fare offered on the Saint John-Toronto route was 20 percent higher than the YRB fare offered on the similar, competitive Moncton-Toronto route. However, by October 6, 2004, the date on which Mr. Burditt purchased his fare from Air Canada, it was only 18 percent higher than the YRB fare offered on the Moncton-Toronto route.

[59] At the opposite end of the range, the lowest fare offered on each of the dates under review on the Saint John-Toronto route was from 6 percent lower to 9 percent higher than the lowest fare offered by Air Canada on the Moncton-Toronto route: on May 20, 2003, the lowest fare was $6 (or 6 percent) lower; and, on October 6, 2004, it was $15 (or 9 percent) higher.

[60] On the Saint John-Toronto route, the difference between the YRB one-way fare and the lowest one-way fare decreased from $543 on May 20, 2003 to $498 on October 6, 2004, a reduction of 8 percent. The fare booking class for the lowest fare was not the same in both years. On the Moncton-Toronto route, the difference between the YRB one-way fare and the lowest one-way fare decreased from $431 on May 20, 2003 to $407 on October 6, 2004, a reduction of 6 percent. The fare booking class for the lowest fare was not the same in both years.

4b) Number of fares

[61] On May 20, 2003, Air Canada offered a total of 41 generally-available, year-round fares discounted off the YRB fare offered on the Saint John-Toronto route - 21 of which were available through the GDS and 20 of which were available through the carrier's on-line booking system. By October 6, 2004, the carrier had reduced the number of generally-available, year-round fares discounted off the YRB fare it offered on the Saint John-Toronto route to 29 - 10 of which were available through the GDS and 19 of which were available through the carrier's on-line booking system.

[62] On the similar Moncton-Toronto route, Air Canada offered 31 generally-available, year-round fares discounted off the YRB fare on May 20, 2003 and 19 such fares on October 6, 2004. Whereas 19 of the fares that the carrier offered on May 20, 2003 were available through the GDS, by October 6, 2004, this number had reduced to 6.

4c) Distribution of discounts off the YRB fare

[63] On the two dates under review, Air Canada offered both one-way and round-trip fares for year-round travel on the Saint John-Toronto and Moncton-Toronto routes that were discounted off the applicable YRB fare. Most of the one-way fares offered on the two routes were available through the carrier's on-line booking system whereas the round-trip fares were available predominantly through the GDS.

[64] On May 20, 2003, Air Canada offered 21 one-way and 20 round-trip fares discounted off the YRB fare on the Saint John-Toronto route. The one-way fares offered the widest range of discounted fares, with the applicable discounts ranging from 16 percent to 84 percent. However, travellers who purchased round-trip fares would have enjoyed discounts ranging from 42 percent to 78 percent.

[65] By comparison, on May 20, 2003, Air Canada offered 25 one-way and 10 round-trip fares discounted off the applicable YRB fare on the Moncton-Toronto route. As with the Saint John-Toronto route, the widest range of discounted fares applied to Air Canada's one-way fare offerings (from 20 to 80 percent). The discounts applied to the round-trip fares offered on the Moncton-Toronto route ranged from 46 percent to 79 percent.

[66] By October 6, 2004, Air Canada offered 19 one-way and 10 round-trip fares discounted off the applicable YRB fare on the Saint John-Toronto route. Whereas the discounts applicable to the round-trip fares ranged from 48 to 70 percent, they ranged from 25 to 73 percent for the one-way fares. On the same date, the carrier only offered 17 one-way fares discounted off the applicable YRB fare on the Moncton-Toronto route. The discounts applied to these fares offered on the Moncton-Toronto route ranged from 16 percent to 70 percent.

4d) Fare booking classes

[67] The fares offered on the Saint John-Toronto and Moncton-Toronto routes that Air Canada made available through a GDS on May 20, 2003 included the one-way YRB and J1 (premium business class) fares, as well as discounted round-trip fares in the B, H, V, Q and L booking classes. The carrier also offered two round-trip fares on the Saint John-Toronto route in the more deeply discounted N booking class. With respect to the fares offered on the two routes that the carrier made available through its on-line booking system on May 20, 2003, Air Canada offered one-way fares in the: Y booking class (Freedom fares); U booking class (Latitude fares); B, H, V, Q and L booking classes, (Econo fares); and, R, I and G booking classes (Fun fares). The carrier also offered one additional T booking class (Tango) fare on the Moncton-Toronto route.

[68] The fares offered on the Saint John-Toronto and Moncton-Toronto routes that Air Canada made available through a GDS on October 6, 2004 included the one-way YRB and JRB (premium business class) fares, as well as discounted round-trip fares in the B, H, V, Q and L booking classes. On October 6, 2004, the carrier also offered through its on-line booking system on both routes, one-way fares in the: J and C booking classes (Executive); Y booking class (Freedom fare); M, U and A booking classes (Latitude fares); R, I and G booking classes (Fun fares); and E booking class (Tango fares). However, it offered two additional fares in each of the B, H, V, Q and L booking classes (Econo fares) on its Saint John-Toronto route that it did not offer on its Moncton-Toronto route.

4e) Historical range

(i) Levels of fares

The Agency's examination of the range of fares offered for travel by Air Canada on the Saint John-Toronto route compared to the range it offered on the similar, competitive Moncton-Toronto route on both dates shows that the fares common to both routes were higher on the Saint John-Toronto route than they were on the Moncton-Toronto route. These fares were $16-$106 higher on May 20, 2003 and $15-$106 higher on October 6, 2004.

(ii) Changes

The fares offered by Air Canada on October 6, 2004 on the Saint John-Toronto route were 5-28 percent higher than they had been on May 20, 2003. In comparison, they were from 3 percent lower to 16 percent higher during the same period on the Moncton-Toronto route.

4f) Summary

[69] With respect to the range of fares offered by Air Canada, the Agency is of the opinion that the selection of fares offered on the Saint John-Toronto route had improved by October 6, 2004. While the fares themselves were slightly higher at each end of the range on the Saint John-Toronto route than on the Moncton-Toronto route, the range of fares offered on the Saint John-Toronto route was more advantageous than that offered on the Moncton-Toronto route on the dates under review for the following reasons: the span between the highest and lowest economy fares was greater on the Saint John-Toronto route; more fares were available for sale on the Saint John-Toronto route; the distribution of the discounts off the YRB fares were similar if not better on the Saint John-Toronto route; and, the fares offered were in the same or additional fare booking classes on the Saint John-Toronto route.

5. Review of the fares offered by other carriers on the Saint John-Toronto route

[70] 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 June 25, 2004 and September 10, 2004, in addition to Air Canada's year-round service, Jetsgo operated a limited summer domestic service between Saint John and Toronto.

[71] Between June 25, 2004 and September 10, 2004, Jetsgo offered non-refundable one-way economy class fares through the GDS that required that reservations and ticketing be completed at the same time, but did not require a minimum stay at destination. On June 25, 2004, Jetsgo offered 7 of these one-way fares, ranging in value from a $24 L booking class fare to a $596 Y booking class fare. Except for the elimination of the L booking class fare, the fares offered by Jetsgo on the route on September 10, 2004 were the same as those offered by the carrier on June 25, 2004.

6. Agency findings

[72] In light of the foregoing, the Agency finds that the $217 G7NRB (Fun) and $187 E10XNRB (Tango) one-way base fares published or offered by Air Canada in respect of its service between Saint John and Toronto on October 6, 2004, which are the subject of the complaint, were not unreasonable.

[73] The Agency also finds that the range of fares offered by the carrier in respect of its service between Saint John and Toronto on October 6, 2004 was not inadequate.

CONCLUSION

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

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