Decision No. 6-AT-A-2008

January 10, 2008

IN THE MATTER OF an application filed by the Estate of Eric Norman, Joanne Neubauer and the Council of Canadians with Disabilities pursuant to subsection 172(1) of the Canada Transportation Act, S.C., 1996, c. 10, as amended, against Air Canada, Jazz Air LP, as represented by its general partner, Jazz Air Holding GP Inc. carrying on business as Air Canada Jazz, WestJet, the Gander International Airport Authority and the Air Transport Association of Canada concerning the fares and charges to be paid by persons with disabilities who require additional seating to accommodate their disabilities to travel by air on domestic air services; and

IN THE MATTER OF oral hearings held from May 30 to June 3, 2005; on October 14, 2005; from November 14 to 29, 2006; and on December 12, 2006, to assist the Canadian Transportation Agency in its consideration of this application.

File No.: 
U3570-14/04-1

Executive summary1

Introduction

[1] The Canadian Transportation Agency (the Agency) is an independent quasi-judicial tribunal of the Government of Canada. Part V of the Agency's enabling statute, the Canada Transportation Act (the CTA), contains accessible transportation provisions which confer on the Agency the responsibility to eliminate undue obstacles to the mobility of persons with disabilities within the federal transportation network. The importance attached by Parliament to a federal transportation network that is accessible to persons with disabilities is reflected both in Canada's national transportation policy contained in section 5 of the CTA and in the substantive accessible transportation provisions which mandate the elimination of undue obstacles in the federal transportation network through regulation or complaint adjudication in a wide range of areas including "tariffs, rates, fares, charges and terms and conditions of carriage applicable in respect of the transportation of persons with disabilities or incidental services. This is the context of the Agency's Decision which is being released.

[2] In some cases, the Agency may make a finding that a feature of the federal transportation network represents an obstacle to some persons with disabilities. When the Agency makes such a finding, it must then proceed to make a determination of whether that obstacle is undue. The Agency may only order corrective measures when it finds that an obstacle is undue.

[3] The Supreme Court of Canada recently confirmed, in Council of Canadians with Disabilities v. Via Rail Canada Inc. (the CCD v. VIA case) that the accessible transportation provisions of the CTA are, in essence, human rights legislation. Furthermore, the Court stated that the principles of the Canadian Human Rights Act, including the principle of reasonable accommodation, must be applied by the Agency when it identifies and remedies undue obstacles.

[4] Consistent with the national transportation policy, the Agency has recognized a number of long-standing principles of accessibility which are consistent with those reflected in general human rights jurisprudence. Particularly relevant to this Decision are the following:

  • persons with disabilities have the same rights as others to full participation in all aspects of society and equal access to transportation is critical to the ability of persons with disabilities to exercise that right. Persons with disabilities have the same needs to travel as others - for example, for business, for pleasure, and for medical reasons - and should have the same travel options that are provided to others, such as those respecting mode of transportation, departure times, cost, quality of service and the ability to travel with friends, family or colleagues;
  • all persons with disabilities are entitled to be treated in the same manner regardless of the underlying reason for their disability and there should be no discrimination between persons with disabilities in terms of entitlement to benefits, as recently confirmed by the Supreme Court of Canada in the Tranchemontagne v. Ontario (Director, Disability Support Program), and is part of the principle that persons with disabilities are to be treated with dignity and respect; and
  • persons with disabilities should not be placed at an economic disadvantage as a result of their disabilities and should not have to pay more for their transportation services than other passengers who do not have disabilities, including in circumstances where transportation service providers must provide different services to ensure equivalent access to the federal transportation network. This principle of accessibility forms the basis of what is commonly referred to in the community of persons with disabilities as the principle of "one person-one fare" (1P1F), which underlies the application.

[5] These principles reflect the interests of the community of persons with disabilities and are used by the Agency both in its determinations of the existence of obstacles and in its assessment of the undueness of any obstacle found, which requires a weighing of those interests with the interests of industry and the public at large.

[6] Once an applicant has established in the application the existence of an obstacle to the mobility of a person with a disability in the federal transportation network, the onus of proof then shifts to the respondent transportation service provider to prove, on a balance of probabilities, that the obstacle is not undue. To establish this, the respondent must demonstrate that the source of the obstacle:

  • is rationally connected to a legitimate objective, such as those objectives found in the national transportation policy;
  • was adopted by the transportation service provider with an honest and good faith belief that it was necessary to the fulfilment of that legitimate objective; and
  • is reasonably necessary for the accomplishment of its objective, such that it is impossible for the transportation service provider to accommodate the person with a disability without imposing undue hardship on the service provider.

[7] The transportation service provider must show that reasonable accommodation has been provided up to the point of undue hardship. What constitutes reasonable accommodation in each case is a matter of degree and depends on a balancing of the interests of persons with disabilities with those of the transportation service provider in the circumstances of the case. This includes the significance and recurrence or continuing nature of the obstacle and the impact of the obstacle on persons with disabilities as well as the transportation service provider's commercial and operational considerations and responsibilities.

[8] In most cases, there will be a range of alternatives available to address the needs of a person with a disability or a group sharing the same characteristics and, in each case, the most appropriate accommodation will be one that respects the dignity of the individual, meets individual needs, and promotes the independence, integration and full participation of persons with disabilities within the federal transportation network. In the end, reasonable accommodation will be the most appropriate accommodation which would not cause undue hardship to the transportation service provider.

[9] To establish undue hardship, a transportation service provider must show that it has considered the accommodation requested and determined that there are no reasonable alternatives to better accommodate the person with a disability affected by the obstacle and that there are constraints that make the removal of the obstacle unreasonable, impracticable or, in some cases, impossible. Examples of constraints on respondent transportation service providers that are relevant to this case are those related to structural issues, safety issues, operational issues, and financial and economic issues.

[10] Where a transportation service provider can justify providing something less than equivalent access, including no accommodation, the Agency would not find an undue obstacle in the accommodation. However, if the Agency finds that the respondent transportation service provider has failed to demonstrate that the accommodation provided is reasonable in the circumstances, then the Agency may find an undue obstacle and require the taking of corrective measures to eliminate that undue obstacle.

Application

[11] In the Decision the Agency addressed a long-standing issue for those persons with severe disabilities who must pay more for their domestic air services than other passengers when traveling from point A to B, where they require additional seating to accommodate their disabilities, for themselves or for their Attendants. The applicants are the Estate of Eric Norman2, Joanne Neubauer and the Council of Canadians with Disabilities (CCD), an organization composed of representatives from provincial disability organizations across Canada as well as major national disability organizations, and the respondents are:

  • Air Canada, Canada's largest full-service air carrier, and Air Canada Jazz, Canada's largest regional air carrier (collectively referred to as Air Canada unless stated otherwise).
  • WestJet, Canada's second largest air carrier.
  • the Gander International Airport Authority (Gander Airport Authority), a not-for-profit organization which manages airport operations at the Gander International Airport.

[12] The applicants maintained that Air Canada's and WestJet's fare policies, which call for charges on a per seat basis, constitute undue obstacles to the mobility of persons with disabilities. The applicants also maintained that the imposition of an airport improvement fee by the Gander Airport Authority on Attendants required to provide specific disability-related assistance to persons with disabilities in-flight also constitute an undue obstacle to their mobility.

[13] The applicants requested the Agency to order the respondents to implement a "one person - one fare regime" for domestic air travel, such that:

  • for any person with a disability who under the carrier respondents' domestic tariffs is required to travel with an Attendant, the carrier respondents shall permit the Attendant to travel free of charge;
  • for any person who is disabled by obesity and cannot lower the armrest of the seat assigned safely and with dignity, the carrier respondents shall provide the person with a second adjacent seat free of charge or a larger seat at no additional charge;
  • for any person with a disability who requires additional seating to accommodate that disability, the additional seating will be provided by the carrier respondents free of charge; and
  • the Gander Airport Authority shall not charge an airport improvement fee for additional seats needed by persons with disabilities who are required to travel with Attendants under the carriers' tariffs.

[14] Following the filing of extensive written pleadings, as well as expert and other evidence; many interlocutory motions and decisions; an 18-month stay of proceedings to permit one of the carrier respondents to complete a significant corporate restructuring; four weeks of public hearings over the course of an 18-month period, including a 10-month adjournment, the Agency has issued its Decision in this matter.

Undue obstacles

Weighing of undueness

[15] Although the Agency recognized that a requirement that the respondents implement a 1P1F policy would entail costs and operational challenges, the Agency concluded that, based on the evidence presented, these would not result in undue hardship to them. Specifically, the Agency determined that the Gander Airport Authority did not provide evidence and, thus, did not meet its burden of proof to demonstrate that it is unreasonable, impracticable or impossible for it to accommodate persons with disabilities who require an Attendant without causing undue hardship.

[16] Additionally, the Agency determined that:

  • the annual net revenue losses to the carriers, which represent less than 0.2 percent of their annual gross passenger revenues and approximately 41¢ and 16¢ in foregone revenue per domestic trip for Air Canada and WestJet, respectively, and
  • the need for the carriers to develop new or modify existing eligibility screening mechanisms so that they can properly apply the new policies, do not, based on the evidence provided to the Agency, constitute undue hardship to them.

[17] The Agency has carefully considered the decision of the Supreme Court of Canada, in the CCD v. VIA case, wherein it states:

A factor relied on to justify the continuity of a discriminatory barrier in almost every case is the cost of reducing or eliminating it to accommodate the needs of the person seeking access. This is a legitimate factor to consider: Central Alberta Dairy Pool v. Alberta (Human Rights Commission), 1990 2.S.C.R. 489, at pp. 520-21. But, as this Court admonished in Grismer, at para. 41, tribunals "must be wary of putting too low a value on accommodating the disabled".

[18] The Agency recognized the evidence presented by the applicants' expert of the following positive social impacts of a 1P1F policy:

  • a reduction in pressure on social welfare systems and fiscal burdens relating to increased income levels and living standards attributable to increased work-related mobility for persons with disabilities;
  • insurance value from having sustained access to air travel in the event of disability, recognizing that it is an actuarial reality that everyone in society stands a statistical chance of becoming permanently or temporarily disabled; and
  • ensuring or preserving the existence of the right of access to persons with disabilities.

[19] The Agency expressed the opinion that the estimated increases in ticket prices resulting from a 1P1F policy of 77¢ and 44¢ in respect of domestic flights on Air Canada and WestJet, respectively, are reasonable in light of the improved access to the federal transportation network for persons with severe disabilities that would result from a 1P1F policy.

Reasonable alternatives

[20] Although there was some evidence which indicated the existence of some alternatives to the requested accommodation of a 1P1F policy (such as Air Canada's policy to provide a 50 percent discount on full fares for seats required by persons' Attendants), given that the Agency determined that the carrier respondents failed to prove that a 1P1F policy would constitute undue hardship, the Agency concluded that it was unnecessary to review the alternatives as they are not reasonable by virtue of the fact that they provide for lesser levels of accommodation than that provided by a 1P1F policy, which the Agency has found to be reasonable.

Conclusion on undue obstacles

[21] It is important to persons with disabilities that they have access to a federal transportation network that is free of undue obstacles. In this case, the limitations to that access are:

  • the Improvement fee charged by the Gander Airport Authority in respect of persons with disabilities' Attendants; and
  • Air Canada's and WestJet's policies for charging additional fares for seating required by persons with disabilities to travel on domestic air services.

[22] The Agency must weigh this right of access against evidence brought forward by the respondents to demonstrate undue hardship. The Gander Airport Authority failed to produce any evidence to establish undue hardship and, while Air Canada and WestJet did produce evidence, they failed to demonstrate that the cost (in terms of the related economic and financial implications) and operational constraints that they would face in implementing a 1P1F policy constitute undue hardship. In this regard, the Agency found that:

  1. the airport improvement fee policy of the Gander Airport Authority; and
  2. the fare policies of Air Canada, Air Canada Jazz and WestJet related to domestic air services

constitute undue obstacles to persons who require additional seating to accommodate their disabilities to travel by air insofar as these policies require these persons with disabilities to pay additional fares and charges for transportation services that are over and above what other passengers pay for the same transportation services to have their disability-related needs accommodated.

Order for corrective measures

[23] In light of the undue obstacle findings against the Gander Airport Authority and Air Canada, Air Canada Jazz and WestJet, the Agency ordered the respondents to amend their current policies and procedures in order to incorporate a "one person - one fare" regime for persons with disabilities who require additional seating to travel on domestic air services by implementing the following corrective measures:

1. Gander International Airport Authority

[24] The Gander Airport Authority shall not charge or collect an airport improvement fee for additional seats needed by persons with disabilities who are required to travel with Attendants, on domestic air services, under the carriers' tariffs.

2. Air Canada, Air Canada Jazz and WestJet

[25] The carrier respondents shall not charge a fare for additional seats provided to the following persons with disabilities:

  • those persons who are required, under the terms of the carriers' tariff, to be accompanied by an Attendant;
  • those persons who are disabled as a result of obesity; and
  • those other persons who require additional seating for themselves to accommodate their disability to travel by air.

[26] With respect to the implementation of corrective measures, in recognition of the need for the respondents to, in the case of the carrier respondents, develop new or modify existing eligibility screening mechanisms so that they can properly apply the new policies, and, in the case of the Gander Airport Authority, establish a procedure to determine how to identify those persons with disabilities who are required by air carrier domestic tariffs to travel with an Attendant, the Agency determined that a twelve-month period is reasonable for the finalization and implementation of the corrective measures ordered.

The Agency's determinations in support of its undue obstacle conclusions

[27] What follows provides further details in respect of the determinations that the Agency has made in the course of coming to its conclusions on undue obstacles.

Disability determinations

[28] The Agency has determined that the application was filed by, and on behalf of, or relates to persons with disabilities, in particular, the following two specific target groups of persons with disabilities:

  • persons with more severe disabilities who are required by the carrier respondents' domestic tariffs to travel with an Attendant. The Decision applies only to those persons with disabilities who are required to travel with another person as an Attendant who will assist them in meeting specific personal care needs in-flight, in particular with meals, taking medication and using the toilet and/or who will provide physical assistance to them in the event of an emergency evacuation or decompression. It should be noted that the Decision does not apply to the much larger subpopulation of persons, disabled or otherwise, who prefer to travel with a companion for a wide variety of personal reasons, nor is it intended to apply to persons with disabilities who only require personal care attendants at destination, but not in-flight.
  • persons with disabilities who require additional seating for themselves and, in particular, persons who are disabled as a result of obesity. Again, the Decision does not apply to persons who are obese but not disabled as a result of their obesity. In applying the Federal Court of Appeal's decision in Linda McKay-Panos v. Air Canada, the Agency determined that persons with severe obesity may be disabled for the purposes of Part V of the CTA, but only where they do not fit in an aircraft seat.

Obstacle determinations

[29] The Agency found that Air Canada's and WestJet's fare policies and the airport improvement fee policy applied by the Gander Airport Authority constitute obstacles to the mobility of persons who require additional seating to accommodate their disabilities to travel by air as they represent an economic disadvantage which effectively limits travel opportunities in respect of employment, education, leisure, medical care, and emergencies available to these persons.

Undueness determinations

[30] At this point, the onus of proof shifts to the respondents to show that providing the accommodation requested, in this case, the implementation of a 1P1F policy, is unreasonable, impracticable or impossible.

1. Airport improvement fee charged by Gander Airport Authority

[31] The Agency accepted that the Gander Airport Authority's policy regarding the charging of the airport improvement fee had a legitimate purpose and was rationally connected to that purpose. The Agency determined, however, that the Gander Airport Authority did not discharge its burden of proof and that the airport improvement fee charged to persons with disabilities for their Attendants constitutes an undue obstacle to their mobility. The Gander Airport Authority argued that the airport improvement fee was not an undue obstacle to the mobility of persons with disabilities who are required to travel with Attendants, however, it did not provide any evidence whatsoever to support this position, despite being provided several opportunities to do so.

2. Fares charged by Air Canada and WestJet

[32] The Agency accepted that the carrier respondents' policies regarding the charging of fares have a legitimate purpose and are rationally connected to that purpose. The carrier respondents submitted substantial evidence in support of their contention that three constraints would result in undue hardship to them and would, thus, prevent them from accommodating persons with disabilities such as the applicants:

  • cost constraints,
  • safety constraints, and
  • operational constraints.
Cost constraints

[33] The cost of implementing a 1P1F policy was a central constraint raised by the carrier respondents in their arguments that the adoption of such a policy in respect of domestic air services would result in undue hardship. To assess the nature and significance of the constraint posed by the cost of providing accommodation to these persons with disabilities through the imposition of a 1P1F policy, the Agency first has to determine the estimated cost to each of the carrier respondents to provide the accommodation sought and then to assess the economic and financial implications of that cost to them.

Incidence

[34] As part of its examination of the estimated cost of a 1P1F policy, the Agency first determined the incidence or the number of times that the carriers could be expected to have to provide accommodation to persons with disabilities pursuant to such a policy. To determine estimated incidence, the Agency examined the following three factors:

  1. the number of persons with disabilities who require additional seating to accommodate their disabilities to travel by air within Canada;
  2. the travel propensity of the target population, being their inclination to travel as represented by the proportion of this population who use domestic air services; and
  3. the number of domestic air trips that this population would take in a year.

(i) the number of persons with disabilities who require additional seating to accommodate their disabilities to travel by air within Canada

Persons with disabilities who require additional seating to accommodate their Attendants in order to travel by air

[35] Of the positions presented by the parties, the Agency accepted as most reasonable the applicants' position that 3.6 percent of persons with disabilities who travel by air would require an Attendant under the terms of the carrier respondents' domestic air tariffs. This finding was based on the Agency's conclusion that the approach of the applicants' expert economist was a reasonable estimate of this target population in that the approach attempted to reflect the tariff criteria for requiring persons with disabilities to travel with Attendants by taking into account information about the severity of disabilities.

[36] The Agency rejected the carrier respondents' argument that 18.5 percent of persons with disabilities who travel by air would qualify for a benefit under a 1P1F policy as persons with disabilities who travel with an Attendant based largely on the conclusion that it was overstated as it did not reflect either Air Canada's or WestJet's domestic tariffs which require only the following categories of persons with disabilities to travel with an Attendant: persons who are deaf and blind; persons who have intellectual disabilities and are non-self-reliant; persons who are ambulatory and non-self-reliant; and, persons who are non-ambulatory and non-self-reliant. Persons who are non-self-reliant are persons who are not capable of taking care of specific personal care needs during flight and/or who require assistance during an emergency evacuation or decompression, over and above that provided by the carriers' personnel. The Agency noted as significant the fact that all of the other carrier respondents' experts premised their subsequent work on the use of this overstated figure.

[37] The Agency also rejected the carrier respondents' position that there would be a 5-25 percent rate of abuse of a 1P1F policy, on the basis that the carriers failed to provide evidence to support the reasonableness of this assumed rate of abuse. This was also rejected particularly in light of the carriers' current procedures they follow to determine fitness to and conditions of travel by establishing the nature of persons' disabilities and assessing capabilities through a combination of evidence from individuals' medical practitioners and the carriers' own Medadesk or Medalink systems. The Agency specifically noted the carriers respondents expert's comment that if the carriers determine who is eligible for a 1P1F policy, they are "going to greatly restrict the numbers and the numbers at the end of the day would be extremely small and whatever cost there might be for the airlines would be quite small, probably much smaller than the cost of challenging this."

Persons who are disabled by obesity

[38] The Agency accepted as reasonable the carrier respondents' proposal to use 2 percent of the Canadian adult population as an estimation of the number of persons who may be disabled by severe obesity for the purposes of the carrier respondents' domestic air services, in light of the number and sizes of seats actually in use by Air Canada and WestJet on their domestic flights.

[39] While the carriers initially argued that the incidence of obese persons who would be eligible for a benefit under a 1P1F policy would be 1.9-32.2 percent of the Canadian adult population, they subsequently acknowledged the faulty assumptions and reasoning in their expert's report and agreed with the Agency expert's range of 1 to 2.4 percent.

(ii) The travel propensity of the target population, being their inclination to travel as represented by the proportion of this population who use domestic air services

[40] The Agency found that the travel propensity of persons with severe disabilities, including both persons who require Attendants to travel by air and persons disabled by obesity, is 10 percent, as it is much lower than the 18.8 percent travel propensity of the general population of persons with disabilities. In coming to this conclusion, the Agency noted the severity of disabilities experienced by persons who require Attendants to travel by air and also determined that persons who are disabled by obesity are likely to be more severely disabled than the general population of persons with disabilities as they will fall at the far end of the spectrum of obesity with severe mobility impairments and other co-morbidities that will have significant impact on their health, quality of life and income levels.

(iii) The number of annual domestic air trips by persons with disabilities who require additional seating to travel by air

[41] The Agency concluded that the target population of persons with disabilities who require additional seating to travel by air would take an average of 2.5 one-way trips per year. The Agency based this on the assumption that the general population of persons with disabilities travel at half the rate of the general population of Canadians and the target population are persons with disabilities with more severe disabilities who would travel significantly less than the general population of persons with disabilities. This is particularly true given the impact of their disabilities on their levels of employment, income and difficulties experienced while traveling.

[42] The Agency rejected the carrier respondents' argument that the target population of persons with disabilities would take 4.94 trips per year, as the Agency found that it was based on a previous Agency survey that was not designed to measure what its data was now being used to support. In particular, the Agency found the 4.94 trip rate to be unreasonable for this subpopulation of persons with disabilities when compared with the 5 to 6 annual trips taken by the Canadian population at large, as supported by what the Agency determined to be the best evidence which was provided by one of the carrier respondents' experts.

[43] Accordingly, based on the evidence provided, the Agency found that:

  • 80,600 persons with disabilities who travel by air will be eligible to benefit from a 1P1F policy;
  • this target population would take an average of 2.5 one-way trips per year;
  • considering the domestic market shares of the carrier respondents, this will amount to 54,200 domestic trips on Air Canada, which represents 0.32 percent of its 17,125,200 domestic passenger trips in 2005 and to 28,900 domestic trips on WestJet, which represents 0.32 percent of its 9,133,440 domestic passenger trips in 2005.
Cost of accommodation

[44] The Agency then examined the related cost to the carriers.

[45] The parties submitted numerous reports which provided estimates of the cost of a 1P1F policy in terms of annual revenue losses attributable to persons with disabilities who require additional seating in respect of their Attendants and provided different estimates of the cost depending on whether it was assumed that ticket prices would increase or whether load factors would increase in response to the adoption of a 1P1F policy. None of the reports provided estimates of the cost of a 1P1F policy attributable to travel by persons disabled by obesity due to the unavailability of data at the time that they were prepared.

[46] In the end, the Agency estimated the cost of a 1P1F policy to each of the carriers based on a methodology which reflected the operational reality of Air Canada's and WestJet's reliance on their "yield management systems" to manage seat sales relative to forecasted demand, a methodology similar to that used by the carrier respondents' expert economist. Although the carrier respondents also submitted reports prepared by accounting firms which were based on the assumption that ticket prices would not increase in response to a 1P1F policy, the Agency determined that the approach used by the accounting firms was not appropriate as the evidence was clear that the carriers' yield management systems would react to new demand for travel as a result of the benefits of a 1P1F policy by increasing ticket prices to maximize passenger revenues at optimal load factors.

[47] Using a methodology reflecting the use of yield management systems, the Agency estimated the cost of a 1P1F policy to the carrier respondents in terms of:

  • revenue losses related to persons with disabilities who require additional seating to accommodate their disability and are already travelling;
  • revenue gains from induced trips taken by persons with disabilities who require additional seating to accommodate their disabilities; and
  • revenue losses as a result of a price increase

[48] The Agency agreed in principle with the applicants that the cost of accommodation should be calculated net of amounts that can be attributed to other sources of funding, including tax credits and deductions, and income or savings that will be generated as a result of having made accommodations. The applicants did not provide evidence to quantify any savings to the carriers. However, the Agency reduced the estimated cost of a 1P1F policy to WestJet by 35 percent to reflect a decrease in future taxes payable associated with an increase in non-capital losses available for carry forward for tax purposes, which results from the reduction in revenues due to a 1P1F policy. There was no evidence to support a similar future tax benefit for Air Canada.

[49] After giving consideration to the future tax benefit to WestJet associated with a 1P1F policy, the Agency determined that the estimated annual cost for the carriers will be $7.1 million for Air Canada and $1.5 million for WestJet, or 41¢ and 16¢ per domestic trip, respectively. The Agency further determined that average domestic ticket prices would increase by 77¢ for an Air Canada flight and 44¢ for a WestJet flight.

[50] The Agency rejected the estimates of costs provided by the carrier respondents of $49.6-$59.1 million per year for Air Canada and $12.9-$21.7 million per year for WestJet and the estimates provided by the applicants of $5.36 million per year for Air Canada and $2.31 million per year for WestJet.

[51] The overstatement of costs by the carrier respondents resulted from the following factors:

  • the carrier respondents used a costing methodology that failed to recognize the reliance by the carriers on their yield management systems to maximize revenues at optimal passenger load factors and that these systems would respond to a 1P1F policy by increasing ticket prices;
  • the carrier respondents attributed revenue losses of $4.4 to $22.6 million per year to the assumption that there would be abuse of a 1P1F policy, which the Agency rejected as unsubstantiated and unreasonable based on its finding that the carrier respondents have available to them sufficient safeguards in the form of screening processes similar to those which already exist which could be implemented to avoid abuse;
  • the carrier respondents used attendant accompaniment rates of 18.5 percent, which does not take into account the carriers' tariffs which limit eligibility for a 1P1F policy, whereas the Agency concluded that 3.6 percent, which does reflect the carriers' tariffs, is a more reasonable rate;
  • the carrier respondents assumed a trip rate of 4.94 trips annually by persons with disabilities who require additional seating to accommodate their disabilities, whereas the Agency found that 2.5 trips annually provided a more reasonable trip rate, on the basis that this is more reflective of persons with severe disabilities who encounter more difficulties travelling by air and who have lower incomes; and
  • the carrier respondents used a 20-percent travel propensity rate for persons disabled by obesity, whereas the Agency determined that a more reasonable travel propensity rate for this subgroup of persons with disabilities is 10 percent, again on the basis that this is more reflective of persons with severe disabilities who encounter more difficulties travelling by air and who have lower incomes.
Economic and financial implications of a 1P1F policy

[52] The Agency then assessed the related economic and financial implications of the cost, given that the cost of accommodation, in and of itself, is not determinative of whether such a policy would cause undue hardship to the carrier respondents.

(a) Economic implications of a 1P1F policy

[53] The carrier respondents presented evidence regarding negative economic implications of a 1P1F policy in terms of competitive disadvantages and cross-subsidization that would arise from the adoption of such a policy. The applicants presented evidence in terms of positive economic impacts attributable to a 1P1F policy.

[54] The carrier respondents alleged that they would be at a competitive disadvantage if they were required to implement a 1P1F policy. The Agency acknowledged that even though the carriers, collectively, represent over 90 percent of the domestic market, they face a certain level of competition on a route-by-route basis. The Agency concluded, however, that the carrier respondents did not provide any evidence regarding the extent and impact of this competition. Therefore, the Agency was not convinced that the nature of the competitive disadvantages that may be experienced by the carrier respondents will have a material impact on them.

[55] The carrier respondents also argued that with the implementation of a 1P1F policy, they will incur disproportionately higher operating costs related to the disproportionate amount of demand for air travel on their flights by persons with disabilities who need additional seating. However, the Agency found that the carrier respondents failed to provide evidence identifying and substantiating the specific component of total operating costs that pertains to the provision of assistance and services to persons with disabilities. Also, they did not provide any evidence of any impact of the additional operating costs that they might incur as a result of a 1P1F policy.

[56] The carrier respondents also argued that a 1P1F policy, absent a direct government subsidy, will result in cross-subsidization. The Agency determined, however, that the carrier respondents failed to demonstrate this and further noted that the Supreme Court of Canada provided a clear indication in its decision in the CCD v. VIA case of its acceptance of cross-subsidization as being reasonable for the achievement of important societal goals such as the accommodation of persons with disabilities.

[57] In terms of the positive social impact of a 1P1F policy, the Agency recognized the following specific economic values:

  • a reduction in pressure on social welfare systems;
  • an insurance value, recognizing that it is an actuarial reality that everyone in society stands a statistical chance of becoming permanently or temporarily disabled; and
  • preserving the existence of the right of access to persons with disabilities.

[58] The Agency found that the positive social impact of a 1P1F policy could outweigh the associated costs, depending on the magnitude of the cost. In this regard, the Agency determined that the estimated cost of a 1P1F policy in terms of the increase in ticket price for an average fare is 77¢ for Air Canada and 44¢ for WestJet. The Agency found these increases in ticket prices to be relatively small, both in absolute dollar terms and as a percentage of average domestic fares, such that these increases in ticket prices are reasonable particularly in light of the above-noted economic values in addition to the improved access to the federal transportation network for persons with severe disabilities that would result from a 1P1F policy. The positive economic values were acknowledged by one of the carrier respondent's experts in terms of the benefits of universal access and reinforced by the Supreme Court of Canada in the CCD v. VIA case; and they are reflective of the fundamental principles of accessibility and must be weighed in the Agency's undueness analysis of a 1P1F policy.

[59] The Agency concluded that both Air Canada and WestJet failed to demonstrate that the economic implications of a 1P1F policy in the domestic market constitute undue hardship to the carriers.

(b) Financial implications

[60] The Agency examined the financial constraints of a 1P1F policy in terms of the carrier respondents' historical costs of accommodation; the carrier respondents ability to absorb the cost of a 1P1F policy; and the cost of implementing screening mechanisms for the purpose of assessing eligibility for benefits of a 1P1F policy.

Historical costs of accommodation

[61] The Agency determined that historical general costs of accommodation of all persons with disabilities were not relevant to its determination of whether the cost of a particular accommodation for certain persons with disabilities would be undue. While the carrier respondents argued that they already bear a heavy financial burden by reason of actions they are required to take for the benefit of persons with disabilities and that any increase in this burden would be an undue hardship, the Agency found that it would be an error to consider the totality of all costs of accommodation for all persons with disabilities in this context other than as forming part of the general operating costs of the carriers.

[62] This is consistent with the Supreme Court of Canada's decision in the CCD v VIA case wherein the Court stated that, "It has never been the case that all forms of disability are engaged when a particular one is said to raise an issue of discrimination." The Agency also pointed out that in addition to any operational constraints, its determination of whether the cost of a 1P1F policy represents an undue obstacle to Air Canada and WestJet must be answered in the context of the economic and financial implications of this cost and this is not determined by how much is already being spent on existing accommodation and accessibility services for all persons with disabilities.

The carrier respondents' ability to absorb the cost of a 1P1F policy

[63] Evidence regarding the ability of the carrier respondents to absorb the cost of a 1P1F policy was provided in terms of the following:

  1. the cyclical nature of the domestic air industry;
  2. impact of a 1P1F policy on the carrier respondents' market capitalization; and
  3. impact of a 1P1F policy on the carrier respondents' gross revenues and credit ratings and cost of capital.

(i) cyclical nature of the domestic air industry

[64] The carrier respondents presented evidence of the historical ups and downs of the Canadian airline industry and the annual seasonality of demand, which the Agency determined to be of little assistance in determining the question, noting that most businesses operate, to some degree, in a cyclical environment and this is not determinative of whether accommodation costs are undue.

(ii) impact of a 1P1F policy on the carrier respondents' market capitalization

[65] The carrier respondents presented a report during the second hearing which concluded that for each $1 million of additional pre-tax cost attributable to a 1P1F policy, Air Canada and WestJet will experience an estimated present value loss of between $9 million and $13 million. However, several limitations to the report were noted, including that the scope was limited to a general consideration of the factors and approaches relevant to the assessment of the present value of a reduction in the annual pre-tax earnings of the carriers; a comprehensive industry study or investment return analysis had not been done; the report is not a valuation report; and no attempt was made to assess the impact of a 1P1F policy on the market capitalization or share values of Air Canada or WestJet. Concerning the underlying assumption for the preparation of the report, i.e., that the cost of a 1P1F policy would not be passed on to consumers, the expert for the carrier respondents acknowledged that it would be necessary to reflect whether fares would change in response to a 1P1F policy to fully explore what would be the impact of such a policy on airline value. The expert for the carrier respondents acknowledged that the report did not assist in drawing conclusions about the economic viability of Air Canada or WestJet in light of the estimated revenue losses associated with the adoption of a 1P1F policy.

[66] The Agency found that, on its own, the carrier respondents' report was of very limited assistance in assessing the significance of the financial impact on the carriers of the cost of a 1P1F policy. The Agency noted that a cost, in and of itself, is not determinative of undueness; rather, a contextual analysis which assesses the significance of the impact of the cost on the respondent is necessary. In this regard, the Agency noted that no serious attempt had been made to demonstrate the significance of the impact of a 1P1F policy on the carriers, either in terms of the market capitalization or share values of the carriers or otherwise, instead arguing that "any change in cost conditions for an enterprise has an impact on its business and on its value." Rather, the applicants presented a persuasive argument that the value impact of a 1P1F policy would be comparable to the value impact of random daily events.

[67] In the absence of evidence to demonstrate the significance of the impact of a 1P1F policy, the Agency concluded that the carrier respondents have the ability to incur the cost of a 1P1F policy.

(iii) impact of a 1P1F policy on the carrier respondents' gross revenues and credit ratings and cost of capital

[68] The Agency accepted the proposition presented by the applicants' expert that, through a comparison with gross revenues, it is possible to obtain an indication of the relative significance of the estimated annual net revenue losses attributable to a 1P1F policy. More specifically, the Agency accepted the submission of the applicants' expert, which was agreed to by the carrier respondents' expert, that an impact on gross revenues of 0.2 percent would be within the margin of error in terms of general revenue expectations, i.e., a change of 0.2 percent would lie within the expected uncertainty for revenue estimates. The Agency also accepted a submission by the applicants' expert, which was not contested by the expert for the carrier respondents, that a 0.2 percent decline in gross revenues would be less than that typically associated with evidence of material financial harm or of the need in financial markets to reassess credit ratings and re-price debt.

[69] As the Agency determined that the cost of a 1P1F policy to Air Canada is estimated to be $7.1 million in annual net revenue losses and the carrier reported approximately $8.2 billion in passenger revenues for 2005, the Agency estimates a 0.09 percent impact on Air Canada's revenues from implementing a 1P1F policy domestically. The comparable figures for WestJet are estimated annual before-tax net revenue losses of $2.3 million compared to "guest" and "charter and other revenues" of $1.4 billion in 2005 such that the Agency estimates a 0.16 percent impact on WestJet's revenues from implementing a 1P1F policy domestically. Accordingly, the Agency concluded that, in terms of the Air Canada's and WestJet's gross revenues, the cost of a 1P1F policy would not be material when considered in the context of the implications for credit ratings and reaction by the financial markets as the impacts for both carriers would be within the margin of error in terms of general revenue expectations.

Conclusion on undue hardship of the financial implications of a 1P1F policy

[70] While the carrier respondents took the position that to introduce opinion evidence to the effect that the carrier respondents would be unable to incur the cost of a 1P1F policy would usurp the Agency's jurisdiction, the Agency disagreed with this position. The Agency noted that to meet its burden of proof when asserting cost constraints as a defense, a respondent is required to produce evidence to demonstrate the significance of the impact of a cost and, further, to demonstrate that the cost would constitute undue hardship, the respondent must demonstrate that the cost and the significance of its impact would be harmful to it to the point that it would be unreasonable, impracticable or impossible for it to provide the accommodation requested. The Agency rejected the applicants' position that a respondent relying on cost constraints as a defence will be expected to prove that the accommodation would threaten its survival or alter its essential character.

[71] In considering all of the evidence filed, the Agency determined that the carrier respondents failed to demonstrate that any of the financial implications of the cost of a 1P1F policy resulted in undue hardship. Specifically, the Agency found:

  • that the historical costs of accommodation were irrelevant to its examination of the financial implications of a 1P1F policy on the carrier respondents;
  • that the evidence submitted by the carrier respondents regarding the cyclical nature of the airline industry, when considered together with the evidence regarding their enhanced ability to sustain significant negative economic events as a result of an increased focus on cost controls, failed to demonstrate that they would be unable to sustain the impact of a 1P1F policy;
  • that the expert report submitted by the carrier respondents on the impact of the cost of a 1P1F policy on the business valuations of Air Canada and WestJet failed to demonstrate the significance of the impact of this cost on these carriers except in the most general of ways by submitting that "any change in cost conditions for an enterprise has an impact on its business and on its value"; and
  • that the cost of a 1P1F policy would not be material in terms of implications for credit ratings and reactions by the financial markets given that the estimated annual net after-tax cost of a 1P1F policy represents less than a 0.2 percent decline in the carriers' gross revenues, which their expert agreed would be within the margin of error.

Safety constraints

[72] In respect of the alleged safety constraints, the Agency rejected the carrier respondents' assertion that the applicants' case arises from the requirement pursuant to Air Canada and WestJet's tariffs for the target group of persons with disabilities to travel with Attendants and that the accommodation needed would be to allow persons with disabilities to decide for themselves whether they will travel with Attendants. Rather, the Agency determined that safety is only relevant in defining the numbers of persons who may benefit from a 1P1F policy as the Agency determined that this case was about entitlement to an economic benefit, for which the carriers are entitled to determine the criteria, and not about denying persons their preference to travel with a companion, for whatever reason.

Operational constraints

[73] The Agency concluded that it is possible to establish an effective screening process to assess eligibility under a 1P1F policy, based on the following facts established by the evidence:

  • functional assessments can and are applied, in particular in the transit industry, to determine more difficult capabilities than whether a passenger requires an Attendant to provide assistance with eating, taking medication or using a toilet while maintaining the dignity of persons with disabilities;
  • the carriers already have mechanisms in place to conduct screening which, with the proper expertise, could be adapted to perform this function to determine the need for an Attendant; and
  • Southwest Airlines has an official policy for accommodation of persons disabled by obesity, under which it administers an objective test on the day of travel to determine eligibility for accommodation by assessing a person's ability to fit in his/her seat by lowering the armrests.

[74] With respect to persons disabled by obesity, as in other cases of disability, there may be some instances where it will be obvious through the carrier's initial screening process that a person who is disabled by obesity will not be able to fit in the seat of the aircraft used by the carrier, while recognizing that an individual assessment of the person's ability to fit in the aircraft seat may be required in other cases. The Agency acknowledged that the carriers' current assessment systems do not presently address the screening of persons who may be disabled by obesity and that the assessment process in these cases will be more complex. The Agency pointed out, however, that the experience of Southwest Airlines would support the proposition that this complexity can be addressed with the development and sensitive implementation of an objective test, such as the armrest test used by Southwest Airlines.

[75] The Agency ruled that it would not dictate to the carrier respondents the means by which they should assess eligibility, however, the Agency found there to be reasonable and practicable means to screen persons. An assessment process that may include an initial medical assessment coupled with possibly an objective screening test such as that used by Southwest Airlines may be perceived by persons who are disabled by obesity as being onerous and difficult. However, the Agency found that this type of assessment would provide objectivity to this assessment and is reasonable given the financial benefit that would be available under a 1P1F policy.

[76] The Agency concluded that the carrier respondents failed to demonstrate that there are operational constraints that would prevent them from operationalizing/implementing a 1P1F policy in respect of the target populations of persons with disabilities and that the carrier respondents did not demonstrate that these challenges constitute undue hardship.


Table of contents


The abbreviations used in this Decision are set out in Appendix A and a glossary of terms and definitions used in this Decision is set out in Appendix B.

Part I - Background

Hearing

Tribunal3

Gilles Dufault Member, Chairman of the Panel, Canadian Transportation Agency

Beaton Tulk Member, Canadian Transportation Agency

Participants

Elizabeth Barker Counsel, Canadian Transportation Agency

Inge Green Counsel, Canadian Transportation Agency

Appearances

David Baker Counsel for the applicants

Sarah Godwin Counsel for the applicants

Eric Norman Applicant

Joanne Neubauer Applicant

Adele D. Furrie Expert witness for the applicants

Dr. David Lewis, Ph.D. Expert witness for the applicants

Ritu Khullar Counsel for the intervener, Linda McKay-Panos

Laurie Ringaert Expert witness for the intervener

Gerard Chouest Counsel for Air Canada and WestJet

Rinku Deswal Counsel for Air Canada and WestJet

Professor David Allison Expert witness for Air Canada and WestJet

Richard Crosson Expert witness for Air Canada and WestJet

Professor Frederick Lazar, Ph.D. Expert witness for Air Canada

Brenda Pask Expert witness for WestJet

Dr. Michael Tretheway, Ph.D. Expert witness for WestJet

Cliff MacKay Witness for Air Canada and WestJet

Colleen Arnold Witness for Air Canada

Dr. Edward Bekeris, M.D. Witness for Air Canada

Odette Desmarais Witness for Air Canada

Lucie Guillemette Witness for Air Canada

Juliane Lambert Witness for Air Canada

Marian O'Connor Witness for Air Canada

Hugh Dunleavy Witness for WestJet

Lorne Mackenzie Witness for WestJet

Lisa Puchala Witness for WestJet

Dean Puffer Witness for WestJet

Richard S. Fisher Independent expert appointed by the Agency

Professor Peter Katzmarzyk Independent expert appointed by the Agency

Susan Greene Witness at the request of the Agency

Issue

[1] The issue raised by the applicants is that some persons with disabilities must pay fares for additional seating required to accommodate their disabilities to travel by air on domestic air services4 and must pay airport improvement fees (hereinafter the Improvement fee) for their Attendants5, which in their view constitutes undue obstacles to the mobility of these persons with disabilities.

[2] By way of remedy, the applicants are seeking from the Agency an order, pursuant to subsection 172(3) of the Canada Transportation Act (hereinafter the CTA), that the respondents implement a "one person - one fare regime" for domestic air travel, such that:

  1. for any person with a disability who under airline tariffs is required to travel with an Attendant, Air Canada, 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), and WestJet (hereinafter collectively referred to as the carrier respondents) shall permit the Attendant to travel free of charge;
  2. for any person who is disabled by obesity and cannot lower the armrest of the seat assigned safely and with dignity, the carrier respondents shall provide the person with a second adjacent seat free of charge or a larger seat at no additional charge;
  3. for any person with a disability who requires additional seating to accommodate that disability, the additional seating will be provided by the carrier respondents free of charge; and
  4. neither the Gander International Airport Authority, nor the Air Transport Association of Canada (hereinafter ATAC) shall charge or collect airport improvement fee on additional seats provided to the persons with disabilities described above.

[3] The respondents' position is that the additional fares and charges do not constitute undue obstacles to the mobility of persons with disabilities as it is reasonable that these persons be charged for, in the case of fares, the seating that they use and, in the case of the Improvement fee, the services and facilities from which Attendants, as passengers, benefit. Specifically, the carrier respondents assert that the application should be dismissed because, if accepted, they would result in undue and unreasonable hardship to the carrier respondents, including:

  • an increase in the financial burden which those airlines already bear as a result of actions mandated to eliminate obstacles to the mobility of persons with disabilities in the form of employee training and special services and equipment;
  • prejudice to the competitive position of those airlines by reason of the fact that they would be subject to rules differing from other airlines offering domestic services; and
  • prejudice to the competitive position of those airlines vis-à-vis their international competitors considering the fact that these competitors are not subject to a similar financial burden.

Preliminary matters

Decisions already made by the Agency

1. Scope of the Agency's investigation

[4] On January 22, 2003, the carrier respondents and ATAC directed interrogatories to the Council of Canadians with Disabilities (hereinafter CCD), including one which asked CCD to specify the range of persons it maintains should be entitled to the application of the principle of "one person - one fare" (hereinafter 1P1F), as defined in Appendix A, as it relates to its application to permit the respondents to know the number of persons and the circumstances of those persons who, in CCD's view, would be entitled to benefit from a 1P1F policy. CCD answered the interrogatory by responding that "any person who requires the use of more than one seat on an aircraft due to their disability should receive the benefit of such principle".

[5] In reply, the carrier respondents and ATAC brought motions before the Agency requesting, among other things, that a full response be required of CCD or, alternatively, that some alternate framework be used to determine the size of the class of persons who would be entitled to benefit from a 1P1F policy. In addition, the carrier respondents and ATAC requested that the Agency identify the carriers and classes of service that would be affected by the application of such policy as, in their view, "there is no basis on which an order could be made without affecting the interests of all air carriers doing business in Canada".

[6] In its Decision No. LET-AT-A-356-2004, the Agency determined that, with respect to defining the class of persons who may be entitled to benefit from any Agency order, the pool of persons who could benefit from a potential systemic remedy are those persons with disabilities who, when travelling by air, require additional seating to accommodate their disabilities, for either themselves or their Attendants. With respect to expanding the respondents to the application to include other carriers in the domestic air industry, the Agency confirmed that under section 172 of the CTA, the Agency cannot expand the scope of an application by adding new and different respondents to its investigation. The Agency noted, however, that this does not preclude other carriers from participating in the proceeding by, for example, applying for and obtaining intervener status.

2. Jurisdiction over the air travellers' security charge

[7] The applicants initially included in their application the air travel security charge (hereinafter the ATSC) levied under the Air Travellers Security Charge Act, S.C., 2002, c. 9 (hereinafter the ATSCA) against, among others, persons with disabilities who require additional seating to accommodate their disabilities to travel by air. However, in response to a motion brought by the then Minister of National Revenue, and in consideration of written pleadings on the subject, in its Decision No. LET-AT-A-128-2005 dated April 21, 2005, the Agency determined that it did not have jurisdiction over the ATSC and dismissed the application against the Minister of National Revenue. The Agency found that the ATSC is not a charge pursuant to subsection 170(1) of the CTA as such charges are imposed under the ATSCA and, thus, falls outside of the Agency's regulation-making and complaint adjudication authority.

3. Application under subsection 15(1) of the Canadian Charter of Rights and Freedoms

[8] The applicants also asserted in their application that the fares contained in the tariffs of the carrier respondents, the Improvement fee charged by the Gander International Airport Authority and the ATSC are matters subject to the Canadian Charter of Rights and Freedoms, R.S.C., 1985, Appendix II, No. 44 Schedule B (hereinafter the Charter) which should be struck down as contrary to subsection 15(1) of the Charter and unjustifiable pursuant to section 1. The applicants submitted that the Agency is a "court of competent jurisdiction" and, thus, is able to both make a determination under subsection 15(1) and order a remedy under subsection 24(1) of the Charter.

[9] The respondents, ATAC and the Minister of National Revenue challenged this assertion. They took the position that the Agency is not a court of competent jurisdiction for the purposes of determining the availability of relief under the Charter and that, in the case of the carrier respondents and ATAC, their actions are not subject to scrutiny under the Charter.

[10] Upon consideration of the written pleadings filed, the Agency, in its Decision No. LET-AT-A-128-2005, determined that there was no need for it to consider its jurisdiction to entertain Charter arguments and order remedies under subsection 24(1) of the Charter. The Agency found that the Charter was not applicable to either the carrier respondents or to ATAC, and that there was insufficient evidence before it to answer the question of whether the level of control exercised by the federal government over the Gander International Airport Authority is sufficient to bring the Gander International Airport Authority under the application of the Charter. The Agency also noted that this last issue would be more properly dealt with in another forum given the broad implications of such a decision on the Gander International Airport Authority.

Outstanding issues

1. Status of ATAC as a respondent

[11] In its reply dated February 28, 2003, ATAC indicated that air carriers collect improvement fees from all departing enplaned air carrier passengers at certain airports pursuant to the terms of a Memorandum of Agreement (hereinafter the MOA) between ATAC and signatory air carriers and certain airport authorities, including the Gander International Airport Authority. Under the MOA, ATAC acts as Administrator and Secretary, and fulfills a purely administrative role by arranging for the means by which the collected improvement fees are remitted to the airport authorities.

[12] Accordingly, the Agency finds that the Gander International Airport Authority, and not ATAC, is the proper respondent to the application with respect to the Improvement fee collected at the Gander International Airport and, as such, the application is dismissed against ATAC.

2. Application under subsection 67.2(1) of the CTA

[13] The applicants initially brought their application under not only section 172 of the CTA, the Agency's accessible transportation complaint adjudication provision, but also under subsection 67.2(1) of the CTA which empowers the Agency to suspend or disallow terms and conditions of carriage applied by Canadian air carriers operating domestic air services where they are found by the Agency, upon complaint, to be unreasonable or unduly discriminatory.

[14] Without commenting on the correctness of the applicants' assertion that subsection 67.2(1) of the CTA is applicable to fares and charges, the Agency is of the opinion that it is appropriate to limit its consideration of the application to its jurisdiction under section 172, as it is the more specific provision, narrowly applicable to the accessibility concerns of persons with disabilities. The jurisdiction of the Agency to consider whether "fares [...] applicable in respect of the transportation of persons with disabilities" and "charges [...] applicable in respect of the transportation of persons with disabilities or incidental services" constitute undue obstacles to the mobility of persons with disabilities is explicit, based on paragraph 170(1)(c) and subsection 172(1) of the CTA. Furthermore, the Agency's power to order corrective measures under subsection 172(3) of the CTA is, in fact, broader than the remedial power under the more general provision, subsection 67.2(1) of the CTA, and includes the remedies available under subsection 67.2(1).

[15] For these reasons, the Agency will only consider the application in the context of the more specific complaint adjudication provision, section 172 of the CTA.

Parties

The applicants

[16] Eric Norman was a person with paraplegia who lived in Gander, Newfoundland. He required additional seating to travel on an aircraft to accommodate an Attendant. Following Mr. Norman's death on March 12, 2006, his application was continued by his Estate.

[17] While Mr. Norman was assistant superintendent of a school board for most of his career, he retired at age 51 after contracting a rare disease in 1983 that resulted in his paraplegia. He indicated that because he lived in Gander, Newfoundland, there was no realistic alternative for him to travel off the island other than to travel by air, which he did to seek medical treatment, among other things. The Province of Newfoundland paid 50 percent of his travel costs for health care that is not available in the province. Although Mr. Norman acknowledged that he could afford to pay his travel expenses, he indicated that the additional cost of travelling with an Attendant caused him concern as he lived on a fixed income.

[18] Mr. Norman estimated that he took seven to ten flights per year, usually four of which were for personal matters. Mr. Norman also indicated that while he used to travel independently, he had problems with this and, as a result, had been travelling with his wife or another family member as an Attendant for many years.

[19] Mr. Norman travelled with Air Canada on May 19 and 24, 2002, and he received a 50-percent reduction of the applicable fare for his Attendant's seat.

[20] On June 3, 2002, Mr. Norman had to travel with his Attendant to Toronto for medical treatment. He confirmed his eligibility for the 50-percent reduction of his Attendant's fare with Air Canada, but was advised that Air Canada Tango (a discount airline launched by Air Canada that has since discontinued operations) did not offer such a reduction. He took exception to the advice that he received from the booking agent that the reduction was not offered because Air Canada Tango was a "no frills airline", adding that the reduction of the Attendant's fare was not a "frill" for him, it was a necessity. He paid two fares and returned on June 6, 2002.

[21] On June 25, 2002, Mr. Norman was required to travel again to Toronto and, on this occasion, he travelled from Gander using Air Canada Jazz. He was offered a reduction on the applicable fare for his Attendant's ticket.

[22] On March 2, 2004, he and his Attendant travelled from Gander to Toronto via Halifax for medical treatment, returning on March 22, 2004. The flights between Gander and Halifax were operated by Air Canada Jazz while the flights between Halifax and Toronto were operated by Air Canada. Mr. Norman's ticket cost a total of $722.48 ($542.00 air fare; $0.84 GST; $85.06 HST; $24.00 Airport Improvement Fee; $13.08 Air Traveller Security Charge; $50.00 Non-refundable Fee-Domestic and $7.50 HST on Fee). The reduced cost of his Attendant's ticket amounted to a total of $433.83 ($291.00 air fare; $0.84 GST; $47.41 HST; $24.00 Airport Improvement Fee; $13.08 Air Traveller Security Charge; $50.00 Non-Refundable Fee-Domestic; and $7.50 HST on Fee). His total transportation cost for the return trip was $1,156.31.

[23] On May 25, 2005, Mr. Norman travelled with his Attendant from St. John's to Toronto for further medical treatment, returning on May 29, 2005. Mr. Norman travelled with Air Canada and was advised that no reduction of the Attendant's fare was available on Air Canada Tango discount fares. Mr. Norman nevertheless chose to travel on Tango fares as the two Tango fares cost a total of approximately $1,396 compared to the $2,471 that he would have had to pay for his ticket and his Attendant's reduced Latitude-fare ticket to travel with Air Canada.

[24] Mr. Norman indicated that, in 2004, he made a total of five trips for medical and other purposes and that he paid between $1,000 and $2,000 for his Attendant to travel with him, this in addition to his own travel expenses and net of the Government of Newfoundland's subsidy for medical travel.

[25] Mr. Norman stated that after he became disabled in 1983, he was active in volunteer work for disability organizations, starting at the local level and subsequently at the provincial level with the Consumer Organization of Disabled People of Newfoundland and Labrador, and finally, at the federal level, with both CCD (formerly known as The Coalition of Provincial Organizations of the Handicapped, hereinafter COPOH) as a member, board member and Chairman of the Transportation Committee, and with the Minister of Transport's Advisory Committee on Accessible Transportation (hereinafter ACAT), again as a member and as Chairman. In this capacity, he was aware of and made submissions related to the history of the 1P1F issue in the context of the Canadian air industry. He indicated that there is "general consensus in the disabled community that transportation is probably the one most important issue that has to be resolved before others can really be satisfactorily dealt with."

[26] According to Mr. Norman, the issue of 1P1F first arose officially at a 1979 national conference organized by COPOH to focus on transportation problems for persons with disabilities. He pointed to the first governmental response on this issue, being in a 1980 decision of the Railway Transport Committee of one of the Agency's predecessors, the Canadian Transport Commission, in the case of Clariss Kelly where the Committee ordered VIA Rail Canada Inc. (hereinafter VIA) to, among other things, institute a tariff based on the principle of 1P1F.

[27] CCD later made submissions to a Special Parliamentary Committee that included the 1P1F issue and Mr. Norman noted that the Obstacles Report released by this Committee included a 1P1F recommendation. In 1983, COPOH made representations to a special committee of the Air Transport Committee of the Canadian Transport Commission which had been struck to consider issues related to accessible air transportation including the 1P1F issue, following which this Committee made a recommendation that regulations be put in place to give effect to the principle of 1P1F.

[28] In 1993, the National Transportation Agency (hereinafter the NTA), as the Agency was then known, proposed Attendant Air Fare regulations. However, Mr. Norman highlighted some of the problems with this proposal from the perspective of CCD, including the fact that it only provided for a 75-percent reduction of Attendant fares and that it contained what, in its view, were overly strict eligibility criteria that would result in many persons with disabilities who are required to travel with an Attendant being ineligible for the reduced fare.

[29] In 1995, ATAC proposed that its members would voluntarily offer a 50-percent reduction on all of their fares for Attendants. Mr. Norman advised that this was considered to be an attractive proposal at the time. He recalled an example that was given which showed the 50-percent reduction being applied to a discount fare such that it resulted in a fare for an Attendant that would be only 9 percent of the full fare for the trip. However, Mr. Norman advised that this policy was only applied for a short time before changes were made which ultimately led to the present situation where, for example, Air Canada now only offers the 50-percent reduction on its full fares and not on its discounted fares.

[30] While ACAT, at the Minister of Transport's request, formed a subcommittee, which included representatives from both the community of persons with disabilities and from the air industry, to examine the 1P1F issue Mr. Norman indicated that, to his knowledge, the subcommittee only met three times over an 18-month period before becoming "hopelessly hamstrung" and unable to achieve the unanimous consensus that was required to make a recommendation to the Minister.

[31] Subsequent to this, CCD decided that it would seek resolution of this issue by way of an application to the Agency.

[32] Joanne Neubauer has had severe rheumatoid arthritis, a progressive disease, since the age of two. She lives in Victoria, British Columbia. She requires a wheelchair for mobility, although she can use crutches for short distances. She also requires the assistance of professional attendants in her daily life and additional seating to accommodate an Attendant when she travels by air. She indicated that, while the provincial government pays for her attendants' regular duties, it will not pay for their transportation costs.

[33] Ms. Neubauer indicates that she has been primarily unemployed for most of her adult life, although she has worked for short periods of time on projects involving persons with disabilities and has done volunteer work with a representative organization in the past. She has a limited fixed income, based on provincial income assistance for persons with disabilities.

[34] Ms. Neubauer gave evidence that she travels approximately once a year. She stated that she would travel more often if she were not charged additional fares for her Attendant. Ms. Neubauer calculated on seven separate occasions where she would have travelled by air but could not afford to do so, between Victoria and each of Edmonton, Prince George, Grand Prairie, and Dawson Creek.

[35] In June 1999, Ms. Neubauer made inquiries with WestJet regarding the cost for her and an Attendant to travel by air from Victoria to Edmonton on July 15, returning on August 10, 1999. She was advised that WestJet provides no discount on the fare for an Attendant. She indicated that she knew from past experience that the two fares to travel with WestJet would cost less than one full fare plus the 50-percent reduction of her Attendant's fare to travel with Air Canada. Despite this, she calculated that she could not afford to travel to Edmonton by air although it is the best means of transit for her, considering her disability-related needs. Instead, she shared the rental of a van with a friend as a car would not accommodate her wheelchair. In October 2000, Ms. Neubauer inquired with WestJet about ticket prices for her and an Attendant to travel by air from Victoria to Grande Prairie on October 28, returning to Victoria on October 30, 2000, for her brother's 25th wedding anniversary. She indicated that she had hoped that, by then, WestJet would have brought its policy into line with those airlines in Canada which offered reduced fares for additional seats required to accommodate persons with disabilities; however, she was advised that WestJet did not offer a reduced fare for Attendants. Ms. Neubauer states that without the discount she could not afford to purchase the tickets; however, her brother ultimately purchased tickets for Ms. Neubauer and her Attendant to travel with Air Canada. However, Ms. Neubauer states that although her brother indicated to the Air Canada ticket agent that the second ticket was for an Attendant, he did not think to ask for, nor was he given, the 50-percent reduction of her Attendant's fare.

[36] Ms. Neubauer was invited to serve as a representative for the Action Committee of People with Disabilities at a conference hosted by the Social Planning and Research Council of British Columbia in Prince George, scheduled for July 27 to August 2, 2002. Once again, Ms. Neubauer inquired about ticket prices with WestJet and was advised that WestJet still did not offer reduced fares for Attendants. Ms. Neubauer recalled that each ticket would have cost her a little less than $200, and that, without the discount, she could not afford the flight, and as a result, she was unable to serve as a representative for the Action Committee.

[37] Ms. Neubauer adds that she was unable to travel by air to her parents' home in Dawson Creek on four separate occasions:

  • in 1998, for her parents' 50th wedding anniversary;
  • in 1999, for her father's 80th birthday;
  • in January 2005, to visit her ailing mother; and
  • in March 2005, to visit her parents before their move to Vancouver.

[38] In 1998, she travelled in a friend's van to Dawson Creek, but she was unable to make the trips in 1999 and 2005 due to winter driving conditions. She also indicates that her condition has deteriorated such that she is unable to make trips such as this by personal vehicle, thus limiting her travel options.

[39] The Council of Canadians with Disabilities was founded in 1976 and advocates at the national level to improve the status of women and men living with disabilities by eliminating inequalities and discrimination. CCD is composed of representatives from provincial disability organizations across Canada as well as major national disability organizations.

[40] CCD submits that the 1P1F issue has been a longstanding concern to the disability community. COPOH regarded this as a priority issue virtually from its inception in the late 1970's. In 1979, COPOH hosted a National Transportation Conference at which the participants passed a resolution calling for a national policy "that the extra cost of an attendant be bourne by the air carrier in question", i.e., that a 1P1F policy be introduced. CCD indicates that following the passage of this motion, it became a central theme for the disability community for the next 20 years.

The intervener

[41] Linda McKay-Panos lives in Calgary, Alberta, and, as a result of her obesity, requires additional seating to travel by air. Following the Federal Court of Appeal's decision of January 13, 2006 that she is a person with a disability for the purposes of Part V of the CTA (as described in paragraph 127 below), she applied to the Agency for participation rights in this proceeding as an intervener in support of the applicants and was granted such rights by the Agency in Decision No. LET-AT-A-175-2006.

[42] The travel experience of Ms. McKay-Panos with Air Canada is set out in Agency Decision No. 567-AT-A-2002.

[43] Ms. McKay-Panos contends that she suffered from stereotypes and discrimination, and that she was subjected to rude and judgmental treatment. She is of the view that she was not treated with dignity because of her obesity. Ms. McKay-Panos states that the fares that she paid for an additional economy-class seat or for a business-class seat means that she cannot equitably participate in travelling by air, an activity that is available to non-disabled Canadians for both professional and personal purposes.

The respondents

[44] Air Canada is Canada's largest full-service air carrier and the largest provider of scheduled passenger services in the domestic, transborder and international markets. Together with Air Canada Jazz, Air Canada provides direct passenger service to over 170 destinations on five continents. Air Canada is a founding member of Star Alliance™, providing a comprehensive international air transportation network.

[45] Air Canada Jazz is Canada's largest regional air carrier and it operates domestic and transborder passenger services on behalf of Air Canada. Air Canada Jazz has the same policies and procedures as Air Canada and the evidence with respect to the two carriers was combined; thus, all references to Air Canada in this Decision also include Air Canada Jazz unless specifically stated otherwise.

[46] WestJet is the second largest Canadian carrier, providing largely domestic air services but with recent expansion into transborder (2004) and international (2006) services.

[47] The Gander International Airport Authority is a not-for-profit organization which manages airport operations at the Gander International Airport following its devolution from the federal government on March 1, 2001.

Experts

On behalf of the applicants

[48] Adele D. Furrie was the director of the Statistics Canada Post-Censal Surveys Program, responsible for the 1986 and 1991 Canadian Health and Activity Limitation Surveys (hereinafter HALS) and the national statistical database program dealing with issues facing persons with disabilities. She was also the Chair of the Advisory Committee for the 2006 Canadian Participation and Activity Limitation Survey, and has worked for the United States of America and the United Nations Statistical Division, advising developing countries on gathering disability statistics. The Agency accepted Ms. Furrie's qualification as an expert on disability demographics, and the design and analysis of disability data.

[49] The applicants submitted two reports entitled Report on Incidence of Persons with Disabilities in Canada Who May Require More Than One Aircraft Seat, prepared by Ms. Furrie, the first, dated May 17, 2005, and the second, an updated version dated May 27, 2005. In those reports, she examined the data included in the 2001 Canadian Participation and Activity Limitation Survey (hereinafter PALS) to identify and provide numbers for three subpopulations of persons with disabilities which were relevant to this case at the time, being: persons who, when they travel, require an Attendant, are disabled by obesity, and/or use a stretcher, with the intent to identify and provide estimations of numbers of persons with disabilities who would qualify for a benefit under a 1P1F policy as well as information about their income level and their ability to travel long distances.

[50] Dr. David Lewis holds a doctorate in economics from the London School of Economics, and wrote a thesis on the economics of serving the transportation needs of people with disabilities. He was awarded the William G. Bell Award for outstanding leadership in specialized transportation for people with disabilities. He is the executive vice-president and national director for Economics and Financial Services of HDR/HLB Decision Economics, and has worked with both the American and the Canadian governments, conducting various regulatory and economic impact analyses related to the Americans with Disabilities Act, the Air Carrier Access Act, and the proposed Open Skies policy of Transport Canada. He has experience in performing risk analysis and credit worthiness analysis for the financial services industry. The Agency accepted Dr. Lewis' qualification as an expert in economics, capable of giving expert and opinion evidence in assessing the economic impact of accommodating the transportation needs of persons with disabilities on both transportation service providers and persons with disabilities, including determining the relevant subpopulations, elasticity of demand, consumer behaviour and financial risk analysis, as well as in the area of data collection.

[51] The applicants submitted two reports prepared by Dr. Lewis:

  • The first, submitted on July 21, 2006, entitled Financial and Economic Effects of One Person - One Fare, detailed the financial effects on the airline industry, as well as the economic effects on airline passengers and the general public, of the implementation of a 1P1F policy for persons with disabilities who travel with Attendants, as defined by airline tariffs. Dr. Lewis combined what was, in his view, the most appropriate economic theory and available data to construct structure and logic models that permitted quantification of potential costs to Air Canada and WestJet if a 1P1F policy were adopted on domestic routes. According to this report, he also employed his Risk Analysis Process© to accommodate data limitations and uncertainty in the modeling framework. Dr. Lewis indicates that he used the same factors for number of one-way trips, average fare and price elasticity as those used by the carrier respondents' expert economist, Professor Lazar; as well as the same full flight factors, marginal costs and domestic market shares as those used by Ernst & Young Orenda Corporate Finance Inc., the expert for Air Canada, and by Siebert/Pask, the expert for WestJet. He provides estimates for revenue losses pertaining to persons with disabilities who require an Attendant and a model for determining revenue losses associated with persons disabled by obesity who require additional seating to accommodate their disability, but he indicates that he was unable to populate the model given a lack of data.
  • The second, dated September 8, 2006, entitled Review of "Analysis of Issues Raised", by Moncrieff Management Limited, August 11, 2006, provided a review of Richard S. Fisher's report, one of the two Agency experts.

[52] At the second oral hearing, Dr. Lewis submitted a schedule entitled "Summary of Evidence", which included a high-level overview of his attendant model, and a schedule presenting the net revenue impact for two scenarios: the first, being his baseline estimates, and the second, based on a trip rate of 2.5, full flight factors based on the number of aircraft that depart 100 percent full, and an average one-way domestic fare of $222 for Air Canada and $150 for WestJet.

On behalf of the intervener

[53] Laurie Ringaert has a Bachelor of Medical Rehabilitation and Occupational Therapy, and a Masters of Science and Community Health Sciences from the University of Manitoba. She is the director of the Office of Research at the School of Public Health at the University of North Carolina where she develops the infrastructure to help the university's researchers on topics such as obesity, water quality and health disparities. She was previously the director of the Centre for Universal Design at North Carolina State University, the director of the Centre for Barrier Free Design (later known as the Universal Design Institute) at the University of Manitoba, and the head of Research and Development at the Canadian Centre on Disability Studies where she continues to be a senior researcher. She has acted as principal investigator in research projects, including post-occupancy evaluations of buildings and long-term care facilities, the determination of dimensions for building codes and standards based on the needs of scooter and power wheelchair users; and she was responsible for one of the first research designs that looked at people and their movements in the space around them. She is a member of the Egress and Use Committee of the National Research Council's National Building Code and the accessibility committee of the Canadian Standards Association. The Agency accepted Ms. Ringaert's qualification as an expert in disability studies, in anthropometrics, and in universal design but not extending to aircraft or aircraft components and interiors.

[54] The intervener submitted a report, dated July 21, 2006, entitled Report of Laurie Ringaert, BSc, BMR-OT, MSc., in which Ms. Ringaert provided background information on occupational therapy, anthropometry, and universal design. This report also contained a methodological critique of the expert reports prepared by Professor David Allison, expert for the carrier respondents, which included an opinion and recommendations for more accurate statistical investigations and for a mechanism to identify persons who qualify for accommodation.

On behalf of the carrier respondents

[55] Professor Frederick Lazar has a doctorate from Harvard University, and he has been a faculty member of the York University Department of Economics since 1972, including past director of the Graduate Program in Economics and coordinator of the economics area at the Schulich School of Business. He has experience specific to the air transportation industry, particularly regarding economic implications of policy, such as deregulation and national airport policy. Professor Lazar's experience regarding persons with disabilities relates to work undertaken for the Attorney-General of Ontario regarding the funding of programs for autistic children. At the May 2005 hearing, the Agency accepted his qualification to give expert and opinion evidence on the economic significance of the air transport industry, the economic factors affecting entry to and carrying on business in that industry, and the impact of regulations on that industry. At the November 2006 hearing, Professor Lazar was further qualified as an economist and, in particular, as an expert on economic theory and the implications of economic theory; the use of economic theory for the resolution of issues which arise in these proceedings; estimating populations, including population growth profiles based on economic studies and statistical data; and on impact stimulation of demand on consumer preference.

[56] In this proceeding, Air Canada submitted to the Agency two reports prepared by Professor Lazar, both of which were subsequently adopted and relied upon by WestJet as well:

  • The first, dated November 25, 2005, entitled Potential Costs for Airlines of a One Passenger, One Fare Rule, estimated the potential costs for airlines of 1P1F. The report presented a number of assumptions which were required, as part of a preliminary framework, to assess those losses for all airlines operating to, from, and within Canada for domestic, transborder and international flights. It projected revenue losses for each year up to and including 2015 and was characterized as a preliminary report, to be completed through a subsequent report.
  • The second report, dated June 1, 2006, entitled Potential Costs in 2005 for ACE and WestJet of a One Passenger, One Fare Rule, narrowed the scope of Professor Lazar's analysis to include only domestic and transborder traffic for Air Canada and WestJet and predicted that the carrier respondents' yield management systems would react to induced trips taken by persons with disabilities pursuant to a 1P1F policy by increasing average fares.

[57] Richard Crosson is a chartered accountant and chartered business valuator with experience in public accounting and management consulting and a specialization in financial consulting, particularly litigation support and business valuation. He is a partner with and senior vice-president of Ernst & Young Orenda Corporate Finance Inc. (hereinafter Ernst & Young). The Agency accepted Mr. Crosson's qualification as a chartered accountant and chartered business valuator, able to illustrate the potential financial implications of a transaction or a series of transactions which impact on the sale of a commercial product and in particular upon the sale of tickets for transportation by air, and with the knowledge and expertise necessary to discuss and illustrate methods of asset valuation, including the market approach and an income approach to valuation.

[58] In this proceeding, Air Canada submitted two reports prepared by Ernst & Young's Valuations Group, under the direction of Mr. Crosson:

  • The first report, dated November 25, 2005, entitled Relevant Costs Incurred by Air Canada & Jazz, contained an analysis of the operating and capital costs currently being incurred by the carriers to accommodate persons with disabilities.
  • The second report, dated November 28, 2005, entitled Preliminary Estimate of Potential Costs of "One Passenger - One Fare Rule", provided preliminary calculations of the potential costs to Air Canada of a 1P1F rule, relating only to persons with disabilities travelling with attendants. Passenger trip data provided in Professor Lazar's November 25, 2005 report was used and adjusted to include only accompanied persons with disabilities travelling on Air Canada's domestic flights.

[59] Both reports had annotations that Ernst & Young was not retained to audit Air Canada's data and that it relied on financial and other information provided to it by Air Canada's management and staff, without audit.

[60] A third report, dated October 8, 2006, entitled Estimate of Air Canada and WestJet's Market Shares, was submitted as a supplement to Professor Lazar's June 1, 2006 report.

[61] Furthermore, three addenda to Ernst & Young's November 28, 2005 report were submitted:

  • The first, dated November 14, 2006, entitled Summary of 1P1F Costs - Accompanied PWDs, contained revised calculations of the estimated costs of a 1P1F rule for Air Canada based on several revised assumptions, and using various passenger trip data from the two reports prepared by Professor Lazar.
  • The second, dated November 21, 2006, entitled Value Impact of 1P1F Costs, was submitted on behalf of both carrier respondents and provides a general consideration of the factors and approaches relevant to the assessment of the present value of a reduction in the annual pre-tax earnings of the carrier respondents. The addendum states that Ernst & Young did not attempt to assess the impact of the adoption of a 1P1F rule on the market capitalization or share values of either Air Canada or WestJet.
  • The third, dated November 24, 2006, entitled Revised Estimate of 1P1F Costs, was prepared to demonstrate how the marginal costs specifically related to domestic travel would impact upon the losses estimated in previous reports.

[62] Brenda Pask is a chartered accountant and chartered business valuator, and is a partner with Siebert/Pask. She provides business valuations and financial litigation support, with a practice focus on family law matters and personal injury damages. The Agency accepted her qualification as a chartered accountant and chartered business valuator, qualified to examine and report upon accounting data for the purpose of making conclusions respecting costs incurred on identified transactions, actions or projects.

[63] WestJet submitted two reports prepared by Siebert/Pask under the direction of Ms. Pask:

  • The first report, dated May 18, 2005, was intended to assist in determining WestJet's accommodation costs for "guests with special needs". The reporting letter states that Siebert/Pask had not audited or otherwise verified the information provided by WestJet, and that it provides no opinion about the accuracy and completeness of the costs incurred by WestJet to accommodate "guests with special needs" because it was not engaged to express opinions. The letter further states that it assumed that the financial information, statistical data and costs assumptions would not be found to be materially misstated or incomplete if the information were audited by WestJet's external auditors. Addenda to this report were submitted on November 25, 2005 and December 1, 2005. The December 1, 2005 addendum was indicated to be an update to and intended to supersede the November 25, 2005 addendum and the May 18, 2005 report.
  • The second report, dated January 9, 2006, entitled Calculation Scenarios of the Financial Impact to WestJet Airlines Ltd. of a "One Passenger One Fare Rule", provides an estimate of revenue losses regarding persons with disabilities who required Attendants. It was intended to calculate the potential costs and revenue gains to WestJet if a 1P1F policy were adopted, based on the understanding from the carrier respondents' counsel that this would require the airlines to provide free travel to "personal attendants, family members or friends (collectively referred to as "personal attendants") who accompany persons with transportation disabilities when they travel by air". The report indicates that it relied on the information contained in Professor Lazar's first report regarding the number of passengers with disabilities who travel by air, and publicly available information regarding WestJet's share of the total domestic air traffic, average net fare per passenger, marginal cost per passenger and load factors in the 2003 and 2004 Transport Canada annual reports and WestJet's 2004 Annual Report. According to the report, Siebert/Pask did not audit or otherwise verify the information it relied upon.

[64] At the November 2006 oral hearing, Siebert/Pask submitted schedules dated November 14, 2006 as an addenda to its January 9, 2006 report, containing a revised scenario which reflected additional reservation time to assist "guests with special needs" and an estimate of resulting incremental costs for reservation agents to assist "guests with special needs". These revisions were based on the affidavit of Hobe Horton, sworn on November 14, 2006.

[65] Also at the November 2006 oral hearing, Siebert/Pask submitted a Report Summary to reconcile its January 9, 2006 report with the changed assumptions in Professor Lazar's passenger trip data and WestJet's share of air traffic in or its 2006 report.

[66] Dr. Michael Tretheway is an economist with a doctorate in economics from the University of Wisconsin-Madison. He is the executive vice-president and chief economist with InterVISTAS Consulting Inc. which provides consulting services to clients largely in the transportation and tourism sectors. He has been a member of the Faculty of Commerce and Business Administration at the University of British Columbia since 1983, teaching courses in areas such as transportation economics, air transportation management, the role of transportation in the economy, and government and business. He has experience in the area of airline economics and has published on the subject. The Agency accepted Dr. Tretheway's qualification as an expert on economic theory and the implications of economic theory; on the impact on demand of increases or decreases in the price of goods and services; on the impact of stimulation of demand on consumer preference; on the market for air transportation services and the impact of regulations on that market; on the impact of direct and cross-subsidies; and on traffic volumes and fares pertaining to air transportation in Canada.

[67] WestJet submitted to the Agency two reports prepared by Dr. Tretheway:

  • The first, dated May 18, 2005, entitled Statement of Dr. Michael W. Tretheway, pertains to the opportunity costs of providing more than one seat to a traveller with a disability, including:

    • the usefulness of load factors (average, high and low for a route or flight) for assessing whether an empty seat will be available for provision at no charge to a person with a disability who requires additional seating;
    • the usefulness of average fares for determining the revenue opportunity cost of a 1P1F policy; and
    • whether a 1P1F policy would result in any reduction in the total volume of air travel or in any change to the average fare paid by passengers.
  • In the second report, dated January 6, 2006, entitled Second Statement of Dr. Michael W. Tretheway, Dr. Tretheway states that he was asked by counsel for WestJet to address questions such as:

    • whether a 1P1F policy would impose any competitive disadvantage on the carrier respondents;
    • the impact on foreign air carriers if 1P1F were applied to Canadian carriers on transborder and international routes;
    • the impact of a multiplicity of regulations on the business model (legacy carrier and low-cost carrier business models); and
    • whether there are better options for addressing the accessibility issues raised in this case, such as cross-subsidization.

[68] Professor David Allison is a licensed clinical psychologist with a doctorate in Clinical and School Psychology from Hofstra University. He is also the Section Head of Statistical Genetics, a professor in the Departments of Biostatistics and Nutritional Sciences, and he is the Director of the Clinical Nutrition Research Center, all at the University of Alabama at Birmingham. Professor Allison has experience in the design and implementation of human obesity-related studies and has published on obesity and related issues. The Agency accepted the qualification of Professor Allison as a biostatistician with expertise in the area of human obesity, able to give expert and opinion evidence on the prevalence of obesity and the classes of obesity; the association between body mass index and volumetric or girth measurements; the interpretation of data from studies of behavioural responses to changes in circumstance; the estimation of the size of defined populations having recourse to statistical methods and empirical data; and the association and/or causal influence of obesity and other variables.

[69] The carrier respondents submitted three reports to the Agency which were prepared by Professor Allison:

  • The first, filed on November 28, 2005, entitled Expert Report of David B. Allison, Ph.D., provided background information on obesity and estimated the proportion of the Canadian population that would not fit in aircraft seats of certain sizes, where "fit" meant that one of their horizontal dimensions would exceed the dimension of the inner armrests of an aircraft seat.
  • The second, filed on June 1, 2006, entitled Supplementary Analysis: One Passenger One Fare Estimates of the Proportion of the Population who May Require an Additional Airline Seat, estimated the proportion of the population that would not fit in an aircraft seat and not have some other disability that might be relevant to travelling by air.
  • The third report, filed on November 1, 2006, entitled Airline Seating Project, provided the results of a project conducted by Professor Allison related to the anthropometric relationship between obesity and size eligibility. The objective of the project was to collect new empirical data that could be used to estimate the proportion of the population that would not fit in an aircraft seat by making more direct observations on people's body sizes and whether or not they could fit in actual aircraft seats.

Agency-appointed experts

[70] Professor Peter Katzmarzyk has a doctorate in exercise science from Michigan State University and has experience conducting epidemiological research on obesity and related issues in the Canadian population and collaborating on large-scale national studies and surveys. He is an Associate Professor with the School of Kinesiology and Health Studies at Queen's University and he has published on obesity and related issues. He was retained by the Agency to provide an evaluation of the reports of Professor Allison and of any other submissions which may have been received by the Agency related to the issue of obesity. Professor Katzmarzyk was qualified as an expert in epidemiology, biostatistics and anthropometry with specialization in obesity in humans, able to give expert and opinion evidence on the classes of obesity and their prevalence; the association between body mass index and volumetric girth measurements; the estimation of the size of defined populations by means of statistical methods and empirical data; and the association and/or causal influence of obesity and other variables.

[71] Professor Katzmarzyk filed two reports:

  • The first, dated August 10, 2006, entitled Expert Report of Peter T. Katzmarzyk, PhD, provided a review and critique of Professor Allison's first report.
  • The second, submitted November 8, 2006, entitled Critique of the Airline Seating Project Report Submitted by Dr. David B. Allison on Wednesday, November 1, 2006, provided a critique of Professor Allison's third report.

[72] Richard S. Fisher has a Bachelor of Science in Aeronautics from Massachusetts Institute of Technology and a Masters in Business Administration from Harvard University. He is president of Moncrieff Management Ltd. and is an aviation consultant with expertise in traffic forecasting, policy planning, equipment planning, benefit/cost analysis, airline route analysis, aircraft scheduling, marketing and financial feasibility. He was retained by the Agency to do research and analysis of a depth necessary to permit the Agency to test the evidence in the briefs, including any expert reports filed by the applicants and respondents. Mr. Fisher was qualified as an expert in the analysis of aviation data through work for both the public and private sectors, particularly in the areas of air traffic forecasting and cost benefit analysis for policy planning and financial feasibility assessment purposes, such that he is able to perform and speak to a comparative analysis of the expert reports submitted by the parties, based on data used in those reports and additional publically available aviation data.

[73] Mr. Fisher prepared and filed a report dated August 11, 2006, entitled Final Report - Analysis of Issues Raised - Air Travel for Persons with Disabilities Who Require Additional Seating Due to Their Disabilities, to assist the Agency in the testing of the evidence in the expert reports filed by the applicants and respondents which provided a discussion and comparative analysis of the expert reports filed by the parties in terms of incidence, growth of travel and the cost to the airlines of travel by persons with disabilities requiring an Attendant and those requiring a second seat.

Other witnesses

On behalf of the applicants

[74] Robert D. Brown is a past chair and chief executive officer of Pricewaterhouse Coopers, where he served for many years as head of the firm's tax practice; a past chair of both the Canadian Institute of Chartered Accountants and the Canadian Tax Foundation; co-chair of a federal committee to review tax assistance for persons with disabilities; an advisor to the Department of Finance; a director and consultant of the Board of Residential Equities Real Estate Investment Trust; a director of Canadian Apartment Properties Real Estate Investment Trust; and a director and vice-chair of the Ontario Financing Authority. The applicants submitted a report on June 27, 2007 prepared by Mr. Brown which examines the impact on WestJet's tax position due to a 1P1F policy.

On behalf of the carrier respondents

[75] Colleen Arnold is the manager of Airport Services at Air Canada and is responsible for overseeing policies and procedures to be followed by employees providing services from check-in to the gate area as well as from the gate to the aircraft seat.

[76] Dr. Edward Bekeris is the Senior Medical Officer and the acting Senior Director of Occupational Health Services at Air Canada, where he is responsible for a group of physicians and occupational health nurses who, among other responsibilities, assess medical information from persons with disabilities to determine fitness and conditions to travel.

[77] Odette Desmarais is Air Canada's Groundhandling Services Training Manager and is responsible for gathering statistical data on airport operations and translating this into training development initiatives; setting training priorities at Canadian airports; developing training material and administering the training.

[78] Lucie Guillemette is senior director of Network Management at Air Canada and is responsible for revenue maximization for the Air Canada network, including market, inventory and pricing management. Ms. Guillemette described the procedures and processes by which seat inventory is managed, and the concept of passenger displacement, and she addressed the issue of load factors.

[79] Juliane Lambert is the general manager of Employee and Cabin Safety and the designated Flight Attendant Manager at Air Canada. She is responsible for cabin safety and employee safety, including training and supervision of cabin crew, cabin procedures and installations, and development of safety briefing cards.

[80] Marian O'Connor is the manager of Aircraft Program and Design for Air Canada. She works within the marketing branch and interacts with the maintenance branch regarding the interior design of aircraft, including the passenger compartment, relative to seating configuration, and lavatories.

[81] Hugh Dunleavy is executive vice-president of Commercial Distribution at WestJet. Mr. Dunleavy commented on the dynamic nature of ticket pricing, the processes by which seat inventory is managed, load factors and the implications of the imposition of a fare increase in response to a 1P1F rule.

[82] Lorne MacKenzie is the director of Airport Regulations at WestJet. He is responsible for the compliance of WestJet with all aspects of government regulation, including those related to airports, in-flight and flight operations in a number of departments. Mr. MacKenzie is also responsible for formulating and implementing long-term strategic positions for government legislation.

[83] Lisa Puchala is the director of In-flight Training and Standards and the designated In-Flight Manager at WestJet. She is responsible for all aspects of cabin safety.

[84] Dean Puffer is the manager of the Customer Care Department at WestJet, which provides support for reservations, airports and operations control. He provides strategic direction for the department and is a member of WestJet's GEM (Guest Experience Matters) Core Committee. He spoke of the evolution of the customer care department from a group of four to more than 60 employees, and of the customer service initiatives that WestJet has developed and implemented for persons with disabilities.

[85] Cliff MacKay was the President and CEO of the Air Transport Association of Canada from 1998 until May 2006. He testified regarding the aviation industry in general, providing a background and speaking to the nature of the industry (capital requirements, typical costs borne by industry, competition, its cyclical nature), particular events in the Canadian aviation industry, fares, passenger demand, and the preoccupation of industry with costs.

At the request of the Agency

[86] Susan Greene is the Chief of Cabin Safety and Civil Aviation at Transport Canada. She is responsible for developing regulations and procedures to reduce fatalities and injuries as a result of aircraft accidents and to provide a safe environment for passengers and crew on board aircraft. Ms. Greene discussed the main safety factors to be considered in the evacuation of an aircraft, and guidelines and regulations that relate to passengers with disabilities, including passenger seating requirements guidelines, and the carriage of non-ambulatory passengers on large turbo jet airplanes guidelines.

Other evidence

[87] A significant amount of other evidence was filed by the parties including an Agreed Statement of Facts Concerning Southwest Airlines' Customer of Size Policy; a letter dated September 5, 2006, prepared by Dr. Ross Roussev, regarding seizure disorders; and twenty-seven affidavits by various employees of the carrier respondents setting out, among other things, information and material facts which were provided to the experts for the preparation of the various expert reports. This evidence was accepted by the Agency and it will be referred to in this Decision where appropriate.

Process

[88] The application raised complex and important issues which have been controversial as between the community of persons with disabilities and the air industry for a very long time.

[89] The Agency has thoroughly investigated and considered all of the issues raised by the parties, which resulted in a longer period of time being required by the Agency to consider the case and render its decision. For example, in the course of its investigation, the Agency:

  • conducted extensive written pleadings;
  • issued several preliminary jurisdictional decisions, including one in relation to the Agency's jurisdiction under the Charter;
  • received pleadings and issued decisions on numerous preliminary procedural matters; and
  • held an oral hearing over the course of 23 days, from May 30 to June 3, 2005; on October 14, 2005; from November 14 to November 29, 2006; and on December 12, 2006,

to permit the parties a full opportunity to produce and test evidence, including extensive expert and other evidence produced by the applicants, an intervener in support of the applicants, and the carrier respondents. In addition, it should be noted that the Agency's investigation was stayed for 18 months from April 1, 2003 until October 1, 2004, as a result of an Order of the Ontario Superior Court of Justice which stayed all proceedings against Air Canada while it was under creditor protection during its restructuring. Also, at the request of the applicants, the Agency granted an adjournment of the hearing from January 2006 to address prejudice arising from the late filing of evidence by the carrier respondents. This adjournment resulted in a ten-month delay in the commencement of the November 2006 hearing.

[90] Furthermore, important decisions were issued by the Federal Court of Appeal on January 13, 2006 in the case of Linda McKay-Panos v. Air Canada, 2006 FCA 8 (hereinafter the McKay-Panos v. Air Canada case) and by the Supreme Court of Canada on March 23, 2007 in the case of Council of Canadians with Disabilities v. VIA Rail Canada Inc., 2007 SCC 15 (hereinafter the CCD v. VIA case), both of which had significant implications for the Agency in the processing of this application. The Agency provided the parties with an opportunity to make further submissions following the release of the decision of the Supreme Court of Canada in the CCD v. VIA case, which process was completed on August 31, 2007.

[91] These proceedings are described in greater detail in Appendix D to this Decision.

Framework of the Agency's decision

The legislative framework

[92] The Agency's legislative mandate with respect to persons with disabilities is found in Part V of the CTA, which contains a regulation-making authority (subsection 170(1)) and a complaint adjudication authority (subsection 172(1)), both for the express purpose of removing undue obstacles to the mobility of persons with disabilities from the federal transportation network. The scope of the Agency's jurisdiction to eliminate undue obstacles by both regulations and complaint adjudication is partially defined by an inclusive list of matters contained in subsection 170(1), which is incorporated by reference into subsection 172(1).

[93] Subsection 170(1) of the CTA states that:

The Agency may make regulations for the purpose of eliminating undue obstacles in the transportation network under the legislative authority of Parliament to the mobility of persons with disabilities, including regulations respecting

  1. the design, construction or modification of, and the posting of signs on, in or around, means of transportation and related facilities and premises, including equipment used in them;
  2. the training of personnel employed at or in those facilities or premises or by carriers;
  3. tariffs, rates, fares, charges and terms and conditions of carriage applicable in respect of the transportation of persons with disabilities or incidental services; and
  4. the communication of information to persons with disabilities.

[94] Subsection 172(1) of the CTA states that:

The Agency may, on application, inquire into a matter in relation to which a regulation could be made under subsection 170(1), regardless of whether such a regulation has been made, in order to determine whether there is an undue obstacle to the mobility of persons with disabilities.

[95] Subsection 172(3) of the CTA sets out the Agency's authority to order, among other matters, corrective measures upon the finding of an undue obstacle as follows:

On determining that there is an undue obstacle to the mobility of persons with disabilities, the Agency may require the taking of appropriate corrective measures or direct that compensation be paid for any expense incurred by a person with a disability arising out of the undue obstacle, or both.

[96] Canada's national transportation policy, as it was written in section 5 of the CTA at the time that this application was filed, makes it clear that one objective of the legislation is to ensure that the federal transportation network is accessible, without undue obstacles, to persons with disabilities.

It is hereby declared that a safe, economic, efficient and adequate network of viable and effective transportation services accessible to persons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost is essential to serve the transportation needs of shippers and travellers, including persons with disabilities, and to maintain the economic well-being and growth of Canada and its regions and that those objectives are most likely to be achieved when all carriers are able to compete, both within and among the various modes of transportation, under conditions ensuring that, having due regard to national policy, to the advantages of harmonized federal and provincial regulatory approaches and to legal and constitutional requirements,

[...]

(g) each carrier or mode of transportation, as far as is practicable, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute

[...]

(ii) an undue obstacle to the mobility of persons, including persons with disabilities,

[...]

and this Act is enacted in accordance with and for the attainment of those objectives to the extent that they fall within the purview of subject-matters under the legislative authority of Parliament relating to transportation.

[97] While the above excerpt highlights the accessible transportation aspect of the national transportation policy, the complete policy is set out in Appendix C to this Decision.

[98] While this policy has recently changed with the promulgation of Bill C-11 on June 22, 2007 which, among other things, amended the CTA, this change does not affect this Decision as the changes to the national transportation policy are not retroactive and the substantive provisions governing the Agency's adjudication of complaints under section 172 of the CTA remain unchanged.

[99] The Supreme Court of Canada has recently considered the accessible transportation provisions set out in Part V of the CTA in its decision in the CCD v. VIA case, regarding the inaccessibility of VIA's Renaissance passenger rail cars. This decision of the Supreme Court of Canada is significant in that it represents the first time that this Court has considered the Agency's mandate under Part V of the CTA.

[100] In its decision, the Supreme Court provided significant direction to the Agency on the execution of this mandate, including the confirmation that Part V of the CTA is human rights legislation and that the Agency is bound to apply the same human rights principles that are found in other human rights legislation, such as the Canadian Human Rights Act, R.S.C., 1985, c. H-6, as amended (hereinafter the CHRA), and in the jurisprudence which has developed under the CHRA. In particular, the Supreme Court clarified that once the applicant has established in the application the existence of an obstacle to the mobility of a person with a disability in the federal transportation network, the onus of proof then shifts to the respondent transportation service provider to prove, on a balance of probabilities, that the obstacle is not undue by demonstrating that reasonable accommodation has been provided, meaning up to the point of undue hardship. The decision of the Supreme Court of Canada in the CCD v. VIA case will be referred to in this Decision where appropriate.

Part V of the CTA as human rights legislation and the application of the Charter

1. Human rights legislation

[101] Part V of the CTA is, by its nature, human rights legislation aimed at removing undue obstacles to the mobility of persons with disabilities in Canada's transportation system as recently confirmed by the Supreme Court of Canada in its decision in the CCD v. VIA case.

2. Charter values

[102] The applicants assert in their application that the discretion vested in the Agency under section 172 of the CTA "represents statutory powers of decision which are to be exercised in a manner which accords with the dictates of section 15(1) of the Charter". The Agency, as a government body exercising discretion under a legislative mandate, is subject to the Charter and, thus, must interpret and execute its mandate in a manner that is consistent with the Charter and the values set out therein.

[103] The purpose of Part V of the CTA is to ensure that persons with disabilities, a recognized minority group, are not unduly discriminated against within the federal transportation network. In this way, the Agency notes that, not only is the legislation consistent with the Charter, it also has a similar purpose, that being the elimination of undue discrimination albeit in a more limited context, that being the removal of undue obstacles to the mobility of persons with disabilities in the federal transportation network.

[104] The Supreme Court of Canada, in its decision in the CCD v. VIA case, clearly states that the "undue obstacle" test to be applied by the Agency in the execution of its mandate under Part V of the CTA is the very same test which was set out by that Court in British Columbia (Public Service Employee Relations Commission) v. BCGSEU, [1999] 3 S.C.R. 3 which, in brief, requires the respondent to prove, on a balance of probabilities, that discrimination is not undue by demonstrating that the source of the discrimination:

  • is rationally connected to a legitimate objective;
  • was adopted by the respondent with an honest and good faith belief that it was necessary to the fulfilment of that legitimate objective; and
  • is reasonably necessary for the accomplishment of its objective, such that it is impossible for the respondent to accommodate the applicant without imposing undue hardship on the respondent.

[105] Furthermore, the Agency notes the Supreme Court of Canada's direction to the Agency to apply human rights principles, including, among others, those enshrined in the CHRA and the jurisprudence that has developed under the CHRA. Accordingly, persons with disabilities are entitled to the elimination of "undue" or "unreasonable" barriers, namely those barriers that cannot be justified under human rights principles. To establish a bona fide, or legitimate, justification for the existence of a violation of these rights, respondent service providers will be required to show that they have made every possible accommodation short of undue hardship, as discussed more fully in paragraph 107 below, including the taking of positive steps to implement inclusive standards. Furthermore, to remedy discriminatory exclusions, service providers are expected to adopt approaches that encourage, rather than fetter, independence and access.

Principles of accessibility

[106] In executing its mandate under the accessible transportation provisions of the CTA, the Agency, as well as one of its predecessors, the NTA, has recognized and considered a number of long-standing principles of accessibility which are consistent with those which have arisen in general human rights jurisprudence. These principles reflect the interests of the community of persons with disabilities and are used by the Agency both in its determinations of the existence of obstacles and in its assessment of the undueness of any obstacles found, which require a weighing of those interests with the interests of industry. While these principles are reflected, either explicitly or implicitly, in its past decisions, the Agency finds it important to set out some of these general principles of accessibility to permit a better understanding of the findings which will follow in this Decision.

  • Persons with disabilities have the same rights as others to full participation in all aspects of society and equal access to transportation is critical to the ability of persons with disabilities to exercise that right. Furthermore, the right to equal access to transportation recognizes that persons with disabilities have the same needs to travel as others - for business, for pleasure, for medical reasons, and the like - and should have the same travel options that are provided to others, such as those respecting mode of transportation, departure times, cost, quality of service and the ability to travel with friends, family or colleagues.
  • In a perfect world, all modes of transportation would be fully accessible to all persons with disabilities and equal access would be a reality for all. However, this is not the case. It is obvious that, as in the rest of society, there are barriers or obstacles to participation inherent in the transportation network that will act to prevent or make access to that network difficult for some people because of their disabilities.
  • Insofar as transportation service providers are aware of the needs of persons with disabilities and are prepared to properly accommodate those needs, it can be said that persons with disabilities may have equivalent access to the network and will experience no barriers or obstacles. Implicit in the use of the term "equivalent access" is the notion that, in order to provide equal access to persons with disabilities, transportation service providers may have to provide different access - more or different services, different facilities or features, all designed to meet the needs of persons with disabilities to ensure that they, too, can access the network.
  • Most persons with disabilities want to have as much independence as possible in their lives, including in their travel. Transportation service providers are required to provide the same services to persons with disabilities as they do to other passengers, although the notion of equivalent access may require the transportation service provider's personnel to provide a different, and sometimes higher, level of assistance to persons with disabilities than is provided to other passengers. This assistance often permits many persons with disabilities to travel independently and others to travel as independently as possible.
  • Notwithstanding, there are persons with disabilities who are unable by reason of their disability to meet their own personal care needs and these persons use attendants to assist them with these functions in their daily lives. Where such persons with disabilities travel and cannot feed themselves, take medication or use the toilet unassisted in-flight, those persons may be required to travel with an Attendant as transportation service providers' personnel are not expected to meet these personal care needs for any passenger in-flight. In addition, transportation service providers may require certain persons with disabilities to travel with Attendants where, for safety reasons, they may require assistance in the event of an emergency evacuation or decompression. These Attendants are notionally viewed as extensions of the person with a disability in that they travel with the person with a disability in order to fulfill their personal care and other mobility-related needs.
  • Persons with disabilities are to be treated with dignity and respect. Part of the entitlement to be treated with dignity is the notion that all persons with disabilities are entitled to be treated in the same manner regardless of the underlying reason for their disability and the fact that there should be no discrimination between persons with disabilities in terms of entitlement to benefits.
  • One important aspect of the entitlement of persons with disabilities to equality is that persons with disabilities should not be placed at an economic disadvantage as a result of their disabilities and should not have to pay more for their transportation services than do other passengers who do not have disabilities, including in circumstances where transportation service providers must provide different services to ensure equivalent access to the federal transportation network. This principle of accessibility forms the basis of what is commonly referred to by the community of persons with disabilities as the principle of 1P1F.

[107] While these are important principles, it is important to note that they are not absolute. An important concept to introduce at this stage is that of reasonable accommodation which, in the context of the Agency's mandate, refers to the responsibility of the transportation service provider to meet the needs of persons with disabilities to the point of undue hardship. In this regard, the Agency's mandate under Part V of the CTA is to eliminate undue obstacles to the mobility of persons with disabilities from the federal transportation network. Where a transportation service provider can justify providing something less than equivalent access, including no accommodation, the Agency would not find an undue obstacle in the accommodation. However, if the Agency finds that the respondent transportation service provider has failed to demonstrate that the accommodation provided is reasonable in the circumstances, then the Agency may find an undue obstacle and may require the taking of corrective measures to eliminate that undue obstacle. These principles and, in particular, the above statement regarding the nature of the Agency's mandate under Part V of the CTA, are consistent with the decision of the Supreme Court of Canada in the CCD v. VIA case.

Part II - Jurisdictional determinations under section 172 of the CTA

[108] In making its findings, the Agency has considered all of the evidence submitted by the parties during its investigation of the application.

[109] Pursuant to section 172 of the CTA, the Agency may inquire into matters to determine whether there is an undue obstacle in the federal transportation network to the mobility of persons with disabilities. In this regard, the Agency considers the particular facts of the case brought before it by the parties to the application in order to first answer the following preliminary jurisdictional questions:

  • whether the application raises issues which arise in the federal transportation network; and, if so,
  • whether the application was filed by, or on behalf of, persons with disabilities;

And, if the Agency has jurisdiction over the matter, then to answer the following substantive questions:

  • whether the mobility of persons with disabilities was restricted or limited by an obstacle in the federal transportation network; and, if so,
  • whether that obstacle was undue.

A. Federal transportation network

[110] As determined by the Agency in Decision No. LET-AT-A-356-2004, the scope of the Agency's investigation in this proceeding is limited to the consideration of:

  • the Improvement fee charged by the Gander International Airport Authority, and
  • the additional fares charged for domestic air services by Air Canada and WestJet

as they relate to persons who require additional seating to accommodate their disabilities, either for their Attendants and/or for themselves. Both issues clearly fall within the federal transportation network and are specifically referred to in paragraph 170(1)(c) of the CTA which provides that the Agency may make regulations respecting tariffs, rates, fares, charges and terms and conditions of carriage applicable in respect of the transportation of persons with disabilities or incidental services; which subjects are incorporated by reference into the Agency's complaint adjudication authority in section 172 of the CTA.

B. Disability

The Agency's approach to the determination of disability

[111] In this case, two individual applicants and one organization representing persons with disabilities, as supported by the intervener, are seeking systemic remedies against the Gander International Airport Authority, Air Canada and WestJet that would be available to all persons who require additional seating to accommodate their disabilities to travel by air. Accordingly, as expressed by the Agency in Decision No. LET-AT-A-356-2004, this is the target population of persons with disabilities who would be eligible to benefit from a 1P1F policy and it can be further divided into two main subgroups:

  1. persons with disabilities who require additional seating on an aircraft for their Attendants; and
  2. persons with disabilities who require additional seating on an aircraft for themselves.

[112] As there are different considerations in the determination of disability for each subgroup, they will be addressed separately below.

1. Persons with disabilities who require additional seating for their Attendants

[113] Most persons with disabilities want to have as much independence as possible in their daily lives, including in their travel. Transportation service providers are required to provide the same services to persons with disabilities as they do to other passengers, although, to provide equivalent access, they may have to provide a different, and sometimes higher, level of assistance to persons with disabilities than is provided to other passengers. These are requirements established by legislation, regulations, and Agency decisions. For example, transportation service providers provide assistance to persons with disabilities to reserve accessible seats, to move through terminals, to enplane and deplane, to transfer from a personal wheelchair to a boarding chair to a passenger seat and back, as well as to move about on board the aircraft including to and from the washroom. In addition, transportation service providers take steps to improve the accessibility of their services on their own initiative. The foregoing assistance often permits many persons with disabilities to travel independently and others to travel as independently as possible.

[114] However, there are certain personal care needs that transportation service provider personnel are not expected to meet for persons with disabilities: in particular, feeding the person, giving them medication and assisting them to use the toilet within the washroom. Where persons with disabilities are unable by reason of their disability to independently meet these specific personal care needs, they will generally6 be required by the transportation service provider to travel with an Attendant.

[115] In addition, there are certain persons who, as a result of their disabilities, have such significant mobility and/or communication impairments that they would require extraordinary assistance in the event of an emergency evacuation or decompression such that they are required by the carrier respondents' tariffs to travel with an Attendant for safety reasons, so that the Attendant can provide this assistance to them.

[116] While some may be required to travel with an Attendant, other persons who have mobility impairments but are self-reliant will not. Air Canada's Central Information Chapter (an internal document setting out its policies and procedures) provides a definition of persons who are non-ambulatory and self-reliant as those who: "are not able to move within aircraft cabin without assistance but are independent and require no special or unusual attention during flight, e.g., Customers who use wheelchairs. Non-ambulatory and self-reliant are not required to travel with an attendant to assist in event of an emergency evacuations. Customers who despite disability are self-reliant and capable of self-care during flight do not require an attendant". Juliane Lambert and Lisa Pachula testified that non-ambulatory passengers who are self-reliant may be accepted to travel independently, that is without an Attendant, if they can release their seatbelt and move to at least the aisle to be able to get assistance to get to the nearest exit and to evacuate.

[117] However, the issue before the Agency in this proceeding is the entitlement to economic accommodation of a particular category of persons with disabilities, being those who are required by the carrier respondents' current tariffs to travel with an Attendant.

[118] Persons with disabilities who require Attendants when they travel, including Mr. Norman and Ms. Neubauer, are, in the spectrum of functional limitations, considered to be persons with severe disabilities in respect of whom the determination of disability for the purposes of Part V of the CTA can be made by the Agency without reference to the underlying health condition which creates this need, similar to a disability determination in the case of any person who requires the use of a wheelchair for mobility. As a category, persons who are required to travel with Attendants can typically be found to be persons with disabilities in the same way that persons who require the use of wheelchairs for mobility are persons with disabilities, regardless of the reason why the person needs the mobility aid or the Attendant. The fact that a person's health condition necessitates the use of a wheelchair or an Attendant is sufficient to permit the Agency to conclude that they are persons with disabilities for the purposes of Part V of the CTA.

[119] It is critical to emphasize that this Decision is intended to only apply to the relatively small group of persons with more severe disabilities who are required under the terms of the carrier respondents' tariffs to be accompanied by an Attendant when they travel to assist them to meet their specific personal care needs in-flight or to provide assistance to them in the event of an emergency evacuation or decompression. This Decision is not intended to apply to the much larger group of persons, disabled or otherwise, who prefer to travel with a companion for reasons other than to meet specific disability-related personal care and/or safety-related mobility and/or communication needs in-flight in the event of an emergency evacuation or decompression, nor is it intended to apply to persons with disabilities who require an attendant at destination but not for the purposes set out in the carrier respondents' tariffs in-flight.

[120] In addition, it must be recognized at this point that what is important is the function to be carried out by the Attendant in-flight, not the identity of the person acting as an Attendant. The Agency is aware that, in many cases such as the late Eric Norman's case, a family member or friend may fulfill the role of Attendant, and the concept of Attendant is intended to be sufficiently broad to continue to include these persons and is not to be construed narrowly as requiring a professional attendant.

2. Persons with disabilities who require additional seating for themselves

[121] This group can be further subdivided into the following two categories of persons with disabilities: persons who are disabled by obesity and persons with other disabilities.

a) Persons who are disabled by obesity

[122] This subgroup of persons have a disability that is, in effect, created by the seating environment which is established by air carriers onboard their aircraft. The role of the environment in the creation of disabilities was explicitly recognized by the Supreme Court of Canada in the CCD v. VIA case:

Lepofsky has noted that "[o]ne of the greatest obstacles confronting disabled Canadians is the fact that virtually all major public and private institutions in Canadian society were originally designed on the implicit premise that they are intended to serve able-bodied persons, [...]": "The Duty to Accommodate: A Purposive Approach" (1993), 1 Can. Lab. L.J. 1, at p. 6. It is, after all, the "combined effect of an individual's impairment or disability and the environment constructed by society that determines whether such an individual experiences a handicap": I.B. McKenna, "Legal Rights for Persons with Disabilities in Canada: Can the Impasse be Resolved?" (1997-98), 29 Ottawa L. Rev. 153, at p. 164. [Para. 181]

[123] On December 12, 2001, the Agency issued Decision No. 646-AT-A-2001 (hereinafter the Calgary Decision), its preliminary jurisdictional decision on whether obesity is a disability for the purposes of the CTA. That decision followed a two-week public hearing where the Agency heard a substantial amount of legal and medical evidence presented by specialists, including medical doctors, a professor of biostatistics; and an internationally-recognized expert in the classification of disabilities. In that decision, the Agency considered several models of disability analysis and chose one model in particular, a synthesis of the medical and the social models, to use in determining this question. In applying this model, the Agency determined that the impairment of obesity could constitute a disability, but only in circumstances where it resulted in activity limitations and/or participation restrictions to the person in the context of travel in the federal transportation network. Accordingly, the Agency concluded that obesity, per se, is not a disability for purposes of Part V of the CTA but that there may be persons who are obese who may have a disability for the same purposes because of their obesity.

[124] In the Calgary Decision, the Agency quoted the following evidence provided by Dr. Lau, a Canadian expert on obesity, who appeared before the Panel in that case:

Dr. Lau testifies that he could not specify a BMI beyond which he can say, with any certainty, that people would not fit into a seat but that such individuals would have Class III obesity [being severe or morbid obesity, with a BMI of over 40]. Dr. Lau further testifies that this presumption does not preclude a person who has a BMI of 41 to 45 from fitting into a seat into which another person, who has a BMI of 39.5 but who has a certain distribution of fat around the waistline, cannot.

[125] As such, the Agency indicated in the Calgary Decision that it would continue to examine, on a case-by-case basis, whether a person who is obese is also a person with a disability for the purposes of Part V of the CTA. The Calgary Decision was not appealed.

[126] The Agency then considered the application of Ms. McKay-Panos and, in Decision No. 567-AT-A-2002, a two-Member majority of the Agency Panel assigned to hear the application, determined that, although she had Class III obesity and did not fit in the Air Canada economy class aircraft seats, she was not a person with a disability. The dissenting Member applied the methodology from the Calgary Decision and determined that she was a person with a disability as a result of her obesity, and he indicated that he would have therefore proceeded to determine whether she encountered any undue obstacles to her mobility.

[127] Ms. McKay-Panos appealed that decision of the Agency to the Federal Court of Appeal and on January 13, 2006, the Federal Court of Appeal issued its decision in the McKay-Panos v. Air Canada case, overturning the Agency's decision. The Court applied the methodology proposed by the Agency in the Calgary Decision for disability determinations in cases of persons who are obese, and, consistent with that methodology, determined that she was, in fact, a person with a disability by reason of her obesity.

[128] Accordingly, there is no longer any doubt that there are persons who are disabled, for the purposes of Part V of the CTA, by obesity where they cannot fit within the dimensions of an aircraft seat; however, in keeping with the Agency's Calgary Decision and the aforementioned Federal Court of Appeal decision, the determination of whether a person is disabled by reason of obesity is dependent on the facts and circumstances in each individual case and must be assessed on a case-by-case basis.

b) Persons who have other disabilities

[129] This is, in the Agency's experience, a small category of persons with disabilities who would require additional seating, which would include persons who, because of their disabilities, for example, cannot sit upright in an aircraft seat for the duration of a flight. While in some instances, it may be obvious that these are persons with disabilities, in other instances, this determination may be more difficult and may require an individual assessment.

[130] Although the Agency was, at one time, also considering, as part of this subgroup, the very small number of persons with disabilities who require stretchers to travel by air through the applications of Barry Growe and Eric Tucker, with Air Canada's cancellation of its stretcher service in 2005, these persons with disabilities are no longer accommodated by the carrier respondents7 and, thus, no longer form part of this target population for the purposes the present decision, as confirmed by the Agency in its Decision No. LET-AT-A-319-2005. (See paragraph 42 in Appendix D)

The case at hand

[131] For the Agency to have jurisdiction over an application, the Agency must determine whether the applicant has a disability or the application concerns persons with disabilities for the purposes of Part V of the CTA. In this case, the Agency also has before it an intervention filed by Ms. McKay-Panos in support of the applicants.

[132] The applicant Eric Norman had paraplegia. He used a wheelchair for mobility and required an Attendant to travel by air.

[133] The applicant Joanne Neubauer has severe rheumatoid arthritis. She uses a wheelchair for mobility and requires personal care attendants to assist her in her daily life. She requires an Attendant to travel by air.

[134] As set out in paragraph 41 above, the intervener, Ms. McKay-Panos, has already been found by the Federal Court of Appeal to be a person with a disability for the purposes of Part V of the CTA as a person with Class III obesity, being morbid or severe obesity, who was unable to fit in an Air Canada economy class seat.

[135] Given the circumstances of the individual applicants and the intervener, there is no doubt that these persons were persons with disabilities at the time of their travel. However, in view of the nature of the present application and the remedy sought, being an Agency order that, in effect, requires the named respondents to provide a systemic remedy to all persons with disabilities who require additional seating to accommodate their disabilities when travelling by air, it is important to keep in mind the Agency's approach to disability determinations, as set out in paragraphs 111 to 120 above. The Agency's decision in this matter may have an impact on the development of policies and procedures by Air Canada, WestJet, and the Gander International Airport Authority, which will apply to all such persons with disabilities who require additional seating to accommodate their disabilities in the future.

Agency conclusion on disability

[136] In light of the foregoing, and given the need for individual assessments of disability in some cases, the Agency is unable to determine specifically who will fall into the category of persons with disabilities who may be eligible to benefit from a 1P1F policy. However, it must be emphasized at this point that this Decision is intended to apply only to persons who are found to have disabilities for the purposes of Part V of the CTA. Furthermore, for the purposes of persons with disabilities who require Attendants, this Decision is intended to apply only to those persons with disabilities who are required by the carrier respondents' tariffs to travel with an Attendant, either for assistance in meeting specific personal care needs or for safety reasons, i.e. to provide them with assistance in the event of an emergency evacuation or decompression. Finally, the person's need for additional seating must arise from his/her disability.

Part III - Obstacles

The Agency's approach to the determination of obstacles

[137] Under Part V of the CTA, the mandate of the Agency is to eliminate undue obstacles to the mobility of persons with disabilities from the federal transportation network. The word "obstacle" is not defined in the CTA, but lends itself to a broad meaning as it is usually understood to mean something that impedes progress or achievement. Obstacles or barriers to the mobility of persons with disabilities may result from, for example, federal transportation service providers' facilities; equipment; and/or policies, procedures, or practices; or a failure by transportation service providers to comply with such and/or to take positive action to enforce compliance with policies, procedures and practices, including a failure to provide appropriate training to employees and contractors.

[138] In considering whether or not a situation constituted an "obstacle" to the mobility of a person with a disability in a particular case, the Agency generally will look to the incident described in the application to determine whether the applicant has established in the application (that is, on a prima facie basis) that:

  • a distinction, exclusion or preference resulted in an obstacle to the mobility of a person with a disability;
  • the obstacle was related to the person's disability; and
  • the obstacle discriminates by imposing a burden upon, or withholding a benefit from a person with a disability.

[139] An individual is not required to have experienced difficulties in travel to make an application to the Agency under Part V of the CTA such that the design of facilities and equipment or the proposed application of a policy in the future may trigger the Agency's jurisdiction.

[140] There is a broad range of circumstances where the Agency has found obstacles in the past. For example, there are cases of obstacles where the person was prevented from travelling, where the person was injured in the course of his or her travels (such as where the lack of appropriate accommodation during travel affects the physical condition of the passenger), or where the person was deprived of his or her mobility aid after the trip as a result of damage caused to the aid while it was being transported. Also, the Agency has found obstacles in instances where the person was ultimately able to travel, but circumstances arising from the experience were such as to detract from the person's sense of confidence, dignity, safety, or security, recognizing that these feelings may be such as to disincline a person from future travel and, thus, have a negative impact on the mobility of the person.

The case at hand

Facts

[141] Both carrier respondents apply fare structure policies which result in fares being assessed and charged to passengers on the basis of the number of seats used by the person.

[142] WestJet does not offer a discount for additional seats required by persons with disabilities, including those occupied by Attendants required to travel with persons with disabilities, such that these persons must pay full fare. It does, however, have a policy, referred to as its "1 in 2" policy, which permits a person to book additional seats, albeit for no discount, for other reasons, including in the case of musicians who travel with large instruments and persons with disabilities who require additional seating to accommodate themselves.

[143] Air Canada offers discounted fares for Attendants required by persons with disabilities as well as for additional seats required by passengers, including by musicians who travel with large instruments and by persons with disabilities who require the additional seating to accommodate themselves. However, the discount is only applicable to full (such as Latitude) fares on domestic and transborder flights. As a result, the purchase of two tickets with discounted fares (now known as Tango) is often less expensive than the purchase of one full fare ticket and one ticket with the Attendant or comfort fare discount.

[144] Both carrier respondents also have policies and practices which permit the ad hoc accommodation of persons with disabilities who require additional seating to accommodate themselves to travel by air. Such seating may be provided by the carrier personnel at no charge at the airport on the day of travel where there are empty seats on the person's flight.

[145] The Gander International Airport Authority assesses the Improvement fee on the basis of enplaned departing passengers and, thus, charges the Improvement fee for Attendants who are required to travel with persons with disabilities.

[146] In terms of the individual applicants in this case, Eric Norman and Joanne Neubauer needed to travel with Attendants and objected to paying additional fares to the carrier respondents and, in Mr. Norman's case, additional Improvement fees to the Gander International Airport Authority for his Attendant.

[147] Additionally, Ms. McKay-Panos was unable, by reason of her disability, to fit in the aircraft seats assigned to her by Air Canada and she required additional seating to accommodate herself to travel by air within Canada. On the first outbound flight, she was not offered additional seating and was required to sit in her assigned seat, which caused her significant pain, bruising, extreme discomfort, as well as embarrassment and humiliation. She was advised of Air Canada's ad hoc accommodation practice, and on the second flight of her outbound trip, carrier personnel offered her an available seat in the business class; however, on the day of her return trip, there were no empty seats on her first flight and she was, again, required to occupy one seat despite the fact that she did not fit in the seat. On the second flight that day, carrier personnel did not accommodate her using the ad hoc practice despite the fact that there was an available empty seat. She was required to pay for an upgrade to obtain the available business class seat, at an extra cost of $972.

Applicants' position

[148] The applicants submit that persons with disabilities want to enjoy equal access to the federal transportation network so that they can travel in the same way as other Canadians. However, insofar as some persons with disabilities are charged an amount over and above that charged to passengers who do not require additional seating to accommodate their disabilities, the applicants assert that this has the effect of requiring these persons with disabilities to pay a premium to take the same trip as other passengers.

[149] The applicants point out that the existence of the obstacle posed by the carrier respondents' policies to charge for additional seating has been recognized by the Agency for many years, noting that the Agency already determined this issue in Decision No. 532-A-1993 (in the Buchholz v. Air Canada case).

[150] The applicants emphasize that if some persons, because of their disabilities, have to pay more for their transportation than other persons, irrespective of the reason or the amount, they face an obstacle and are discriminated against. However, aside from the principle of economic discrimination, the applicants assert that these additional fares and charges have a significant impact on the access that persons with disabilities have to the federal transportation network, given that:

  • persons with disabilities already have relatively low incomes and significant barriers in the workplace;
  • persons with disabilities are required to pay fares in addition to those that are paid by non-disabled persons which makes long distance travel prohibitive for many who might otherwise have travelled for business or personal reasons; and
  • the additional fares and charges required to be paid by persons with disabilities for additional seating that they require to accommodate their disabilities only serve to exacerbate the disadvantage which, for many persons with disabilities, makes trips more costly, while, for others, makes air travel prohibitively expensive, such that they are no longer able to travel by air.

[151] The applicants also refer to the additional expenses that they must incur as a result of their disabilities, such as living and medical expenses, in supporting their position that they are simply unable to bear the cost of any additional and unnecessary expenses. For example, they refer to the substantial economic and personal costs involved in being accompanied by an Attendant when one travels.

[152] With respect to the Improvement fees, the applicants state that they are the fee imposed by the Gander International Airport Authority as a flat fee to air passengers which is added to the cost of tickets, without regard to the fare arrangements applicable for persons with disabilities and without regard to the impact such charges would have on the mobility of persons with a disability. The applicants point out that the full fee is imposed on the fare or portion of a fare attributable to a person with a disability's Attendant, without regard to the principle of 1P1F.

[153] Mr. Norman explained at the May 2005 hearing that he was taken aback by the fact that he had to pay two Improvement fees in Gander. Although Mr. Norman understood that the Gander International Airport Authority was not unique in collecting such fees, it was the first time he realized the impact of the cost of the additional fees as a result of spending so much money on his air travel.

Intervener's position

[154] Ms. McKay-Panos contends that she suffered from stereotypes and discrimination, and that she was subjected to rude and judgmental treatment. She is of the view that she was not treated with dignity because of her obesity. Finally, Ms. McKay-Panos states that the extra charge to purchase a second economy-class seat or a business-class seat means that she cannot equitably participate in traveling by air, an activity that is available to non-disabled Canadians for both professional and personal purposes. Ms. McKay-Panos made the following statement at the November 2006 hearing:

The issue is not about money. It is about human dignity. I feel that Air Canada's policies are overly rigid and discriminatory. I suffered humiliation, embarrassment and physical pain [...]. I want to be able to fly like anybody else. I want to be able to fly with dignity and without humiliation. I want to pay a reasonable fare for that. I do not want to worry about not fitting in a seat. I do not want to have to worry about how I will be treated. I do not think I should be treated differently than any other traveller. I want to be treated with respect. I want to be able to get to another location without a hassle. Really, what I want is to have a normal air travel experience. I do not want it to be an ordeal for me or for the airline. All I really want is to be able to decide I want to fly somewhere, make my booking and be able to travel like any other person in Canada. I want to be able to phone and make a reservation, say I am obese, what do I need to do? And to have the travel arrangements made seamlessly. While I am prepared to pay a reasonable fare, I do not want the fare to be a barrier to my ability to travel anymore than the fare is a barrier for anybody else to travel.

Respondents' position

[155] The carrier respondents do not contest that there is an obstacle to the mobility of certain persons with disabilities posed by their policies which require additional fares to be paid by persons with disabilities for additional seating required to accommodate their disabilities. In this regard, the carrier respondents state:

With respect to some members of the class [of persons with disabilities], the fact that a disability exists and that an obstacle to the mobility has been encountered will be clear and the real issue will be whether the obstacle is undue. However, with respect to other members [of the class of persons with disabilities], there will be questions respecting both the existence of the alleged disability as well as the obstacle.

[156] The Gander International Airport Authority takes the position that the $12 Improvement fees charged to Gander International Airport departing enplaned passengers is not an obstacle to the mobility of persons with disabilities as it is nominal. The Gander International Airport Authority asserts that it is appropriate that each passenger, including persons with disabilities and their Attendants, pay the Improvement fees when using and benefiting from the expansion and improvement of the Gander International Airport, regardless of the reason why they are travelling.

Agency analysis and findings

[157] The Agency is of the opinion that everyone has the right to reasonable access to transportation services. Air Canada and WestJet are in the business of transporting people, and persons with disabilities are simply one such group. Persons with disabilities who require an Attendant require extra seating as do persons who, because of their disabilities, do not fit within the one seat usually provided by the airline to transport people. Within the various fare classes, Air Canada and WestJet base their charges on the seats that persons occupy while being transported. This practice penalizes persons with disabilities who require additional seating to accommodate their disabilities to travel, notwithstanding the fact that they receive the same transportation from point A to point B as do all other passengers.

[158] The Agency recognizes that for many people, disabled or not, air travel may not be affordable, but the issue before the Agency is whether it is appropriate that some persons with disabilities, as a direct result of their disabilities, have to pay more for the same transportation that others receive, to travel from point A to point B.

[159] The Agency notes that the additional fare increases the cost of travel for persons who require an Attendant when they travel, as illustrated by Mr. Norman's and Ms. Neubauer's cases where the cost of travel for them was higher than it would have been for a passenger with no disability.

[160] In Mr. Norman's case, while he was eligible for Air Canada's 50-percent reduction of his Attendant's fare, the Agency notes that, in some cases, he chose not to avail himself of the discount as the cost of his ticket plus the cost of his Attendant's ticket with the discounted fare under the attendant air fare policy was higher than buying two discounted tickets.

[161] In Ms. Neubauer's case, she indicates that, while she travels by air approximately once a year, she would travel more often if she were not charged additional fares for her Attendant.

[162] Persons with disabilities are a minority group, generally recognized as being disadvantaged in society as a result of their disabilities. As a subpopulation, they generally face higher levels of unemployment and underemployment, have lower incomes and achieve lower levels of education than do members of the non-disabled population.8 As a result, persons with disabilities are given legislative protections to address this disadvantage and to ensure that they are not subjected to undue discrimination. In particular, in the context of the CTA, the intent of Part V is to improve the access of persons with disabilities to the federal transportation network such that they may participate fully in society.

[163] The Agency is of the opinion that the carrier respondents' policies to charge persons with disabilities for additional seats required to accommodate their disabilities, either for an Attendant or themselves, represents an economic disadvantage arising directly from these persons' disabilities which can effectively limit their available travel options such that travel opportunities for employment, leisure, education, medical care and emergencies may be reduced for these persons. As persons with disabilities are statistically more likely to be in lower income brackets, the economic impact of these fare policies on persons with disabilities is that much more pronounced as this group of people would appear to be generally less able to absorb this monetary impact. The Agency notes the applicants' assertion that the carrier respondents do not deny that persons who are charged additional fares because of their disabilities may face an obstacle to their mobility as a consequence.

[164] The Agency notes the substantial impact on these persons with disabilities of the fares for additional seating that they required to travel by air, as illustrated by Mr. Norman's and Ms. Neubauer's evidence, and the Agency accepts the evidence of the applicants that, for some persons, it may be difficult, or impossible, to travel because of these fares. The Agency notes the statement of Ms. Neubauer that "one person - one fare would mean that I would have at least a fighting chance, an ability to be what I call more on an equal footing with the rest of society, where at least I could, if I could scrounge up the money for myself, go and do some of these things that I would really like to be involved in and do, some pleasurable, some for work".

[165] Mr. Norman acknowledged that he was able to afford to pay his travel expenses. Notwithstanding, the Agency is of the opinion that the ability of particular individuals with disabilities to pay more for their travel than other passengers is not a relevant factor in the obstacle analysis as their ability to pay does not address the economic discrimination posed by additional fares and charges.

[166] The Agency further notes that, as in the case of Mr. Norman who resided in Newfoundland and Labrador and was required to travel by air for business and medical purposes, some persons with disabilities who live in smaller communities and more remote areas may have even greater dependence on air travel due to a lack of reasonable alternatives in modes of transportation, such that the impact of the higher cost of air travel may be more pronounced for them. The Agency also notes that there are persons with disabilities, such as Ms. Neubauer, for whom air travel is the only realistic option given their disability-related needs.

[167] With respect to the Improvement fees, the Agency is of the opinion that insofar as the fees are charged to each enplaned departing passenger, meaning that persons who require an Attendant must pay two Improvement fees, as indicated by Mr. Norman, the additional fees represent an economic disadvantage arising directly from the person's disability, which effectively limit the travel options available to persons who require an Attendant when travelling by air. The Agency further notes that at Gander, the Improvement fees are $12, however, the Improvement fees at other airports are over $20 which, depending on the ticket price purchased, can represent a significant portion of the cost of the ticket. The Agency accepts CCD's argument that any additional charge, nominal or otherwise, has a cumulative effect and is discriminatory.

[168] The Agency is of the opinion that to require persons with disabilities to pay more than other passengers for their transportation from point A to point B to have their disabilities accommodated constitutes an obstacle to the mobility of those persons with disabilities. In particular, the Gander International Airport Authority and WestJet provide no alternative to accommodate these persons with disabilities. This clearly constitutes an obstacle to the mobility of these persons with disabilities.

[169] Air Canada, on the other hand, offers a 50-percent reduction on full fares for additional seats required to accommodate persons with disabilities, whether it be for themselves or for their Attendants. However, insofar as these policies still result in persons with disabilities having to pay more for their transportation than other passengers, this constitutes an obstacle to the mobility of these persons with disabilities.

Agency conclusion on obstacles

[170] In light of the above, the Agency finds that both the fares charged by the carrier respondents for domestic air services and the Improvement fees charged by the Gander International Airport Authority which are required to be paid by persons with disabilities in respect of one additional seating that they require to accommodate their disabilities to travel by air constitute obstacles to the mobility of those persons with disabilities, including the late Mr. Norman, Ms. Neubauer and Ms. McKay-Panos.

Part IV - Undueness of obstacles

The Agency's approach to the determination of the undueness of obstacles

[171] Should the Agency make a finding that a feature of the federal transportation network represents an obstacle to some persons with disabilities, it must then proceed to make a determination of whether that obstacle is undue as it is only upon finding that an obstacle is undue that a transportation service provider may be ordered to take corrective measures to address the obstacle.

[172] In this way, once the applicant has established in the application the existence of an obstacle to the mobility of a person with a disability in the federal transportation network, the onus of proof then shifts to the respondent transportation service provider to prove, on a balance of probabilities, that the obstacle is not undue. To this end, the respondent must demonstrate that the source of the obstacle:

  • is rationally connected to a legitimate objective, such as those objectives found in the national transportation policy contained in section 5 of the CTA;
  • was adopted by the transportation service provider with an honest and good faith belief that it was necessary to the fulfilment of that legitimate objective; and
  • is reasonably necessary for the accomplishment of its objective, such that it is impossible for the transportation service provider to accommodate the person with a disability without imposing undue hardship on the service provider.

[173] The transportation service provider must show that reasonable accommodation has been provided, meaning up to the point of undue hardship. What constitutes reasonable accommodation in each case is a matter of degree and depends on a balancing of the interests of persons with disabilities with those of the transportation service provider in the circumstances of the case. This includes the significance and recurrence or continuing nature of the obstacle and the impact of the obstacle on persons with disabilities as well as the transportation service provider's commercial and operational considerations and responsibilities.

[174] In most cases, there will be a range of alternatives available to address the needs of a person with a disability or a group sharing the same characteristics and, in each case, the most appropriate accommodation will be one that respects the dignity of the individual, meets individual needs, and promotes the independence, integration and full participation of persons with disabilities within the federal transportation network. In the end, reasonable accommodation will be the most appropriate accommodation which would not cause undue hardship to the transportation service provider.

[175] To establish undue hardship, a transportation service provider must show that it has considered and determined that there are no reasonable alternatives to better accommodate the person with a disability affected by the obstacle and that there are constraints that make the removal of the obstacle unreasonable, impracticable or, in some cases, impossible. Examples of constraints on respondent transportation service providers which the Agency may consider in its determination of undue hardship are those related to structural issues, safety issues, operational issues and financial/economic issues and include security measures carriers must adopt and apply, timetables or schedules that they must attempt to adhere to for commercial reasons, equipment design and the economic impact of adapting services. These constraints may have some impact on persons with disabilities as, for example, they may not be able to board in their own wheelchair, they may have to arrive at a terminal earlier to allow time for boarding, and they may have to wait for a longer period of time for deboarding assistance than persons without disabilities.

[176] It is impossible to establish an exhaustive list of the obstacles a passenger with a disability may encounter and the constraints that transportation service providers will encounter in trying to meet the needs of persons with disabilities. A balance has to be struck between the various responsibilities of transportation service providers and the rights of persons with disabilities to travel without encountering undue obstacles and it is in the weighing of this balance that the Agency applies the concepts of undueness and undue hardship.

A. Airport improvement fee charged at the Gander International Airport

[177] The applicants have established the existence of an obstacle to the mobility of certain persons with disabilities in the federal transportation network in the Improvement fee that they are required to pay to the Gander International Airport Authority for additional seats required to accommodate their disabilities for their Attendants to travel on domestic air services. The onus now shifts to the respondent, Gander International Airport Authority, to prove, on a balance of probabilities, that the obstacle is not undue.

[178] The Agency will consider below each of the three aspects of the test set out in paragraph 172 above.

1. Is the source of the obstacle rationally connected to a legitimate objective?

[179] The Gander International Airport Authority notes that the funds from the Improvement fee are required to meet the costs associated with maintaining, improving and constructing Gander International Airport's infrastructure to ensure that the Gander International Airport Authority is able to provide safe, reliable and efficient air transportation services to those passengers utilizing the Gander International Airport. The Gander International Airport Authority submits that its goal is to operate and develop a safe and secure international airport that contributes to the economic development of the Central Newfoundland Region and to develop and expand the Gander International Airport to ensure that the air traffic demands of the Central Newfoundland Region are satisfied.

[180] The Agency is of the opinion that the source of the obstacle - that is, the collection of Improvement fees from all passengers - is rationally connected to a legitimate objective, that being the funding of the construction, maintenance and improvement of capital infrastructure needed to provide safe, reliable and efficient air transportation services to passengers. The Agency notes that this objective is consistent with those objectives listed in the national transportation policy found in section 5 of the CTA and, in particular, the preamble which expresses the objective of providing for "[...] a safe, economic, efficient and adequate network of viable and effective transportation services accessible to persons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost". There is no doubt that air terminals and their infrastructure form an important part of this network.

[181] Accordingly, the Agency finds that the first aspect of the test has been met.

2. Is the continued existence of the obstacle based on an honest and good faith belief that it was necessary for the fulfilment of that legitimate objective and with no intention of discriminating against the claimant?

[182] The Gander International Airport Authority notes that to meet the costs associated with maintaining, improving, and constructing the Gander International Airport's infrastructure, it charges an Improvement fee at a flat rate of $12 to enplaned departing passengers at the Gander International Airport. The Gander International Airport Authority maintains that persons with disabilities and their Attendants use and benefit from the expansion and improvement of the Gander International Airport as do all other passengers, and it is therefore appropriate that each passenger pay a "nominal fee" when travelling from the Gander International Airport.

[183] There is no indication in this case or in the applicants' submissions that the imposition by the Gander International Airport Authority of the Improvement fee was based on anything other than an honest and good faith belief that it was necessary for the fulfilment of the legitimate objective of ensuring that there are adequate resources available to fund the construction, maintenance and improvement of capital infrastructure needed to provide safe, reliable and efficient air transportation services to passengers. Furthermore, there is no suggestion that the Gander International Airport Authority's imposition of the fee was intended to discriminate against persons with disabilities who require additional seating for their Attendants to travel by air.

[184] The Agency, thus, finds that the second aspect of the test has been met.

3. Is the continued existence of the obstacle reasonably necessary to achieve that legitimate objective, where reasonable necessity must be demonstrated by showing that it is impossible for the service provider to accommodate persons with disabilities without imposing undue hardship on the service provider?

[185] At this stage of the analysis, the Gander International Airport Authority must prove that reasonable accommodation has been provided up to the point of undue hardship.

[186] To establish undue hardship, the Gander International Airport Authority must demonstrate that there are constraints that make the removal of the obstacle impracticable, unreasonable or impossible, and that it has considered and determined that there are no reasonable alternatives to accommodate persons with disabilities affected by the obstacle.

The Gander International Airport Authority's position

[187] The Gander International Airport Authority contends that the imposition of an Improvement fee of $12 by a not-for-profit organization is neither excessive nor disproportionate to the safe operational requirements of the Gander International Airport, and cannot be considered to be, as provided for in the CTA, an undue obstacle to the mobility of persons with disabilities who require additional seating for their Attendants.

[188] The Gander International Airport Authority does not take the position that there are any structural, safety, operational, cost or other constraints which prevent them from removing the requirement that the Improvement fee be paid in respect of Attendants who are required to assist persons with disabilities so that they may travel by air. The Gander International Airport Authority simply asserts its view that it is important to uphold the principle that all persons who travel through the network should pay for the use of facilities. It provided the following explanation as to why it would not be participating in the oral hearing: "The potential impact on our airport is deemed to be minimal, no matter what the outcome of this hearing reveals. The cost associated with our continual involvement is just too high."

[189] The Gander International Airport Authority presented no evidence of reasonable alternatives which had been identified or considered by it to accommodate persons with disabilities who rely on Attendants to travel by air and who are required to pay two Improvement fees to travel from the Gander International Airport.

Applicants' position

[190] The applicants assert that the levying of the Improvement fee violates the principle of 1P1F in that it requires persons with disabilities to pay more than other persons for their transportation as a result of their disabilities and, therefore, constitutes an undue obstacle. They further submit that the impact on persons with disabilities of additional charges does not vary depending on who levies the charge or the purpose for which the money is required.

[191] The applicants state that the levying of improvement fees is not unique to the Gander International Airport and these fees are charged without regard to the fare arrangements applicable for persons with disabilities, and without regard to the impact such charges have on the mobility of persons with disabilities. According to the applicants, it is irrelevant whether the additional charges are low or high as the cumulative effect is discriminatory.

Agency analysis

[192] As noted previously, to establish undue hardship, the respondent must show that there are constraints that make the removal of the obstacle impracticable, unreasonable or, in some cases, impossible and that it has considered and determined that there are no reasonable alternatives to accommodate persons with disabilities affected by the obstacle.

[193] The Agency notes that all enplaned departing passengers are required to pay the Improvement fee. As a result of this policy, persons with disabilities who require an Attendant to travel by air pay more than other passengers for their transportation to accommodate their disabilities.

[194] In principle, the Agency is of the opinion that all persons with disabilities requiring additional seats to accommodate their disabilities should pay the same fee and that the fee they pay should be the same as that paid by non-disabled passengers. As previously discussed, the principle of equality includes the notion that persons with disabilities should not be placed at an economic disadvantage as a result of their disabilities. Again, in principle, persons with disabilities should not have to pay more for their transportation services than other non-disabled passengers.

[195] The Agency notes that, in this case, the Gander International Airport Authority made no effort to demonstrate that it considered whether there are reasonable alternatives to accommodate persons with disabilities who require Attendants and must pay the additional Improvement fee.

[196] It may be true that the central constraint to providing accommodation in this case is economic insofar as the need to maximize this revenue is related to the Gander International Airport Authority's ability to fund airport improvements. The Agency notes, however, that the Gander International Airport Authority did not take the position that failure to maximize this revenue by charging on a per person basis regardless of discriminatory impact would result in a significant negative impact on either its economic well-being or the safety, reliability and efficiency of airport operations. In fact, the Agency notes that the Gander International Airport Authority did not file any supporting evidence to demonstrate that it is unable to provide the accommodation requested by the applicants.

[197] The Gander International Airport Authority provided no other arguments related to constraints, except to ask that the Agency uphold the principle that all passengers must pay to use its facilities. In this regard, while it is reasonable to expect service providers to establish principles to guide them in their policy setting and decision-making, where such a principle imposes discrimination on persons with disabilities, it must be justified as being reasonably necessary. In this case, there was no attempt made by the respondent to provide evidence to demonstrate that a change in policy to accommodate persons with disabilities would cause it undue hardship. Therefore, the Agency finds no evidence of any constraints which would justify a finding that the removal of the obstacle would be impossible or unreasonable.

[198] The Gander International Airport Authority was provided with many opportunities to submit this evidence, including in written pleadings, at the oral hearing, and following the issuance of the Supreme Court of Canada's decision in the CCD v. VIA case, which clarified the burden of proof and evidentiary requirements applicable in this proceeding. The Gander International Airport Authority simply stated that any order made by the Agency in this matter will significantly impact upon all airports in Canada which charge a fee to expand, enhance and improve passenger travel; however, the Agency notes that its stated reason for declining to participate in the Agency's oral hearing and submit further evidence was that the potential impact of an undue obstacle finding on its airport would be "minimal compared to the costs associated with the Gander International Airport Authority's continued involvement in the Agency's investigation of this application".

[199] Although the Agency has determined that ATAC is no longer a respondent to this application, the Agency notes that ATAC did raise the issue of undue financial hardship. It submitted that the Improvement fee is neither excessive nor disproportionate, and that the funds "are integral to a safe, efficient and well-run national air transportation system". While ATAC submitted that the application of a 1P1F policy in terms of the Improvement fee would result in an undue financial burden on the airlines and airport operators, the Agency notes that no concrete evidence whatsoever was filed to support this impressionistic allegation of undue hardship.

[200] Accordingly, the Agency finds that the Gander International Airport Authority did not meet its burden of proof to demonstrate that it is unreasonable, impracticable or impossible for it to accommodate persons with disabilities who require an Attendant without causing undue hardship to the Gander International Airport Authority.

[201] Having concluded that the Gander International Airport Authority did not meet its burden of proof to demonstrate that accommodation would cause undue hardship to it, the Agency finds that, on the balance of probabilities, the continued existence of the obstacle is not reasonably necessary to achieve the legitimate objective of providing safe, reliable and efficient air transportation services to passengers.

Undue obstacle conclusion on the improvement fee at the Gander International Airport

[202] In light of the above, the Agency finds that the levying by the Gander International Airport Authority of an Improvement fee in respect of the additional seat for an Attendant who is required, according to the terms of the air carriers' domestic tariffs, to accompany a person with a disability for that person to travel by air on domestic air services is an undue obstacle to the mobility of persons with disabilities who require Attendants, including the late Eric Norman.

B. Additional fares charged by Air Canada and WestJet for domestic air services

[203] The applicants have also established the existence of an obstacle to the mobility of certain persons with disabilities in the federal transportation network in the fares that they are required to pay to the carrier respondents for additional seats required to accommodate their disabilities, either for themselves or for their Attendants, so that they can travel on their domestic air services. The onus now shifts to the carrier respondents, Air Canada and WestJet, to prove, on a balance of probabilities, that the obstacle is not undue.

[204] The Agency will consider below each of the three aspects of the test set out in paragraph 173 above.

1. Is the source of the obstacle rationally connected to a legitimate objective?

[205] Air Canada's and WestJet's fares are charged on a per seat basis. At this stage of the inquiry, the carrier respondents must establish that they adopted the standard to fix fares on a per seat basis for a purpose or goal that is rationally connected to a legitimate objective.

[206] In this regard, the Agency is satisfied that the source of the obstacle, the policy to set fares on a per seat basis, is rationally connected to a legitimate objective, that being the recovery of costs incurred to provide the service and providing economic benefit to the carrier, both of which are necessary to the financial viability of the business. The connection between the two factors is evident and is consistent with the objectives listed in the national transportation policy found in section 5 of the CTA which, again, expresses, as an objective, the achievement of "[...] a safe, economic, efficient and adequate network of viable and effective transportation services accessible to persons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost".

[207] Accordingly, the Agency is satisfied that the first aspect of the test has been met.

2. Is the continued existence of the obstacle based on an honest and good faith belief that it was necessary for the fulfilment of that legitimate objective and with no intention of discriminating against the claimant?

[208] Now that the legitimacy of the more general objective is established, the second aspect that must be demonstrated is that the carrier respondents adopted the policy at issue in good faith, in the belief that it is necessary for the fulfilment of its objective.

[209] There is no indication in the present case that the carrier respondents acted other than honestly and in good faith in adopting the policy at issue, to establish fares on a per seat basis. This policy simply reflects a neutral rule made for business reasons and to apply equally to all passengers. There is no suggestion that the carrier respondents, in adopting this policy, were motivated in any way by discriminatory considerations.

[210] On this basis, the Agency is satisfied that the second part of the test has been met.

3. Is the continued existence of the obstacle reasonably necessary to achieve that legitimate objective, where reasonable necessity must be demonstrated by showing that it is impossible for the service provider to accommodate person(s) with disabilities without imposing undue hardship on the service provider?

[211] The Agency found that, in this case and given the nature of the issue being considered, it does not need extensive evidence to permit it to make the determinations under the first two parts of the undueness test as set out above. However, the carrier respondents must now prove that incorporating the most appropriate accommodation within the policy by providing additional seating at no additional charge to address the needs of the target population of persons with disabilities will create undue hardship.

Part V - Consideration of constraints raised by Air Canada and WestJet

[212] The carrier respondents' position is that there are three constraints to accommodating persons with disabilities in this case which, in their view, create undue hardship: safety, cost (including financial and economic implications) and operational constraints.

[213] The Agency must determine whether each carrier respondent has established that the constraints raised, when considered either individually or collectively, will create undue hardship such that it is not reasonable for it to provide to persons with disabilities the most appropriate accommodation identified by the applicants, that being to provide additional seating required to accommodate persons' disabilities at no additional charge. If the carrier respondents meet this burden of proof of establishing undue hardship, the Agency will consider any reasonable alternative identified.

[214] The Agency notes the applicants' and intervener's position that the ideal accommodation for the majority of persons with disabilities who need additional seating for themselves is for the carrier respondents to be required to reconfigure their aircraft to install a number of larger seats. That way, persons with disabilities could be accommodated and pay no extra cost than the fare paid by other passengers. In pursuit of evidence regarding this type of accommodation, the intervener requested that the carrier respondents produce a witness to speak to seat size, seat design and cabin configuration. While the carrier respondents initially refused to produce such a witness, they indicated a change of this position during the course of the November 2006 hearing and did offer to make a witness with this knowledge or information available for questioning. However, both the applicants and the intervener declined this opportunity to question such a witness as the offer was only made on Friday, November 24, 2006, and the witness would only be made available to them after their own expert witnesses had testified and been released, and after their cases had closed.

[215] In any event, it should be noted that the applicants specifically indicated that they were not seeking this type of accommodation as a remedy in this case, and they renewed their request for remedies in the nature of policy changes to implement a 1P1F policy. Accordingly, the Agency has not considered accommodation related to seat size and aircraft configuration in its undueness analysis.

Safety constraints

[216] In their May 17, 2007 submission, the carrier respondents assert that there are safety constraints to the provision of the accommodation requested by the applicants on behalf of persons with disabilities who require an Attendant to travel by air. The carrier respondents characterize the applicants' case as being based on the fact that "they are ‘required' by the airlines to travel with an attendant" and they go on to note that "the most inclusive remedy for the obstacle imposed by this requirement would be the removal of the requirement so as to allow persons with disabilities to make their own choice in the matter." The carrier respondents then explain why this accommodation is not possible such that an undueness analysis could not result in this corrective measure.

[217] However, it is clear to the Agency that this, in fact, does not form the basis of the applicants' case. The applicants have not questioned the carrier respondents' authority to establish tariffs that define which persons with disabilities will require an Attendant to travel by air and, on many occasions in the course of the proceeding, the applicants have specifically stated that this proceeding is not to review the reasonableness of the criteria set out in the carrier respondents' tariffs used to determine the requirement to travel with an Attendant.

[218] Rather, the issue before the Agency in this proceeding is whether the current policies of the carrier respondents to charge fares on the basis of seats occupied and their failure to apply a 1P1F policy to persons with disabilities who require additional seating to accommodate their disabilities to travel by air on domestic air services constitutes an undue obstacle. The Agency agrees with the applicants' assertion in their submission dated May 29, 2007, that "(s)afety is only relevant in that it assists in defining the numbers of persons who may require such a policy."

[219] Accordingly, the arguments that the carrier respondents make about their perceived inability to deny a person the right to travel with an attendant or travel companion are in relation to the criteria required to assess eligibility for a benefit under a 1P1F policy and are properly considered in the context of incidence, as discussed in the section beginning at paragraph 224 below, and operational constraints, as discussed in the section beginning at paragraph 830 below.

Cost constraints

[220] The Agency's approach to assessing the cost constraints raised by the carrier respondents will be:

  • to determine the estimated cost of accommodation to each of the carrier respondents, with accommodation being defined as the adoption of a 1P1F policy for domestic air services,
  • to then assess both the economic and financial impacts of those costs on each of the carrier respondents, and
  • finally, to determine whether the cost, either considered separately or collectively with any other constraints, constitutes undue hardship to either of the carrier respondents.

A. Determination of the cost of accommodation

[221] Based on the evidence provided and in light of the carrier respondents' burden of proof to establish undue hardship, the Agency must consider whether the economic and financial implications of the cost of implementing a 1P1F policy on the carrier respondents are such that their failure to implement such a policy would be found to not constitute an undue obstacle to the mobility of persons with disabilities. To do so, the Agency must first consider what the cost of a 1P1F policy would be to each of the carrier respondents before it can assess the economic and financial implications of these costs to them.

[222] The Agency's approach to determining the estimated cost of accommodation in this case will be to:

  • first, determine incidence, or the number of times that the carrier respondents may be expected to have to provide accommodation to persons with disabilities under a 1P1F policy; and
  • then, apply a costing methodology to estimate the total annual costs to each of the carrier respondents that would be associated with the adoption of a 1P1F policy.

[223] It should be noted that the values presented in the text that follows have been rounded, such that re-performing the calculations using these values may produce variances attributable to rounding.

1. Incidence

[224] The determination of the costs associated with a 1P1F policy requires an estimation of the number of times that the carrier respondents may be expected to have to provide accommodation to persons with disabilities under a 1P1F policy. The Agency refers to this factor as "incidence", the calculation of which incorporates three main factors:

  • the number of persons with disabilities who require additional seating to accommodate their disabilities to travel by air within Canada;
  • the travel propensity of this population, being their inclination to travel as represented by the proportion of this population who use domestic air services; and
  • the number of domestic air trips that this population takes in a year.

[225] Each of these factors will be considered below for each subset of persons with disabilities that form the target population.

[226] The Agency notes that the source of evidence on which assumptions and estimations are based is of critical importance to the reliability of the estimates made. There has been much discussion in the course of this proceeding regarding the parties' various responsibilities to produce evidence and actual data, including requests made that the Agency draw particular conclusions and negative inferences as a result of the failure to do so.

[227] The applicants' position is that the carrier respondents are responsible to produce this evidence based on the burden of proof that the carrier respondents bear to prove the defence of undue hardship, and on the fact that, as transportation service providers, they have reservation systems which track their actual experience with transporting persons with disabilities.

[228] The respondent carriers objected to providing the data sought by the applicants on the basis that it is their onus to prove that any obstacle is undue and that they should be allowed to determine what evidence they will rely upon in making their case. They added that "[...] if the applicants are correct in their assertion that the lack of ‘undueness' can only be established by reference to the data sought [...] then the respondents, if they elect not to produce that data do so at their peril."

[229] In the event that data for a particular subgroup of persons with disabilities who require more than one seat to accommodate their disability was not available, the applicants also requested that the Agency order the carrier respondents to collect data for such a subgroup for the period from July 1 to December 31, 2005, so that it would be available for the second stage of the oral hearing.

[230] In response, the carrier respondents objected to providing this data on the basis that their reservation systems are not designed to capture this specific information. To introduce procedures and systems necessary to collect this data would, in the carrier respondents' submission, be costly, time consuming, and commercially intrusive with meaningless statistical results. They submitted that CCD should immediately begin collecting this data from its membership as this is information available to it and its constituents who are the best source of the information sought.

[231] While empirical data would have been preferable, the Agency accepted the carrier respondents' request that the Agency not interfere unduly with the carrier respondents' decisions respecting the manner in which the case should be developed. Accordingly, the Agency did not order the production of the data requested by the applicants in the absence of a compelling reason why the carrier respondents should not be left to make their case.

[232] Consequently, the Agency will conduct its analysis based on the best evidence made available to it by the parties and will, in the end, determine whether the carrier respondents have met their burden of proof.

Incidence Factor 1 - The number of persons in the target population

[233] To estimate the number of persons with disabilities who require additional seating to accommodate their disabilities to travel by air within Canada, consideration must be given to the various relevant disabilities and how these disabilities affect the requirement for additional seating. In this regard, the Agency will consider the evidence introduced by the parties related to the number of persons with disabilities who require additional seating to accommodate:

  • an Attendant, as required pursuant to the terms of the carrier respondents' tariffs; or,
  • themselves, including:

    • persons who are disabled by obesity; and
    • persons with other disabilities;

to travel by air.

[234] In relation to the category of persons who require Attendants, the carrier respondents also made submissions on the potential abuse of a 1P1F policy and its impact on incidence. The Agency has determined that this concern raises issues that are properly considered in the context of operational constraints as they refer to problems which the carrier respondents foresee in their determination of eligibility for a benefit under a 1P1F policy. As a result, although the Agency will address whether to factor in abuse in its calculation of incidence, there is overlap between this and the operational constraints set out in the section beginning at paragraph 830 below, where the Agency considers the ability of the carrier respondents to implement an effective screening mechanism to determine eligibility for a benefit under a 1P1F policy.

a) Persons with disabilities who require additional seating to accommodate their Attendants to travel by air

[235] Under both Air Canada's Canadian General Rules Tariff No. CGR-1, Rule 33AC, and WestJet's Local Domestic Tariff, the following categories of persons with disabilities are required, for safety purposes, to have an Attendant to be accepted for transportation: (i) persons who are deaf and blind, (ii) persons who have intellectual disabilities and are non-self-reliant, (iii) persons who are ambulatory and non-self-reliant, and (iv) persons who are non-ambulatory and non-self-reliant.

[236] There is no definition of "non-self-reliant" provided in the carrier respondents' tariffs; rather, it is to be understood through the definition of "self-reliant" which provides as follows:

[...] a person who is independent, self-sufficient and capable of taking care of all his/her physical needs during flight, during an emergency evacuation or decompression. He/she requires no special or unusual attention beyond that afforded to the general public, except that he/she may require assistance in boarding and deplaning.

[237] Since 1995, Air Canada has offered a 50-percent reduction on Attendant fares on its domestic and transborder air services, such that where a person with a disability who is non-self-reliant establishes to the carrier's medical staff that an Attendant is required under the tariff, he or she will be charged 50 percent of the "applicable fare" on the first seat occupied by the person with a disability. Originally, this fare reduction was available on the fare paid by the person with a disability regardless of the fare category. However, it is now only available on full fares and no longer available on the discounted Tango fares offered by Air Canada. No carrier witness was able to say with certainty when this change occurred. However, the evidence of the late Eric Norman suggests that it occurred sometime between 2002 and 2005.

[238] WestJet, on the other hand, does not offer a discount on fares for Attendants required by persons with disabilities.

[239] In considering the incidence of persons with disabilities who require additional seating for Attendants to travel by air, the parties introduced evidence from two sources, namely the carrier respondents' reservations systems and expert reports relying on information from other sources.

Air Canada's reservation systems data

[240] According to Air Canada, "good data" exists only for persons who make a formal request for an Attendant seat and who undergo a medical evaluation process in accordance with Air Canada's Attendant air fare policy:

2001

3945

2002

3092

2003

(No data submitted)

2004

2937

2005

12249

May 2005 to April 2006

112410

[241] The carrier respondents' expert, Professor Lazar, indicated that Air Canada informed him that the numbers of persons with disabilities actually travelling with attendants are significantly higher than this but that they did not know how much higher. Professor Lazar further noted as a possible explanation for the divergence that there may no longer be a benefit to asking for a discount under this policy as the Tango discount air fares now available are usually cheaper than the discounted full fare available under the Attendant air fare policy.

WestJet's reservation systems data

[242] Although WestJet submitted reservation system data regarding Attendant travel on domestic and transborder flights, there were some discrepancies in the data provided as the annual numbers were derived from different sources.

[243] WestJet indicated that it was unable to provide Attendant statistics limited to domestic air services, and that these figures include transborder air services as well.

[244] WestJet also indicated that after December 2004, it changed its system of coding and can no longer capture this data.

2002

514

2003

(variously reported as)

448

443

1060

2004

(variously reported as)

827

537

821

Jan. 2001 to Dec. 2004

1268

[245] Lorne MacKenzie, Director of Airport Regulations Affairs at WestJet, states that there is a large number of unrecorded events which renders inaccurate the number of persons who need an Attendant recorded under Special Service Request Codes (hereinafter SSR Codes) in their system. He explains that if a passenger identifies a requirement for an Attendant in advance of travel, the carrier has the ability to track the information. However, he comments that, as WestJet does not offer a discount on the Attendant's fare, there is no incentive for a person to make the carrier aware of his or her need for an Attendant unless the person has experienced difficulties in the past and wants to make the carrier aware of this fact. He also notes that if WestJet first becomes aware at the airport that an Attendant is required, then data collection is dependent on whether or not an agent chooses to document the file. Finally, he states that, in some cases, the carrier will not know if an Attendant is needed unless it is an obvious case of a person with a severe disability who is non-ambulatory and non-self reliant.

Estimations of incidence based on non-reservation data

[246] As the carrier respondents assert that their reservation systems are not reliable sources of information for determining the number of persons with disabilities who require Attendants to travel by air, they referred to other sources of data and information to provide estimations, as did the applicants. The carrier respondents developed a position that 18.5 percent of persons with disabilities require an Attendant to travel by air; the applicants' position is that only 3.6 percent of persons with disabilities have this requirement. The carrier respondents also asserted that this estimation should be increased by 5 to 25 percent of the total number of persons with disabilities who currently do not claim that they need to travel with an attendant to account for the abuse that, in their view, would be inevitable with the implementation of a 1P1F policy, to which the applicants responded that this would be inappropriate given the availability of effective eligibility control mechanisms which virtually eliminate the risk of abuse.

Carrier respondents' position

[247] The carrier respondents assert that between 154,000 and 163,000 persons with disabilities would travel with an Attendant pursuant to a 1P1F policy, being 18.5 percent of the 833,00011 to 881,000 persons with disabilities who are assumed to have travelled by air in 2005. The carrier respondents relied on this 18.5-percent estimation based on the evidence of their expert, Professor Lazar, who derived this estimation largely from information published in Transportation and Disability in Canada - An Overview, a report prepared for Transport Canada in July 1995 by Goss Gilroy Inc. (hereinafter the Goss Gilroy report). The Goss Gilroy report is based on the data contained in the 1991 Health and Activities Limitation Survey, a Statistics Canada survey which was developed in consultation with government representatives, associations of and for persons with disabilities, and persons with disabilities themselves based on the 1991 Census.

[248] Professor Lazar first estimated the proportion of the Canadian population that has a disability and travels by air. He referred to the Goss Gilroy report which sets out that, of the 3.8 million adults with disabilities in Canada in 199512, 2.9 million of them were reported as being able to take long distance trips and 715,000 of them travelled by air, which represented 2.43 percent of the 29.4 million total Canadian population that year. Professor Lazar reported that a later study by Goss Gilroy Inc. (hereinafter Goss Gilroy) estimated that the number of travellers with transportation disabilities in Canada increased by 11 percent between 1995 and 2000. Using this figure, he calculated a revised estimation of 794,000 individuals with transportation disabilities who travelled by air in 2000, which represented 2.58 percent of the 30.8 million total Canadian population that year. To determine the number of persons with disabilities who travelled by air in 2005, Professor Lazar applied the 2.58 percent to the 2005 total Canadian population of 32.3 million to arrive at a low estimate of 833,000. Professor Lazar also calculated a high estimate. He noted that from 1995 to 2000, the percentage of persons with transportation disabilities who traveled by air had increased from 2.43 to 2.58 percent. For his high estimate, Professor Lazar assumed that this growth continued at the same rate, on account of an aging population, reaching 2.73 percent in 2005. Professor Lazar calculated his high estimate by applying the rate of 2.73 percent to the 2005 total Canadian population, yielding a high figure of 881,000.

[249] Professor Lazar used the Harris Interactive Survey data to cross-check the reasonableness of the above calculations. Specifically, he noted the findings in this source that 15 percent of the general American adult population had a disability and that 31 percent of this population had travelled by air in the past two years. He adjusted his results to account for the fact that, in contrast to the Goss Gilroy report, this Survey covers a two-year period and is in relation to the adult population of persons with disabilities. Professor Lazar arrived at an estimation that 2.74 percent of the total American population consisted of persons with disabilities who travelled by air in 2005.

[250] Professor Lazar then estimated the proportion of persons with disabilities that travel by air and who travel with attendants. He makes the assumption that 18.5 percent of persons with disabilities who travel by air also travel with an attendant, again based on the Goss Gilroy report which indicates that "of the 2.9 million persons with disabilities who were able to take long distance trips, 18.5 percent (537,000) need an attendant or companion to accompany them on long distance trips due to their condition or health problem. This represents 14.1 percent of all persons with disabilities."

[251] Professor Lazar also referred to an estimation made by the Department of Transportation of the United States of America (hereinafter the US DOT) that 22 percent of persons with disabilities who travel by air are accompanied by attendants or "family travel companions" in the United States of America. He initially used this estimation in his first and second reports as the base or high figure in his range for attendant incidence, purportedly based on what he believed was the applicants' expert Dr. Lewis' agreement with this figure and the fact that, unlike the Goss Gilroy report, this estimation is based solely on travel by air. However, in final oral argument, counsel for the carrier respondents used only the 18.5 percent derived from the Goss Gilroy report as the more conservative estimation for Attendant incidence. The carrier respondents further contend that based on the assertion that Dr. Lewis supports the 22 percent estimate, it is an estimate that supports the reasonableness of the 18.5 percent estimate for the proportion of persons with disabilities that travel by air and who travel with Attendants.

[252] Professor Lazar states that, although the 18.5 percent figure was based on the 2.9 million persons with transportation disabilities13 who took trips in excess of 80 kilometres on all modes of transportation and not just by air, he chose to use this estimation in the absence of a specific number for those who travel exclusively by air. Further, counsel for the carrier respondents, in final oral argument, asserts that 18.5 percent is the "qualifying number" which represents how many people would not only say that they need an Attendant but how many people would qualify for a benefit under a 1P1F policy after a qualification process is put into place.

[253] The carrier respondents also took the position, based largely on the evidence of Professor Lazar, that the introduction of a 1P1F policy will result in an "inducement effect", which, according to Professor Lazar, is akin to abuse.

[254] During his examination-in-chief, Professor Lazar states:

So the assumption here, which has sort of a long history of economic theory to support it, is that if you change the rules, if you now make it mandatory for an airline or all airlines to provide free travel for an attendant, setting aside how we define the attendant, how we monitor and enforce the rules, but regardless how you define it, monitor, enforce it, people will still try to find a way to capitalize on this.

[255] He notes that the exact number of the resulting change in behaviour is unknown because the rule has not been changed, and, while he stated that one can infer what the behaviour might be from looking at other cases where rules have changed, he indicated that he had not done this work.

[256] Accordingly, in his report, Professor Lazar assumed that between 5 and 25 percent of the total number of persons with disabilities who currently do not claim that they need to travel with an attendant, family member or friend would obtain medical documentation entitling them to a benefit under a 1P1F policy. On this basis, the carrier respondents instructed their experts, Richard Crosson and Brenda Pask, to rely upon the report of Professor Lazar in their estimation of the potential costs of a 1P1F policy to the carrier respondents, and, thus, they factored in an additional 5 to 25 percent to represent the number of persons with disabilities who currently do not claim that they need to travel with an attendant, family member or friend who would falsely claim that they need an attendant under a 1P1F policy.

Applicants' position

[257] The applicants take the position that 31,752 persons with disabilities who travelled by air in 2005 required an Attendant and would have qualified for a benefit under a 1P1F policy, being 3.6 percent of the 872,300 persons with disabilities who Dr. Lewis asserts travelled by air in 2005. This 3.6 percent estimation was developed by Dr. Lewis and is also based on information published in the Goss Gilroy report. He expressed his result using lower and upper values being the range within which there exists an 80 percent probability of finding the actual outcome, expressed as an 80 percent probability that the value lies between 2.2 and 5.1 percent.

[258] Like Professor Lazar, Dr. Lewis notes that, according to the Goss Gilroy report, 715,000 persons with disabilities travelled by air in 1995; however, he goes on to note that the Goss Gilroy report also reported "growth of [persons with disabilities] was 22 percent over 1995-2005" and he applied this growth factor to the population of persons with disabilities who travel by air to arrive at his estimation that 872,300 persons with disabilities travelled by air in 2005.

[259] As the Goss Gilroy report did not provide an Attendant incidence rate, Dr. Lewis examined the report for other indicators of the need for an Attendant. He derived his 3.614 percent estimation by multiplying the percentage of persons with disabilities who travelled long distances and who reported difficulty travelling by air, being 9.1 percent, by the proportion of those persons who reported that those difficulties limited their travel by air (40 percent of the 9.1 percent of persons with disabilities who travel by air and reported difficulties doing so also reported that those difficulties limited their travel by air).

[260] Dr. Lewis highlighted that, unlike Professor Lazar, he:

  • defined this target population with reference to the carrier respondents' tariffs as they are critical to the assessment of eligibility to a benefit under a 1P1F policy;
  • chose only data pertaining to air travel; and
  • took the severity of disability into account as this aspect is strongly tied to the need for an Attendant.

[261] Specifically, Dr. Lewis indicates that he tried to reflect the carrier respondents' tariff definition in his estimates. He did so by taking into account information in the Goss Gilroy report which reflects the severity of disabilities, notably by capturing those persons with disabilities who reported that their condition caused difficulty travelling by air and for whom those difficulties limited their travel. He further notes in his report that his 3.6-percent estimation represents the upper bounds of the tariff eligible target population, as the difficulties that limit the use of air travel by persons with disabilities will not always necessitate the use of an Attendant.

[262] Dr. Lewis refers to Ms. Furrie's report wherein she states that she examined the data included in the PALS to identify the populations relevant to this case and found that 1.5 percent of all Canadian adults with disabilities living in households indicated that they require help with personal care such as washing, dressing or taking medication, seven days a week, for a minimum of 20 hours per day. She submitted that, given the intensity of care required by these persons with disabilities, one could assume that if they travelled, they would be assessed as non-self-reliant and would require an Attendant under the carrier respondents' tariffs.

[263] Dr. Lewis uses Ms. Furrie's 1.5-percent estimation as a "sanity check" to support the reasonableness of his 3.6-percent estimation as well as the unreasonableness of the carrier respondents' 18.5-percent estimation, and he expresses the opinion that it would be implausible that the percentage of persons with disabilities who would qualify for a benefit under a 1P1F policy would rise from Ms. Furrie's estimate of the 1.5 percent of Canadian adults with disabilities who require a full-time attendant more than 1,000 percent to Professor Lazar's 18.5 percent estimation.

[264] Dr. Lewis further indicates that, based on Ms. Furrie's conclusion that only 1.5 percent of all disabled adults living in households require a full-time attendant, there is a greater likelihood that the true value for the Attendant incidence rate lies closer to the 2.2 percent end of his probability range than to 5.1 percent.

[265] In addition, Dr. Lewis derives a second alternative estimate based on WestJet's 2004 reservation data, which he also uses as a form of "sanity check" to support the reasonableness of his 3.6-percent estimation. He indicates that, based on the SSR Codes data for WestJet set out in the Siebert/Pask December 1, 2005 report, 3.4 percent of WestJet's passengers with disabilities, being approximately 18,048 people, could be assessed as requiring an Attendant. This estimation was based on:

  • 100 percent of the people who were coded in the carrier respondents' reservation system as having an Attendant (821 persons);
  • 100 percent of the people who need personal oxygen, based on the tariff requirement that persons who travel with oxygen also be accompanied by an Attendant (1,331 persons);
  • 20 percent of the people who have visual and hearing impairments (1,390 persons);
  • 15 percent of the people needing wheelchair assistance, based on the assumption that 10 percent of wheelchair users use power wheelchairs and these people tend to have quadriplegia and, thus, would be non-self reliant (11,913 persons); and
  • 10 percent of the people with meet and assist requirements (2,593 persons).

[266] Dr. Lewis indicates that, in his opinion, the 3.4-percent figure derived from the WestJet SSR Codes is a conservative estimate, given that he expects that most of the people who require Attendants are already accounted for in the total number of persons who declare the need for an Attendant. Dr. Lewis noted that the 3.4-percent estimation closely approximates the 3.6-percent estimation derived from his first methodology and provides further assurance that 3.6 percent is a reasonable estimation for 2005 of the number of persons with disabilities who travel by air and who require an Attendant to do so.

[267] Dr. Lewis asserts that the 18.5-percent estimation used by the carrier respondents is an overstatement of the proportion of persons with disabilities who require an Attendant to travel by air, based on the fact that the 18.5 percent includes persons with disabilities who travel on all modes of transit, and not just air. Dr. Lewis pointed to Table 5.11 in the Goss Gilroy report as support for the proposition that approximately 89 percent of the long distance trips taken by persons with disabilities are by car, van or truck, and only 3.9 percent are taken by air.

[268] The applicants also submit that the carrier respondents did not inform their expert, Professor Lazar, that they set the criteria in their tariffs to establish which persons with disabilities are required to travel with an Attendant and, as a result, Professor Lazar, during his cross-examination, expressed some astonishment about the fact that this case is about persons with disabilities who are required by the airline to travel with an Attendant as he agreed that the carriers will be able to set the criteria and "greatly restrict the numbers" of persons who would be eligible for a benefit under a 1P1F policy.

[269] During cross-examination and in response to counsel for the applicants describing the case as being "about people who are required by airlines to be accompanied by Attendants", Professor Lazar responded:

Yeah, I find that to be an absurd assumption as an economist. I mean, if that is really the case, why are we here? [...] What's the disagreement? I mean if the airlines are going to be the ones that determine who is eligible for the one-passenger, one-fare rule, you know, they can then establish whatever criteria they want. The only concern for them might be sort of the public relations aspect. If someone comes along and claims, I need an attendant, so that could sort of, you know, force the airlines to offer more seats, but setting aside the public relations part, which is important. If it's up to the airlines to define the criteria [...] and there is no one overseeing their decision-making process, the airlines are going to greatly restrict the numbers and the numbers at the end of the day would tend to be extremely small and whatever cost there might be for the airlines would be quite small, probably much smaller than the cost of challenging this. Nevertheless even if that's the case from a policy point of view, there still may not even be a case for offering free travel or half-price seats because we need the other side of it. What are the benefits to individuals in society? If I don't know what those benefits are, I can figure the cost, even if they're trivial, even if they are a dollar in total, if the benefits are less than a dollar, economic theory is quite clear, stupid policy from private point of view, from a social point of view. If the benefits exceed the dollar, well, now, we have something to discuss, so if you're telling me that that's the case, that the airlines have the sole discretion to set the criteria and determine who's eligible, the numbers should be quite small, but, nevertheless, it may still be a foolish policy.

[270] The applicants question the carrier respondents' use of the 22-percent attendant incidence estimation made by the US DOT. They indicate that although this figure was noted in the Preliminary Regulatory Evaluation report entitled Air Transportation for Individuals with Disabilities (14 CFR part 382), Notice of Proposed Rulemaking to Implement Air-21 Act Amendment to Air Access Act of 1986 (hereinafter the Evaluation report), the underlying report where the figure was first reported could not be produced such that there was no ability to understand the basis on which this figure was developed. As a minimum, though, the applicants object to the use of this figure as, in their view, it overstates the Attendant incidence rate by appearing to include 17 percent of people who travel with family members and friends as travel companions. Although the carrier respondents asserted that Dr. Lewis worked on the Evaluation report and that he supports the figure of 22 percent as he used it as the basis of the model outlined in the Evaluation report, Dr. Lewis testified that he, in fact, did not work on that part of the Evaluation report and does not support the use of the 22-percent estimation in this context.

[271] With respect to the carrier respondents' position on abuse, the applicants responded that while there could be a higher demand for a free service, the carrier respondents can control the rate of eligibility of people who claim a benefit under a 1P1F policy with the proper application of eligibility criteria.

[272] In his report, Dr. Lewis agreed that economic theory is clear that lower prices would induce more travel and, during cross-examination, he acknowledged that the prospect of obtaining a free seat for an Attendant meant that the number of people who would declare a need for an Attendant would likely rise. However, Dr. Lewis specified in his report that Professor Lazar's 5 to 25 percent abuse rate was not applicable to the circumstances of a 1P1F policy. He asserts that Professor Lazar made an "undocumented assumption of a massive further increase" of persons with disabilities who would somehow obtain documentation entitling them to free Attendant travel even if they did not require an Attendant. Dr. Lewis noted that the carrier respondents already have in place methods of risk management to guard against the "fraudulent use" of fare discounts for people requiring an Attendant.

[273] Furthermore, the applicants assert that this is a function that the carrier respondents are already carrying out, insofar as the carrier respondents' tariffs contain provisions limiting the number of non-self reliant passengers that may be carried by aircraft type.

Carrier respondents' reply

[274] In response to the applicants' position that the 18.5-percent figure derived by Professor Lazar is an overstatement of the number of persons with disabilities who require an Attendant to travel by air on the basis that it largely reflects persons with disabilities who travel in personal vehicles, counsel for the carrier respondents produced a worksheet in final oral argument that referred back to the Goss Gilroy report, noting that other data in the report may demonstrate that the 18.5 percent is not predominantly made up of those travelling in personal vehicles.

[275] Counsel also attempted to apply Dr. Lewis' approach to incorporate the severity of disability by looking at whether the persons with disabilities who reported travelling by personal vehicle also reported difficulties due to their condition or health problem, and whether they reported that these difficulties limited their travel by personal vehicle. However, in the absence of data on the proportion of these persons who reported that their difficulties limited their travel by personal vehicle, counsel for the carrier respondents used the 60 percent of persons with disabilities who reported this for intercity bus travel. Based on the above, he calculated that, of those persons with disabilities who express a need for an attendant in HALS, only 16.7 percent state that they have difficulty travelling long distances and that those difficulties limit their travel such that the proportion of persons with disabilities who are likely to require an attendant or companion and travel by car, van or truck is 16.7 percent.

[276] Professor Lazar also referred to indications of severity of disability as a means of cross-checking the reasonableness of his estimation of the proportion of persons with disabilities who will need an attendant to travel by air. Specifically, he noted that, by referring to both the Harris Interactive Survey and the Goss Gilroy report, the range of persons reporting severe disabilities reported by these sources varies from 14 to 31 percent, as follows:

  • 14 percent of all adults with disabilities in the United States of America reported having very severe disabilities (Harris Interactive Survey);
  • 18.2 percent of all Canadians with disabilities reported having severe disabilities (the Goss Gilroy report); and
  • 31 percent of persons with transportation disabilities report severe disabilities (the Goss Gilroy report);

with Professor Lazar's assumption being that all of these people, if they can travel, would require an Attendant to do so. Professor Lazar noted that the 18.2 percent of persons with severe disabilities reported in the Goss Gilroy report was "strikingly similar" to the 18.5-percent attendant rate contained in that same report. Professor Lazar also noted that the Harris Interactive Survey reported another 41 percent of all adults with disabilities in the United States of America having somewhat severe disabilities, and that it would be a reasonable assumption that some proportion of this group would also require an Attendant to travel by air which, when combined with the 14 percent, would quickly exceed the 18.5-percent estimation of attendant incidence set out in the Goss Gilroy report.

[277] Further, in response to questions raised by the applicants, the carrier respondents acknowledge that the source of the 22-percent US DOT attendant incidence estimation is not properly identified in the analysis provided by Professor Lazar in his first report and, although Professor Lazar indicated that he had seen the report which is the underlying source of the 22 percent, he was later unable to produce it. However, the carrier respondents contend that the US DOT continues to rely on the Evaluation report and, thus, took the position that the 22 percent remains on the public record as a viable number that "is being used in the real world" and continues to support the credibility of the 18.5-percent estimate.

[278] The carrier respondents assert that Dr. Lewis' estimation of 3.6 percent is not a viable number as it is misleading and understated. The carrier respondents assert that this is particularly true as the 3.6-percent estimation does not include other persons with disabilities, including, for example, persons with seizure disorders who, while they generally do not experience difficulties travelling by air and any difficulties they do experience may not limit their travel by air, may nevertheless require an Attendant pursuant to their tariffs. In support of this proposition, the carrier respondents filed a letter dated September 5, 2006 prepared by Dr. Ross Roussev, a practising neurologist, wherein he states that of the 0.5 percent of the general population that has a seizure disorder, some proportion of these persons will have very poor seizure control despite medications and may experience various degrees of impairment for travel by air. Furthermore, during his examination-in-chief, Dr. Bekeris testified that Air Canada did not have any effective way of determining who are persons with seizure disorders unless they had a seizure on board one of Air Canada's flights.

[279] In response to Dr. Lewis' evidence regarding the importance of effective screening mechanisms in eliminating abuse, the carrier respondents submit that "an effective screening process is not possible". As an illustration of this, they refer to Dr. Bekeris' evidence that although persons with disabilities may need to travel with an attendant for one of three reasons: i.e., medical, safety or personal reasons, his office is unable to assess passengers who claim to need attendants for personal reasons. He indicated that the need for an attendant to assist with meals, taking oral medication and using the toilet is not assessed and cannot be objectified medically. By way of example, Dr. Bekeris referred to passengers who use wheelchairs or who are blind - if these persons declared a need for an attendant to meet personal needs, they would not normally require a medical note to confirm that need and Dr. Bekeris states that he would not be in a position to contradict their expressed need.

[280] Dr. Bekeris acknowledges that the group does assess passengers with disabilities as requiring attendants for medical and safety reasons, even where that assessment is contrary to the advice of the passenger's medical provider. He also indicates that they could challenge a claimed need for an attendant in a situation where the passenger and his or her medical provider have taken the position that, for medical reasons, a person should travel with an attendant. However, Dr. Bekeris could not recall any case in which they had actually done so. He adds that he does not typically see the person being assessed, and that conclusions are made on the basis of the medical data provided by the person's medical provider.

[281] Employee witnesses Juliane Lambert for Air Canada and Lisa Puchala for WestJet testified that carrier cabin and flight crew may be involved in the assessment of self-reliance insofar as a passenger may be refused transportation if he or she is obviously non-self reliant but attempting to travel without an attendant. Although acknowledging that the majority of persons who use wheelchairs or who are blind are self-reliant for the purposes of air travel and do not travel with attendants, they did, however, indicate that they would not be able to contradict an expressed need by these persons for an attendant.

Agency analysis

[282] The applicants and the carrier respondents derived their very different estimations of the incidence of persons with disabilities travelling with Attendants primarily from the same data source, i.e., the Goss Gilroy report, with the main difference being the fact that Dr. Lewis' estimation was based on eligibility under the carrier respondents' own tariffs while Professor Lazar's estimation was not.

[283] There is no doubt that statistical evidence can be subject to varying, and even contradictory, interpretations, such that it is important to carefully consider the underlying factors or variables that form the basis of the evidence to properly assess, weigh and balance the positions of the parties. In this case, the issue on which the various experts disagree is an important factor in this analysis and the five-fold discrepancy between the two estimations highlights the requirement for the Agency to carefully review each of the variables used in the evidence which forms the foundation for the experts' estimations.

[284] The Agency notes that both the carrier respondents and their expert, Professor Lazar, as well as the applicants and their expert, Dr. Lewis, based their Attendant incidence rates on two estimations contained in the Goss Gilroy report i.e.,:

  • an estimation of persons with disabilities who would require an attendant or companion to accompany them on long distance trips; and
  • an estimation of the base population of persons with disabilities who travel by air.

[285] Having determined that they would use the Goss Gilroy report to provide this base population, the parties have, in effect, incorporated a travel propensity rate of 18.8 percent for the general population of persons with disabilities who travel by air15, to be used for this target population of persons with disabilities who require Attendants to travel by air. The Agency is concerned that this approach appears to be contrary to the evidence that the Agency received which points to the conclusion that the travel propensity of this particular target population would be lower than that of the general population of persons with disabilities and, accordingly, the Agency will review the issue of the appropriate travel propensity estimation for this target population in the section, Incidence Factor 2, paragraphs 395 to 452 below.

[286] Having noted the problem associated with the 1995 base number of 715,000 as incorporating travel propensity, this base number was used by both Professor Lazar and Dr. Lewis to project a base number for 2005. The Agency accepts as more reasonable Dr. Lewis' estimation of the 2005 base population, that is, that 872,300 persons with disabilities travelled by air in 2005, as it was based on the growth of the proportion of persons with disabilities in the total population over the ten-year period from 1995 to 2005. In any event, it is between Professor Lazar's low range figure of 833,000 and his high range figure of 881,000.

Table 1: Estimated number of persons with disabilities who are able to take long distance trips and travel by air (2005)

Estimated Number of Persons with Disabilities Who Are Able to Take Long Distance Trips and Travel by Air (1995)1

715,000

Growth Rate (1995 - 2005)2

22%

Estimated Number of Persons with Disabilities Who Are Able to Take Long Distance Trips and Travel by Air (2005)

872,300

Source:

1Goss Gilroy report [pg. 32]

2Goss Gilroy report [pg. 6, Exhibit 2.1]

[287] While the carrier respondents' expert, Professor Lazar, offers the opinion that 18.5 percent of the persons with disabilities who travel by air would qualify for a benefit under a 1P1F policy as persons with disabilities who travel with an Attendant, the Agency is of the opinion that there is insufficient compelling support for this estimation, based largely on the fact that this figure is derived from the Goss Gilroy report using answers reported in HALS to a question which is overly broad for the Agency's purposes in this proceeding.

[288] Specifically, Question F-22 in HALS asked, "Because of your condition or health problem, do you require an attendant or companion to accompany you on long distance trips?" Accordingly, the 18.5 percent of persons with disabilities who answered "yes" to this question represent:

  • all persons with disabilities;
  • who take long distance trips defined as 80 kilometres or over;
  • by any mode of transport; and
  • who require an attendant or companion to accompany them.

[289] The problems inherent in each of these aspects of the question are considered below.

[290] The first problem with this figure is that it is derived from the 2.9 million persons with disabilities who are able to take long distance trips and does not involve a clear consideration of the notion of severity of disability. The Agency is of the opinion that it is a reasonable assumption that the persons with disabilities who are required under the carrier respondents' tariffs to travel with an Attendant are more severely disabled persons, being certain persons who are non-self-reliant such that they can be expected to require assistance to meet specific personal care needs and/or have such significant mobility and/or communication impairments and would require extraordinary assistance in the event of an emergency evacuation or decompression.

[291] While Professor Lazar stated that the 18.5-percent figure was "based on the 2.9 million persons with transportation disabilities", in fact, the Agency notes that the 2.9 million persons refers to persons with disabilities who take trips in excess of 80 kilometres on all modes of transportation, rather than the 2.2 million persons who were identified as having "transportation disabilities".

[292] In any event, according to Professor Lazar, he "just took the data as they were presented" in the Goss Gilroy report without questioning how Goss Gilroy defined severity of disability and without considering which subgroup of this population would fall within the target population of persons with disabilities who require an Attendant to travel by air.

[293] The second problem with this figure is the use of "80 kilometres or more" to define long distance trips. Given the nature of air transportation, it is reasonable to assume that hardly any trips by air would be only 80 kilometres and there is no support for the proposition that all of these trips or even the majority of them would be taken by air transportation services. It is evident that a significant portion of the 18.5 percent of persons with disabilities who answered "yes" to this question travel by personal vehicle, bus or rail, and not by air.

[294] The reasonableness of this conclusion was supported by the applicants by referring to Table 5.11 in the Goss Gilroy report, which sets out that 88.7 percent, or the great majority, of estimated long distance trips taken by persons with disabilities of over 80 kilometres or more, are by car, van or truck. In fact, Table 5.11 of the Goss Gilroy report reflects that of the total estimated long distance trips taken, only 3.9 percent are by air. In this way, it is apparent that, of the 18.5 percent of persons with disabilities who expressed a need for an attendant or companion when travelling long distances, 88.7 percent of those trips would be by personal vehicle and not by air. Moreover, the Agency notes that Table 5.11 indicates that of the total number of persons with disabilities taking long distance trips by all modes in the three-month period represented in the Table, 12.3 percent travelled by air as compared to 67 percent who travelled by car, van or truck - a five-fold difference.

[295] In addition, as submitted by the applicants' expert, Dr. Lewis, smaller proportions of persons with severe disabilities hold drivers' licences because:

  • they have lower incomes;
  • they are less likely to work; and
  • as persons with physical disabilities, they are less likely to be able to operate a motor vehicle independently and, thus, are more likely to require someone to travel with them by personal vehicle.

[296] In fact, under cross-examination, Professor Lazar conceded that a very high proportion of people who report requiring an attendant or companion in the Goss Gilroy report are being driven in cars, vans or trucks. Furthermore, as the applicants submitted, it is evident that if there is a high proportion of persons with disabilities who travel with an attendant or a companion in the personal vehicles category, the proportion of persons requiring attendants or companions in other modes of transportation will necessarily be lower. In view of this, significant doubts are raised about the validity of Professor Lazar's estimation as air is the only relevant mode of transportation in the case before the Agency.

[297] Finally, the Agency notes that the HALS did not include a definition of "attendant" and the use of the word "companion" in the HALS question clearly contemplates and captures a much broader role than the word "attendant". As a result, the 18.5 percent of respondents to the HALS who answered "yes" to this question includes people who, as the applicants asserted, say that they require an attendant or companion to accompany them as a matter of "social habit", which is very different from the number who would require an Attendant under a carrier's tariff to perform specific functions related to personal care or in the event of an emergency decompression and/or evacuation in-flight.

[298] The Agency notes the report of the applicants' expert, Ms. Furrie, whose work was used by the applicants to support their position that the carriers' figure of 18.5 percent is unreasonable. Dr. Lewis compared the carrier respondents' 18.5-percent estimate to her finding that only 1.5 percent of adults with disabilities require an attendant for 20 hours a day, 7 days a week, and suggests that those who the carrier respondents' submit will claim to need an Attendant for air travel exceed those who currently require a full-time attendant by more than 1,000 percent. The Agency accepts the carrier respondents' position that 1.5 percent is too low a figure to be used for the purpose of estimating incidence, given that it reflects more rigorous or stringent criteria than is used in the carrier respondents' tariffs to identify persons with disabilities who would require an Attendant in-flight. Further, as evidenced by the submission of the carrier respondents, the applicant Eric Norman would not have fallen into this category as he did not require a full-time attendant yet he required an Attendant to travel by air. Nevertheless, the Agency remains of the opinion that 18.5 percent cannot be a reasonable estimation of this number.

[299] Another problem with the use of the 18.5-percent rate from the Goss Gilroy report is that it is based on the assumption that eligibility would extend to everyone who would make a request under a 1P1F policy, which is a mistaken assumption given that it fails to consider the carrier respondents' domestic tariffs which set out the terms and conditions of carriage for their air services, including definitions of which persons with disabilities require an Attendant to travel by air.

[300] In fact, during his cross-examination, Professor Lazar confirmed that the carrier respondents did not inform him that they have a tariff that establishes the criteria for the determination of whether a person requires an Attendant and that could be used to determine the number of persons with disabilities on their flights. Professor Lazar expressed surprise that this case is about persons with disabilities who are required by the carrier respondents' tariffs to travel with an Attendant as he stated that if the airlines are going to be the ones that determine who is eligible for a benefit under a 1P1F policy, they could establish whatever criteria they want and they are going to "greatly restrict the numbers". Professor Lazar added that if there is not someone overseeing the carrier respondents' decision-making process, the numbers would be "extremely small" and the resulting costs would be "quite small, probably much smaller than the cost of challenging this".

[301] The Agency agrees with the applicants that the failure of the carrier respondents to direct one of their key expert witnesses, Professor Lazar, to address the eligibility criteria for persons with disabilities in the tariff is significant for two reasons, being:

  • the tariff eligibility criteria limit the number of persons with disabilities who would qualify for a benefit under a 1P1F policy and, as a result, 18.5 percent is an overstatement of the number of persons with disabilities in the target population; and
  • all of the other carrier respondents' experts premised their subsequent work, including their estimates of incidence of persons with disabilities in the target population and the associated potential costs of a 1P1F policy on the estimate of eligible persons with disabilities which was provided by Professor Lazar as a result of the application of the 18.5-percent figure.

[302] While Professor Lazar subsequently attempted to argue that eligibility would be a "slippery slope" that the carrier respondents would not be capable of controlling, the Agency is of the opinion that it is essential to consider eligibility restrictions contained in the carriers' tariffs to determine the number of persons with disabilities who will qualify for a benefit under a 1P1F policy. The Agency notes the evidence of Dr. Lewis that, based on his experience with many American paratransit systems, putting restrictions into place results in tightly controlled eligibility which ensures that those who are registered to use the service are limited to those who need it. The Agency accepts Dr. Lewis' opinion that failure to use the tariff criteria would result in a much higher estimate for the number of persons with disabilities who would be eligible to travel by air with an Attendant. Furthermore, given the control that the carrier respondents have over eligibility for benefits under any of its policies, the Agency finds this to be an inappropriate basis on which to estimate the incidence of this target population.

[303] In response to Dr. Lewis' assertion that 89 percent of persons with disabilities who require an attendant travel by personal vehicle, counsel for the carrier respondents, in final oral argument, introduced a worksheet to support a new assumption that 16.7 percent should be accepted as the proportion of persons with disabilities who require an attendant and travel by personal vehicle. In addition to the fact that these submissions were made by counsel at the end of the hearing such that the applicants' expert Dr. Lewis could not comment on them or test them, these submissions are also problematic from a substantive perspective.

[304] For example, counsel suggested rejecting Dr. Lewis' proposition that "more of the people who travel by vehicle are going to need attendants because they can't drive themselves" based on the statement in the Goss Gilroy report that "of these 3.3 million persons with disabilities who travel as passengers (of personal vehicles), 254,000, i.e., 7.7 percent, state that they have difficulties travelling as a passenger because of their condition or health problem." The Agency notes, however, that the two statements are not, in fact, contradictory as persons who are travelling as passengers in a personal vehicle, by definition, have a person in the vehicle with them, driving, and who could be considered an "attendant or companion" for the purposes of question F-22 in HALS. Once these persons with disabilities have a driver, they may well encounter no difficulties travelling long distances by personal vehicle as a passenger.

[305] The second example of a substantive problem with the counsel for carrier respondents' submissions in the final oral argument is the adoption of the 60-percent figure, representing persons with disabilities who report difficulties travelling by intercity bus which limit their travel by this mode, at line 7 of his worksheet to be applied to persons travelling by personal vehicle. Although the carrier respondents asked the Agency to make an inference that this number is equally applicable to travel by personal vehicle as it is to travel by intercity bus, the Agency finds nothing in the evidence to support the reasonableness of this inference. Accordingly, the Agency will not consider the 16.7-percent figure.

[306] In response to the carrier respondents' suggestion that the 22-percent estimate used by the US DOT is a "sanity check" and supports the reasonableness of their 18.5-percent figure, the applicants asserted that there is no basis for the US DOT estimation that 22 percent of persons with disabilities require an attendant or family companion to travel by air as the source document has never been located. While Professor Lazar stated that he went behind the US DOT Evaluation report to confirm the origin of the 22-percent figure in the American Travel Survey and determined that it is accurately quoted, when he was given the opportunity to look at the American Travel Survey to confirm his testimony, he was unable to provide a reference to the 22 percent. Accordingly, it is not possible for the Agency to assess the reliability and reasonableness of this figure. Further, given the Agency's concerns regarding the impact of the breadth of the underlying question posed in HALS on the Goss Gilroy report figure of 18.5 percent and Professor Lazar's figure of 22 percent as representing the percentage of persons with disabilities in the United States of America who require "an attendant or family companion" to travel by air, the Agency is not prepared to accept the 22-percent figure as either a definitive answer, or even as support for the 18.5-percent figure as a definitive answer, to the question of how many persons with disabilities will require an Attendant under the carrier respondents' tariffs to travel by air and be eligible to benefit under a 1P1F policy.

[307] Therefore, the Agency is of the opinion that Professor Lazar's choice of data from the Goss Gilroy report as a foundation for the 18.5-percent figure results in a significant overstatement and does not lead to a reasonable estimation of the number of persons with disabilities who require additional seating to accommodate an Attendant to travel by air.

[308] The applicants, on the other hand, took the position that 3.6 percent of persons with disabilities would require an Attendant under the terms of the carrier respondents' tariffs to travel by air in 2005. The applicants' expert, Dr. Lewis, emphasized that these are persons with disabilities who are travelling by air, would be eligible to travel with an Attendant under the carriers' tariffs and form a group which, by definition, is made up of persons who are more severely disabled than the general population of persons with disabilities.

[309] Dr. Lewis also used statistical data contained in the Goss Gilroy report to estimate how many persons would require an Attendant to travel by air; however, he used different variables and data to make his calculations. In particular, his use of the number of persons who travelled by air and who reported difficulties travelling by air, combined with the proportion of those people who reported that those difficulties limited their travel by air, was, in the Agency's opinion, a reasonable attempt to arrive at an estimation of a population by attempting to reflect the tariff criteria by taking into account information about the severity of disabilities. Although the survey questions were not designed to identify this target population, the data chosen by Dr. Lewis represents a good attempt to do so.

[310] Furthermore, Dr. Lewis offered Ms. Furrie's estimate of 1.5 percent as a "sanity check" for his 3.6-percent estimation. There is no doubt that this 1.5 percent of persons with disabilities represents the most severely disabled persons, in that they are non-self-reliant and require attendant care for 20 hours per day, and they would most certainly require an Attendant under the terms of the carrier respondents' tariffs. The Agency notes that, on this basis, there may be value to Ms. Furrie's 1.5-percent factor to support the reasonableness of the 3.6 percent figure. However, the Agency is of the opinion that it does not, by itself, represent a realistic number for persons who would require an Attendant under the carrier respondents' tariffs to travel by air in that there are also persons with severe disabilities who do not require full-time attendant care in their homes, but who would require an Attendant to travel by air, such as the late Mr. Norman. Dr. Lewis, in fact, agreed during cross-examination that the 1.5 percent figure is too low for the Agency's purposes in this investigation.

[311] Dr. Lewis' alternative, which was derived from SSR Codes data for WestJet, resulted in his calculation that 3.4 percent of WestJet's passengers with disabilities are estimated to require an Attendant. This alternative was, in the Agency's view, another reasonable approach to estimating the incidence of this target population.

[312] The Agency notes the consistency of the approach taken by Dr. Lewis with this alternative estimation with the Regulatory Impact Analysis Statement (hereinafter the RIAS) which was issued by the NTA, one of the predecessors of the Agency, on September 25, 1993 with the proposed amendment to the Air Transportation Regulations concerning Air Fares for Attendants of Persons with Disabilities. At page 2 of the RIAS, the Agency notes the definition used for persons eligible for a benefit as

[...] an individual who is quadriplegic; deaf and blind; blind with an additional physical, mental health or intellectual disability; newly blind or newly paraplegic; or who has cerebral palsy with permanent spasticity; or has another physical disability, a mental health or intellectual disability or a medical condition, such that the person would require extraordinary in-flight services (i.e., services not usually provided by an air carrier) or assistance in the event of an emergency evacuation from an aircraft.

[313] Based on this eligibility criteria, the NTA assessed the estimated incidence as follows in the RIAS:

The economic assessment of the Regulations, which made use of available data on persons with disabilities, determined that the number of persons who would qualify for an attendant is low: approximately 13,000 persons would be eligible in Canada.(A more accurate estimate will not be possible until a review of the Regulations is undertaken two years after their coming into force).

[314] While the Agency does not intend to use this figure for the purpose of determining the Attendant incidence rate, the Agency notes that the approach to defining this target population does tend to support the reasonableness of Dr. Lewis' approach to the WestJet SSR Codes and, in particular, the use of percentages of populations of persons with specific disabilities who may be predicted to require an Attendant under the terms of the carrier respondents' tariffs. Furthermore, the Agency finds Dr. Lewis' assessment of the categories of eligible persons with disabilities to be reasonable as well as the assumptions that he made to develop the proportions of persons in each category who might require an Attendant to travel by air.

[315] The applicants assert that the reservation systems data may well be a more reliable source of information than the carrier respondents express, given the target population and the fact that persons with more severe disabilities who are non-self-reliant and who require an Attendant to meet their personal care needs to travel by air have other reasons why they would declare their need for an Attendant, including the need to ensure that they will be seated beside the Attendant on the aircraft, as was recognized by WestJet's witness Lorne MacKenzie.

[316] In addition, the carrier respondents have submitted that frequently an attendant is only recorded in the reservation system at check-in if the check-in agent chooses to record the fact; however, the Agency notes the evidence of Susan Greene that Transport Canada has issued guidelines for the maximum permissible number of non-ambulatory, non-self-reliant passengers to be carried by aircraft type, with the limits dependent upon the types and number of exits by aircraft type as were in existence in 1984. She indicated that while these guidelines are not binding on the carriers, in her experience, most carriers do incorporate these guidelines into their tariffs and/or flight manuals, and the flight attendant manuals are expected to contain a reference to the number limitation. Furthermore, she indicated that while there is no direct regulation requiring carriers to keep track of the numbers of non-ambulatory, non self-reliant passengers per flight, there is an expectation that carriers will abide by the procedures set out in their flight manuals and she noted that it is the carriers' responsibility to monitor these numbers.

[317] While an Air Canada witness asserted that Air Canada's flight attendant manual does not contain exact numbers of passengers requiring Attendants that may be carried and that the flight attendants do not monitor these numbers, the Agency notes that these numbers do form part of both Air Canada's and WestJet's tariffs as well as WestJet's Flight Attendant manual, such that it is expected that the carrier respondents do perform this monitoring function. Furthermore, witnesses for both carriers indicated that they believed that the carrier respondents' reservation agents performed this function. Regardless of whether the function is performed, it is clear that Transport Canada has encouraged the carrier respondents to impose such a limitation in the interests of safety, such that it should be performed and will clearly act to limit the number of eligible persons per flight and, thus, counter the carrier respondents' floodgates arguments.

[318] The Agency notes the carrier respondents' submission that if 18.5 percent is found to be "a little too high", 3.6 percent "cannot possibly be the right number"; that the right number would be between these two figures; and that Dr. Lewis' number should be at least doubled to reflect categories of persons with disabilities such as those with seizure disorders who may require an Attendant to travel under the terms of the carrier respondents' tariffs but who do not presently declare their disability or their need for an Attendant. Assuming, but without deciding, that the number of persons with seizure disorders who may need an Attendant is important, this leaves a myriad of unanswered questions regarding the number of affected persons and whether it is, as suggested by Dr. Lewis, already accounted for in the applicants' figure of 3.6 percent. The carrier respondents did not attempt to establish a credible link between their view that Dr. Lewis' estimation was too low so as to prove their allegation of 18.5 percent and discharge their burden of proof. On the contrary, much emphasis was placed on the unsubstantiated statement to suggest that this is an example of the floodgates that would open with a 1P1F policy. However, in the absence of any substantiating evidence, the Agency is not in a position to attribute any specific number to the incidence of persons who have seizure disorders in Canada in its evaluation of the incidence of persons with disabilities who may be eligible to benefit from a 1P1F policy.

[319] Nevertheless, and in the absence of evidence to the contrary, the Agency accepts the position of Dr. Lewis that his 3.6 percent is generous enough to include persons in this category, noting that Dr. Lewis expressed his estimation as a range of probability varying from 2.2 to 5.1 percent and, while he expected that the number would be closer to 2.2 percent, he used 3.6 percent as the median to be conservative and account for categories of persons such as this.

[320] With respect to abuse, the Agency notes the agreement of the parties that, as an economic principle, lower prices will induce more travel; however, it is important to differentiate between inducement, which is considered by the Agency in the section beginning at paragraph 637 below, and an increase in demand based on an assumption that there will be abuse or illegitimate use of a 1P1F policy.

[321] The Agency notes that neither Professor Lazar nor any of the other witnesses, expert or otherwise, for the carrier respondents provided any evidence to support the reasonableness of their assumption that the overall estimate of incidence should include an additional 5 to 25 percent of persons with disabilities who, Professor Lazar estimated, do not currently require an attendant to travel, to account for the number of persons who would falsely claim that they need an Attendant.

[322] It is important to emphasize that Attendant is defined, for the purposes of this proceeding, as being a person required, pursuant to the carrier respondents' tariffs, to travel with a person with a disability for specific and clearly defined reasons related to:

  • specific personal care needs, and/or
  • safety in emergency evacuation and decompression circumstances,

and does not include travel companions, family members and friends travelling with persons for reasons other than this. This Decision is not to be interpreted as expanding eligibility beyond the criteria for determining the requirement for an Attendant currently in place in the tariffs.

[323] The evidence on file indicates that the carrier respondents have similar policies, procedures and practices in place to assess both fitness to travel and conditions to travel for persons with disabilities, and both carrier respondents may deny a passenger carriage on a flight if he or she needs an Attendant but does not have one, both at the time of check-in and before check-in.

[324] The Agency agrees with the applicants' assertion that, contrary to the carrier respondents' position that they cannot contradict a person with a disability's claim for an Attendant. Professor Lazar's testimony on cross-examination was that if the airlines determine who is eligible, they "are going to greatly restrict the numbers and the numbers at the end of the day would tend to be extremely small and whatever cost there might be for the airlines would be quite small, probably much smaller than the cost of challenging this".

[325] The carrier respondents argued, however, that the risk of abuse of a 1P1F policy is high because carriers have to err on the side of caution in not refusing a person with a disability the right to travel with an attendant in view of the consequences of making a wrong assessment, which may lead to a person with a disability causing problems in the evacuation of an aircraft in an emergency, possibly leading to serious consequences such as injury or loss of life. However, the Agency notes that what is at issue in this proceeding is simply whether certain persons with disabilities will be determined by the air carrier to be eligible for a benefit under a 1P1F policy when they are required to travel with an Attendant under the terms of their own tariffs. The Agency is not suggesting that the carriers refuse any person, including a person with a disability, the opportunity to travel with a companion; rather, the Agency is considering whether a fare policy that creates economic discrimination for certain persons with disabilities who require Attendants is undue and should be amended to eliminate the discrimination. The fact that a person is denied eligibility under a policy intended to eliminate economic discrimination against certain persons with disabilities who are required to travel with Attendants does not mean that another person will be denied the opportunity to travel with a companion.

[326] Air travel is, by its nature, an activity with some level of risk involved. While it is understandable that the carrier respondents want to manage that risk by establishing rules such as those contained in the tariffs whereby certain non-self reliant persons with disabilities will be required to travel with an Attendant to assist in an emergency evacuation or decompression, there is no doubt that the risk that passengers will cause problems in an emergency situation is not limited to these persons with disabilities or even to persons with disabilities in general. Practically speaking, this risk cannot be eliminated as, at any given time, anyone may respond poorly in an emergency situation and create risk for the other passengers and flight crew.

[327] The Agency is of the opinion that the fact that this risk exists cannot be used by the carrier respondents to create a floodgates argument to support a defence of undue hardship, to counter the need for specific economic accommodation for a target population of persons with disabilities who are explicitly required by the carrier respondents' tariffs to travel with an Attendant. This proceeding is concerning persons whose disabilities create a requirement for an Attendant to meet certain specific needs as it can be reasonably predicted from the nature of the person's disability and their individual capabilities that they cannot meet these needs independently. Insofar as the nature of each person's disability can be established medically and their individual capabilities can be functionally assessed through some combination of evidence from the individual's medical practitioner and the carrier respondents' Meda Desk/Medlink systems, the requirement to travel with an Attendant and the eligibility for a benefit under a 1P1F policy can be established.

[328] The Agency accepts the evidence of Dr. Lewis that by carefully crafting and applying a 1P1F policy to incorporate the concept of Attendant as defined in the tariffs as a person who is essential to a person with a disability to meet specific personal care and/or safety-related needs, the carrier respondents can ensure that the incidence of persons with disabilities who benefit from a 1P1F policy should equal the number of persons who are required by the carrier respondents to travel with an Attendant under the terms of their tariffs.

[329] In addition, the carrier respondents have not persuaded the Agency that a range of 5 to 25 percent for abuse should be factored into its calculation of incidence of persons with disabilities who require an Attendant to travel by air and who may benefit from a 1P1F policy. It is not enough to say in the abstract that there is a potential risk of abuse; rather, the carrier respondents must provide evidence to support such a position, which they have failed to do.

[330] In light of the carrier respondents' failure to substantiate their arguments regarding the inevitability of abuse, the evidence regarding the carrier respondents' current medical screening systems which establish, among other things, fitness to and conditions of travel, and Dr. Lewis' evidence of the availability of professional expertise in the area of eligibility control systems which have been used successfully elsewhere and, in particular, in the American public transit sector, the Agency is not prepared to accept any increasing incidence factor for abuse.

Conclusion

[331] The Agency does not agree with the carrier respondents' proposition that 18.5 percent is a reasonable figure for estimating the number of persons with disabilities who travel with an Attendant using domestic air services in Canada. The Agency notes that there is a five-fold difference in the numbers presented by the applicants and the respondents in their experts' reports, i.e., 3.6 and 18.5 percent, respectively, and, for the reasons set out above, there is no doubt that the evidence before the Agency supports the Agency's conclusion that the 3.6-percent figure proposed by the applicants' expert is the more reasonable estimation of the Attendant incidence rate.

[332] Having said this, the Agency notes that, like Professor Lazar's estimations, Dr. Lewis' 3.6-percent estimation of the Attendant incidence rate is derived from a base population which incorporates an 18.8-percent travel propensity rate. Although the Agency has concluded that, of the estimations that were provided to the Agency by the parties, Dr. Lewis' estimation is the most reasonable estimation of incidence for this subpopulation, the evidence before the Agency does not support the reasonableness of an 18.8-percent travel propensity rate for persons who have severe disabilities. The appropriate travel propensity estimation for persons with severe disabilities such as those who require Attendants to travel by air is discussed further in the section beginning at paragraph 401 below.

[333] The Agency notes that Dr. Lewis' subsequent calculations to arrive at his 3.6-percent estimation which incorporated 9.1 and 40 percent factors, did narrow the 18.8 percent of the population of persons with disabilities who travel by air by adjusting the figure downward to account for severity of disability, as not all persons with disabilities who travel by air require an Attendant to do so. However, this 3.6-percent estimation does not include a downward adjustment for a reduced travel propensity as both the 9.1-percent factor (which represents the proportion of persons who travel by air and who experience difficulties doing so) and the 40-percent factor (which represents the further proportion of that same subset of the population of persons with disabilities who travel by air and who experience difficulties and for whom those difficulties limit their air travel) relate to a subpopulation that already travels by air.

[334] In light of the above, the Agency concludes that 3.6 percent16 is the most reasonable Attendant incidence rate despite the fact that it is based on an overstatement of the travel propensity estimation for this group. In the absence of a better estimation, the Agency prefers to use this overstated figure for the purposes of calculating the cost of accommodation as a generous estimation.

b) Persons with disabilities who require additional seating to accommodate themselves to travel by air

[335] In assessing the first fundamental factor in the determination of the costs associated with a 1P1F policy, which is the incidence of persons with disabilities who might qualify for a benefit under a 1P1F policy, the Agency must consider the target population, being the number of persons with disabilities who require additional seating to accommodate their disabilities to travel by air which was identified earlier in this Decision as Incidence Factor 1. Having completed in the above section an analysis of the evidence regarding the first category of this target population, being the number of persons with disabilities who require additional seating to accommodate an Attendant to travel by air, the Agency must now consider the evidence of the parties on the second category of this target population, that being the number of persons with disabilities who require additional seating to accommodate themselves as a result of their disabilities to travel by air.

[336] The parties made separate submissions on two subgroups of persons with disabilities who require additional seating to accommodate their needs as a result of their disabilities to travel by air:

  1. persons who are disabled by obesity; and
  2. persons with other disabilities.

[337] Accordingly, the Agency will consider these two subgroups separately.

(i) Persons who, for the purposes of Part V of the CTA, are disabled by obesity, being those who require additional seating to accommodate themselves as a result of this impairment in the context of domestic air services provided by the carrier respondents

[338] It is important to emphasize that for the purposes of this proceeding, the Agency is not required to assess the number of persons who are obese in Canada but, rather, the much smaller subgroup of persons who are disabled by obesity, being those who require additional seating to accommodate themselves as a result of this impairment in the context of Air Canada's and WestJet's domestic air services. It is only the latter subgroup, persons who are disabled by obesity, which will form part of the target population of persons with disabilities who may be eligible to benefit from a 1P1F policy.

Background

[339] Obesity is commonly defined by reference to body mass index (hereinafter BMI), the classification of obesity adopted by the World Health Organization (hereinafter WHO), which is a ratio of weight to squared height (kg/m2).

[340] Statistics Canada lists six categories of BMI, as used by WHO:

 
ClassificationBMI
Underweight < 18.5
Normal weight 18.5 to 24.9
Overweight 25 to 29.9
Obese Class I 30 to 34.9
Obese Class II 35 to 39.9
Obese Class III 40

[341] As set out in the Agency's determination of disability in paragraphs 123 and 124 above, to determine the number of persons who are disabled by obesity and who may be eligible to benefit from a 1P1F policy, it is important to note that, in the Calgary Decision, the Agency determined that obesity, per se, is not a disability for the purposes of Part V of the CTA in that not all persons who are obese will necessarily experience activity limitations and/or participation restrictions in the context of air travel. The Agency noted the evidence of Dr. Lau, a Canadian expert on obesity, in the Calgary Decision:

Dr. Lau testifies that he could not specify a BMI beyond which he can say, with any certainty, that people would not fit into a seat but that such individuals would have Class III obesity. Dr. Lau further testifies that this presumption does not preclude a person who has a BMI of 41 to 45 from fitting into a seat into which another person, who has a BMI of 39.5 but who has a certain distribution of fat around the waistline, cannot. Dr. Lau also expresses the opinion that the majority, if not 100 percent, of persons with a BMI of 30 can fit into an aircraft seat.

[342] Accordingly, the Agency indicated that it would continue to examine, on a case-by-case basis, whether a person who is obese is in fact a person with a disability for the purposes of Part V of the CTA.

[343] The first case concerning a person who is obese that the Agency considered following its issuance of the Calgary Decision was the application of Ms. McKay-Panos against Air Canada. In that case, the Agency determined that Ms. McKay-Panos was not a person with a disability for the purposes of Part V of the CTA. However, the Federal Court of Appeal overturned this decision in January 2006 and determined that obesity can be a disability for the purposes of Part V of the CTA where the person cannot, by reason of obesity, fit in an aircraft seat. Accordingly, the Federal Court of Appeal determined that Ms. McKay-Panos is a person with a disability for the purposes of Part V of the CTA.

[344] In this proceeding, evidence was presented indicating that Southwest Airlines is the only major airline in North America with a well-defined policy regarding the seating of passengers who are disabled by obesity. As set out in the Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy, Southwest Airlines requires obese passengers (defined as those passengers who cannot lower the armrests while seated in a Boeing 737 aircraft seat) to purchase two seats, for both their comfort as well as that of adjacent passengers. At the conclusion of the flight, however, Southwest Airlines will refund the cost of the second seat to the passenger if the flight does not depart full which is operationally defined by Southwest Airlines as no confirmed passenger being denied boarding on the flight. Southwest Airlines provides information to passengers wishing to make use of this policy on whether the flight is likely to oversell and will permit them to travel on less full flights, if available. Southwest Airlines estimates that less than one half of one percent of its passengers are eligible for the customer of size policy and less than two percent of the 0.5 percent who are eligible end up paying a second fare.

[345] In the case at hand, the Agency must determine what proportion of persons who are obese are disabled as a result of their obesity in the context of domestic air travel with Air Canada and WestJet. To determine this, the Agency must consider what proportion of persons who are obese requires additional seating to accommodate themselves as a result of their obesity to travel by air. Accordingly, to begin to identify this target population, the carrier respondents, through their expert, Professor Allison, provided background information on the current and future projected prevalence of obesity in Canada. Using data from different surveys, Professor Allison also estimated the proportion of the population whose horizontal dimensions may exceed those of an aircraft seat to provide an estimation of the number of people who will be disabled by obesity for purposes of this proceeding.

[346] The Agency retained Professor Katzmarzyk, an expert in the field of obesity and biostatistics, to analyze the evidence submitted to the Agency on this issue.

Prevalence of obesity in Canada

[347] Professors Allison and Katzmarzyk agreed that the Canadian Community Health Survey, which was based on data collected in 2004, contains the most recent statistics on the current prevalence of obesity in Canada17:

 
ClassificationPercent of adult populationNumber of people
Total

23

5,538,000

Obese Class I

15.2

3,656,000

Obese Class II

5.1

1,231,000

Obese Class III

2.7

651,000

[348] Professor Allison submits in his first report that every study of Canadian or American obesity levels using measured height and weight shows increases in obesity rates over the last several decades and that obesity levels will be even higher in the next ten years. He referred to a study18 which estimated that by the year 2020, 35 to 45 percent of the United States of America population age 50-69 will be obese, but indicated that there were no similar studies regarding Canadian trends.

[349] In reply, Professor Katzmarzyk notes in his first report that although several studies document past temporal trends in obesity in Canada, none use past trends to predict future obesity rates. However, he provided the following estimate for a projected prevalence of adult obesity in Canada, taking into account both the increase in the prevalence of obesity and the projected increase in the overall size of the Canadian population: 25 percent of the adult population will be obese in 2010, 30 percent in 2025 and 39.2 percent in 2050. Professor Katzmarzyk also criticizes the use of past trends to predict future obesity rates as it assumes that past trends in obesity rates will continue in the future and that intervention efforts are not successful.

Prevalence of persons who are disabled by obesity in Canada

[350] The Agency accepts the current prevalence of obesity, as agreed to by Professors Allison and Katzmarzyk. The Agency also notes the comments of Professor Katzmarzyk on the future estimated prevalence of obesity and, in particular, that the prevalence of adult obesity in Canada is increasing over time. However, the Agency is of the opinion that it is impossible to predict with any certainty how that may impact on the issue currently before the Agency. The Agency notes that the carrier respondents have already taken steps, such as installing more seats with fully retractable armrests, recognizing that not all of their customers easily fit in a single seat. It is possible that seat manufacturers and carriers may come up with other solutions in the future. As stated earlier, it is expected that the great majority of persons who are obese will not experience activity limitations and/or participation restrictions in the context of air travel and, therefore, are not persons with disabilities for the purposes of Part V of the CTA. Rather, the target population that must be identified in this section is the proportion of persons who are disabled by obesity, being those who require additional seating on an aircraft as a result of this disability to travel by air.

[351] Accordingly, while the present and future prevalence of obesity in Canada may be informative as background to this issue, it cannot be used to estimate the incidence of persons who are disabled by obesity as this depends on whether a person who is obese can fit in seats on aircraft operated by, for the purposes of this proceeding, Air Canada and WestJet for their domestic air services.

[352] With respect to the incidence of persons who are disabled by obesity, the carrier respondents introduced evidence from two sources, namely their reservations systems and two expert reports prepared by Professor Allison relying on information from other sources. In reply, the intervener introduced anthropometric and ergonomic evidence through her expert, Ms. Ringaert, following which the carrier respondents introduced a third report prepared by Professor Allison which reported on the results of a "real life" project or study. The Agency's expert produced two reports that set out his analysis of Professor Allison's first and third reports. Finally, an Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy was filed with the Agency.

Carrier respondents' reservation systems data

[353] Air Canada offers a comfort fare or reduced fare rate for a second seat required by a passenger for his or her comfort on its domestic and transborder air services, being a 50-percent reduction on full adult fares. This fare reduction is not available on Tango fares, the most deeply discounted level of fares offered by Air Canada.

[354] While WestJet has a "1 in 2" seating policy that permits passengers to book additional seats for comfort, it does not offer a discounted fare for the additional seating.

[355] Both carrier respondents indicate that they provide ad hoc accommodation to this category of persons with disabilities at the airport on the day of travel, where flight load factors permit the provision of an additional empty seat to a person who does not fit in one seat at no additional charge.

[356] Air Canada indicates that while it has a comfort fare policy that can be used to accommodate persons who are disabled by obesity by permitting them to book an additional seat and receive a 50-percent reduction on the full fare, use of the comfort fare policy is not limited to persons who are obese and Air Canada cites the example of a person who needed a second seat to carry a musical instrument. In addition, the carrier asserts that its reservation system does not track the number of persons who request a comfort fare, the number of obese passengers who are disabled by obesity and who require additional seating to accommodate themselves, and, in particular, the number of these people who are accommodated by the carrier on an ad hoc basis at the airport on the day of travel.

[357] WestJet, on the other hand, indicated that its reservation system shows that 473 passengers requested accommodation under its "1 in 2" seating policy in 2004, but that this system is not a reliable source of data to determine the number of persons who are disabled by obesity as the numbers produced by this system are not limited to persons who are obese and do not capture the people who are disabled by obesity who are accommodated by the carrier on an ad hoc basis at the airport on the day of travel.

Carrier respondents' estimations of incidence based on non-reservation data

[358] The carrier respondents assert that their reservation systems are not reliable sources of information for determining the number of persons who are disabled by obesity. Accordingly, the carrier respondents referred to other sources of data and information to provide these estimates.

[359] Professor Allison, expert for the carrier respondents, produced two reports designed to provide an estimate of the incidence of persons who are disabled by obesity:

In his first expert report19, dated November 28, 2005, Professor Allison made a number of predictions regarding the number of persons who might benefit from a 1P1F policy by considering the seat width of aircraft seats and the percentage of passengers who may be "size eligible", which he defined as being persons for whom one or more of five breadth measurements (shoulders, hips, waist, buttocks and thighs) exceed the threshold dimensions of the aircraft seat as measured between the armrests. His findings were as follows:
 

Seat size/Threshold (in inches)

Seat size/Threshold (in cm)

Percent Size Eligible

16"

40.64 cm

32.6%

16.5"

41.91 cm

19.7%

17"

43.18 cm

10.6%

17.5"

44.45 cm

4.7%

18"

45.72 cm

1.9%

In his second report, dated June 1, 2006, Professor Allison provided estimates of the proportion of the population that might qualify for an additional seat only by virtue of size and not by some indicator of disability, to avoid counting someone twice who would be both disabled by obesity and size eligible as well as disabled for other relevant reasons. Again, Professor Allison conducted an analysis of the 1991 United States of America NHANES III survey data, this time to determine how many people would have a "relevant disability" other than their size.20 On this basis, he then estimated that between 20.69 and 33.06 percent of the population might be eligible to claim additional seating on an aircraft with 17"-wide seats. He notes that this estimate is an unweighted analysis, meaning that every subject in the data set is counted only once, or treated as though they contribute equally with respect to the amount of information they offer. Professor Allison concluded that the majority of people who are size-eligible are obese.

[360] Professor Allison noted two weaknesses in his own analysis:

  • it was based on an assumption that all body perimeters were "true circumferences" and that people do not "spread" when they sit, which he states is known to be false.
  • people tend to under report stigmatizing conditions under most circumstances, thus surveys which may ask participants if they need additional seating when travelling by air may "markedly underestimate the proportion that would respond affirmatively" if the additional seating were provided without additional charges.

[361] Ms. McKay-Panos asserts that information provided to Professor Allison was "an attempt to overstate" the number of obese passengers who require additional seating to accommodate their disabilities, as there are no seats on the carrier respondents' aircraft that are 16" or 16.5", which were the sizes of seats used for Professor Allison's project using the convenience sample, as discussed at paragraphs 377 and 378. The intervener notes that the carrier respondents requested that Professor Allison include the smaller seat sizes of 16" and 16.5" even after a witness for Air Canada testified in June 2005 that the narrowest seat that Air Canada had was approximately 17" wide.

[362] In response to Professor Allison's first report, Professor Katzmarzyk states that although body perimeters may not represent true circular circumferences, they provide reasonable approximations. He agrees with Professor Allison that the use of the United States of America NHANES III survey adult population data provided the best proxy in absence of similar Canadian data. However, Professor Katzmarzyk finds Professor Allison's assumption that the shoulder breadth (biacromial) must fit the width of the seat from armrest to armrest to be erroneous, resulting in an overestimation of the number of eligible passengers whose body dimensions would exceed the threshold of the seats, including many who are not obese and, thus, do not form part of the target population as they would not be eligible for a benefit under a 1P1F policy.

[363] Professor Katzmarzyk conducted an analysis and found that:

  • the proportion of the population that would exceed aircraft seat thresholds based on shoulder measurements represents the largest group of persons whose measurements would exceed the seat sizes;
  • the percentage of men who are "size eligible" is higher than the percentage of women;
  • the main constraint to fitting into an aircraft seat for men is the width of the shoulders whereas the main constraints for women are the width of the thighs and buttocks; and
  • although the criteria for size eligibility allows for any one of the body dimensions to exceed the threshold imposed by the seat width, not all dimensions contribute equally as more men than women exceeded the dimensions of the aircraft seat because of their shoulder width and some of them were non-obese men.

[364] Consequently, Professor Katzmarzyk reanalyzed the United States of America NHANES III survey data separately by body weight category (underweight, normal, overweight, obese) and found that a significant number of non-obese individuals exceed the horizontal dimensions of a 17"-wide aircraft seat when shoulder measurements are included in eligibility criteria. To determine the number of individuals who are both obese and exceed the horizontal dimensions of an aircraft seat, Professor Katzmarzyk sought further information on the dimensions of the seats used by the carrier respondents. Based on the information provided, the analyses were repeated using the upper and lower boundaries of the reported seat sizes.

[365] On the basis of his reanalysis, Professor Katzmarzyk concluded that if the true width of the airline seats at shoulder height is taken into account, only 1 to 2.4 percent of the adult Canadian population are both obese and would exceed the dimensions of the seat. His findings were as follows:

 

Men

Women

Both

Air Canada and WestJet

     

Lower - boundary of seat sizes

1.2

3

2.1

Upper - boundary of seat sizes

0.5

1.5

1

       

Air Canada Jazz

     

Lower - boundary of seat sizes

1.8

3

2.4

Upper - boundary of seat sizes

1.7

2.6

2.1

[366] Professor Allison acknowledged his error in assuming that the width of the seats as measured between the armrests would be a valid measurement for the width of the seat at shoulder level, and he subsequently accepted Professor Katzmarzyk's analysis and findings. Counsel for the carrier respondents state that the 1 to 2.4 percent of the population asserted by Professor Katzmarzyk to be size eligible "represents the range of persons who would be in conflict with their seat [...]. This is the very minimum number of persons who might have -make a plausible claim [...]".

[367] Professor Allison conceded that the findings in his second report would need to be changed given the acceptance of Professor Katzmarzyk's conclusions; however, a revised version of the report was not submitted to the Agency.

[368] Ultimately, the carrier respondents revised their position and counsel expressed the opinion in final argument that it is reasonable to assume that the incidence of persons who are obese and require additional seating to accommodate their disabilities is 2 percent of the Canadian adult population, based on the following:

  • all of WestJet's seats are 17.2" wide between the armrests and, thus, are at the lower end of the seat dimensions used by Professor Katzmarzyk, resulting in slightly more than 2 percent of the population being in conflict with these seats.
  • 57 percent of Air Canada's seats are 17.33" or less while 43 percent are 17.77" or more, resulting in a little less than 2 percent of the population being in conflict with the Air Canada seats.

[369] Counsel for the carrier respondents expressed the opinion that a useful "sanity check" for the 2 percent incidence is that 2.7 percent of the Canadian adult population fall into the highest class of obesity, Class III, as those who are severely or morbidly obese.

[370] The applicants' position, on the other hand, was that 0.5 percent of adults with disabilities in Canada would be a reasonable estimation of the target population of persons who are disabled by obesity and require additional seating to accommodate their disabilities.

[371] The applicants' position is based on the testimony of Dr. Lewis that the only evidence on file about the incidence of persons who are disabled by obesity came from the report of the applicants' expert, Ms. Furrie, i.e., that 0.5 percent of Canadian adults with disabilities reported obesity as their main or secondary disabling condition in the 2001 PALS. Dr. Lewis explains that this figure of 0.5 percent is based on the assumption that a 1P1F policy applies to people who are obese within the population of people with disabilities, not the population at large.

[372] Dr. Lewis asserts that the evidence from Southwest Airlines, as described at paragraph 344 above, corroborates the use of Ms. Furrie's 0.5 percent finding. He refers to the Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy, wherein it is stated that, in Southwest Airlines' experience, "less than one half of one percent [0.5 percent] of its passengers are eligible for the customer of size policy".

[373] The intervener submits that the only evidence that is "somewhat helpful" in terms of determining the number of obese persons who would require additional seating to travel by air is that with regard to Southwest Airlines. In that carrier's experience, where the seat width is 17¼" wide as measured between the armrests, less than one half of one percent of its passengers are size eligible; furthermore, less than 2 percent of the 0.5 percent of passengers end up paying a second fare; and Southwest Airlines indicates that the use of the armrest is a simple operational method for determining fit. The intervener submits that the size eligible population in Canada would be smaller because, currently, obesity rates in the United States are approximately 30 percent higher than obesity rates in Canada.

Ergonomic and anthropometric Data

[374] On the issue of the correlation between the size of an aircraft seat and the size of the person, the intervener retained the services of an expert in universal design in the use of anthropometrics, Ms. Ringaert, who submitted a report on July 21, 2006 relating to the issue of "people fitting into a seat".

[375] According to Ms. Ringaert's report, Professor Allison implies that the percentage of people in the Canadian population who have horizontal dimensions that exceed those of an aircraft seat is very high, although, in her opinion, there is no evidence from Professor Allison's mathematical extrapolation to make predictions about the number of people who would not be able to use the aircraft seat.

[376] Ms. Ringaert notes that one of the problems with relying on a mathematical model to make such predictions is that a real person and how he or she functions in a particular setting have not been observed, which means that things can be overlooked or incorrect assumptions can be made. Ms. Ringaert further notes that Professor Allison's conclusions assume that all body perimeters would be true circumferences, which she submits is problematic because real people have soft tissue that can be compacted and moulded, factors which cannot be accounted for in a mathematic model. Ms. Ringaert cited as an example, a removable arm rest design which allows people who have wider hips than the width of the seat between the arm rests to sit in the seats.

[377] Ms. Ringaert submits that there is a lack of anthropometric and ergonomic studies dealing with persons who are obese per se and persons who are obese using aircraft seating and that, in fact, most anthropometric and ergonomic studies look at average size people aged 20-40 and that persons who are obese, persons with disabilities and older adults are rarely studied, making it difficult to predict the percentage of persons who are obese and who would require additional seating to accommodate their disabilities. She concludes that there is a need for further studies using more accurate methodologies and a need to develop a practical mechanism to determine who qualifies for accommodation in a way that is cost effective and respects the privacy and dignity of obese persons.

[378] In response to Ms. Ringaert's report, Professor Allison prepared a third report which detailed a research project that he conducted to ascertain true airline seat fit and comfort by performing a "real-world" study that examined individuals who varied widely in their body dimensions sitting in aircraft seats.

[379] The project used a convenience sample of 50 adult participants, with a wide distribution of body types, ethnicities, and ages, from the vicinity of the University of Alabama in Birmingham, but which was not an attempt to create a sample that was representative of the population at large. His report stated that anthropometric measurements, including weight, height, biacromial breadth, bi-iliac breadth, waist circumference, buttocks circumference, and thigh circumference were measured, following which participants sat in airline seats21 that had been brought into a laboratory setting, and answered a questionnaire about their ability to transfer to and from the seat easily, their level of comfort in the seat, and the projected level of comfort they thought they would have after sitting in the seat for two-and-a-half hours. An observer recorded the perception of the ability of the participant to transfer to and from the seat, and the participant's level of comfort in the seat, along with the participant's projected comfort level after two-and-a-half hours. According to Professor Allison, the participants' perception of their ability to transfer to and from the seat easily was biased, and so this data was not analyzed and only data from the perception of the observer was analyzed. Professor Allison concluded that based on the observers' perceptions, the estimated proportion of persons in the population that may not fit in an aircraft seat could plausibly be as high as 90 percent of the obese population.

[380] Professor Katzmarzyk reviewed Professor Allison's third report and concluded that "the study conducted and reported by Professor Allison on the issue of airline seat sizes does not provide any useful or relevant information on the matter under discussion". He expressed specific concerns about:

  • the manner in which the study was conducted;
  • the fact that the observers were not blinded to the purpose of the study;
  • the lack of standardization of seating;
  • the lack of information regarding the results of the logistic regression analyses such that there are many sources of variation that have not been taken into account;
  • the sample size being too small and not representative of the population as a whole;
  • they provided no information on ethnicity which would have been helpful in assessing the differences between this United States of America sample and the Canadian population;
  • the subjectiveness of some of the measures used in the study; and
  • the fact that the results were not interpreted or discussed in a meaningful manner.

Agency analysis

[381] The carrier respondents have formal policies and ad hoc practices that are used to accommodate persons who are disabled by obesity to provide them with the additional seating that they require to travel by air. However, Air Canada can produce no numbers under either the policy or the practice to indicate the number of persons who either request and/or receive such accommodation while WestJet only produced a number for a one-year period and was unable to confirm what proportion of that number was persons who are disabled by obesity and who requested accommodation under its "1 in 2" seating policy.

[382] The Agency accepts the evidence of Professors Allison and Katzmarzyk that there is no Canadian data which directly answers the question of how many persons are disabled by obesity and would require an additional aircraft seat to accommodate this disability.

[383] The Agency also notes the obesity experts' use of only the adult population as a basis for the calculation of the target persons who are disabled by obesity and who would require an additional seat to accommodate this disability, and the Agency accepts this position as reasonable. The Agency notes that the obesity experts refer to statistics that define the adult population as being composed of persons who are ages 20 and over or, alternatively, ages 18 and over. The Agency also notes that the data from Statistics Canada is provided for ages in five-year increments and, in light of this, the Agency will use the data for 20 and over to represent the adult population which represents 75.7 percent of the total Canadian population of 32.3 million for 2005, being 24.4 million; the adult population of Canada.22

[384] The carrier respondents started out with the proposition that a range of 1.9 to 32.2 percent of the adult Canadian population would be eligible for a benefit under a 1P1F policy, but this position was later withdrawn after the Agency's expert, Professor Katzmarzyk, filed a report highlighting the faulty assumptions used by Professor Allison to develop this range. It is clear that the first position of the carrier respondents, as put forward by Professor Allison, was a dramatic overstatement of the range of persons who are disabled by obesity.

[385] Professor Katzmarzyk subsequently corrected Professor Allison's faulty assumptions and reasoning, and reworked the analysis to provide a range of 1 to 2.4 percent of the adult Canadian population who are obese and would exceed the seat dimensions, based on the seats used by the carrier respondents which range in size from 17" to 17.8" wide. The carrier respondents and their expert ultimately agreed with this range as being appropriate.

[386] Later, counsel for the carrier respondents suggested, in final argument, that working with an average estimation of 2 percent of the Canadian adult population would be reasonable as WestJet's seats are uniform at 17.2" wide, meaning that slightly more than 2 percent would not fit, while in Air Canada's case, 57 percent of seats are 17.3" wide or less while 43 percent are 17.7" wide or more, meaning that slightly less than 2 percent would not fit.

[387] The Agency notes that there are varying sizes of seats in the carrier respondents' aircraft, and that the expert witnesses agreed that when the width of the seat increases, a decrease in the number of people who could not fit in the seats would be expected.

[388] However, the Agency notes the significant problem with the use of United States of America NHANES III survey data, which was acknowledged by both Professors Allison and Katzmarzyk, being that the measurements used in this data set are true circumferences of various body parts which were measured while persons were in a standing position. The Agency heard evidence that these measurements do not reflect the dimensions of bodies in a seated position and, therefore, do not account for the spread of soft tissue nor the compressibility of soft tissue. The Agency accepts the applicants' observation that, according to Professors Allison and Katzmarzyk's methodology, as soon as a person's body touched the armrests, they would register as exceeding the dimensions of the seat, this despite the fact that most armrests are retractable. The Agency also notes that Ms. Ringaert, an expert in, among other things, ergonomics, testified that most people of size would lift the armrest while sitting down into the seat. Accordingly, the Agency accepts that the number of persons whose true circumferences exceed the width of the aircraft seats could be an overstatement of the number of persons who would not fit in the aircraft seats.

[389] While Ms. Ringaert noted the need for dynamic anthropometric studies to be able to accurately estimate the proportion of people who are obese who would not fit in an aircraft seat, Professor Allison's study, detailed in his third report which tried to address this concern, exhibited significant problems, both in terms of the methodology used and the results achieved in respect of the samples of obese and non-obese persons who participated in his study. In fact, Professor Katzmarzyk noted that Professor Allison's study revealed:

  • there are minimal differences in moderate and severe discomfort between the overall sample and the obese sample within a given airline seat;
  • in the WestJet seats, obese people seem to have a slightly higher level of discomfort; in the Air Canada seats, obese people seem to have a lower level of discomfort;
  • the proportion of the overall sample and the obese sample that have severe discomfort (and this would suggest they aren't fitting into the seats) is low; and
  • these results are in direct contrast to the conclusion of Professor Allison that perhaps 90 percent of the obese population may not fit in airline seats.

[390] From this critique, it is apparent that comfort, which this study was purporting to measure, is not determinative of the issue of whether persons are disabled by obesity in that they do not fit in an aircraft seat.

[391] The applicants assert that 0.5 percent of the population of Canadians with disabilities is a more reasonable figure for the target population of persons who are disabled by obesity and would be eligible for a benefit under a 1P1F policy. While the Agency acknowledges the expertise of the applicants' expert, Ms. Furrie, in working with disability statistics as she is the Statistics Canada expert who conducted the HALS and she has internationally-recognized expertise in designing and collecting disability-related data, the Agency must balance her expertise against the fact that Ms. Furrie's 0.5-percent figure does not represent disability in the context of fitting in an aircraft seat.

[392] The Agency also notes and accepts the testimony of Professor Allison regarding the tendency of persons who are obese, as a member of a stigmatized population, to underreport their condition such that Ms. Furrie's 0.5-percent estimate is also likely too low from this perspective to form the low end of a reasonable range of probability for this incidence estimation.

[393] However, the Agency notes that the carrier respondents' own experience would tend to substantiate the reasonableness of the applicants' position that the numbers of persons who would fall into this target population would be small. One would expect that if there were a significant number of requests for accommodation and/or if the implications of providing this accommodation were significant to the carrier respondents, they would track this data.

[394] Furthermore, the applicants' position is also supported by the experience of Southwest Airlines, as described in paragraph 344 above, which indicates that less than one half of one percent of its passengers are eligible for accommodation under its "customer of size" policy based on seats that are 17.2" wide between the lowered armrests, which is the same size as all of WestJet's seats and smaller than over 43 percent of Air Canada's seats. In addition, the Agency notes that obesity rates are generally 30 percent higher in the Unites States than the obesity rates for Canada such that even Southwest Airlines's experience may be an overstatement when applied in a Canadian context. The Agency is of the opinion that the evidence of Southwest Airlines must be considered carefully and given considerable weight by the Agency in this proceeding in the balancing of the opinions and assumptions presented by the other experts, who lack Southwest Airlines's experience as the only major North American carrier that administers a variation of a 1P1F policy for the accommodation of persons disabled by obesity.

[395] Having said this, while it is clear that the exact number of persons who will be found to be disabled by obesity and entitled to benefit under a 1P1F policy will depend on the size of seats used from time to time by the carrier respondents, the Agency accepts as reasonable the carrier respondents' proposal that 2 percent is a reasonable, although probably generous, incidence estimation to use for the purposes of calculating the general costs of accommodation in this proceeding based on the seats in use at this time. Professor Katzmarzyk provided a range of 1 to 2.4 percent based on the number and sizes of seats actually in use by the carrier respondents. The carrier respondents proposed using an average of 2 percent based on the distribution of seats in the fleets and the Agency is of the opinion that, in the absence of tested evidence to support a value at either end of the range, this represents a reasonable estimation for these purposes.

Conclusion

[396] In summary, the Agency notes the proposal of the carrier respondents for the use of 2 percent of the adult Canadian population as a reasonable estimation of the number of persons who may be disabled by obesity for the purposes of the carrier respondents' domestic air services. The Agency is of the opinion that this figure is likely an overstatement of the true number by virtue of the fact that it is based on static measurements of true standing circumferences found in the United States of America NHANES III survey and represents the percentage of the Canadian adult population who have a body part that will exceed the dimensions of the space between the armrests when lowered. The Agency is prepared, however, to accept this as a generous estimation of this target population for the purposes of the calculation of the cost of accommodation.

(ii) Persons with other disabilities

[397] The incidence of this category of persons with disabilities was characterized by the applicants' expert, Dr. Lewis, as extremely small and, thus, not material. This was not contested by the carrier respondents who brought no evidence forward regarding this category of persons with disabilities despite the fact that they are the parties who would have experience with the accommodation requirements for this group. It is reasonable to expect that had the carrier respondents' experience been significant, they would have at least provided examples to illustrate that experience or as a minimum, indicated their concern with Dr. Lewis' position. Therefore, based on the evidence on file, the Agency accepts the position of the applicants that a separate estimation of incidence for this category of persons with disabilities, those who require additional seating for themselves, is not needed. The Agency will, therefore, not address persons with other disabilities in its determination.

Incidence Factor 2 - The travel propensity of the target population

[398] The second important component in the calculation of the cost of accommodation is the estimated proportion of this target population who will travel on domestic air services. The Agency's examination of this factor is intended to determine the inclination of the target population to use domestic air services.

[399] To estimate the travel propensity in this case, the Agency has separated the target population of persons with disabilities who may be eligible for a benefit under a 1P1F policy into the following categories:

  • persons with disabilities who require additional seating to accommodate an Attendant to travel by air; and
  • persons who are disabled by obesity who require additional seating to accommodate themselves to travel by air.

[400] The Agency will address each category of persons with disabilities separately below.

a) Persons with disabilities who require additional seating to accommodate their Attendants to travel by air

[401] As set out in paragraph 332 in the Incidence Factor 1 section above, the attendant incidence rates proposed by both the carrier respondents and the applicants incorporated an 18.8-percent estimation for travel propensity by using a base population of persons with disabilities who travelled by air. The evidence supports the reasonableness of this estimation for the travel propensity of the general population of persons with disabilities; however, it does not support the reasonableness of extending this travel propensity to persons who are more severely disabled, such as those persons in the target population of persons who are required to travel with an Attendant under the carrier respondents' tariffs.

[402] While the Agency has determined, in paragraph 334 above, that it will accept Dr. Lewis' 3.6-percent Attendant incidence rate despite the foregoing problem, this section contains the Agency's examination of the issue of what is an appropriate travel propensity estimation for this target population to better understand the nature of the overstatement reflected in the Attendant incidence rate.

Carrier respondents' position

[403] As previously set out in paragraph 248 above, the Goss Gilroy report states that of the 3.8 million persons with disabilities in Canada in 1995, 715,000 of those persons travelled by air. Accordingly, the carrier respondents assert that the air travel propensity of the general population of persons with disabilities is widely accepted to be 18.8 percent.

[404] The carrier respondents' expert, Professor Lazar, compared this finding with the air travel propensity of the general Canadian population and asserted that an 18.8-percent air travel propensity figure for all persons with disabilities is appropriate given his assertion that approximately one third of the general Canadian population, being approximately 10 million people in 2005, travels by air.

Applicants' position

[405] The applicants' position is that persons with disabilities are widely believed to travel half as much as the general population, and that persons with severe disabilities have a significantly lower travel propensity than the general population of persons with disabilities.

[406] The applicants' expert Dr. Lewis is of the opinion that "[a] trip rate for all people with disabilities would be considerably higher than a trip rate for people with very severe disabilities." In support of this, he asserts that persons with more severe disabilities have lower levels of employment and income than do persons in the population of people with disabilities at large and among the population at large.

Agency analysis

[407] There was widespread acceptance by the parties and their experts that persons with disabilities will have a lower travel propensity than the general population. The Agency is of the opinion that the 18.8-percent air travel propensity cited in the Goss Gilroy report, at slightly more than 50 percent of the general air travel propensity of the Canadian population, is a reasonable estimation of the air travel propensity of the general population of persons with disabilities. However, the subpopulation at issue in this proceeding is composed of persons whose disabilities result in their being considered non-self-reliant for the purposes of domestic air travel and, thus, they are required by the carrier respondents' tariffs to travel with an Attendant. Accordingly, the question to be determined is whether this target population would have the same air travel propensity as the general population of persons with disabilities or whether there are factors which would support the application of a lower air travel propensity rate for this group.

[408] The Agency finds that, as a subpopulation, this category of persons with disabilities is, in fact, more severely disabled than the general population of persons with disabilities, particularly in the context of transportation. These are persons whose disabilities prevent them from tending to certain of their basic essential personal care needs: eating, taking medication and using the toilet, such as persons with quadriplegia or permanent spasticity. These are also persons whose disabilities prevent them from receiving and acting upon instructions during an emergency evacuation or decompression, such as certain persons who are both deaf and blind or who have serious mobility impairments.

[409] It should be noted that the fact that a person is non-ambulatory does not equate with non-self-reliance. The evidence of the carrier respondents' employees, Ms. Lambert and Ms. Puchala, was that in their experience most persons who use wheelchairs or who are blind, for example, are considered self-reliant and travel independently, without an Attendant. This experience is consistent with the Agency's knowledge of this issue. Despite the fact that paraplegia and blindness are commonly considered to be moderately severe or severe disabilities, it is important to note that persons with these conditions do not necessarily fall into this target population and do not always require an Attendant to travel by air. Accordingly, it is logical to assume that the persons in this target population are among the persons with the most severe disabilities.

[410] Having concluded that the target population of persons with disabilities who will require an Attendant to travel by air are more severely disabled than the general population of persons with disabilities, the Agency will review some of the evidence regarding demographic factors affecting the travel propensity of this subpopulation.

Severity of disability

[411] The evidence on the record supports the assumption that people with more severe disabilities tend to be less mobile and travel less than those with more mild or moderate conditions.

[412] The Goss Gilroy report noted that, of the 3.8 million Canadians with disabilities in 1995, 2.2 million had a transportation disability, defined as "those individuals: who because of their health problem(s) or condition(s), are unable to use transportation services; or, who use transportation services with more difficulty than those in the general population". The Goss Gilroy report noted that persons with transportation disabilities account for 57.5 percent of adults with disabilities. It is clear that the target population of persons who require Attendants to travel by air would fall into this subcategory of persons with disabilities.

[413] Severity of disability was shown to have an impact on travel propensity in the Goss Gilroy report, in that, of the 17.7 percent of persons with disabilities who reported being unable to travel long distances, 45.3 percent have a severe disability, and 84.3 percent of persons who are prevented from taking long distance trips report moderately severe or severe disabilities.

[414] During cross-examination, Professor Lazar agreed with counsel for the applicants that if persons with disabilities who require an Attendant experience a higher than average number of obstacles within the group of persons with disabilities travelling by air, they would probably travel less on average, and that the particular subset of persons with disabilities defined in the tariff is a very small group that probably has a lower propensity to travel than the general population of persons with disabilities.

[415] This evidence indicates that if this target population of persons with disabilities is a group of persons with severe disabilities, which in the Agency's opinion is likely to be the case given the nature of their disabilities, their propensity to travel is likely to be significantly lower than that of the general population of persons with disabilities.

[416] Professor Lazar acknowledged on cross-examination that "If based purely on the severity of the disability the answer is likely to be no, they wouldn't travel as frequently as general persons with disabilities."; however, he noted the existence of other factors such as income and age.

Low income levels

[417] The Agency notes that during cross-examination, Professor Lazar agreed with counsel for the applicants that if the group of persons with severe disabilities has relatively lower income levels, this fact would indicate reduced demand for any service, including air transportation service. He stated that the income variable alone would reduce the propensity of travel regardless of the severity of the disability. He also expressed the view that because these persons with disabilities have a higher cost of living, incurring additional costs that the average Canadian without disabilities does not incur, they will have a lower travel propensity; however, this factor was stated to be a comparison between persons with disabilities and persons without disabilities.

[418] The Agency also notes that, based on the evidence on file, persons with severe disabilities do have lower income levels:

  • uncontradicted evidence from Ms. Furrie's expert report indicates that:

    • 94 percent of persons with disabilities who require an attendant at least 20 hours a day, seven days a week are not in the labour force, neither employed nor seeking employment;
    • only 47 percent of these persons with disabilities are members of households where the household income in 2000 was $40,000 or more, compared to the population as a whole, for which 67 percent live in households with this level of income;
  • the Goss Gilroy report shows more general demographic factors for persons with disabilities that, as compared to the 18.7 percent of persons without disabilities and the 43.4 percent of persons with disabilities who are not in the labour force, 56.7 percent of persons with transportation disabilities, are not in the labour force. Furthermore, persons with transportation disabilities also report lower levels of individual income, with 65.8 percent receiving employment income of less than $10,000 per year, as compared to 39.7 percent of persons without disabilities and the 57.4 percent of persons with disabilities.

Conclusion

[419] Based on the foregoing, the Agency is of the opinion that the severity of disabilities experienced by the target population of persons with disabilities who require an Attendant to travel by air under the carrier respondents' tariffs results in a significantly reduced air travel propensity for this target population. Specifically, the Agency finds it reasonable to make an assumption that the travel propensity of this target population is 10 percent, which is slightly more than half of that reported for the general population of persons with disabilities.

[420] As stated in paragraph 334 above, however, the Agency does not intend to reduce the Attendant incidence rate provided by Dr. Lewis to reflect the lower travel propensity for this target population, particularly in the absence of a better methodology to calculate Attendant incidence in isolation from travel propensity.

b) Persons who are disabled by obesity who require additional seating to accommodate themselves to travel by air

Carrier respondents' position

[421] The carrier respondents propose that 20 percent of the obese adult population will travel by air, such that 20 percent of the 2 percent of adult population who are disabled by obesity will travel by air and be eligible for a benefit under a 1P1F policy. They refer to two different sources in support of this estimated travel propensity figure, namely information contained in the Goss Gilroy report and evidence submitted by Ms. Ringaert, expert for the intervener.

[422] The carrier respondents note that the Goss Gilroy report states that in 1995, 18.8 percent of the 3.8 million Canadian persons with disabilities travelled by air. The carrier respondents then rely on the evidence of Ms. Ringaert that persons who are obese will probably travel "a little bit more" than other persons with disabilities (but less than the general population) to arrive at their assumption that 20 percent of obese adults in Canada will travel by air and qualify for a benefit under a 1P1F policy.

[423] The carrier respondents agree with Ms. Ringaert's proposition that persons with disabilities travel by air less than the general population, and their expert, Professor Lazar, specifically asserted that while approximately one third of the Canadian population, being approximately 10 million people in 2005, travels by air, only 18 to 19 percent of the population of persons with disabilities travel by air, calculated in 1995 to be 715,000 people in the Goss Gilroy report.

Applicants' position

[424] Dr. Lewis used a 36-percent travel propensity figure as an estimation of the air travel propensity of persons disabled by obesity, based on the evidence of Ms. Furrie regarding persons with disabilities who report obesity as their primary or secondary disabling condition. This position was taken despite his noting that the 36 percent is not limited to air and may be overstated due to being largely comprised of car, van and truck users.

[425] Specifically, the applicants' expert, Ms. Furrie, indicated in her expert report that, of the one half of one percent (0.5 percent) of adults with disabilities who reported obesity as their main or secondary disabling condition in the 2001 PALS, only 36 percent of that category of persons with disabilities said that they travelled long distances in the past 12 months and 64 percent said that they did not travel.

[426] Ms. Furrie also gave evidence that PALS reported that 59.3 percent of this population are not in the labour force, while 45.5 percent are members of households where household income was $40,000 or more, compared to the population as a whole, for which 67 percent lived in households with this level of income. She stated that these demographic factors would support a lower travel propensity for this population than for the general population.

[427] The applicants point to the fact that Professor Allison acknowledged during cross-examination that Ms. Furrie's one half of one percent of adults with disabilities who reported obesity as their main or secondary disabling condition would be "probably only the most severely obese" such that it would be "extremely unlikely that the proportions of those people who say that they can't or don't fly would be representative of the general population".

[428] Counsel for the applicants submits that their expert, Dr. Lewis, relied on the evidence of Ms. Furrie regarding the travel propensity of persons who are disabled by obesity which is appropriate given her expertise in the collection of disability-related statistics, as contrasted with the carrier respondents' reliance on the evidence of Ms. Ringaert who was not qualified as an expert in obesity. Counsel for the applicants questions the appropriateness of the carrier respondents' reliance on the evidence of Ms. Ringaert in this area instead of the clear expertise of Ms. Furrie and Professors Allison and Katzmarzyk.

Intervener's position

[429] The intervener's expert, Ms. Ringaert, refers to Ms. Furrie's expert report and, specifically, her statement that, of those persons with disabilities who reported obesity as their main or secondary disabling condition, 64 percent said they did not travel. She states that this report provides a start to the information that would need to be collected to make determinations about the air travel propensity of persons who are obese, but if 64 percent of those surveyed did not travel, then "the percentage of obese people who would be ‘size eligible' who may travel may actually be quite low".

[430] In her expert report, Ms. Ringaert, also provided support for the demographic factors raised by Ms. Furrie that would impact on the propensity of this target population to travel by air. Specifically, she states in her expert report that there is a higher percentage of obese people in lower income populations, that obese people have more health problems, and that, as a result, obese people would be likely to travel less than the general population. While Ms. Ringaert produced one report to support her observation that obesity is higher in lower income adults as well as minority adults in the United States of America, she also referred to her position as the director of the Office of Research at the School of Public Health at the University of North Carolina where obesity is one of the priority areas of research for the school to establish her source of knowledge of obesity research and findings.

Agency analysis

[431] The Agency notes that the estimates for the travel propensity of persons who are disabled by obesity varied considerably, from 20 percent of the 2 percent of the size eligible population identified in Incidence Factor 1 paragraph 420 above, being 97,715 people who will travel by air, as advanced by the carrier respondents, to 36 percent of the 0.5 percent of adults with disabilities, being 5,570 people who will travel by air, as advanced by the applicants. However, the Agency is of the opinion that neither of these estimations is reasonable to use to calculate the air travel propensity of persons who are disabled by obesity.

[432] The carrier respondents noted that the Goss Gilroy report indicated that 18.8 percent of persons with disabilities travel by air and that this, combined with Ms. Ringaert's testimony that persons who are obese would travel slightly more than persons with disabilities, leads to the carrier respondents' position that 20 percent is a reasonable figure for the air travel propensity of persons who are disabled by obesity in Canada and who would be eligible/ for a benefit under a 1P1F policy. However, without commenting on the carrier respondents' assertion that Ms. Ringaert is "the knowledgeable person in this area", the Agency is of the opinion that Ms. Ringaert's testimony is of little or no use to the Agency as she was asked to comment on the travel propensity of persons who are obese, and not on the travel propensity of the much smaller target population of persons who are disabled by obesity. The Agency notes that the 18.8 percent travel propensity cited in the Goss Gilroy report represents the general population of persons with disabilities while the subpopulation at issue in this proceeding is persons who are disabled by obesity. Accordingly, the question to be determined is whether this target population would have the same travel propensity as the general population of persons with disabilities or whether there are factors which would support the application of a lower air travel propensity rate for this group.

[433] The Agency is of the opinion that the evidence supports the proposition that persons who are disabled by obesity are persons at the severe end of the obesity scale, more than likely persons with Class III obesity (meaning persons with BMIs of 40 and over), otherwise known as morbid or severe obesity. Although the Agency notes the evidence of Professor Allison that girth measurements would probably be of more assistance in predicting whether a person would be able to fit in an aircraft seat than either weight or BMI, the Agency has already accepted as reasonable Professor Katzmarzyk's analysis of the United States of America NHANES III survey data which resulted in an estimation that 1 to 2.4 percent of the adult population will be disabled by obesity in the context of domestic air travel with the carrier respondents. Given that the incidence of Class III obesity is 2.7 percent of the adult population, it is thus reasonable to assume that the persons who are disabled by obesity in this context will more than likely fall into the category of the most severely obese.

[434] Given this assumption, it is clear that the target population will have significantly higher co-morbidities and more severe mobility impairments such that it is reasonable to assume that they are also more severely disabled than the general population of persons with disabilities, particularly in the context of transportation. For example, in the Calgary Decision, the Agency noted, based on the evidence of Drs. Cheskin and Lau, obesity experts for Air Canada, and the amicus curiae, respectively, in that proceeding, that at the highest end of the spectrum, BMI 40 or Class III morbid obesity, co-morbidities dramatically increase such that this has a negative impact on health-related quality of life. In this way, the higher the person's BMI is, the more likely the person is to be severely disabled.

[435] Specifically, Dr. Lau's evidence was reflected as follows in the Calgary Decision:

Dr. Lau asserts that it is well known that obesity causes significant functional limitations in a "severity-dependent manner". Dr. Lau notes that mobility limitations may result from excessive demands for muscular work or from skeletal or postural changes and that these can prevent obese persons from strenuous activities and hinder participation in exercise. Dr. Lau further testifies that obesity is associated with many health conditions which can lead to disability.

[436] The Agency also notes the following statement of the dissenting member in Decision No. 567-AT-A-2002:

During the hearing in Calgary, the Agency heard evidence of the significant impact of morbid obesity on the functions of a person. From that evidence, it is clear to me that persons who are morbidly obese have a high level of functional difficulties considering the extent of the medical and other problems they experience. Morbid obesity is at one extreme end of the scale [...].

[437] Having concluded that persons who are disabled by obesity will be more severely disabled than the general population of persons with disabilities, the Agency refers back to its review of the demographic factors affecting the travel propensity of other persons with more severe disabilities, being those persons who require an Attendant to travel by air in Canada. The Agency finds that these factors are likely more relevant to the estimation of the travel propensity of persons who are disabled by severe obesity than is the travel propensity of the general population of persons with disabilities.

Severity of disability

[438] The evidence on file supports the assumption that people with more disabling conditions tend to be less mobile and travel less than those with more mild or moderate conditions. The Goss Gilroy report states that 84.3 percent of persons with disabilities who are prevented from taking long distance trips have moderately severe or severe disabilities. This evidence indicates that if the target population of persons with disabilities is a group of persons with severe disabilities, which in the Agency's opinion is likely to be the case given the nature of the disability, their propensity to travel is likely to be significantly lower than the general population of persons with disabilities.

[439] This is consistent with the data presented in Ms. Furrie's report that 64 percent of the one half of one percent of the population of persons with disabilities who reported obesity as a primary or secondary disabling condition do not travel, which is a significantly higher rate than that for the general population of persons with disabilities23.

Low income levels

[440] The Agency notes that, during cross-examination, Professor Lazar agreed with counsel for the applicants that if the group of persons with severe disabilities has relatively lower income levels, this fact would indicate reduced demand for any service, including air transportation service. He states that the income variable alone would reduce the propensity of travel regardless of the severity of the disability.

[441] Ms. Furrie indicates that PALS data showed that, of the one half of one percent of persons with disabilities who report obesity as a primary or secondary disabling condition, 59.3 percent are not in the labour force and 45.5 percent are members of households with incomes of $40,000 or more, as compared to the general population for which 67 percent had this level of household income.

[442] The Agency notes that, based on the evidence as set out in paragraph 418 above, persons with severe disabilities have lower employment rates and lower income levels than both the general population of Canadians and the general population of persons with disabilities.

Existence of obstacles to travel

[443] During cross-examination, Professor Lazar agreed with counsel for the applicants that if persons with disabilities who require an Attendant experience a higher than average number of obstacles within the group of persons with disabilities travelling by air, they would probably travel less on average, and that the particular subset of persons with disabilities defined in the tariff is a very small group that probably have a lower propensity to travel than the general population of persons with disabilities.

[444] Other evidence on file demonstrates that persons with disabilities face significant difficulties in air travel. The Agency notes that the Goss Gilroy report indicates that 17.7 percent of all persons with disabilities state that they are prevented from taking long distance trips due to their condition or health problem.

[445] With respect to persons who are disabled by obesity, the Agency notes Professor Allison's admission that at the extreme end of the obesity scale, even for men, it is plausible that they would be less likely to travel by air.

[446] Given the Agency's findings regarding the severity of disability experienced by persons disabled by obesity, set out in paragraph 434 above, the Agency is of the opinion that the ability of the subgroup at issue to travel would be more similar to that of persons with severe disabilities who, for example, require an Attendant to travel by air.

[447] With respect to the applicants' use of a travel propensity figure of 36 percent, on the face of it this figure is an overstatement in view of the fact that it represents travel of 80 kilometres or more by all modes of transportation and is not limited to air travel. This limitation was explored more fully in this Decision at paragraph 294 above. Furthermore, the Agency is of the opinion that its finding that this air travel propensity estimation is a significant overstatement can also be supported by the evidence regarding persons who are disabled by obesity likely having significant co-morbidities which would limit their mobility, employment, and income, all of which would limit their ability to travel, especially by air.

[448] The Agency is of the opinion that the parties have not provided sufficient or compelling evidence to support their positions regarding the air travel propensity of persons who are disabled by obesity. The Agency notes that 20 percent may well be an appropriate travel propensity rate for persons who are obese, generally. However, in light of the foregoing, the Agency is of the opinion that this represents a significant overstatement of an air travel propensity for more severely disabled persons such as those disabled by obesity, and a more reasonable travel propensity for persons disabled by obesity is determined to be 10 percent.

[449] The Agency notes that its conclusion tends to be supported by the evidence reflecting the experience of Southwest Airlines, which the Agency has already determined, in paragraph 391 above, should be given considerable weight in this proceeding. The Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy indicates that less than one half of one percent of Southwest Airlines' passengers seek and receive accommodation, such that they could be considered to be disabled by obesity. There is no doubt that this is the best evidence that the Agency has before it and the closest thing to a dynamic anthropometric study that even mimics some of the other conditions, such as an increased incentive to declare eligibility given the considerable financial benefit available under Southwest Airlines's Customer of Size policy, and it supports the proposition that the air travel propensity of this particular target population will be lower than the air travel propensity of the general population of persons with disabilities.

Conclusion

[450] The Agency considers a 20-percent figure to be an overstatement for the air travel propensity of the target population of persons who are disabled by obesity. The target population in this proceeding is persons disabled by obesity which, the Agency has determined, likely constitutes less than 2 percent of the adult population, and not the 23 percent of the adult population that is obese. The Agency has also determined that persons who are disabled by obesity are likely to be more severely disabled than the general population of persons with disabilities, as they will fall at the far end of the spectrum of obesity with severe mobility impairments and other co-morbidities that will have significant impact on their health and quality of life.

[451] Accordingly, the Agency is of the opinion that it is reasonable to assume that the travel propensity of this target population of persons with disabilities is likely to be similar to the travel propensity of persons with severe disabilities, as described in the section on severity of disability beginning at paragraph 438 above. The Agency finds that the travel propensity of persons with severe disabilities, including this target population, would be 10 percent.

Agency conclusion on Incidence Factor 2 - travel propensity of the target population

[452] While the Agency determined that it would not calculate and apply a separate travel propensity factor for persons who are required to travel with an Attendant, despite the finding that these are persons with severe disabilities who would have a much lower travel propensity than the general population of persons with disabilities, the Agency did conclude that the travel propensity for the target population of persons with disabilities who would be entitled to benefit under a 1P1F policy is 10 percent. This estimation has been calculated and applied to the target population of persons who are disabled by obesity.

[453] The following table reflects the number of 1P1F eligible Canadians who travel by air, being persons with disabilities who require additional seating for their Attendants and persons disabled by obesity who require additional seating to accommodate themselves as a result of this impairment.

Table 2: Incidence Factors 1 and 2 - The number of 1P1F eligible Canadians who travel by air

Estimated number of persons with disabilities who are able to take long distance trips and travel by air1

872,300

Attendant Incidence Rate2

3.6%

   

Total Canadian Population3

32,270,507

Percent of Canadian Population Who Are Adults4

75.7%

Obesity Disability Rate

2.0%

Travel Propensity of Persons Disabled by Obesity

10.0%

   

Number of 1P1F Eligible Canadians Who Travel by Air

80,598

Source:

1As calculated in Table 1 (page 57)

2As calculated in Footnote 12 (page 51)

3Statistics Canada: Annual Demographics Statistics, 2005, Catalogue No. 91-213-XIB

4As calculated in Footnote 20 (page 76)

Incidence Factor 3 - The number of annual domestic air trips taken by the target population

[454] The third important component in the calculation of the cost of accommodation is the estimated number of domestic air trips that are taken each year by the target population of persons with disabilities who require additional seating to accommodate their disabilities to travel by air.

[455] It should be noted that the discussion of trip rate below is limited to persons who travel, as the Agency's calculation of travel propensity above has already incorporated the number of persons who do not travel in its assessment of the inclination of the general population of persons with disabilities to travel.

[456] Furthermore, it should also be noted that the discussion of trip rate below is in terms of domestic, transborder and international air trips. Although the applicants and carrier respondents agreed that the trip rate should be reduced for the purposes of this proceeding to reflect domestic air trips only, the Agency addresses this and applies a reduction to limit the calculation of cost to domestic air travel only in the section beginning at paragraph 483 below.

Carrier respondent's position

[457] The carrier respondents rely on the position that this target population take an average of slightly less than 4.94 air trips per year.

[458] This figure is based on Professor Lazar's use of data which was contained in the 2001 Canadian Transportation Agency Air Travel Accessibility Survey Report (hereinafter the CTA Survey). The CTA Survey reported on data which was collected randomly from persons with disabilities at six major Canadian airports over the course of a four-month period in 2000 to provide an analytical tool to assess the impact of regulatory initiatives on travellers with disabilities. Professor Lazar explains that by calculating a weighted average of the number of single trips taken, he estimates that 4.94 domestic, international and transborder trips are taken per year by persons with disabilities who travelled by air with an attendant. Although this figure was initially proposed to be for persons with disabilities who travel with an attendant, Professor Lazar and the carrier respondents subsequently adopted it for the target population as a whole.

[459] The carrier respondents acknowledge that persons with disabilities will travel less than the general population and they relied on a number of assumptions, calculations and comparisons made by Professor Lazar to support the reasonableness of a 4.94 one-way trips as the trip rate of the target population.

[460] Professor Lazar first calculated the trip rate for the general population at large (including those who travel and those who do not), and asserts that the average number of domestic, transborder and international air trips taken per year by Canadians is slightly less than 2. He compared this with his estimate of approximately 0.9 for the trip rate for the general population of Canadian persons with disabilities (again, including those who travel and those who do not), and noted that it is approximately one half of the trip rate of the Canadian population at large.

[461] Professor Lazar also asserts that when you compare the number of Canadians who travel by air, being approximately 10 million people, with the Transport Canada reported Total Air Passenger Traffic of 63 million passengers in 2005, this results in an annual trip rate of just over 6 one-way domestic, transborder and international air trips taken by Canadians who travel. Professor Lazar noted that this calculation was consistent with (or "not invalidated by") Dr. Tretheway's evidence that, according to surveys conducted by his company of passengers in some airport and cruise ship terminals throughout Canada, the general population who travels by air takes five or six trips per year.

[462] Working with the information from the Harris Interactive Survey, Professor Lazar calculated a weighted average of 4.8 one-way trips by all modes taken by persons with disabilities who travelled in the United States of America in 2005 and 3.8 one-way trips by this same population taken by air in the United States of America in 2005. He expresses his opinion that this result is consistent with his 4.94 trip rate estimation.

[463] In final oral argument, counsel for the carrier respondents asserts that given the differences in the proportion of the domestic air market as compared to the transborder and international markets between Canada (40 percent domestic market) and the United States of America (90 percent domestic market), both the CTA Survey and the Harris Interactive Survey support a conclusion that approximately 2 domestic air trips are taken per year by persons with disabilities who travel by air.

[464] Professor Lazar's calculations were based on his assumptions that the "trips" referred to in the CTA Survey, the Harris Interactive Survey and the Goss Gilroy report all referred to round-trips and not one-way trips, and he explained his rationale for making these assumptions under cross-examination.

Applicants' position

[465] The applicants' position is that 2.5 one-way trips per year is a more reasonable and accurate estimation of the annual trip rate for this target population of persons with disabilities. The applicants base this position on two assumptions:

  • that persons with disabilities travel at half the rate of the general population, and
  • that the target population are persons with more severe disabilities than the general population of persons with disabilities.

[466] According to the applicants' expert, Dr. Lewis, the general population of persons with disabilities travel about half as much as the general population, and this includes people with far less severe disabilities.

[467] Dr. Lewis also notes that the group of persons with disabilities that would be eligible under the tariffs is a group that, by definition, is more severely disabled than the general population of persons with disabilities, and that people with more disabling conditions tend to be even less mobile and travel less than those with less moderate conditions. Dr. Lewis provides the opinion that "[a] trip rate for all people with disabilities would be considerably higher than a trip rate for people with very severe disabilities."

[468] Dr. Lewis acknowledges using a trip rate of 4.94 in his initial calculations because a better one was not readily available. As with the Attendant incidence rate, he expressed his result using lower and upper values being the range within which there exists an 80 percent probability of finding the actual outcome, expressed here as an 80 percent probability that the value lies between 3.95 and 5.93. However, Dr. Lewis testified that, upon reflection and in light of other evidence regarding trip rates, such as the average trip rate of 5 to 6 for the general Canadian population as reported by Dr. Tretheway, 4.94 seems too high, because it is too close to the trip rate of the general population and too high to be consistent with the number of trips that would be taken by persons with disabilities who require an Attendant.

[469] Dr. Lewis testified that demographic studies show that income and disability are highly related, in that a much more severely disabled subgroup of the population of persons with disabilities will travel at a much lower rate than the population as a whole and at a lower rate than other members of the population of people with disabilities. Dr. Lewis adds that, as air travel is a more expensive mode than other modes of transportation, a trip rate of 4.94 is especially high when applied to a particularly severely disabled subcategory of the population of persons with disabilities.

[470] Dr. Lewis also points out that neither the CTA Survey nor the Harris Interactive Survey clearly indicate whether a "trip" involves a return-trip or a one-way trip. Counsel for the applicants assert that Professor Lazar's assumption that they reflect return trips is not the conservative assumption. Dr. Lewis also questions the reliability of these statistics in the Goss Gilroy report by pointing out that although they suggest, on face value, that the average annual trip rate for persons with disabilities could be eight trips per year, it is a three-month survey only and not an annual survey.

Agency analysis

[471] The Agency accepts that WestJet's expert, Dr. Tretheway, provided the Agency with the best evidence of the average trip rate of the general Canadian population that travels, being 5 to 6 trips by air per year. As compared to Professor Lazar's assertion that this figure should be over 6 trips per year, the Agency finds Dr. Tretheway's evidence to be more persuasive because it was stated to be based on empirical research which his company had performed, and was limited to travel by air.

[472] The Agency also accepts as reasonable the evidence of Dr. Lewis, based on his expertise specific to the transportation needs of persons with disabilities, that persons with disabilities travel half as much as the general population. In doing so, the Agency notes the agreement of the carrier respondents with the general proposition that persons with disabilities travel less than the general population, and Professor Lazar's comment that while approximately one third of the general Canadian population travels by air, only 18 to 19 percent of the general population of persons with disabilities do so. Furthermore, with respect to the target population, during cross-examination Professor Lazar agreed that the particular very small subset of persons with disabilities defined in the tariff as requiring an Attendant probably has a lower propensity to travel and would travel at a lower rate than the general population of persons with disabilities, and Professor Allison agreed that, at the extreme end of the obesity scale, even for men, it is plausible that they would be less likely to travel by air.

[473] While the assumption that persons with disabilities will travel half as much as the general population has already been factored by the Agency into the travel propensity of the target population as it reflects the inclination of people to travel by air, the Agency is of the opinion that it is equally relevant to the determination of trip rate. It is reasonable to assume that even if persons with disabilities are travelling by air, they are likely to take far fewer trips than the general population due to the impact of the same demographic factors, such as lower income and employment levels. Furthermore, the Agency accepts that the impact of these demographic factors will be magnified in this proceeding both because the target population being considered in this case is made up of persons with more severe disabilities than the general population of persons with disabilities and the mode of transportation under consideration in this proceeding is widely regarded as the more expensive mode of transport. Accordingly, it is reasonable to assume that this target population will have a lower average trip rate than that of the general population of persons with disabilities.

[474] As support for this assumption, the Agency notes the following from the Goss Gilroy report: "[i]n absolute terms, air represents the mode with which the most persons with disabilities encounter difficulties". The Goss Gilroy report states that the five most commonly encountered difficulties by persons with disabilities when travelling by air are: transporting special aids; moving around the terminal; boarding or disembarking; seating on board; and that it is "too costly". The Goss Gilroy report also states that 40 percent of persons with disabilities who have difficulty travelling by air state that the difficulties they encounter limit the amount of air travel that they do.

[475] The Agency also notes the evidence of Ms. Furrie that, according to the 2001 PALS data, of the persons with disabilities who require personal support at least 20 hours a day, seven days a week, 18.3 percent report that they are prevented from travelling long distances, 37.7 percent said that seating is a problem, 50.9 percent say that travelling aggravates their condition, 42.6 percent find that moving around the terminal or station is difficult, and 42.6 percent said boarding and disembarking is difficult. Although these statistics were not limited to air travel, they are nonetheless relevant to the Agency's conclusion that persons with severe disabilities will have a lower trip rate than the general population of persons with disabilities.

[476] The Agency accepts that the same trip rate should apply to all persons with disabilities who require additional seating to accommodate their disabilities, including both those who travel with an Attendant and those who are disabled by obesity. As set out above, the Agency is of the opinion that, as a category, this target population is more severely disabled than the general population of persons with disabilities such that they have similar demographic factors which impact negatively on the frequency of their travel, especially by air.

[477] Although Dr. Lewis used in his calculations the 4.94 average trip rate proposed by Professor Lazar as it was the best estimate available at the time and he continued to accept it as "the best estimate we have for the median expectation", he candidly admitted that he became less comfortable with the estimate as a result of hearing other evidence at the November 2006 hearing and he stated that, as a result, the real distribution is probably skewed towards the lower end of his probability range.

[478] The Agency is of the opinion that the average trip rate for the target population is likely to be closer to 2.5, being one half of the 5 expressed as the low range of the average trip rate of the general population of Canadians who travel by air expressed by Dr. Tretheway. Although Dr. Tretheway expressed the trip rate of the general population of Canadians who travel by air to be between 5 and 6, the Agency finds it appropriate to use 5, the low range of Dr. Tretheway's opinion, for the purposes of calculating the estimated trip rate of the target population in recognition that the target population is more severely disabled than the general population of persons with disabilities.

[479] While the carrier respondents expressed the view that the CTA Survey was an appropriate source of data from which to derive this factor, the Agency is of the opinion that the CTA Survey was not designed to measure what its data is now being used to support, that is the average annual number of one-way domestic air trips taken by the target population of persons with disabilities who require additional seating to accommodate their disabilities to travel by air.

[480] Another problem with the way that data was expressed from the surveys is related to their lack of definition for "trips", such that Professor Lazar assumed that they all referred to "round-trips" which counsel for the applicants asserted was not a conservative assumption to make. Furthermore, in this instance the Goss Gilroy report provides data based on a three-month period only, which has limited statistical significance and could reflect variations in travel dependent on factors such as the season that the three-month period fell in. Finally, they do not identify the particular travel patterns of the target population.

Agency conclusion on Incidence Factor 3 - Trip rate

[481] Based on the evidence submitted, the Agency finds that the estimation that persons with severe disabilities who require additional seating to accommodate their disabilities would take an average of 2.5 one-way trips per year, or approximately one-half as many trips as the general population, is more reasonable than the position that the Agency should apply an average trip rate of 4.94 one-way trips per year taken by the general population of persons with disabilities.

[482] The following table reflects the estimated number of annual domestic trips taken by 1P1F eligible Canadians.

Table 3: Incidence Factor 3 - The number of annual domestic air trips taken by the target population

Number of 1P1F eligible Canadians who travel by air

80,598

Trip rate

2.5

Number of trips by 1P1F eligible Canadians who travel by air

201,496

Calculation of the carrier respondents' domestic air passenger traffic as a percentage of total air passenger traffic

[483] As noted in the introduction to Incidence Factor 3, the trip rate reflects domestic, transborder and international travel and an adjustment must now be made to remove the transborder and international elements from the calculation of cost of accommodation.

Air Canada

[484] Air Canada submits in the November 28, 2005 Ernst & Young report that its 2004 Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic was approximately 24 percent.24 Ernst & Young submitted that in March 2005, Air Canada had captured 55 percent of the domestic market, based on available seat mile capacity. Using Transport Canada data for 2004, which indicated Domestic Air Passenger Traffic of approximately 26.5 million passengers, Ernst & Young estimated that Air Canada carried 14.6 million (55 percent of 26.5M) passengers domestically, representing approximately 24 percent (14.6M / 60.0M) of the 60 million passengers reported by Transport Canada for the 2004 Total Air Passenger Traffic.

[485] In its report of October 6, 2006, Ernst & Young further submitted that Air Canada carried 17.4 million passengers domestically in 2005, based on a 61 percent domestic market share. The Agency notes that this represents 27.3 percent (17.4M / 63.7M) of the Total Air Passenger Traffic reported by Transport Canada for 2005.

[486] However, the Agency notes that the source of the 61 percent domestic market share indicated in the Ernst & Young report, namely a document prepared for a presentation as part of a Merrill Lynch Global Transportation Conference on June 14, 2006, actually indicates a 2005 domestic market share of 60 percent.

Table 4: Air Canada's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic
 

2004

2005

Domestic Air Passenger Traffic

26,462,000A

28,542,000C

Domestic Market Share

55.0%B

60.0%D

Air Canada's Domestic Air Passenger Traffic

14,554,100

17,125,200

Total Air Passenger Traffic

59,988,000A

63,689,000C

% of Total Air Passenger Traffic

24.3%

26.9%

Source:

AErnst & Young report dated November 28, 2005

BACE Aviation Holdings Inc. presentation at Merrill Lynch Global Transportation Conference on June 8, 2005 referred to in the Ernst & Young report dated November 28, 2005

CErnst & Young report dated October 6, 2006

DACE Aviation Holdings Inc. presentation at Merrill Lynch Global Transportation Conference on June 14, 2006 referred to in the Ernst & Young report dated October 6, 2006

[487] The Agency understands that the Transport Canada data in respect of Total Air Passenger Traffic and Domestic Air Passenger Traffic is based on the number of passengers enplaned and deplaned at Canadian airports which includes domestic segments of international trips. As the Decision does not apply to domestic segments of international trips purchased on a single fare, Air Canada's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic may be overstated. However, in the absence of other data, the Agency accepts, based on the Ernst & Young report dated October 6, 2006, that in 2005 Air Canada's Domestic Air Passenger Traffic represented approximately 26.9 percent of the Total Air Passenger Traffic.

WestJet

[488] WestJet submitted via Siebert/Pask's report dated January 9, 2006 that its Domestic Air Passenger Traffic, expressed as a percentage of Total Air Passenger Traffic, was 12.97 percent in 2004, calculated using the same methodology as Air Canada and based on data presented in the Transport Canada 2004 Annual Report and its Addendum.

[489] Ernst & Young submitted in its October 6, 2006 report that WestJet reported a 32 percent domestic market share in its 2005 annual report. The report further estimates that 32 percent of the 2005 domestic market represents 9.1 million domestic passengers, which is 14.3 percent of Total Air Passenger Traffic.

[490] During the second oral hearing, Siebert/Pask submitted a revision to its January 9, 2006 report, which included an updated estimate of WestJet's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic for 2005. This submission estimated that WestJet carried 14.8 percent of Total Air Passenger Traffic domestically. However, this value was not substantiated with supporting calculations.

[491] During final oral arguments, WestJet submitted in its obesity worksheet that 13 percent of all flights are WestJet domestic flights. This value was used by the carrier in the same capacity as it had previously used the percentage Domestic Air Passenger Traffic.

[492] As WestJet did not substantiate with supporting calculations the value of the 14.8-percent figure as presented in the revision to the Siebert/Pask report or the value of the13-percent figure as presented during final oral arguments, the Agency finds it reasonable to accept the values presented by Ernst & Young in its report of October 6, 2006, as supported by data from the Transport Canada 2005 Annual Report and WestJet's 2005 Annual Report. Based on these values and the methodology presented by Air Canada and WestJet for determining their Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic, the Agency estimates that WestJet carried approximately 14.3 percent of Total Air Passenger Traffic on its domestic flights in 2005. However, as indicated with respect to Air Canada's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic, given the inclusion in the Transport Canada data of domestic segments of international trips, this estimation in respect of WestJet's domestic traffic may be overstated. This said, as WestJet's passenger traffic is predominantly domestic, it is expected that this overstatement would be relatively small.

Table 5: WestJet's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic
 

2004

2005

Domestic Air Passenger Traffic

26,462,000A

28,542,000B

Domestic Market Share

29.4%A

32.0%C

WestJet's Domestic Air Passenger Traffic

7,779,828A

9,133,440

Total Air Passenger TrafficA,B

59,988,000A

63,689,000B

% of Total Air Passenger Traffic

12.97%A

14.34%

Source:

ASiebert/Pask Report dated January 9, 2006

BErnst & Young Report dated October 6, 2006

CWestJet 2005 Annual Report as referred to in Ernst & Young report dated October 6, 2006

Agency conclusion on incidence

[493] Therefore, based on the above, the Agency finds that the total number of persons with disabilities who require additional seating to accommodate their disabilities multiplied by 2.5 trips per year amounts to approximately 201,000 international, transborder and domestic trips in one year. Given Total Air Passenger Traffic for international, transborder and domestic markets of 63.7 million trips and that Air Canada's and WestJet's domestic traffic represent 26.9 and 14.3 percent, respectively, of this total, the estimated number of trips taken by persons with disabilities who require additional seating to travel by air in 2005 is 54,200 trips by Air Canada and 28,900 trips by WestJet, which represents the number of times that the carrier respondents may be expected to have to provide accommodation to persons with disabilities under a 1P1F policy.

Table 6: The Number of Annual Domestic Air Trips Taken by Persons with Disabilities Who Require Additional Seating to Accommodate Their Disability by Carrier
 

Air Canada

WestJet

Number of trips by 1P1F eligible Canadians who travel by air

201,496

201,496

Carriers' domestic air passenger traffic as a percentage of Total Air Passenger Traffic

26.9%

14.3%

Domestic 1P1F trips by eligible Canadians

54,180

28,896

2. Calculation of costs

[494] As previously noted in paragraph 222, the Agency's approach to determining the estimated cost of accommodation in this case is to first determine the incidence, or the number of times that the carrier respondents may be expected to have to provide accommodation to persons with disabilities under a 1P1F policy, and then to apply a costing methodology to estimate the total annual costs for each of the carrier respondents that would be associated with the adoption of a 1P1F policy. The following section examines the reports prepared by the experts for the applicants and the carrier respondents which set out their respective methodologies for calculating the cost of a 1P1F policy.

a) Expert reports on estimating the cost of a 1P1F policy

[495] The experts for the applicants and the carrier respondents submitted several reports designed to calculate the cost of a 1P1F policy to the carrier respondents in the context of the domestic market. The estimates of the cost of a 1P1F policy as reflected in the expert reports differ depending on the factors relating to the estimated incidence of persons with disabilities travelling with Attendants, as discussed in the section beginning at paragraph 246, and the components that are used in the calculation of this estimate; whether abuse of the policy is considered to be a variable, also previously discussed in the section referred to above; and whether it is assumed that carriers can increase ticket prices to offset the cost of a 1P1F policy. The latter is key to the determination of which methodology is appropriate for calculating the cost of a 1P1F policy.

[496] A detailed examination of the reports is provided in this section of the Decision to provide an understanding of the methodologies used by the various experts and to permit the Agency to choose which is the most appropriate for calculating the cost of a 1P1F policy.

Carrier respondents' expert reports on the cost of a 1P1F policy

[497] The carrier respondents produced six primary reports relating to the estimated cost of a 1P1F policy:

  • two reports prepared by Dr. Tretheway, which address broad implications of a 1P1F policy on the carrier respondents;
  • two reports prepared by Professor Lazar which provide estimates of the cost of a 1P1F policy based on calculated incidence rates; and
  • reports by Ernst & Young and by Siebert/Pask, which provide estimates of the cost of a 1P1F policy based on the incidence rates set out in Professor Lazar's reports.

[498] The main differences between the reports prepared by Professor Lazar and those prepared by Ernst & Young and Siebert/Pask relate to whether the calculation of the cost of a 1P1F policy reflects an increase in ticket prices in response to the adoption of a 1P1F policy.

Dr. Tretheway's May 18, 2005 report

[499] Dr. Tretheway's first report dated May 18, 2005 addresses several general questions, answers to which were relied upon by the other respondent carriers' experts in preparing their reports. Dr. Tretheway's report did not quantify the cost of a 1P1F policy.

[500] Dr. Tretheway expresses the opinion that the use of system-wide, route or flight average load factors would not be useful for assessing whether an otherwise empty seat will be available for provision at no charge to a person who requires additional seating due to his or her disability on the basis that, even when a carrier's average load factors are relatively low, there can be a large percentage of flights which depart full.

[501] Additionally, Dr. Tretheway states that, in his view, the use of high and low load factors for a route or flight would not be useful for assessing whether an otherwise empty seat will be available for provision at no charge to a person who requires additional seating due to his or her disability as the high value is very likely to be 100 percent for any given route or flight. Dr. Tretheway indicates that it is more useful to analyze the number or percentage of flights that depart full or "nearly full", the latter of which are, notwithstanding load factors that are less than 100 percent, considered to represent full flights.

[502] Dr. Tretheway concludes that a higher than average fare should be used when calculating the opportunity cost of a 1P1F policy, based on the assumption that an additional seat provided under a 1P1F policy to a person with a disability at no additional charge might have been sold at a higher than average fare closer to the date of the flight.

[503] Regarding the impact of a 1P1F policy on the total volume of air travel, Dr. Tretheway concludes that the provision of seats under such a policy would result in a reduction in total travel as the removal of seats from the inventory available for sale is likely to reduce the number of seats available at the deepest discounts thereby reducing the amount of travel. In this regard, Dr. Tretheway notes that the offering of discount, fares was designed to stimulate new travel by individuals who are able to travel only at reduced fares.

[504] Finally, in this report Dr. Tretheway concludes that the provision of additional seats at no charge to certain persons with disabilities would result in a change to the average fare paid by other passengers in that the reduction in the inventory of seats available for sale is most likely to reduce the number of discount seats sold, which will result in an increase in the average fare paid by all air passengers. Dr. Tretheway further concludes that, while the average fare paid may increase, overall revenues will be lower due to fewer seats being sold.

Dr. Tretheway's January 6, 2006 report

[505] In his second report dated January 6, 2006, Dr. Tretheway addressed questions pertaining to:

  1. the impact of a 1P1F policy on the carrier respondents in terms of competitive disadvantage;
  2. the implications on foreign carriers of the imposition of a 1P1F policy on Canadian carriers domestically;
  3. whether a multiplicity of regulations, especially if they are not consistent with regulations in other jurisdictions, could undermine the business model presently used by the carriers; and
  4. whether there are any better options for addressing the accessibility issues raised by the applicants.

[506] With respect to the first question, Dr. Tretheway concludes that carriers subject to a 1P1F policy would be directly subjected to two major competitive disadvantages - referred to as carrier selection and higher operating cost disadvantages - and indirectly subjected to a third competitive disadvantage, referred to as destination choice. Dr. Tretheway also notes a fourth effect arising from his conclusion that a 1P1F policy would lead to cross subsidization. These arguments are examined further in the section on economic implications of the cost of a 1P1F policy beginning at paragraph 714.

[507] With respect to the second question, Dr. Tretheway concludes that, based on his assessment that the competitiveness of Canadian carriers would be reduced as a result of a 1P1F policy, the Canadian government would be pressured into requiring foreign carriers operating into Canada to adopt a 1P1F policy, which Dr. Tretheway concludes would be complicated in practice to implement, citing the impact on computer reservation systems that would need to be able to price complex itineraries for passengers eligible for a 1P1F policy and the changes that would be required to seat inventories. Dr. Tretheway also comments that jurisdictional issues may arise pertaining to questions such as whether a 1P1F requirement could be applied to a domestic or non-Canadian international route segment on an itinerary which originates in Canada, in addition to whether a 1P1F policy would only apply to tickets purchased in Canada versus tickets for travel to Canada which originate in another country.

[508] In answer to the third question, Dr. Tretheway comments on the operational and pricing complexity that he asserts could arise if a 1P1F policy is imposed on foreign carriers. In addition, Dr. Tretheway asserts that any increase in costs of low-cost carriers due to the need to cross subsidize 1P1F passenger traffic would destimulate the markets where higher fares would be charged to cover these costs and undermine the most important principle of low-cost carriers' business models. These arguments are examined further in the section on the methodology for calculating the cost of a 1P1F policy beginning at paragraph 550.

[509] Finally, in response to the last question, Dr. Tretheway submits that a better way of addressing the applicants' concerns about the fares charged to persons with disabilities for additional seating is to provide direct subsidies to the carriers providing services pursuant to a 1P1F policy.

Professor Lazar's reports

[510] Professor Lazar produced two reports to estimate the net revenue losses attributable to a 1P1F policy. The reports were limited to losses relating to travel by persons with disabilities who require additional seating for attendants and did not provide estimates in respect of persons disabled by obesity who require additional seating to accommodate their disability.

Professor Lazar's November 25, 2005 report

[511] In his first report, Professor Lazar estimates net revenue losses from implementing a 1P1F policy in terms of persons with disabilities requiring additional seating to accommodate an attendant and in respect of all air carriers operating to, from and within Canada for domestic, transborder and international flights.

[512] Professor Lazar's model for estimating the net revenue losses considers the following elements:

  • revenue losses related to persons with transportation disabilities who currently travel with an attendant, family member or friend and claim this person as an attendant/companion;
  • revenue losses related to individuals with transportation disabilities who currently travel with a family member or friend, but do not currently claim this person as an attendant/companion (for ease of reference, hereinafter referred to as Abuse Factor 1);
  • revenue losses related to individuals with transportation disabilities who currently do not travel with a family member or friend, but might claim the need to be accompanied (for ease of reference, hereinafter referred to as Abuse Factor 2); and
  • net revenue gains related to individuals with transportation disabilities who would be induced to travel as a result of lower prices created by a new rule.

[513] Professor Lazar applied the following factors to calculate the range of estimated revenue losses:

  • a range estimating the number of one-way trips by persons with disabilities who travel with attendants, family members or friends for 2006 of between 904,000 and 959,000;
  • a 5-percent rate of travel with a non-family member as an attendant and a 17-percent rate of travel with a family member as an attendant which, as discussed in paragraph 251, reflect the estimated proportion of persons with transportation disabilities who travelled by air and who needed an attendant or companion taken from the US DOT study;
  • a trip rate of 4.94 annual trips;
  • the effects of policy abuse as introduced in paragraph 246 above based on the assumption that 5 to 25 percent of persons with disabilities who do not currently claim to require an attendant would do so under a 1P1F policy. Professor Lazar further assumed that 25 percent of these persons are currently travelling with a family member or friend and would claim this companion as an attendant (Abuse Factor 1). Similarly, Professor Lazar assumed that 75 percent of these persons are not currently travelling with a family member or friend but would decide to do so and claim the benefit under a 1P1F policy, thereby displacing revenue-paying passengers, whether or not the flight is full (Abuse Factor 2);
  • average fares of $150 and $350, which Professor Lazar accepted as there was no information available on the distribution of trips as between domestic, transborder and international flights and on the proportion of trips booked at discount versus full fares; and
  • a price elasticity of 1.2525.

[514] Professor Lazar noted that the potential revenue losses and additional costs associated with the displacement of revenue-paying passengers due to the above-noted abuse factor would be discussed in another report. While Professor Lazar recognized that there could be some offsetting revenue gains due to the additional trips by persons with disabilities who are induced to travel, his report did not calculate these.

[515] Based on the foregoing assumptions and factors, Professor Lazar calculated a range of total estimated revenue losses for 2006 between $143 and $418 million in respect of all air carriers operating to, from and within Canada and in respect of transborder, international and domestic flights. Professor Lazar's first report extrapolated the estimated revenue losses over the period 2006 to 2015.

Professor Lazar's June 1, 2006 report

[516] In his second report, Professor Lazar narrows his estimate of revenue losses from the implementation of a 1P1F policy by including only Air Canada and WestJet and by including only domestic and transborder flights, this last aspect notwithstanding that the scope of the Agency's investigation was limited to domestic flights. Consistent with his first report, Professor Lazar did not set out estimated revenue losses in respect of persons disabled by obesity who need additional seating to travel by air.

[517] Professor Lazar explains that the methodology used in his second report builds on that used in his first report in that two cases are presented: the "base case", which reflects the attendant rate of 22 percent noted above; and a "low estimate case", which represents the attendant rate of 18.5 percent based on the Goss Gilroy report, as previously discussed beginning at paragraph 247.

[518] Professor Lazar reflects the following elements in his estimation of revenue losses attributable to a 1P1F policy, some of which were partially addressed in his first report and others which are new.

[519] Professor Lazar's model for estimating the net revenue losses considers the following elements:

  • revenue losses related to passengers with transportation disabilities who likely were accompanied by an attendant;
  • revenue gains related to additional trips taken by individuals with transportation disabilities who are entitled to the rule;
  • revenue losses related to a price increase resulting from the additional trips taken by individuals with transportation disabilities who are entitled to the rule; and
  • revenue losses related to a price increase resulting from additional trips taken by attendants for current travellers with transportation disabilities who are not accompanied by an attendant, family member or friend, and would get a medical letter to recommend that they would need to be accompanied on flights (Abuse Factor 2).

[520] Professor Lazar did not assume that there would be revenue losses attributable to revenue-paying passengers being displaced on full flights as a result of additional seats being occupied by Attendants under a 1P1F policy. Rather, he assumes that the carriers' yield management system would increase average fares such that the net decline in the number of trips, as a result of the fare increase, would largely neutralize the initial increase in the number of additional trips generated by a 1P1F policy.

[521] Professor Lazar also assumes that passengers who might have been displaced on full flights as a result of the 1P1F rule would have booked on other flights operated by the carrier respondents. In other words, Professor Lazar assumes that displaced passengers would not have rebooked with competitors or cancelled their reservation altogether.

[522] As a result, Professor Lazar predicts that the carrier respondents would react to the additional trips taken by persons with disabilities who require additional seating to accommodate their attendants by increasing ticket prices. As discussed in the section on the methodology for calculating the costs of a 1P1F policy beginning at paragraph 550, Air Canada and WestJet use complex systems, known as "yield management systems", to manage the sale of seats relative to demand in order to maximize revenues.

[523] Professor Lazar calculates the total estimated net revenue losses for 2005 in respect of domestic and transborder flights, attributable to a 1P1F policy as a range between $27 to $39.1 million for Air Canada and $9.7 to $13.7 million for WestJet. This range of estimates reflects the aforementioned "base case", which uses a 22 percent attendant rate, and a "low estimate case", which uses a 18.5 percent attendant rate; an assumed average fare of $150; and a price elasticity of 1.112, based on a Department of Finance survey of elasticity studies as noted in the section on price elasticity of demand beginning at paragraph 640.

Reports by Ernst & Young

[524] Air Canada submitted a report prepared by Ernst & Young dated November 28, 2005, which estimates revenue losses as a result of a 1P1F policy for Air Canada in respect of domestic air travel. Although it is consistent with Professor Lazar's report, the Ernst & Young report did not consider revenue losses attributable to travel by persons disabled by obesity. While Professor Lazar assumed that induced travel by persons with disabilities would result in the displacement of revenue-paying passengers on full flights and flights with empty seats, Ernst & Young assumed that revenue-paying passengers would only be displaced on full flights.

[525] The report notes that in the absence of financial and operational data which was not provided to it as it was considered commercially sensitive and highly confidential by Air Canada, Ernst & Young had to rely on average passenger fares and average flight full factors as provided to it by the carrier, in addition to public information, to estimate the marginal cost of carrying an additional passenger. Regarding the former, an average fare of $250 per one-way trip was used. Regarding flight full factors, calculations were made using factors of 15, 20, 25 and 30 percent.

[526] Estimated revenue losses were calculated using a mid-range point of the estimates set out in Professor Lazar's first report of the numbers of persons with disabilities requiring additional seating to accommodate their attendants and assuming that 24 percent of the trips by accompanied persons with disabilities reflected in Professor Lazar's first report related to domestic air travel with Air Canada.

[527] The Ernst & Young report notes that, based on 2004 public financial reports, marginal costs relating to fuel, food, beverage and supplies were approximately 22 percent of operating expenses, or $55 per passenger trip. Ernst & Young expressed the opinion that the average marginal cost of carrying a person with a disability would be higher than for other passengers and noted that wages, which were not included, would be expected to vary with changes in passenger volume. However, the report recognizes that some portion of the operating costs included in marginal costs, such as fuel, may not vary in direct proportion with changes in passenger volume. Based on the foregoing, a marginal cost of $50 was used for the estimates.

[528] Ernst & Young's model for estimating the net revenue losses considers the following elements:

  • revenue losses related to persons with disabilities who, irrespective of the adoption of a 1P1F rule, would have travelled with a fare paying attendant and will continue to travel with an attendant under a 1P1F rule;
  • revenue losses related to persons with disabilities who, irrespective of the adoption of a 1P1F rule, would have travelled with a fare paying family member or friend and will continue to travel with a family member or friend, but will now claim the family member or friend as an attendant under a 1P1F rule (Abuse Factor 1);
  • revenue losses related to persons with disabilities who otherwise would have travelled without an Attendant, but would choose to travel with an attendant under a 1P1F rule; (Abuse Factor 2)
  • revenue losses related to the displacement of revenue-paying passengers on full flights as a result of persons with disabilities who otherwise would not have travelled now choosing to travel with a non-fare paying attendant; and
  • net revenue gains on flights with empty seats as a result of persons with disabilities who otherwise would not have travelled, but now would choose to travel with a non-fare paying attendant.

[529] Based on the assumed full flight factors, the report estimated a range of total revenue losses in respect of domestic flights to Air Canada of implementing a 1P1F policy for 2006 of between $54 and $83 million. The report also extrapolated the estimated revenue losses to 2015.

[530] The carrier respondents submitted schedules prepared by Ernst & Young and dated November 24, 2006 during the November 2006 hearing setting out revised estimates of the cost of a 1P1F policy, based on the assumption that an average of 15 percent of flights depart full and the use of a marginal cost of $39.11 per one-way trip (as opposed to the $50 amount used in Ernst & Young's initial report). The schedules showed that, for 2005, the cost of a 1P1F policy to Air Canada for persons with disabilities needing additional seats for their attendants would range between $41 to $51 million, based on Professor Lazar's 2006 report.

Reports by Siebert/Pask

[531] WestJet submitted a report prepared by Siebert/Pask dated January 9, 2006, which estimates revenue losses as a result of a 1P1F policy for WestJet in respect of domestic air travel based on the incidence of persons with disabilities travelling with attendants as reflected in Professor Lazar's first report. Consistent with the reports prepared by Professor Lazar and Ernst & Young, the Siebert/Pask report did not consider obesity. Further, consistent with the Ernst & Young report and, unlike the reports prepared by Professor Lazar, in considering revenue losses due to the displacement of revenue-paying passengers, the Siebert/Pask report considered the proportion of flights that would be full.

[532] The report notes that the estimated revenue losses reflect the assumption that WestJet's 2004 Domestic Air Passenger Traffic represents 12.97 percent of the Total Air Passenger Traffic, including international, transborder and domestic sectors; an average fare of $140 per one-way trip; and a marginal cost rate of 10 percent of the average fare per flight segment and is based on the assumption that 20 percent of WestJet's flights depart full.

[533] For the purposes of calculating induced travel, consistent with Professor Lazar's November 25, 2005 report, Siebert/Pask assumed a price elasticity rate of 1.25.

[534] Estimated revenue losses were calculated using the estimated number of persons with disabilities requiring additional seating to accommodate their attendants set out in Professor Lazar's first report.

[535] Siebert/Pask's model for estimating the net revenue losses considers the following elements:

  • revenue losses related to persons with disabilities who travelled by air and paid for a personal Attendant and would continue to travel if a 1P1F rule is adopted;
  • revenue losses related to persons with disabilities who travelled with an "unreported" personal attendant and would continue to travel if a 1P1F rule were adopted, but would officially "report" their personal attendant so that their personal attendant could travel for free (Abuse Factor 1);
  • revenue losses related to persons with disabilities who travelled by air "without" a personal attendant and will continue to travel, but will now travel "with" a personal attendant if a 1P1F rule is adopted (Abuse Factor 2);
  • revenue losses related to the displacement of revenue-paying passengers on full flights as a result of persons with disabilities who did not travel in the past, but who will now travel and claim a personal attendant if a 1P1F rule is adopted; and
  • net revenue gains on flights with empty seats as a result of persons with disabilities who did not travel in the past, but who will now travel and claim a personal attendant if a 1P1F rule is adopted.

[536] Based on the assumed full flight factors, the report estimated a range of total costs of implementing a 1P1F policy for 2005 of between $13.2 and $19.7 million.

[537] As with the Ernst & Young report, schedules were submitted during the November 2006 hearing which set out revised estimates of the cost of a 1P1F policy. The schedules applied revised Domestic Air Passenger Traffic (as a percentage of Total Air Passenger Traffic) of 14.8 percent versus the 12.97 percent presented in Siebert/Pask's initial report. The schedules also used the incidence data from Professor Lazar's second report.

[538] The schedules showed that for 2005 the cost of a 1P1F policy to WestJet for persons with disabilities needing additional seats for their attendants would range between $10.8 and $19.6 million, based on Professor Lazar's 2006 report.

Applicants' expert reports

[539] Dr. Lewis estimated the net revenue losses of implementing a 1P1F policy domestically for Air Canada and WestJet using similar elements as those used by Ernst & Young and Siebert/Pask, but he adopted a different methodology by using risk analysis to reflect probability distributions to the estimates of each cost factor.

[540] As previously discussed, Dr. Lewis based his estimate of the number of domestic trips by persons with disabilities travelling with attendants on an incidence rate of 3.6 percent, compared to the 18.5 to 22 percent rates used by the experts for the carrier respondents. Additionally, Dr. Lewis suggests that not all persons with disabilities who might be eligible to travel with an attendant prior to a 1P1F policy will have been doing so due to the cost of travelling with an attendant.

[541] Dr. Lewis used a one-way trip factor of 4.94, a price elasticity of 1.112, and an average domestic fare of $150.

[542] Dr. Lewis' model for estimating the net revenue losses considers the following elements:

  • revenue losses related to eligible persons with disabilities who would travel with an attendant both prior to or after the adoption of a 1P1F rule;
  • revenue losses related to eligible persons with disabilities who would have travelled without an attendant prior to the adoption of a 1P1F rule, but would travel with an attendant after the adoption of a 1P1F rule (not abuse);
  • revenue losses related to the displacement of revenue-paying passengers on full flights as a result of induced trips by eligible persons with disabilities if a 1P1F rule were to be adopted;
  • net revenue gains on flights with empty seats as a result of induced demand by eligible persons with disabilities and their personal attendant(s) induced to travel if a 1P1F rule were to be adopted; and
  • revenue losses related to a price increase resulting from the additional trips taken by persons with disabilities who would be induced to travel if a 1P1F rule were to be adopted.

[543] Dr. Lewis characterizes his estimates of revenue losses due to the adoption of a 1P1F policy as being conservative for the following reasons:

  • his estimates assume that the percentage of persons with disabilities who need additional seating to accommodate their attendant and who would qualify for a 1P1F policy range between 2.2 and 5.1 percent, whereas Statistics Canada reports that 1.5 percent of Canadians with disabilities require full-time use of an attendant for daily life activities. While the estimates recognize that some persons with disabilities who do not require a full-time attendant might require one for air travel, the report notes that income levels among the 1.5 percent requiring a full-time attendant are, on average, very low, sharply diminishing the propensity of this group to travel;
  • while the 1.1 elasticity of demand for air travel used by Professor Lazar lies within the probability range assumed for this variable in his estimates, the report notes that low income levels among persons with disabilities suggest a much lower value for elasticity of demand;
  • the report adopts the assumption used by Professor Lazar that aircraft are "full" at load factors well beneath 100 percent in recognition of weight and revenue management factors; however, in reality, seats are deliberately withdrawn from the market to preserve the statistical possibility that last-minute walk-up passengers will purchase them at higher, undiscounted fares. Dr. Lewis notes that although such a practice maximizes airline revenue, resulting empty seats could be filled at zero marginal costs from an economic point of view;
  • the full competitive effects of rail and bus services on the demand for airline services among persons with disabilities were not taken into account. The report expresses the opinion that the less costly modes of travel will continue to attract the vast majority of low-income travellers when these modes offer reasonable alternatives to air travel; and
  • the estimates assume no discounts are already provided for attendant travel. If the existing discount policy of Air Canada were recognized, foregone revenues due to a 1P1F policy would be lower.

[544] Unlike the carrier respondents' expert reports, Dr. Lewis' report also recognized the possibility of displaced cargo due to the induced demand by persons with disabilities who need additional seating to accommodate their attendants. Dr. Lewis estimated the opportunity cost of a single additional passenger with respect to cargo at $100 and estimated the probability of displaced cargo due to the additional passenger at 5 percent.

[545] Dr. Lewis' report estimates annual net revenue losses based on 2005 data of $5.1 million for Air Canada, with an 80 percent likelihood that the losses fall between $2.6 and $7.9 million. The report estimates annual net revenue losses of $2.2 million for WestJet, with an 80 percent likelihood that the losses fall between $1.1 and $3.4 million.

Richard S. Fisher's expert report

[546] As is evident from the foregoing review of the various expert reports, and reflected below in the summary table, the experts derived widely different estimates of the cost of a 1P1F policy.

Table 7: Estimated annual revenue losses in 2005 in respect of Attendants, by carrier and expert
ExpertAir CanadaWestJet

Professor Lazar (adjusted to exclude Transborder traffic)1

$27 - $19 million2

$13 - $9 million3

Ernst & Young (based on Professor Lazar 2006 report)4

$51 - $41 million

 

Siebert/Pask (based on Professor Lazar 2006 report)5

 

$20 - $11 million

Dr. Lewis6

$5.1 million

$2.2 million

Source:

1 Professor Lazar's report dated June 1, 2006

2 Calculated as: ($39.1 million x 70%) & ($27.0 million x 70%); Ernst & Young report dated October 6, 2006

3 Calculated as: ($13.7 million x 94%) & ($9.7 million x 94%); Ernst & Young report dated October 6, 2006

4 Ernst & Young report (Schedules dated November 24, 2006)

5 Siebert/Pask report (Schedules dated November 14, 2006)

6 Dr. Lewis' report dated July 21, 2006

[547] In his report dated August 11, 2006, the Agency's expert, Mr. Fisher, sets out, in Table 4.7, reproduced below in Table 8, the input variables to which most of the differences in the estimates can be attributed, namely those regarding: estimated incidence of persons with disabilities travelling with attendants; average domestic fares; elasticity of demand; and marginal cost rates.

[548] Mr. Fisher notes that the difference in the assumptions regarding the percentage of eligible traffic results in a more than six-fold difference in predicted incidence of the numbers of persons with disabilities travelling with attendants and approximately an equal difference in imputed costs. As noted by the Agency in paragraph 282, this difference is largely attributable to the use by the applicants' expert of the carrier respondents' tariffs in developing an estimate of incidence of the number of persons with disabilities eligible for a 1P1F policy and the fact that the tariffs were not considered by the carrier respondents' experts. Mr. Fisher also notes that four different fare assumptions were used, ranging from $140/$150 to $350.

[549] Mr. Fisher points out that, in comparing the reports prepared by Siebert/Pask and by Ernst & Young, the estimated cost of a 1P1F policy for WestJet is proportionately smaller than that for Air Canada due to a lower fare assumption ($140 for WestJet vs $250 for Air Canada) and a lower marginal cost rate (10 percent for WestJet vs 20 percent for Air Canada).

Table 8: Comparison of Input Variables Used in Experts' Reports

Variable

Estimate

Lewis

Lazar 2005

Lazar 2006

E&Y

S/P

Attendant Rate

3.6%

22%

18.5%/22%

22%

22%

Average Airfare

$150

$150/$350

$150

$250

$140

Price Elasticity of Demand

1.112

1.25

1.112

1.25

1.25

Marginal Cost Rate

15%

N/A

N/A

20%

10%

b) The methodology for calculating the cost of a 1P1F policy

[550] The various expert reports as described in the preceding section provide significantly different estimates of the cost of a 1P1F policy for Air Canada and WestJet, which reflect not only the use of different factors in the calculations but also the use of different methodologies. The Agency has already determined, in paragraph 493, the estimated number of persons disabled by obesity who require additional seating. Other factors for the calculation, specifically the fare level and price elasticity of demand, are discussed in a later section on the estimated annual pre-tax net revenue losses attributable to a 1P1F policy beginning at paragraph 614. In this section, the Agency examines the different methodologies used by the experts and determines which is the most appropriate for estimating the cost of a 1P1F policy to the carrier respondents.

[551] It is evident from the review of the various reports that the experts hold varying opinions regarding the question of whether the implementation of a 1P1F policy would result in the carrier respondents increasing their ticket prices, even among the experts for the carrier respondents. Professor Lazar assumed that the carriers would react to new demand for travel by persons with disabilities pursuant to a 1P1F policy by increasing ticket prices and Professor Lazar reflected this in his methodology used to calculate the cost of such a policy. Ernst & Young and Siebert/Pask, on the other hand, assumed that ticket prices would not increase; rather, they assumed that load factors would increase as a result of the additional travel by persons with disabilities in response to a 1P1F policy. Finally, Dr. Lewis, expert for the applicants, assumed that both ticket prices and load factors would increase as a result of a 1P1F policy.

[552] For simplification purposes, the methodology used by Professor Lazar in his second report, as discussed in the preceding section will be referred to as the "Yield Management Methodology", given that it reflects an increase in ticket prices which would be effected by the carrier respondents' yield management systems under the assumption that the carriers would be able to increase ticket prices in reaction to the cost of a 1P1F policy. The methodology used by Ernst & Young and Siebert/Pask will be referred to as the "Marginal Cost Methodology", given that it reflects an increase in load factors as a result of demand induced by a 1P1F policy and considers the marginal cost of carrying extra persons with disabilities and their attendants. As noted above, the model used by Dr. Lewis reflects aspects of both methodologies.

[553] The question of which methodology is appropriate for the purposes of calculating the cost of a 1P1F policy is largely dependent on whether it is assumed that the carrier respondents can or would increase ticket prices in response to the cost of a 1P1F policy. The carrier respondents' ability to increase ticket prices is examined below in terms of three factors:

  • the level of competition in the domestic air industry;
  • the ability of the carrier respondents to influence the price of air travel; and
  • the carriers' use of yield management systems to maximize passenger revenues while maintaining optimal load factors.

The level of competition in the domestic air industry

[554] The Agency's expert, Mr. Fisher, submitted that the carrier respondents collectively represent 89.5 percent of the domestic market, while Mr. Crosson, expert for Air Canada, estimated that the carrier respondents represent 93 percent of the domestic market. Dr. Tretheway submitted that in terms of seat capacity in the market, when all of the independent carriers, such as NorTerra and First Air, are considered, Air Canada and WestJet account for more than 80 percent of the market. Notwithstanding this apparent dominance in the domestic market, the carriers submitted that they face competitive market conditions and are able to exert little influence over ticket prices.

[555] Although the applicants argued that the Canadian market is a duopoly such that the level of competition would not hinder the ability of Air Canada and WestJet to increase ticket prices, the carrier respondents disagreed on the grounds that there is competition on a route basis. Specifically, while Dr. Tretheway noted that Air Canada and WestJet compete as the only two carriers in a broad set of markets and submitted that if the market is defined as providing wide domestic network coverage, duopoly is an accurate description, he also emphasized the existence of other carriers in the domestic market and expressed the opinion that these carriers provide significant competition that prevent Air Canada and WestJet from operating in isolation. In this regard, Dr. Tretheway noted that demand for service between city pair markets cannot be considered in isolation of one another because many consumers, such as those travelling for leisure, have the discretion to alter their destination. On this basis, Dr. Tretheway submitted that "duopoly" is not necessarily appropriate for describing the market in which Air Canada and WestJet operate.

[556] Hugh Dunleavy, the executive vice-president of Commercial Distribution at WestJet, expressed a similar opinion. Mr. Dunleavy noted that for the primary markets in Canada, only Air Canada and WestJet currently have a structured network that covers all of the major cities. However, he qualified this by noting that there are other air carriers that are currently competing in Canada on a specific market-by-market basis and submitted that the presence of these carriers results in competition.

[557] Professor Lazar expressed the opinion that the airline industry does not have monopolistic pricing powers and that, despite being the only two carriers competing in a broad set of domestic markets, there is sufficient competition to prevent Air Canada and WestJet from co-operating to establish monopolistic conditions.

[558] The carrier respondents also submitted that there is competition from other modes of travel. In this regard, Mr. Dunleavy expressed the opinion that, with respect to markets such as Calgary-Edmonton and Ottawa-Toronto-Montréal, intermodal competition is intense. Further, Mr. Dunleavy expressed the opinion during cross-examination that despite the fact that other modes such as intercity bus and train maintain 1P1F policies, this does not create unfair competition in favour of the air carriers given that there is flexibility for these modes to add equipment, which is not the case for air carriers.

[559] The applicants referred to a newspaper article in which Clive Beddoe, then chief executive officer of WestJet, expressed the view that Air Canada and WestJet "have a healthy duopoly" in Canada in respect of the market for domestic air travel. In support of the position that Air Canada and WestJet operate in a duopoly market, counsel for the applicants noted that Dr. Tretheway and Professor Lazar expressed the opinion that Canada is only big enough to support two national domestic carriers, to which Messrs. Dunleavy and MacKay agreed during cross-examination.

[560] While Dr. Lewis expresses the opinion in his report dated July 21, 2006 that Air Canada and WestJet dominate the profitable domestic Canadian market for air travel, even in considering some level of competition within that market, Dr. Lewis concludes that minor competitors can be expected to adopt a 1P1F policy if done so by the two principal carriers or if compelled to do so by regulatory authorities.

Agency analysis

[561] The Agency notes that there is agreement between the experts that the carrier respondents dominate the Canadian market and that, based on a preponderance of the evidence, Air Canada and WestJet collectively represent approximately 90 percent of the domestic market. Further, while the Agency agrees with Mr. Dunleavy and Dr. Tretheway that only Air Canada and WestJet currently have a structured network that spans all major Canadian cities, the Agency also accepts that the carrier respondents face some competition on a route-specific basis such that they do not operate as a perfect duopoly. Additionally, the Agency agrees with the carrier respondents that they face some competition from other modes of travel on certain routes.

The ability of the carrier respondents to influence the price of air travel

[562] The carrier respondents and the applicants expressed opposing views regarding the carriers' ability to influence prices in the domestic market.

[563] The carrier respondents argued that they are price-takers, lacking the ability to influence price. When asked to discuss WestJet in terms of being a price-taker, Mr. Dunleavy noted that WestJet does not influence the market by establishing prices under the assumption that the market will follow. Mr. Dunleavy submitted that the market sets the price and WestJet has to adapt its pricing to the point at which the traffic volume meets the carrier's expectations vis-à-vis demand forecasts.

[564] Ms. Guillemette, Air Canada's Senior Director of Network Management, responsible for revenue maximization within Air Canada's network, stated that, while Air Canada has applied some fare increases to most of its markets over time to attempt to recover some costs, she was "not comfortable" with the applicants' assertion that carriers could increase prices to avoid a loss. Ms. Guillemette explained that, for any price fluctuation, there is demand fluctuation and that, additionally, the marketplace is extremely competitive, such that this would imply that other carriers would have to effect the same price increase. Ms. Guillemette further explained that, due to changes in the market and "any economic change in the economics, any situation around the world that impacts air travel", incremental costs are not really sustainable over time.

[565] In response to a question from counsel for the applicants as to whether there is something unique to Air Canada's sophisticated pricing system that means that the impact of a "1P1F fare" will be qualitatively different than for a bus system that has a 1P1F policy where this has been sustained for many years, Ms. Guillemette explained that air carriers have a multitude of "price points", something which is not the case for bus or other modes of transportation.

[566] Mr. Crosson agreed with counsel for the applicants that if a 1P1F policy were applied to both Air Canada and WestJet simultaneously, the carriers would be more likely to be able to pass on the associated cost to consumers. Similarly, Dr. Lewis submitted that under such a scenario, the state of competition would be held constant and both carriers would enjoy the benefit of higher load factors.

[567] During cross-examination by counsel for the applicants, Dr. Tretheway stated that the evidence in airline markets is that it is difficult for carriers to increase their prices in response to a new cost requirement. By way of example, Dr. Tretheway explained that when carriers are under financial distress, one carrier may try to be a price leader and increase their price with other carriers following their lead; however, he indicated that the evidence suggests that this is not always the case. Dr. Tretheway asserted that, in fact, it is probably more common that attempted price increases are not matched by other carriers such that the initiating carrier then has to revert back to its original prices.

[568] By way of example, Dr. Tretheway referred to the carriers' experience with fuel prices. He submitted that there have been several times in the airline industry's history during which carriers have attempted to raise base fares in response to fuel price increases but submitted that because fuel price increases have often taken place at times of economic weakness, carriers will attempt to put their prices up but other carriers, which are short on cash, will keep their fares down, hoping to pick up some market share and increase their revenues. Dr. Tretheway commented that he is sceptical that the cost of a 1P1F policy could be passed on in full and asserted that, at the very least, carriers would be required to absorb part of the cost. He submitted that the ability to pass on the increased cost would be "even more problematic" if there are some carriers who are not required to implement a 1P1F policy.

[569] Dr. Tretheway suggested that a more successful means of passing on costs is to place a surcharge on tickets, as opposed to increasing base fares, as was done in the case of increased fuel costs. Dr. Tretheway explained that, in this way, the increase may be considered by some to be "unseen" in cases where base fares are advertised but all applicable surcharges are not. Dr. Tretheway stated that he would advise a carrier that has adopted a 1P1F policy that the best way to pass on any additional cost associated with it would be to do so in the form of a surcharge. Concerning the desirability of this advice, during cross-examination, counsel for the applicants took exception to the notion of a surcharge for accessibility services and referred to the experience of Ryanair which had attempted to introduce such a surcharge; but was subsequently advised against it.

[570] When asked for his comments on WestJet's ability to pass on the increased fuel charges to its passengers through higher fares, as reflected in the carrier's 2003 annual report, Dr. Tretheway submitted that this may have been as the result of a withdrawal from the domestic market by Jetsgo Corporation carrying on business as Jetsgo and that the fact that a lot of WestJet's service is focussed in western Canada, where the economy is relatively very strong. Dr. Tretheway noted that, notwithstanding WestJet's experience vis-à-vis fuel price increases, his views on passengers' resistance to higher fares remain the same. By way of emphasis, Dr. Tretheway noted a study that he prepared for the Council of Provincial Ministers Responsible for Tourism which revealed that a $12 air travel security charge imposed on airline tickets effectively reduced air travel, prompting a response from carriers' yield management systems. Dr. Tretheway explained that, to stimulate demand, yield management systems responded by offering a higher percentage of tickets at discounted prices with the result that there was a reduction in the average fare paid by passengers. Dr. Tretheway further explained that while passengers were actually paying a higher fare, the cost of the tax "ended up being split"; part of it being absorbed through a "higher final ticket price to the passenger, including the tax" and part of it, estimated at $3, absorbed by the air carriers.

[571] Contrary to Dr. Tretheway's submissions regarding carriers' inability to adjust ticket prices to recover increased fuel prices, Dr. Lewis presented evidence that despite the imposition of fuel-related fare increases and increased capacity, the carrier respondents' passenger load factors increased. Specifically, Dr. Lewis notes in his July 21, 2006 report that, in April 2006, in response to increased fuel costs, Air Canada raised ticket prices for domestic flights by $6 on short-haul flights; $8 on medium-haul flights; and $10 on long-haul flights, and that WestJet matched Air Canada's fare increases. Dr. Lewis comments that, notwithstanding such fare increases, Air Canada reported passenger load factors in June 2006 of 81.3 percent compared to 79.4 percent the previous year, which he states was, according to industry trade press reports, the carrier's highest rate for that time of year. Dr. Lewis states that Air Canada's passenger traffic in June increased by 7.3 percent on a capacity increase of 4.7 percent. With respect to WestJet, Dr. Lewis states that its reported load factor "for June [2005] rose to [7]3.5 percent from 71.9 percent in June 2004, and that its traffic increased by 22.4 percent on a capacity increase of 19.8 percent". Further, with respect to increases in fuel costs, and in relation to the disclosure in WestJet's 2006 annual report that the carrier experienced a positive trend in its bookings with travellers who were willing to pay higher fares in recognition of its higher cost of fuel, Mr. Dunleavy agreed with counsel for the applicants that WestJet made a very wise decision to bring in all of the additional capacity, which he noted the marketplace had absorbed quite well with load factors continuing to increase at record levels year over year.

[572] Dr. Lewis concludes that, in light of the foregoing, Air Canada and WestJet possess sufficient market power to recover foregone revenues through increases in ticket prices without incurring material market resistance. Dr. Lewis notes the action by Air Canada in April 2006 to increase ticket prices between $6 and $10 per flight to compensate for increased fuel costs and compares these increases to the magnitude of ticket price increases needed to compensate for a 1P1F policy, which he estimates to be 45¢ to 57¢ for average length journeys and $3.00 to $4.00 for longer journeys.

[573] During examination-in-chief, Mr. Dunleavy stated that he was not comfortable with the notion that the cost of a 1P1F policy could be passed on in the form of increased ticket prices and stated that the notion that the carrier respondents have the ability to pass on costs is a definite "misnomer". Mr. Dunleavy explained that, from an "airline revenue maximization challenge, if we could have already charged those extra dollars, we would have done so already. The fact is that we can set price points in the market and then we monitor how the market responds. If the traffic does not arise or we don't receive the bookings, then we have to adjust our prices accordingly."

[574] In response to a question by counsel for the carrier respondents as to whether, as suggested by witnesses for the applicants, the cost of a 1P1F policy which would amount to a dollar or less per ticket could be recovered through fare increases, Mr. Dunleavy responded: "The reality of the situation is that if air carriers could do that, I would have raised my fares by $1 today." Mr. Dunleavy explained that it is the market that dictates the price of tickets such that extra costs have to be absorbed by the air carriers.

[575] Witnesses for the carrier respondents also spoke to the implications of ticket price increases in terms of the effects on market share. Specifically, Dr. Tretheway expressed the opinion that if carriers increase their fares and if other carriers can provide service at lower fares, the medium and long-term record is that other carriers will enter the market. Further, he suggested that "the ability to pass these costs through and sustain that pass-through is problematic, both because it seems likely we're going to have a softened economy at some point in the future, and I think we have to contemplate that there is going to be entry into this industry."

[576] During examination-in-chief, Dr. Tretheway spoke further on the implications of a 1P1F policy in terms of air carriers' business models. Concerning the historical perspective of the airline industry, Dr. Tretheway submitted that obligations imposed by governments, suppliers, and the labour force on carriers resulted in relatively small cost increases, but, over time, these have accumulated quite significantly. Dr. Tretheway noted that this led to legacy carriers having costs significantly higher than others that could provide services in the industry, specifically the many low-cost carriers that entered the market in the 1990s. Dr. Tretheway further noted that this resulted in legacy carriers needing to readjust their costs to "more rational levels".

[577] In terms of the foregoing, Mr. Dunleavy testified during examination-in-chief that it is extremely important for carriers to be careful about costs, noting the high fixed costs in terms of aircraft. Mr. Dunleavy explained that the airline business is a commodity business and, like any commodity-based industry, it is the unit with the lowest cost that tends to survive. Concerning the experience of carriers with low-cost business models relative to that of the legacy carriers which have high cost structures that rely on the ability to charge relatively high fares, Mr. Dunleavy explained that as a result of lower cost structures, low-cost air carriers are able to stimulate significant increases in demand as a result of their low fares and are only required to implement a small fare decrease to maintain the same level of traffic.

[578] Regarding the statement by Robert Milton, chief executive officer of Air Canada, reflected in the carrier's 2005 annual report that Air Canada's new business model is "robust and resilient" given that the corporation's $258 million net profit was achieved despite soaring world crude prices that pushed its jet fuel costs by $592 million on a consolidated basis over 2004. Ms. Guillemette stated that she did not agree that this indicates that Air Canada can handle some major cost increases. Rather, Ms. Guillemette indicated that this is a reflection of very stringent cost controls and other initiatives in terms of cost reduction, manpower, and the introduction of a new business model for different ways of generating revenue.

[579] During examination-in-chief, Mr. MacKay expressed the opinion that, for the first time in the better part of fifteen years, carriers have been able to sustain some measure of fare increase to try and cover their ever-increasing costs.

[580] Professor Lazar generally expressed the opinion that given the market conditions faced by the carrier respondents and the lack of monopoly pricing powers in the airline industry, the carrier respondents are unable to pass on all costs to the passengers. Professor Lazar stated, however, that there exists an ability to pass on costs to consumers when the prices set by carriers are below the maximum average price that consumers are willing to pay. He further noted that any additional costs will be borne in part by passengers and in part by the shareholders, the employees, and by suppliers to the air carriers.

[581] Regarding the likelihood that none of the costs of a 1P1F policy could be passed on to Air Canada and WestJet customers, Dr. Lewis stated that it is very unusual, based on his experience conducting econometric elasticity studies, for there to be statistical traction on a fare increase of the magnitude that he believes would result from a 1P1F policy, being 30¢ to 40¢ on a $300 ticket, which he notes represents about a tenth of one percent of the fare. Dr. Lewis noted that fares rise and fall periodically by more than this for all sorts of other market reasons. Based on the foregoing, Dr. Lewis asserted that, notwithstanding his agreement with Professor Lazar and Dr. Tretheway that there is elasticity of demand in the airline industry, the sheer smallness of increase in ticket prices is such that the cost of a 1P1F policy would not be discernable, statistically, and there would be no statistically measurable or "documentable" shrinkage in passenger traffic.

[582] In response to a question during cross-examination by counsel for the carrier respondents as to why carriers do not increase their prices when faced with costs in such small amounts, Dr. Lewis submitted that large companies do avail themselves of such opportunities and test what the market is willing to pay.

Agency analysis

[583] The Agency notes that, while witnesses for the carrier respondents argued that it is difficult to pass on costs through fare increases, they did not argue that no part of a new cost could be passed on through fare increases.

[584] Although the carrier respondents argued in a general way that they cannot increase ticket prices and that, if they could, they would have already done so, the Agency is of the opinion that the examples provided by Dr. Tretheway in terms of ticket price increases due to fuel costs and the $12 air travellers' security charge do not support the position that the carrier respondents cannot pass on any new costs through ticket price increases. While acknowledging that the carrier respondents had to absorb $3 of the charge, Dr. Tretheway agreed that an estimated 75 percent of the $12 charge was borne by the passenger through a higher price. Additionally, the Agency notes the uncontested evidence presented by Dr. Lewis regarding the market's reaction and the carrier respondents' positive results in the face of substantial fuel surcharges to be convincing of the carriers' ability to pass on costs, at least on a partial basis.

[585] Further, the Agency notes Dr. Lewis' position that there would be little or no market resistance in terms of diminished passenger demand to fare increases needed to mitigate the cost of a 1P1F policy, given the magnitude of ticket price increases (which he estimated to be in the order of 45¢ to 57¢ for average length journeys and $3.00 and $4.00 for longer journeys), was not contested by the carrier respondents. While the Agency recognizes that these amounts do not reflect the revenue losses attributable to travel by persons disabled by obesity pursuant to a 1P1F policy given that the data necessary to populate Dr. Lewis' model was not available at the time that his report was written, the Agency notes that the carrier respondents did not contest Dr. Lewis' assertion.

[586] With respect to Dr. Tretheway's submission that the ability to pass on costs and sustain this is "problematic" in that it is likely that the economy will "soften" in the future and that there will be new entrants into the airline industry, the Agency finds this to be of little assistance. To say that the economy will experience a downturn in the future is a given, as is the statement that there will be new carriers that enter the Canadian market. While the timing of either is difficult to predict, as can be expected for many or most industries, both events are inevitable; however, what is important is the impact of these events.

[587] The Agency notes the evidence regarding WestJet's ability to weather recent economic downturns and escalating fuel costs and Air Canada's restructuring, which has helped it move away from being a legacy carrier towards more stringent cost control.

[588] The Agency notes Mr. Crosson's agreement during cross-examination by counsel for the applicants that, if a 1P1F policy were applied to both Air Canada and WestJet simultaneously, the carriers would be more likely to be able to pass on the associated cost to consumers. The Agency agrees with this view, especially in light of the carrier respondents' dominance in the domestic market.

[589] In light of the foregoing, the Agency is of the opinion that it is unreasonable to conclude that all increases in fares, regardless of the magnitude, will elicit material market resistence. The evidence heard demonstrates that it is possible for Air Canada and WestJet to pass on some portion of new costs, such that the Agency is of the opinion that the carriers have the ability to pass on costs, at least partially, through ticket price increases.

The use of carrier respondents' yield management systems to maximize passenger revenues at optimal load factors

[590] Air Canada and WestJet have sophisticated systems which are used for setting fare levels based on forecasted demand. These "yield management systems", which are variously referred to as "revenue management" or "revenue optimization" systems enable the carriers to set prices that maximize revenues at optimal load factors and to continually test the market's acceptance of fare levels.

[591] In describing the process by which WestJet sells seats on any given flight using its yield management system, Mr. Dunleavy explained that WestJet typically loads flights into its reservation system 356 days prior to the departure date and its yield management system monitors how bookings are received. Mr. Dunleavy noted that the yield management system generates a profile over time that indicates how bookings characteristically appear for a particular flight, noting that each individual flight demonstrates statistical variation. To this extent, WestJet's Revenue Management and Pricing Department monitors how the actual bookings are received over time to determine if a flight is performing stronger or weaker than anticipated. Mr. Dunleavy noted that if a flight is not performing as strongly as anticipated, a seat sale might be triggered or some adjustment made to the pricing to stimulate demand. Mr. Dunleavy further noted that if a flight is performing stronger than anticipated, a decision might be made to close down the lower fare booking classes sooner than anticipated to promote a buy up into a higher fare class. Mr. Dunleavy indicated that the primary objective of this approach is to maximize the revenues generated from a flight and stated that, as a result, WestJet's pricing is "very dynamic", with price changes taking place as frequently as "maybe five or even 10,000 times on a given day".

[592] In describing the use of Air Canada's yield management system, Ms. Guillemette explained that the sale of any given flight commences with the development of a flight schedule and revenue targets and that flights are "loaded" into Air Canada's reservation system a year in advance, at which time Air Canada begins to manage the inventory of seats available on each particular flight to meet revenue targets. Ms. Guillemette noted that Air Canada uses demand forecasts based on historical data and market prices to estimate how many bookings can be expected throughout a flight's booking window.

[593] Ms. Guillemette submitted that the markets faced by Air Canada are extremely dynamic, noting that demand is impacted by events outside of Air Canada's control. Ms. Guillemette explained that to maximize revenue it is imperative that Air Canada monitor the performance of a flight relative to forecasts. Ms. Guillemette stated that Air Canada continually seeks to understand the demand for seats on any given flight, recognizing that sales made closer to the departure date can generate a higher level of revenue than those made earlier in the flight's booking. Using price as a key lever, Air Canada manages seat sales relative to demand forecasts to maximize revenues.

[594] Professor Lazar submitted that each customer is willing to pay a different maximum price and that on any given flight, the mix of customers will affect the maximum average price that may be achieved. Professor Lazar stated that air carriers try to set prices that match that maximum average price and explained that if the airline's pricing is below the maximum average, then there exists an ability to pass on costs to consumers. Professor Lazar further explained that if the airline is currently pricing its flights at the maximum average price, then the airline will be forced to absorb new costs.

[595] In his June 1, 2006 report, Professor Lazar notes that the additional trips resulting from a 1P1F policy would increase load factors and result in more full flights. However, he adds that there would be a subsequent reduction in demand as carriers' yield management systems incorporate these effects and average fares are increased as a result of there being more full flights. Professor Lazar further explains that the yield management systems would adjust fares and/or the availability of seats at different fare levels so that the resulting net decline in the number of trips would "largely neutralize" the initial increase in the number of additional total trips generated by a 1P1F policy. Finally, Professor Lazar concludes that average load factors and the percentage of full flights would be "marginally higher" than they would be absent a 1P1F policy.

Agency analysis

[596] The carrier respondents' yield management systems manage seat sales relative to forecasted demand to maximize revenues at optimal load factors and in the event that demand on a given flight is stronger than expected, yield management systems can be expected to close down the lower fare booking classes sooner than anticipated to promote a buy up into higher fare classes, with the result that the average ticket price for the flight is increased.

[597] In terms of the effects of a 1P1F policy on demand, all of the methodologies presented by the parties' experts for estimating the revenue losses associated with the implementation of a 1P1F policy reflect that persons with disabilities who require additional seating to accommodate their disabilities would be expected to take more trips with the carrier respondents if a 1P1F policy were to be adopted. Concerning this induced demand, it is noted that the carrier respondents led evidence during the November 2006 hearing regarding several studies, mainly regarding the medical and transit fields, which Dr. Tretheway noted as having as the primary message that, when something is made available for free, there is a stimulation of demand which can be fairly large.

[598] The Agency is of the opinion that in the absence of an increase in ticket prices, the additional demand induced if a 1P1F policy were adopted would tend to result in an increase in load factors beyond profit maximizing levels. However, it is clear from the evidence of both carrier respondents that the carriers' yield management systems will ensure that adjustments are made to maintain a profit maximizing balance between yields and load factors. As testified by Ms. Guillemette, one of the key mechanisms for achieving this balance is price adjustments.

[599] The Yield Management Methodology predicts that air carriers' yield management systems will respond to the induced trips that result from the implementation of a 1P1F policy by increasing fares, thereby maintaining the profit maximizing balance of revenue gained from the sale of additional seats and revenue foregone from having fewer seats available to sell closer to departure when yields are higher. Consistent with Professor Lazar's testimony, this methodology assumes that a price increase will deter about as many trips as a new 1P1F policy is expected to induce. As a result, all other things remaining equal, load factors and costs are expected to remain stable.

[600] Based on the evidence presented regarding the carrier respondents' reliance on their yield management systems to maximize revenues while maintaining optimal load factors, the Agency is of the opinion that in the absence of operational changes, such as the addition of capacity, the introduction of a 1P1F policy can be expected to result in the carriers' yield management systems effecting an increase in average fares. This said, the Agency also acknowledges the opinion expressed by Dr. Lewis that, while Air Canada and WestJet may recover forgone revenues through higher ticket prices, as indicated by Ms. Guillemette, it would not be realistic for carriers to be able to impose a price increase that is fixed and expect that this would survive continuous market changes.

[601] The Agency notes that implicit in the foregoing opinion is the notion that the ability to influence prices is time sensitive, such that while the carrier respondents may increase fares in the short run, the question remains as to whether that price increase may be sustained over the long run as competing carriers make decisions affecting their operations, such as the decision to add capacity to compete for additional market share, or as there are new entrants to the markets.

[602] As a general premise, the Agency accepts that in a competitive market, price increases over a certain level may cause competing carriers to adjust their operations in an attempt to capture additional market share. Such measures might include the addition of capacity or entry into new markets, thereby prompting yield management systems to reduce prices or reduce planned price increases to maintain market share.

[603] In recognition of the possibility that the estimated price increase attributable to a 1P1F policy might not be sustainable in the long run, the Agency needs to examine the question of whether the Marginal Cost Methodology, which presumes that prices will remain relatively unchanged, provides a more appropriate estimate of the revenue losses from implementing a 1P1F policy.

[604] In this regard, the Agency notes that the Marginal Cost Methodology predicts that there will be revenue losses as a result of revenue-generating passengers being "spilled" or displaced on full flights and the assumption that the carrier respondents will take no action to recover such customers who might decide to book on competitor carriers. However, the Agency is of the opinion that this would be an unlikely response and that the carrier respondents could be expected to add capacity or effect other operational adjustments over time to avoid losing these passengers to competitors. Given that no evidence was put forth by the carrier respondents regarding how they would respond in time to a continuous displacement of passengers which is assumed by the Marginal Cost Methodology to result from a 1P1F policy, the Agency is of the opinion that this methodology is not appropriate for the calculation of the cost of the policy.

[605] It is noteworthy that both Professor Lazar and Dr. Lewis shared the view that a 1P1F policy might lead to both increased ticket prices, consistent with the Yield Management Methodology, and higher load factors, consistent with the Marginal Cost Methodology. While the Agency recognizes the revenue impact of a price increase under the Yield Management Methodology, the Agency finds that it is inappropriate, as discussed below, to combine this impact with the elements of the Marginal Cost Methodology as to do so would overstate both revenue losses and costs.

[606] With respect to the overstatement of revenue losses, Dr. Lewis fully accounts for revenue losses as a result of passengers being displaced on flights that are full, in a manner consistent with a Marginal Cost Methodology. His methodology also fully accounts for revenue losses from a price increase sufficient to reduce an associated increase in demand, in a manner consistent with a Yield Management Methodology. To this extent, Dr. Lewis' methodology suggests that passengers will be "spilled" despite there being seats made available as a consequence of a decrease in the quantity of seats demanded resulting from the price increase. This result reflects a double-counting of some revenue loss.

[607] With respect to the overstatement of costs, Dr. Lewis' methodology recognizes increased costs in the form of additional marginal costs from induced trips on flights that have empty seats, in a manner consistent with a Marginal Cost Methodology. As indicated previously, his methodology also recognizes a price increase sufficient to reduce an associated increase in demand in a manner consistent with a Yield Management Methodology. To this extent, Dr. Lewis' methodology recognizes the cost of carrying additional passengers, despite a prediction that a price increase will result in the number of passengers being relatively unchanged. The result is an overstatement of costs under Dr. Lewis' methodology.

[608] As reflected above, extensive evidence was presented by the carrier respondents that they rely on their yield management systems to maximize revenues at optimal load factors and that one of the key mechanisms employed by these systems for achieving this are adjustments to ticket prices. Accordingly, the Agency is of the opinion that the Yield Management Methodology is appropriate for estimating revenue losses arising from the implementation of a 1P1F policy.

Conclusion

[609] The Agency notes that the preponderance of the evidence presented is that the combined domestic market share of Air Canada and WestJet is approximately 90 percent. The Agency acknowledges, however, that the carriers face competition on some routes, both from other air carriers and from other modes of transportation. While the Agency accepts the carrier respondents' evidence that in a competitive market where other carriers are not required to implement a 1P1F policy their ability to influence prices in the domestic market and pass on costs would not be absolute, the Agency is of the opinion that the evidence demonstrates that the carrier respondents have some ability to increase ticket prices in response to new costs.

[610] Additionally, the Agency is of the opinion that, contrary to the general assertion by Dr. Tretheway that the carriers' ability to pass on costs and sustain this is questionable given that the economy will decline at some point in the future, the adoption by WestJet of a low-cost business model and Air Canada's increased focus on stringent cost controls will significantly enhance their ability to withstand economic downturns as demonstrated by WestJet's experience of sustained profitability.

[611] Finally, the Agency finds that in light of the evidence regarding the purpose and use of the yield management systems, it is evident that these systems would react to the cost of a 1P1F policy by adjusting ticket prices upwards in response to the induced demand by persons with disabilities who require additional seating, to maximize revenues while maintaining optimal load factors.

[612] Therefore, the Agency finds that the Yield Management Methodology is the most appropriate methodology, and it will now proceed with its estimation of the cost of a 1P1F policy.

c) Estimated cost of a 1P1F policy

[613] The calculation of the estimated cost of a 1P1F policy using the Yield Management Methodology is expressed in terms of associated annual pre-tax net revenue losses. It is set out below, on a preliminary basis, and then adjusted, as appropriate, to reflect the cost of the policy net of any quantifiable savings that can be attributed to it and any reduction in taxes payable associated with a 1P1F policy.

Estimated annual pre-tax net revenue losses attributable to a 1P1F policy

[614] The incidence components of the calculation of the cost of a 1P1F policy pursuant to the Yield Management Methodology have been determined in paragraph 493. In this section, the monetary components of the calculation, being the fare level and the price elasticity of demand, are determined.

[615] None of the expert reports quantified the net revenue losses attributable to persons with disabilities disabled by obesity who are accommodated pursuant to a 1P1F policy. While Dr. Lewis and Ernst & Young developed methodologies for doing so, due to the lack of related incidence data at the time their reports were written, the relevant calculations could not be made. However, as noted below, Dr. Lewis derived approximate estimates of the cost of a 1P1F policy attributable to persons disabled by obesity based on evidence heard during the November 2006 hearing regarding incidence and travel propensity for this subgroup of persons with disabilities. Additionally, counsel for the carrier respondents expressed estimates of the cost of a 1P1F policy attributable to persons disabled by obesity for each of the carriers during final oral argument.

Approach to the calculation of annual pre-tax net revenue losses

[616] The calculation of the net revenue losses is based on four broad assumptions and factors as discussed below.

(i) The number of additional seats that a person with a disability is expected to require to travel with an Attendant or to accommodate the person's disability

[617] Dr. Lewis indicated in his testimony that there are very few persons with disabilities who require more than one additional seat and that the corresponding revenue losses are negligible. More specifically, in his July 21, 2006 report, Dr. Lewis notes that his assessment of the financial effects also extends to those whose disability requires that they sit horizontally across seats, citing Ms. Furrie's report, Incidence of Persons with Disabilities in Canada Who May Require More Than One Aircraft Seat, as indicating that this group is extremely small. The carrier respondents did not question this point and did not provide any evidence to the contrary.

[618] Accordingly, the Agency accepts that the vast majority of persons with disabilities that would be eligible to a benefit under a 1P1F policy will only require one additional seat to accommodate their disability.

[619] Consistent with the foregoing, the Agency has assumed for the purpose of calculating annual net revenue losses attributable to a 1P1F policy that one additional seat will be required for each trip taken by an eligible person.

(ii) The impact of Air Canada's current Attendant Air Fare Policy on estimated net revenue losses

[620] In his calculation of potential revenue losses, Professor Lazar took into account Air Canada's current Attendant Air Fare policy. This policy provides a 50-percent reduction on full fares paid by a person with a disability for an Attendant. In his testimony, Professor Lazar noted that Air Canada's "Tango fare" (i.e., Air Canada's lowest fare) is generally much less than 50 percent of a full-fare which, as has been previously noted, is believed to be the main reason why only 1,124 trips were sold under this policy in the 12-month period from May 2005 to April 2006. In light of the foregoing, the Agency is of the opinion that the impact on the calculation of net revenue losses attributable to a 1P1F policy (in terms of a reduction in the total calculated) that would result from reflecting Air Canada's current policy in the calculation is immaterial. Accordingly, an adjustment has not been made to the estimate of annual pre-tax net revenue losses from implementing a 1P1F policy, as reflected later in this section, to account for the discount offered on these 1,124 trips, based on the assumption that this would result in an immaterial impact on the estimate26.

(iii) 2005 data and presentation of values

[621] Professor Lazar, Ernst & Young and Siebert/Pask provided estimates of the annual cost of a 1P1F policy up to the year 2015. However, given that many of the variables for estimating the cost of such a policy, such as the carriers' average fares, are subject to potentially significant change over time, the following discusses estimated annual pre-tax net revenue losses attributable to a 1P1F policy in terms of the 12-month period covered by all of the experts' reports, which was 2005.

[622] The values presented in the text that follows have been rounded, such that reperforming the calculations using these values may produce variances attributable to rounding.

(iv) The number of trips taken by persons with disabilities

[623] As reflected in paragraph 493, the estimated number of annual domestic trips by persons with disabilities who require an additional seat to accommodate their disabilities is 54,200 trips on Air Canada and 28,900 trips on WestJet.

Calculation of annual pre-tax net revenue losses

[624] The estimated annual pre-tax net revenue losses under a 1P1F policy using the Yield Management Methodology are determined as the sum of the following three revenue impacts:

  1. revenue losses related to persons with disabilities who require additional seating to accommodate their disability and are already travelling;
  2. revenue gains from induced trips taken by persons with disabilities who require additional seating to accommodate their disabilities; and
  3. revenue losses as a result of increased fares

(i) Revenue losses from persons with disabilities who require additional seating to accommodate their disability and are already travelling

[625] Under the above-noted assumption that a person with a disability who requires additional seating to accommodate his/her disability requires one additional seat to travel, the carriers will lose one fare for each trip taken by a person with a disability who, prior to a 1P1F policy, was travelling and paying for two seats. Therefore, the revenue lost as a result of this impact is calculated by multiplying the number of domestic trips taken by this group by the average fare.

[626] In terms of whether an average fare is appropriate for estimating the net revenue losses attributable to a 1P1F policy, the Agency notes that the applicants' expert used average fares. The Agency also notes that the carrier respondents' experts used average fares to derive their estimates of net revenue losses, although Dr. Tretheway submitted that an average fare is not necessarily a useful measure of revenue opportunity cost, on the basis that an additional seat provided to a person with a disability at no additional charge might have been sold to a "higher yield passenger". In this way, Dr. Tretheway argues that the use of average fares understates the revenue opportunity cost of providing additional seats at no charge under a 1P1F policy.

[627] Similarly, in his report of July 21, 2006, Dr. Lewis suggests that the revenue impact of a displaced passenger should be evaluated at a higher than average fare.

[628] While the Agency acknowledges the argument that an additional seat, provided at no additional charge to a person with a disability pursuant to a 1P1F policy might otherwise have been sold closer to the departure date at a higher-than-average fare, it may also be argued that the use of average fares may, in fact, result in an overstatement of the revenue opportunity cost. In this regard, the Agency notes that the carrier respondents' expert reports estimate that the number of domestic trips taken by persons with disabilities who require additional seating to travel by air would number in the hundreds of thousands, yet only 1,124 people claimed a 50-percent reduction under the Air Canada Attendant Airfare Policy27, which applies to full fare tickets.

[629] In his June 1, 2006 report, Professor Lazar states that only 0.41 percent of potentially eligible passengers on Air Canada received a 50-percent discount on fares paid for attendants. As discussed in paragraph 241, Professor Lazar suggested that persons with disabilities do not avail themselves of the benefit offered under the Air Canada Attendant Air Fare Policy because the Tango air fares now available are usually less expensive than the reduced fares available under the policy.

[630] The Agency notes the evidence of its expert, Mr. Fisher, who submitted in his report that, based on the most current Statistics Canada data available at the time of his report28, only 6.2 percent of air passengers purchased business class and unrestricted economy fares in 2002. It may reasonably be concluded through a comparison of the 6.2 percent figure submitted by Mr. Fisher for the general population, and the 0.41 percent figure submitted by Professor Lazar for the target population, that persons with disabilities who require additional seating to travel by air are more likely to avail themselves of discounted fares than the general population. This conclusion is further supported by the fact that, as previously discussed in paragraph 418, the target population of persons with severe disabilities have statistically lower employment and income levels.

[631] As it is apparent that persons with disabilities who require additional seating to accommodate their disability tend to purchase tickets at reduced fares, the seats that are removed from inventory would also tend to be at reduced fares. To the extent that persons with disabilities are more likely to purchase tickets at discounted fares, it may be argued that it is not appropriate to evaluate additional seating provided to a person with a disability at a higher than average fare.

[632] In light of the foregoing, it is apparent that, for the purposes of calculating the estimated cost of a 1P1F policy, there are arguments in favour of using higher than average fares and in favour of using lower than average fares. However, despite Dr. Tretheway's assertions that it is appropriate to use higher than average fares for the purpose of estimating the cost of a 1P1F policy, the carrier respondents' experts used average fares for this purpose. Given this, and in the absence of definitive evidence to support choosing one fare over the other, the Agency accepts that average fares provide an appropriate measure of revenue opportunity cost.

[633] Regarding Air Canada's domestic average fare, Ms. Guillemette testified that it was $222 "per coupon", which she explained is the fare associated with a single flight segment. Ms. Guillemette noted that the $222 was an accurate fare for year-to-date 2006 and that it is "very, very close" to what Air Canada had as an average domestic fare in 2005. Ms. Guillemette explained that an average of 2.2 coupons are consumed on a return trip, or 1.1 coupons per trip. As such, the Agency finds that an equivalent average domestic fare of $244 ($222 x 1.1) per trip is appropriate for calculating estimated net revenue losses as a result of a 1P1F policy for Air Canada.

[634] In terms of WestJet's domestic average fare, Bart Casson, the Senior Analyst, Route Development for WestJet, submitted by way of affidavit that WestJet's average domestic fare per flight segment in 2005 was $140. The affidavit stated that this figure is consistent with information on yields and average stage lengths contained in WestJet's annual reports. Mr. Dunleavy testified that $140 is a very accurate representation of WestJet's 2005 average domestic fare per flight segment. While WestJet did not provide any indication of the average number of flight segments per trip, the Agency notes that Siebert/Pask made calculations using an average fare of $140 per trip, such that the Agency finds it appropriate to assume an average of one coupon per trip. To this extent, the Agency finds that an average domestic fare of $140 ($140 x 1.0) per trip for WestJet appears reasonable.

Table 9: Carriers' Average Domestic Fare Per Trip
 

Air Canada

WestJet

Average Domestic Fare Per Coupon

$222.00

$140.00

Number of Coupons Per Trip

1.1

1.0

Average Domestic Fare Per Trip

$244.20

$140.00

[635] As noted above, the estimated number of annual domestic trips by persons with disabilities who require an additional seat to accommodate their disabilities is 54,200 trips on Air Canada. Based on this, and Air Canada's average domestic fare of $244 per trip, the Agency estimates that, prior to factoring in revenue gains (discussed in the following section), Air Canada's annual revenue losses attributable to a 1P1F policy would be $13.2 million (54,200 x $244).

[636] The corresponding figures for WestJet are 28,900 domestic trips at an average fare of $140 per trip. The Agency estimates that, prior to considering revenue gains (discussed in the following section), WestJet's annual revenue losses attributable to a 1P1F policy would be $4.0 million (28,900 x $140).

Table 10: Revenue Impact #1 - Annual Revenue Losses from Persons with Disabilities Who Require Additional Seating to Accommodate a Disability and Are Already Travelling and Paying the Additional Fare
 

Air Canada

WestJet

Domestic 1P1F Trips by Eligible Canadians

54,180

28,896

Average Domestic Fare Per Trip

$244.20

$140.00

Annual Revenue Foregone from Passengers Already Travelling

$13,230,729

$4,045,432

(ii) Revenue gained from induced trips taken by persons with disabilities who require additional seating to accommodate their disabilities

[637] The Yield Management Methodology recognizes that for each induced trip taken by a person with a disability who requires additional seating to accommodate his/her disability, the carriers will gain revenue in the amount of an applicable fare and will provide the required additional seat(s) at no additional charge. Again assuming that persons with disabilities who require additional seating to accommodate their disabilities each require one additional seat to travel, the carriers will gain one average fare for each induced trip taken by such persons. Therefore, the revenue gained can be calculated by multiplying the number of induced trips by the average fare.

[638] In terms of estimating the number of induced trips, it is necessary to consider:

  1. the percentage discount for a trip; and
  2. the price elasticity of demand.

Percentage discount

[639] As noted above, given that a decrease in the estimated cost of a 1P1F policy attributable to Air Canada's existing Attendant Airfare Policy is not material, it is assumed for the purposes of calculating the cost of the policy that a person with a disability who requires additional seating to travel by air currently pays two fares. Under a 1P1F policy, this person will pay one fare. This represents a 50-percent discount on a trip.

Price elasticity of demand

[640] The expert reports submitted by the parties all indicate that persons with disabilities who require additional seating to accommodate their attendants or themselves will take more trips with the carrier respondents if a 1P1F policy is implemented.

[641] Professor Lazar explained that price elasticity of demand is the ratio of a percent change in quantity demanded to the percent change in price. He further submitted that the higher the value of the price elasticity, the greater the proportionate increase in demand from any given change in price. By way of example, Professor Lazar noted that given a price elasticity of 1.2, a one percent decline in price would be expected to produce a 1.2 percent increase in the quantity demanded and that given a price elasticity of 0.8, a price decrease of one percent would be expected to produce a 0.8 percent increase in demand.

[642] Experts presented a number of values for the price elasticity of demand for domestic trips.

[643] In his first report dated November 25, 2005, Professor Lazar assumed a price elasticity of demand of 1.25 for the purposes of estimating the number of additional trips by air which would be taken by persons with disabilities who require additional seating to accommodate their disability, as a result of the implementation of a 1P1F policy. This assumption was not supported with a source and was the basis for the analysis performed by Ernst & Young and by Siebert/Pask.

[644] In his second report dated June 1, 2006, Professor Lazar revised his assumption, using values presented in the Air Travel Demand Elasticities: Concepts, Issues and Measurement29 report prepared by the Canadian Department of Finance. In this report, Professor Lazar assumes a price elasticity of demand of 1.112, being the median estimate for the studies that accounted for inter-modal effects. He noted that this was "one of a set of studies and estimates preferred by the Department of Finance".

[645] During testimony, Dr. Tretheway indicated that the demand for air travel is known to be fairly elastic, with elasticities in the range of 1.25 and 1.5.

[646] Dr. Lewis introduced a wider range of values for price elasticity of demand in his report of July 21, 2006. Dr. Lewis suggested in his report that persons with disabilities tend to have lower incomes and a reduced propensity to travel and, as a result, a lower price elasticity of demand is appropriate. He proposed price elasticities in the range of 1 to 1.5 for general air travel, and price elasticities in the range of 0.3 to 1.5 for air travel by persons with disabilities. Dr. Lewis' model for calculating the estimated cost of a 1P1F policy reflected, as the base value, the rate of 1.112 reflected in Professor Lazar's second report, with minimum and maximum values of 0.3 and 1.5.

[647] Mr. Fisher noted in his report of August 11, 2006 that the current Transport Canada air passenger forecasting model uses elasticities of 0.88 for standard domestic economy fares, and 0.96 for discounted economy fares.

[648] While the Agency recognizes the economic principle presented by Dr. Lewis that persons with disabilities exhibit different demand for air travel than those without disabilities, in the absence of a specific value, the Agency finds that a price elasticity of demand for air travel of 1.112 is appropriate to estimate the impact of implementing a 1P1F policy, in terms of potential revenue losses.

[649] With a price elasticity of demand of 1.112, a fare reduction of 50 percent is expected to generate a 55.6-percent (1.112 x 50 percent) increase in the quantity demanded. This equates to 30,100 (55.6 percent × 54,200) induced domestic trips by persons with disabilities who require additional seating to accommodate their attendants or themselves for Air Canada, and 16,100 (55.6 percent × 28,900) for WestJet.

Table 11: Number of Induced Trips by Persons with Disabilities Who Require Additional Seating to Accommodate a Disability
 

Air Canada

WestJet

Domestic 1P1F Trips by Eligible Canadians

54,180

28,896

Price Elasticity of Demand

1.112

1.112

Discount Offered by Policy

50%

50%

Number of Induced Trips

30,124

16,066

[650] Each of those induced trips will generate one average fare. Given that Air Canada's average fare is $244 per trip, this revenue impact may be calculated by multiplying 30,100 trips by $244 of revenue. The Agency estimates that Air Canada will gain $7.4 million (30,100 x $244) dollars annually from induced trips by persons with disabilities needing additional seating to travel by air.

[651] The corresponding value for WestJet is 16,100 induced trips and an average fare of $140. The Agency estimates that WestJet will gain $2.2 million (16,100 x $140) dollars annually as a result of induced trips by persons with disabilities needing additional seating in order to travel by air.

Table 12: Revenue Impact #2 - Annual Revenue Gains from Induced Trips by Persons with Disabilities Who Require Additional Seating to Accommodate a Disability
 

Air Canada

WestJet

Number of Induced Trips

30,124

16,066

multiply: Average Domestic Fare Per Trip

$244.20

$140.00

Annual Revenue Gains from Induced Trips

$7,356,286

$2,249,260

(iii) Revenue losses as a result of increased fares

[652] The Yield Management Methodology predicts that air carriers will respond to the induced trips by increasing fares to maintain the profit-maximizing balance of revenue gained from the sale of additional seats and revenue foregone from having fewer seats available to sell in periods when yields are higher. This methodology predicts that the average fare will increase in an order of magnitude that will deter about as many trips as the 1P1F policy is expected to induce.

[653] Consistent with the submissions of Professor Lazar, the Yield Management Methodology predicts that fares will increase in response to demand stimulated by the implementation of a 1P1F policy. Dr. Tretheway suggested that the removal of a seat from the inventory available for sale will induce the seat management system to reduce inventory in, or close off, the most heavily discounted fare classes resulting in an increase in average fare. He also suggested that an increase in average fare will result in fewer people travelling, thereby reducing revenues.

[654] Both Professor Lazar and Dr. Lewis proposed the same methodology for estimating the value of this loss: one using an economic equation for estimating a percentage change in revenue, based on the associated percentage change in price and price elasticity of demand. Both used the following equation:

% Change in Revenue = (1 - Price Elasticity of Demand) × % Change in Price

[655] Professor Lazar and Dr. Lewis projected that the percentage increase in price would be of sufficient magnitude to deter about as many trips as the 1P1F policy is expected to induce. Specifically, in his report dated June 1, 2006, Professor Lazar stated that the resulting net decline in the number of trips would largely neutralize the initial increase in the number of additional trips generated by the new rule. Consistent with the Yield Management Methodology, the Agency is of the opinion that the implementation of a 1P1F policy is not expected to have a material impact on load factors, given that the number of passenger trips induced and the number of passenger trips deterred are expected to be equal and opposite.

[656] Both Professor Lazar and Dr. Lewis estimated revenue foregone as a result of a price increase in the same manner. They first calculated the increase in demand for seats. For each additional trip taken by a person with a disability who requires additional seating to accommodate his or her disability, Professor Lazar and Dr. Lewis assumed that two seats are required. The increase in demand for seats was therefore reflected as twice the number of additional trips by air taken by persons with disabilities who require additional seating to accommodate their disability, or 60,200 (30,100 x 2) trips for Air Canada and 32,100 (16,100 x 2) trips for WestJet.

Table 13: Estimated Increase in Demand for Seats due to the Implementation of a 1P1F Policy
 

Air Canada

WestJet

Number of Induced Trips

30,124

16,066

Average Number of Seats Per Induced Trip

2

2

Increase in Demand for Seats

60,248

32,132

[657] As discussed in paragraphs 486 and 489, respectively, Air Canada and WestJet reported having captured 60 and 32 percent of the domestic market, respectively. The number of domestic trips performed by each carrier was determined by applying these values to the value for 2005 Domestic Air Passenger Traffic reported by Transport Canada in its annual report30. Given Domestic Air Passenger Traffic of 28.5 million trips, it was determined that Air Canada operated 17.1 million (28.5 million x 60 percent) domestic trips in 2005, and that WestJet operated 9.1 million (28.5 million x 32 percent) domestic trips in 2005.

Table 14: Number of Domestic Passenger Trips by Carrier
 

Air Canada

WestJet

2005 Domestic Air Passenger TrafficA

28,542,000

28,542,000

Carriers' Domestic Market Share

60.0%

32.0%

Number of Domestic Passenger Trips

17,125,200

9,133,440

Source:

ATransport Canada: Transportation in Canada, 2005 Annual Report [pg 91]

[658] The percentage increase in demand for seats was calculated by dividing the increase in demand for seats by the number of domestic trips performed by the carrier respondents prior to the implementation of a 1P1F policy. The demand for domestic trips for both Air Canada and WestJet is estimated to increase by 0.35 percent (Air Canada: 60,200 / 17.1 million, and WestJet: 32,100 / 9.1 million) as a result of a 1P1F policy.

[659] Professor Lazar submitted that the carriers' yield management systems would adjust fares and/or the availability of seats at different fare levels so that the resulting net decline in the number of trips would largely neutralize the initial increase in the number of additional trips generated by a 1P1F policy. In his calculations, Professor Lazar presumed that the percentage decrease in the quantity of seats demanded from an increase in average fares would be equal and opposite to the percentage increase in demand generated by a 1P1F policy. Under this presumption, if a 1P1F policy is expected to result in a 0.35 percent increase in the demand for seats, then the price increase would be expected to result in a 0.35 percent decrease in the quantity of seats demanded.

[660] The percentage increase in average fare was determined by Professor Lazar and Dr. Lewis by dividing the 0.35 percent decrease in the quantity of seats demanded by the price elasticity of demand, yielding a percentage increase in average fare of 0.32 percent (-0.35 percent / -1.112).

Table 15: Percentage Decrease in the Quantity of Seats Demanded Required to Neutralize Increase in Demand from Induced Trips and the percentage Increase in Average Fare
 

Air Canada

WestJet

Required Decrease in the Quantity of Seats Demanded

60,248

32,132

Number of Domestic Trips

17,125,200

9,133,440

Percentage Decrease in Quantity of Seats Demanded

0.35%

0.35%

Price Elasticity of Demand

1.112

1.112

Percentage Increase in Average Fare

0.32%

0.32%

[661] Based on a percentage increase in average fare of 0.32 percent and average fares of $244 for Air Canada and $140 for WestJet, average domestic ticket prices can be expected to increase by 77¢ (0.32 percent x $244) and 44¢ (0.32 percent x $140) for Air Canada and WestJet, respectively.

Table 16: Increase in Average Domestic Fare as a Result of the Implementation of a 1P1F Policy
 

Air Canada

WestJet

Percentage Increase in Average Fare

0.32%

0.32%

Average Domestic Fare Per Trip

$244.20

$140.00

Increase in Average Domestic Fare

77¢

44¢

[662] Applying the percentage increase in price and the price elasticity of demand, Professor Lazar and Dr. Lewis used the equation set out in paragraph 654 above to estimate the percentage decrease in revenue as 0.04 percent for both Air Canada and WestJet ([1-1.112] x 0.32).

Table 17: Estimated percentage Change in Revenue as a Result of the Implementation of a 1P1F Policy
 

Air Canada

WestJet

Percentage Increase in Average Fare (%ÄP)

0.32%

0.32%

Price Elasticity of Demand (å)

1.112

1.112

Percentage Change in Revenue

As Per Professor Lazar's Formula:

%ÄR = (1- å) %ÄP

-0.04%

-0.04%

Key:

%ÄR = percentage change in revenue

å = Absolute price elasticity of demand

%ÄP = percentage change in price

[663] In its 2006 Combined Consolidated Financial Statements, Air Canada presented passenger revenues for the geographic regions in which it operates, reporting domestic passenger revenues of $3.42 billion in 2005.

[664] WestJet's annual report does not similarly present domestic passenger revenues, reporting "Guest Revenues" of $1.207 billion and "Charter and other Revenues" of $182 million, yielding total passenger revenues of $1.389 billion in 2005. In its report dated October 6, 2006, Ernst & Young reported that in 2005, 93.9 percent of WestJet's passengers travelled on domestic flights. Based on this proportion, $1.304 billion ($1.389B x 93.9 percent) of revenue is attributable to domestic passenger traffic.

Table 18: WestJet Domestic Revenue

WestJet Guest RevenuesA

$1,207,075,000

WestJet Charter and Other RevenuesA

$181,641,000

WestJet Total Passenger Revenues

$1,388,716,000

Percent DomesticB

93.9%

Estimated WestJet Domestic Passenger Revenues

$1,303,842,551

Source:

A2005 WestJet Annual Report

BErnst & Young report dated October 6, 2006

[665] Annual revenue losses as a result of a price increase are calculated by multiplying domestic revenue by the percentage change in price. Given domestic revenues of $3.42 billion for Air Canada and $1.30 billion for WestJet, and a percentage decrease in revenue of 0.04 percent, the estimated annual revenue losses as a result of a price increase for Air Canada is $1.2 million and $460,000 for WestJet.

Table 19: Revenue Impact #3 - Annual Revenue Losses as a Result of a Price Increase
 

Air Canada

WestJet

Percentage Change in Revenue

-0.04%

-0.04%

Domestic Revenue

$3,420,000,000A

$1,303,842,551

Annual Revenue Losses from Price Increase

$1,211,844

$462,004

Source:AAir Canada - 2006 Combined Consolidated Financial Statements

Estimated annual pre-tax net revenue losses attributable to a 1P1F policy

[666] As reflected above, the estimated annual pre-tax net revenue losses under a 1P1F policy using the Yield Management Methodology are determined as the sum of the following three revenue impacts:

  • revenue losses related to persons with disabilities who require additional seating to accommodate their disability and are already travelling;
  • revenue gains from induced trips taken by persons with disabilities who require additional seating to accommodate their disabilities; and
  • revenue losses as a result of a price increase

[667] As calculated in the following Table, the implementation of a 1P1F policy will result in estimated annual pre-tax net revenue losses of $7.1 million for Air Canada, and $2.3 million for WestJet.

Table 20: Total Revenue Impacts: Annual Pre-Tax Net Revenue Losses as a result of the Implementation of a 1P1F Policy by Carrier
 

Air Canada

WestJet

Revenue Impact #1 - Annual Revenue Losses from Persons with Disabilities Who Require Additional Seating to Accommodate a Disability and Are Already Travelling and Paying the Additional Fare

$13,230,729

$4,045,432

Revenue Impact #2 - Annual Revenue Gains from Induced Trips by Persons with Disabilities Who Require Additional Seating to Accommodate a Disability

($7,356,286)

($2,249,260)

Revenue Impact #3 - Annual Revenue Losses as a Result of a Price Increase

$1,211,844

$462,004

Annual Pre-Tax Net Revenue Losses

$7,086,288

$2,258,176

[668] The Agency notes that the above estimates of annual net revenue losses attributable to a 1P1F policy do not reflect other factors relevant to the analysis of costs of accommodation which must be considered before the Agency assesses the undueness of a 1P1F policy. In this regard, the applicants have presented arguments that the cost of a 1P1F policy must reflect savings in operating costs that can be attributed to a 1P1F policy and associated reductions in taxes payable by the carrier respondents. Conversely, the carrier respondents have presented arguments that they will incur additional operating costs as a result of the additional travel by persons with disabilities pursuant to a 1P1F policy.

[669] CCD argues, in its April 26, 2007 submission, which was filed in response to the Supreme Court's decision in the CCD v. VIA case, that, in calculating costs, it is appropriate to reflect reductions in the costs by the amounts that can be attributed to factors other than accommodation, and by other sources of funding, including tax credits and deductions and income that will be generated as a result of having made accommodations.

[670] Consistent with the Supreme Court's decision in the CCD v. VIA case, the Agency will examine the evidence submitted by the parties, both in terms of any savings that can be attributable to a 1P1F policy and any tax benefits that might arise as a result of such a policy and, to the extent that such are determined to exist, the Agency's estimate of the cost of a 1P1F policy to the carrier respondents will be adjusted accordingly.

Savings in operating costs attributable to a 1P1F policy

[671] In his July 21, 2006 report, Dr. Lewis submits that a 1P1F policy creates cost savings as a result of the presence of Attendants which relieves air carriers of their duty to accommodate the personal needs of persons with disabilities during flight.

[672] In reference to the Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy, Dr. Lewis expressed the opinion during his examination-in-chief that Southwest Airlines's policy for accommodating "customers of size", which requires these customers to self-identify when making reservations, results in cost savings. Dr. Lewis clarified that these savings arise as a result of avoiding costs associated with overbookings, negative customer relations, embarrassments due to delays in departure as a result of flight crew attempting to find seating to accommodate "customers of size", and a reduction in the number of refunds that have to be given to disgruntled passengers who are seated next to customers of size. Dr. Lewis submits that if such benefits are realized by Air Canada and WestJet, his estimate of the cost of accommodating persons disabled by obesity would be reduced.

[673] During cross-examination by counsel for the applicants, Ms. Guillemette agreed with counsel that there would be cost savings to Air Canada in relation to services provided by Attendants to persons with disabilities, as the carrier's personnel would have to provide theses services otherwise.

[674] With respect to costs associated with accommodating passengers who are obese, Ms. Guillemette expresses the view that to the extent that Air Canada chooses to compensate passengers who complain about an obese passenger occupying some of their seat space, this results in a cost to the carrier. Additionally, Mr. Dunleavy submits that with respect to WestJet's policy of either providing a second seat to an obese passenger in the event that, once all passengers are boarded, there is an unoccupied seat, or, in the event that there are no available seats, possibly requiring the obese passenger to exit the aircraft, there might be a significant impact in terms of improvements to on-time performance for certain flights if a 1P1F policy is implemented, but he clarified that this impact would probably be less than "other areas".

Agency analysis

[675] The Agency notes that there was some agreement among the expert witnesses for the applicants and the carrier respondents that there would be cost savings attributable to a 1P1F policy. While the Agency does not disagree that there may be some cost savings, as the applicants did not quantify any of the cost savings which they attributed to a 1P1F policy, the Agency will not consider these in its estimate of the net cost of the policy.

Tax implications of a 1P1F policy

[676] In its submission filed with the Agency in response to the Supreme Court's decision in the CCD v. VIA case, CCD argues that, before undue hardship can be assessed, any cost attributable to a 1P1F policy must be reduced by the percentage that would have been payable in tax by each carrier respondent in respect of each cost.

[677] In response, the carrier respondents agree with the applicants in this regard and attached reports prepared by Ernst & Young and by Siebert/Pask, which address the tax implications of the cost of a 1P1F policy to the carrier respondents. These reports are examined below.

Carrier respondents' reports by Ernst & Young and by Siebert/Pask on the tax implications of the cost of a 1P1F policy

[678] In its report dated May 17, 2007, Ernst & Young notes that the scope of its work was limited to a review of Air Canada's 2006 annual report and audited financial statements, and that it did not undertake any independent study of Air Canada's current or future income tax position, or discuss the matter with the carrier's income tax advisors.

[679] The Ernst & Young report notes that the "Critical Accounting Estimates" section of Air Canada's annual report discloses that, at December 31, 2006, the carrier retained over $3 billion in tax attributes, including undepreciated capital costs, to shelter future taxable income, and that, based on its projected results, Air Canada did not forecast having any significant current taxes payable within the foreseeable future. The report notes that Air Canada's policy, which is in accordance with Generally Accepted Accounting Principles (hereinafter the GAAP), is to only recognize the existence of a related future tax asset to the extent that it is more likely than not that the benefit of these tax pools will be realized in the future. The report further notes that Air Canada has determined that, of $1.4 billion in possible future tax assets, it is more likely than not that $1.2 billion will not be realized. Ernst & Young concludes, on that basis, that it is more likely than not that Air Canada will not realize any tax benefit from the deduction of the annual cost of a 1P1F policy in the foreseeable future.

[680] The Siebert/Pask report dated May 16, 2007 notes that although WestJet has historically shown a profit for accounting purposes, it reports a loss for income tax purposes and explains that this loss position is created based on timing differences related to depreciation and amortization being deducted for accounting purposes and capital cost allowance being deducted for income tax purposes. The report refers to the following note contained in WestJet's 2006 annual report:

The Corporation has recognized a benefit on $291.7 million of non-capital losses which are available for carryforward to reduce taxable income in future years. These losses will begin to expire in the year 2014. The non-capital losses recognized result from tax deductions taken in excess of taxable earnings. The Corporation has the ability to adjust tax deductions to avoid losses from expiry.

[681] The Siebert/Pask report notes that WestJet's income tax loss position has been confirmed with the carrier's tax manager. The report concludes that, based on the foregoing, there would be no income taxes to offset the financial impact to the carrier if a 1P1F policy is adopted.

Applicants' report prepared by Mr. Brown on the tax implications of the cost of a 1P1F policy

[682] In response to the Ernst & Young and Siebert/Pask reports, the applicants filed a report on June 27, 2007 prepared by Robert D. Brown, which examines the impact on WestJet's tax position due to a 1P1F policy.

[683] Mr. Brown's report notes that it is based on a brief review of WestJet's 2006 financial statements contained in the carrier's annual report. The report makes reference to the same note contained in WestJet's financial statements which was reflected in Siebert/Pask's report as noted above, and explains that WestJet recognizes loss carry forwards and other tax attributes that will reduce future taxes payable, even though there are currently no taxes payable, on the basis that recovery of future taxes is reasonably assured and can be recognized now. Mr. Brown explained that if WestJet's current income were reduced due to the adoption of a 1P1F policy, the carrier would also report a reduction in income tax expense. He added that this would be the case even though WestJet may not be paying income taxes currently but would assume that the reduction would lead to cash tax savings in future years.

[684] Using a tax rate of approximately 35 percent, which is comparable to that reported in 2005, Mr. Brown notes that a reduction in income of $100 attributable to a 1P1F policy would result in a reduction in net after tax income of $65 and an increase in future tax reductions of $35.

The carrier respondents' submission on the cross-examination of Mr. Brown

[685] Following the cross-examination of Mr. Brown on August 16, 2007, counsel for the carrier respondents filed a submission dated August 28, 2007, wherein it is noted that Mr. Brown considered a number of scenarios which demonstrate that the ability to use a tax loss carry forward is subject to a number of limitations, including:

  • the number of years for which a loss can be carried forward is limited.
  • the Income Tax Act can change in ways to affect the ability to use loss carry forwards.
  • positive taxable income is an absolute requirement of being able to use a loss in a particular year.
  • a company which fails to make a profit for accounting purposes, and has no depreciation to claim, will not have taxable income.
  • future need for assets cannot be predicted with certainty, such that the availability of capital cost allowance is also variable. Making decisions about the acquisition of assets, the increase in capital cost allowance, and the use of tax losses and capital cost allowance to achieve the most favourable tax position requires professional judgment.
  • if a tax loss can be used at all, the time at which it can be used will vary. However, it is in the company's best interest to use the loss as soon as possible.
  • projections of profitability are also a key factor in determining whether the tax loss carried forward will be used.
  • while Mr. Brown has no specialized experience respecting the aviation industry, he remarked from personal experience that profits are marked by considerable volatility.
  • if a company's fortunes decline, it will be less likely to be able to make use of deferred tax accounting.

[686] In its August 28 submission, counsel for the carrier respondents notes that WestJet has made its projections based on the facts available to it which include facts respecting the current costs of regulatory compliance, and submits that if these increase, this, together with the totality of economic factors, could result in a decline in profitability of the kind often witnessed in the past. Counsel submits that if conditions do not deteriorate, WestJet should be able to use its current tax loss carry forwards to offset future taxes payable. Counsel adds that the chances of this happening would be less if the Agency were to order the adoption of a 1P1F policy. Further, the rules under which the judgment that losses would be used before expiry was made would change, and would, at the very least, delay further the point at which tax losses might be used.

[687] The August 28 submission concludes that, in light of the fact that WestJet has non-capital losses to offset future taxes payable and that a 1P1F policy would lower profits, thereby deferring the carrier's ability to utilize its loss carry forwards, it is not appropriate to assume that WestJet will be able to lessen the impact of a 1P1F policy by further deferring future taxes.

The applicants' response to the carrier respondents' August 28, 2007 submission

[688] By letter dated August 31, 2007, counsel for the applicants filed a response to the carrier respondents' August 28, 2007 submission on the cross-examination of Mr. Brown.

[689] Counsel refers to Mr. Brown's submission that WestJet's financial statements indicate that the carrier expects to be profitable in the future, noting that the 2006 statements provide that WestJet has recognized a benefit on $291.7 million of non-capital losses which are available for carry forward to reduce future taxable income. Counsel states that WestJet presented the $291.7 million of non-capital losses with the expectation that they could be used in the future, noting Mr. Brown's explanation that, "[as] a large generalization, one gets into deferred tax accounting, provided it is more likely [...] that tax loss carry forwards or tax deductions will be used at a future date, including the indefinite future".

[690] The August 31 submission notes Mr. Brown's testimony that the rules of accounting with respect to accounting for income taxes are clearly codified and applied on a reasonably uniform basis by all Canadian public companies.

[691] Counsel for the applicants submits that even if, unexpectedly, WestJet's profits were to decline slightly, various other factors would be relevant to a consideration of whether tax losses could be used in the future, including the period over which the losses and deductions can be claimed and the ability to recalculate deductions and losses under the rules. In this regard, counsel for the applicants notes that WestJet has reported that it has the ability to adjust tax deductions - specifically by choosing not to claim capital cost allowance - to avoid losses from expiry. Counsel further notes that Mr. Brown explained that in the event that a corporation claims too much capital cost allowance, thereby creating a large tax loss only to determine that the tax loss is going to expire, it can refile its taxes from earlier years and claim less capital cost allowance, thereby reducing the tax losses that might expire. The August 31 submission concludes that WestJet's publicly stated financial position is that it is in "fine financial form" and that it is expected to take full advantage of any tax losses associated with revenue losses attributable to a 1P1F policy.

[692] While Mr. Brown's report filed on June 27, 2007 was limited to a review of the tax implications of a 1P1F policy for WestJet, counsel for the applicants notes in his August 31 submission that Mr. Brown's testimony during cross-examination raises concerns with the currency of Ernst & Young's May 17 opinion that Air Canada would not enjoy any tax benefit from a 1P1F policy given the corporation's recent decision to sell-off assets. Specifically, the August 31, 2007 submission notes Mr. Brown's submission that corporate reorganizations, on the one hand, can give rise to substantial tax losses, as divisions are closed down and employees fired; however, on the other hand, they can give rise to substantial gains through such things as the sale of divisions and realizing on plant equipment, with the result that corporations may find that they can use loss carry forwards.

Agency analysis

[693] In examining the evidence presented regarding the question of whether Air Canada and WestJet will benefit from reductions in taxes payable as a result of a 1P1F policy, the Agency accepts that the 2006 audited financial statements for both carriers were prepared on a basis consistent with the GAAP, including the principle regarding deferred tax benefits, i.e., the existence of a future tax asset is recognized to the extent that it is more likely than not that the benefit will be realized in the future.

[694] Concerning the tax implications of the cost of a 1P1F policy for Air Canada, the Agency notes that the carrier's 2006 audited financial statements disclose that it is more likely than not that approximately 85 percent of the carrier's possible future tax assets will not be realized in the future. The Agency further notes that the carrier's 2006 annual report discloses that the carrier retained over $3 billion in tax attributes in the form of undepreciated capital costs and other tax attributes to shelter future taxable income and that, based on its projected results, Air Canada did not forecast having any significant current taxes payable within the foreseeable future.

[695] While the Agency notes the applicants' concern regarding the currency of the opinion expressed by Ernst & Young in its May 17, 2007 report that Air Canada would not realize any tax benefit from a 1P1F policy, which it raised in light of the corporation's recent decision to sell-off assets, the Agency is of the opinion that Mr. Brown's testimony regarding the possible positive impacts of a corporation reorganization which might enable a corporation to use tax loss carry forwards is general in nature and does not provide any specific evidence respecting Air Canada's actual circumstances. On the other hand, the Agency is of the opinion that Air Canada's 2006 audited financial statements provide concrete evidence that it is more likely than not that the carrier will not be able to realize any benefit in the future from possible net future tax assets. The statements were prepared in accordance with the GAAP and, as testified by Mr. Brown, the rules governing the accounting for income taxes are clearly codified and applied on a reasonably uniform basis by Canadian public companies. Moreover, as testified by Mr. Brown, the reasonableness of Air Canada's judgment regarding the realization of future tax benefits would have been assessed as part of the audit of the financial statements.

[696] In light of the foregoing, the Agency is of the opinion that Air Canada's conclusion that it is more likely than not that it would not realize any tax benefit from the deduction of the annual cost of a 1P1F policy in the foreseeable future, is reasonable and consistent with the disclosure in its 2006 audited financial statements. Accordingly, for the purposes of the Agency's assessment of the undueness of the cost of a 1P1F policy in the domestic market for Air Canada, the Agency's estimate of the cost of such a policy will not be adjusted to reflect the cost on an after-tax basis.

[697] Concerning the tax implications of the cost of a 1P1F policy for WestJet, while the May 16 report by Siebert/Pask notes that the benefit which WestJet currently recognizes due to non-capital losses available for carry forward will begin to expire in 2014, the Agency is of the opinion that there is nothing in the report which indicates that WestJet will not be in a position to benefit from the tax loss carry forwards, such that the Agency finds that Siebert/Pask did not support its conclusion that there would be no income taxes to offset the financial impact to WestJet if a 1P1F policy is adopted. On the contrary, as disclosed in WestJet's 2006 audited financial statements, it has recognized a benefit on $291.7 million of non-capital losses which are available for carry forward to reduce future taxes payable.

[698] Furthermore, although the Agency accepts the carrier respondents' position that there is uncertainty regarding the accounting for deferred taxes due to underlying uncertainties regarding the existence and timing of future taxes payable, the Agency notes that these uncertainties are considered as a matter of course by corporations' senior management in their assessment of whether deferred tax benefits should be recognized currently in financial statements. In this regard, the Agency is aware of and accepts the evidence presented by Mr. Brown that the rules governing the accounting for income taxes are clearly codified, which would include rules governing the recognition of future tax benefits. In this way, given that WestJet has recognized benefits attributable to loss carry forwards, which are reflected in financial statements that have been audited, the Agency finds that this provides concrete evidence that it is more likely than not that the carrier will realize the benefits from reductions in future taxes payable.

[699] Moreover, the carrier respondents failed to indicate, other than in a general way, the impact of the adoption of a 1P1F policy on WestJet's ability to use tax loss carry forwards. Counsel for the carrier respondents asserts that if the current costs of regulatory compliance increase, this, together with the totality of economic factors, could result in a decline in profitability of the kind often witnessed in the past and the chances of WestJet being able to use its current tax loss carry forwards will be less or, at the very least, delayed if the Agency were to order the adoption of a 1P1F policy. However, the Agency finds these submissions to be unsupported. Additionally, the Agency accepts the evidence presented by counsel for the applicants that corporations have the ability to recalculate deductions and losses under tax rules to lessen the chances of loss carry forwards expiring.

[700] In light of the foregoing, the Agency is of the opinion that the evidence supports that it is more likely that WestJet would realize a future tax benefit as a result of the annual cost of a 1P1F policy. Accordingly, for the purposes of the Agency's assessment of the undueness of the cost of a 1P1F policy in the domestic market for WestJet, the Agency's estimate of the cost of such a policy will be adjusted to reflect the cost on an after-tax basis.

Estimated net cost of a 1P1F policy

[701] In light of the foregoing determination by the Agency that the evidence supports that it is more likely that WestJet would realize a future tax benefit as a result of the cost of a 1P1F policy, the Agency's calculation of the estimated annual net revenue losses attributable to such a policy are reduced in respect of WestJet, from the before-tax amount of $2.3 million reflected in paragraph 667 to $1.5 million, as reflected below. Given that the Agency has determined that Air Canada would not realize a future tax benefit as a result of the cost of a 1P1F policy, the estimated net revenue losses attributable to such a policy have not been reduced for Air Canada. Also reflected in the following Table is the estimated annual after-tax cost of a 1P1F policy per domestic passenger trip for Air Canada and WestJet (Air Canada: $7.1M ÷ 17.1M; WestJet: $1.5M ÷ 9.1M).

Table 21: Estimated Annual After-Tax Cost of a 1P1F Policy by Carrier
 

Air Canada

WestJet

Annual Net Revenue Losses (pre-tax effect)

$7,086,288

$2,258,176

Tax Rate

N/A

35%

Reduction in cost due to tax effect

N/A

$790,361

Estimated Annual After-tax Cost of a 1P1F Policy

$7,086,288

$1,467,814

Number of Domestic Trips

17,125,200

9,133,440

Estimated Annual After-tax Cost of a 1P1F Policy Per Domestic Passenger Trip

41¢

16¢

Comparison of Agency's estimate of the cost of a 1P1F policy with those of the parties' experts

[702] In its report dated November 24, 2006, Ernst & Young estimated annual net revenue losses for Air Canada of between $41.3 million and $50.8 million in 2005 with the adoption of a 1P1F policy with respect to persons with disabilities who require additional seating to accommodate their attendants. Furthermore, in closing arguments, counsel for the carrier respondents estimated annual revenue losses for Air Canada at $8.3 million with the adoption of a 1P1F policy with respect to persons who are disabled by obesity and require additional seating. Taken together, Air Canada estimates annual net revenue losses in the range of $49.6 million to $59.1 million as a result of implementing a 1P1F policy for domestic air travel.

[703] In its November 14, 2006 report, Siebert/Pask presented a revised estimate of the annual net revenue losses for WestJet in the range of $10.8 million to $19.6 million in 2005 with respect to persons with disabilities who require additional seating for their attendants. Additionally, in closing arguments counsel for the carrier respondents estimated annual net revenue losses for WestJet of $2.1 million with respect to persons who are disabled by obesity and require additional seating. Taken together, WestJet estimates annual net revenue losses in the range of $12.9 million to $21.7 million as a result of implementing a 1P1F policy for domestic air travel.

[704] In his July 21, 2006 report, Dr. Lewis estimates that domestic revenues earned by Air Canada would, if not recovered through higher fares, decline by an estimated $5.1 million a year. Dr. Lewis notes that this amount represents a reduction of 0.15 percent of annual gross company revenue. He further predicts an increase in Air Canada passenger fares of 45¢ on a $300 ticket if revenue losses are fully recovered through ticket prices or an increase of $3.00 on a representative $2,000 ticket.

[705] Dr. Lewis suggests that the comparable values for WestJet would be foregone revenue of $2.2 million annually, representing 0.19 percent of annual gross company revenues. Furthermore, Dr. Lewis estimates a 57¢ increase in the price of a $300 ticket and a $3.80 increase in the price of a $2,000 ticket, if revenue losses are fully recovered through ticket prices.

[706] Notably, Dr. Lewis indicates in his report that the foregoing estimates did not include revenue losses attributable to travel by persons disabled by obesity on the basis that the data necessary for populating his model for estimating the financial effects of extending a 1P1F policy to these persons was not available. However, after hearing the evidence presented during the November 2006 hearing on the issues of incidence and travel propensity relating to persons disabled by obesity, Dr. Lewis derived approximate associated cost estimates.

[707] These estimates were calculated based on the 0.5 percent of adults with disabilities who reported obesity as their main or secondary disabling condition as noted in Ms. Furrie's report, multiplied by 36 percent of these persons who reported having travelled long distances in the preceding 12 months and adding this product to the Attendant incidence rate of 3.6 percent, which Dr. Lewis set out in his report, to produce a revised incidence rate of 3.78 percent. This reflects a 5 percent increase in eligibility rate which Dr. Lewis concluded would increase the cost of a 1P1F policy for each of the carrier respondents by 5-percent, resulting in an overall policy cost of $5.36 million for Air Canada and $2.31 million for WestJet.

[708] Both Ernst & Young and Siebert/Pask based their original reports on the incidence numbers reflected in Professor Lazar's November 25, 2005 report, which they interpreted in the context of a Marginal Cost Methodology. To this extent, the methodology used by Ernst & Young and by Siebert/Pask and the methodology used by the Agency represent a source of difference in the calculation of the cost of a 1P1F policy.

[709] The Agency notes the following additional sources of difference between the estimates of annual pre-tax net revenue losses proposed by the carrier respondents and the estimate of annual pre-tax net revenue losses determined by the Agency:

  • the carrier respondents attributed revenue losses due to the assumption that there would be abuse of a 1P1F policy, whereas the Agency has concluded that sufficient safe-guards in the form of screening processes similar to those which already exist (as set out in paragraphs 320 to 330 above), could be implemented to avoid abuse;
  • the carrier respondents used Professor Lazar's attendant accompaniment rates of 18.5 and 22 percent, which do not take into account the carriers' tariffs which limit eligibility for a 1P1F policy, whereas the Agency concluded that 3.6 percent, which is more reflective of the carriers' tariffs, is a more reasonable rate;
  • the carrier respondents assumed a trip rate of 4.94 trips annually by persons with disabilities who require additional seating to accommodate their disabilities, whereas the Agency found that a rate of 2.5 trips annually provided a more reasonable trip rate, on the basis that it is more reflective of persons with severe disabilities; and
  • the carrier respondents used a 20 percent travel propensity rate for persons disabled by obesity, whereas the Agency determined that a more reasonable travel propensity rate for this subgroup of persons with disabilities is 10 percent.

[710] With respect to the difference in estimates of annual net revenue losses attributable to the abuse factors, the carrier respondents estimated annual revenues losses ranging between $3.1 and $15.8 million for Air Canada and between $1.2 and $6.8 million for WestJet as a result of abuse. Given that the Agency has determined that the carrier respondents will be able to implement effective eligibility screening processes, this difference overstates the carriers' estimates of annual net revenue losses by as much as $22.6 million. Furthermore, as noted above, the Agency determined that the attendant accompaniment rates used by the carrier respondents to derive their estimates were overstated. The failure by the carrier respondents' experts to consider the carrier respondents' tariffs resulted in more than a six-fold overstatement of incidence of persons with disabilities who require additional seating to accommodate their Attendants.

[711] These above-noted differences, combined with the difference relating to trip rate, result in an overall overstatement of the carriers' estimates of annual pre-tax net revenue losses by as much as $50.1 million for Air Canada and $13.3 million for WestJet.

[712] Again, in terms of the annual after-tax cost of a 1P1F policy per domestic passenger trip, the Agency estimates that Air Canada and WestJet will lose no more than 41¢ and 16¢ of revenue, respectively, for each domestic passenger trip if a policy is implemented that will allow persons with disabilities who require additional seating to accommodate their disabilities to travel for the same price paid by persons without disabilities. As previously reflected in Table 16, the estimated increase in average fare as a result of the implementation of a 1P1F policy is 77¢ on Air Canada's average fare of $244 and 44¢ on WestJet's average fare of $140. As the tax effect of a 1P1F policy on WestJet affects its financial results and not the adjustment to its ticket prices which would result from such a policy, the increase in ticket price for WestJet flights is unaffected by the reduction in the estimated cost to WestJet of a 1P1F policy as a result of the related tax benefit.

Table 22: Estimated Annual Net Revenue Losses from Implementing a 1P1F Policy

Expert

Air Canada

WestJet

Professor Lazar1,2

$27 - $36 million

$11 - $15 million

Ernst & Young (based on Professor Lazar 2006 report)2

$50 - $59 million

 

Siebert/Pask (based on Professor Lazar 2006 report)2

 

$13 - $22 million

Dr. Lewis

$5.4 million

$2.3 million

Agency

   

Agency's Estimate (Before Tax)

$7.1 million

$2.3 million

Agency's Estimate (After Tax)

$7.1 million

$1.5 million

Revenue Losses Per Domestic Passenger Trip (After Taxes)

41¢

16¢

Revenue Losses as expressed in terms of the Estimated Increase in Domestic Fares

77¢ on $244

44¢ on $140

Notes:

1Adjusted to exclude transborder traffic.

2Adjusted to include revenue losses associated with persons disabled by obesity, as expressed by counsel for the carrier respondents during final oral arguments.

[713] As illustrated above, the estimated annual cost of a 1P1F policy applied in the domestic market to Air Canada is $7.1 million and the related cost, net of tax savings, to WestJet is $1.5 million. However, the cost of accommodation, in and of itself, is not determinative of whether such a policy would cause undue hardship to the carrier respondents. Rather, the cost of a 1P1F policy must be examined in the context of the related impacts on the carrier respondents so that the Agency can consider the cost constraint in its weighing of the benefits of a 1P1F policy to persons with disabilities who require additional seating to travel by air against the various operational, economic and financial constraints that the carriers would be confronted with in adopting such a policy. In the sections that follow, the Agency will first examine the economic implications and then the financial implications of the cost of a 1P1F policy to the carrier respondents.

B. Economic implications of the cost of a 1P1F policy

[714] The parties provided evidence and testimony relating to the economic implications for Air Canada and WestJet of a 1P1F policy in the domestic market. These are examined below in terms of:

  1. competitive disadvantages attributable to a 1P1F policy;
  2. cross-subsidization as a result of a 1P1F policy; and
  3. positive economic effects related to a 1P1F policy.
1. Competitive disadvantages attributable to a 1P1F policy

[715] As previously noted in paragraph 506, Dr. Tretheway submitted in his January 6, 2006 report that carriers required to adopt a 1P1F policy would be subject to two direct competitive disadvantages in addition to a third, indirect competitive disadvantage.

[716] The first direct competitive disadvantage that Dr. Tretheway asserts would arise from a 1P1F policy is that carriers required to adopt a 1P1F policy would receive most of the demand by persons with disabilities who require additional seating to travel by air, recognizing that some demand might go to other carriers who do not adopt the policy but who offer significantly more convenient flight schedules or such low fares that purchasing two seats would be less expensive than purchasing one and obtaining the second free of charge. This, Dr. Tretheway argues, results in carriers who adopt a 1P1F policy incurring the opportunity cost of foregone revenues while the other carriers would not, thereby creating a competitive disadvantage.

[717] The second direct competitive disadvantage that Dr. Tretheway asserts would arise from a 1P1F policy is that carriers required to adopt a 1P1F policy would, as a result of attracting most of the demand by persons with disabilities who require additional seating, incur disproportionately higher operating costs relative to carriers who do not adopt a 1P1F policy related to, for example, additional time required from customer service agents and reservations personnel.

[718] Dr. Tretheway asserts that the third competitive disadvantage that would arise from a 1P1F policy is an indirect disadvantage which he submits arises as a result of the fact that the choice of destination is often flexible and strongly influenced by price, especially with respect to leisure travel. Dr. Tretheway submits that, as a result of this, destinations served by carriers which have adopted a 1P1F policy will be more attractive and this will also lead to them incurring relatively higher opportunity and operating costs in contrast to carriers who do not adopt a 1P1F policy, who will serve the relatively less expensive traffic and, thereby, be able to offer lower fares.

[719] With respect to Dr. Tretheway's assertion that Air Canada and WestJet would incur disproportionately higher operating costs relative to carriers who do not adopt a 1P1F policy, as previously noted, Dr. Lewis, in his July 21, 2006 report, stated that minor airline competitors can be expected to adopt a 1P1F policy if done so by the two principal air carriers - Air Canada and WestJet - or if compelled to do so by regulatory authorities. Further, during cross-examination by counsel for the applicants, Dr. Tretheway agreed that it is possible that a regulation, applicable to all domestic carriers, might be put into effect subsequent to a ruling by the Agency that requires the carrier respondents to implement a 1P1F policy such that, if such a policy were applicable to all competitors on individual routes, any competitive disadvantage would be neutralized, assuming the physical access is also the same.

[720] While Dr. Lewis notes that his July 21, 2006 report did not take full account of the competitive effects of rail and bus services on the demand for airline services among persons with disabilities, Dr. Lewis concludes that the less costly modes of travel will, notwithstanding an adoption of a 1P1F policy by air carriers, continue to attract the lion's share of low income travellers when these modes represent feasible substitutes.

[721] Also with respect to the second competitive disadvantage arising from a 1P1F policy, Dr. Tretheway asserted that, even if a 1P1F policy were applied only to domestic markets, competitive disadvantages would arise between Canadian and foreign carriers. Dr. Tretheway explained that if the carrier respondents must cross-subsidize domestic traffic subject to a 1P1F policy, it might lead the carriers to attempt to increase fares in transborder and/or international markets. However, he noted that, to the extent that they compete in markets with United States of America or foreign carriers which do not have a 1P1F policy, such a decision would put the carriers at a competitive disadvantage and that, due to the level of competition that exists, he is of the opinion that the carriers would not be able to raise ticket prices in response to a 1P1F policy.

[722] Finally, during cross-examination by counsel for the applicants, and in response to a question as to whether the United States of America requirements that a seat be provided at no charge for an attendant required by carriers for safety purposes resulted in negative impacts on WestJet's "ticket sales mechanism" and loss of revenues, Mr. Dunleavy stated that, with respect to the very small percentage of the carrier's business represented by the sale of tickets in the United States of America, nothing has been brought to his attention in this regard.

2. Cross-subsidization

[723] With respect to the competitive disadvantages that Dr. Tretheway submitted would exist as a result of a 1P1F policy, he argues in his January 6, 2006 report that a 1P1F policy would, absent a direct government subsidy, lead to a form of cross-subsidy.

[724] Dr. Tretheway explains that cross-subsidy exists when a product or service is provided to one group of customers below the incremental cost of the product or service consumed by them, with other customers required to pay prices which are above the costs of the product or service which they consume, in order that there are no revenue losses. Dr. Tretheway comments that economists are nearly unanimous in recognizing that cross-subsidies are undesirable as they introduce two forms of economic inefficiency: one resulting from the over consumption of a good or service at a price that is below cost and the second one resulting from the under consumption of a good or service by those who are required to pay above-cost prices.

[725] During examination-in-chief, Dr. Tretheway notes that, at a zero price or, in other words, at no charge for additional seating for persons with disabilities under a 1P1F policy, some of these seats would be sold below marginal cost. Dr. Tretheway further notes that cross-subsidies interfere with the economic efficiency of markets: economic efficiency being achieved when the greatest possible value from a market's economic value is achieved. Dr. Tretheway explains that economists are of the opinion that prices should equal marginal or incremental costs, submitting that, when there is cross-subsidization, one market is receiving a service below cost which is undesirable because that results in a destruction of economic value.

[726] Dr. Tretheway asserts that any increase in costs of low cost carriers due to the need to cross-subsidize 1P1F traffic would destimulate the markets where higher fares would be charged to cover these costs, thereby undermining one of the most important principles of the low cost carrier business model. Dr. Tretheway further asserts that higher costs associated with the cross-subsidy would also undermine the emerging business models of some full service carriers. Dr. Tretheway notes that to respond to the success of low cost carriers and to mitigate unsustainable losses, some of the legacy carriers have "relentlessly pursued cost reductions".

[727] During cross-examination by counsel for the applicants, Dr. Tretheway agreed that where human rights legislation imposes a duty to accommodate, it is in effect imposing on the business a cross-subsidy situation. Further, counsel for the applicants noted in his April 26, 2007 submission regarding the implications of the Supreme Court's decision in the CCD v. VIA case that the Court expressly contemplated that the costs of accommodation could raise ticket prices, noting that all other legitimate expenditures such as wages and fuel contribute to the price and accommodations for persons with disabilities should be no different.

3. Positive economic effects related to a 1P1F policy

[728] Dr. Lewis submits in his report dated July 21, 2006 that the experts for the carrier respondents limited their analysis to the financial effects of a 1P1F policy, ignoring the reality that economic benefits would also arise. Dr. Lewis submits that the economic effects of a 1P1F policy arise in the form of increased mobility for persons with disabilities and as mobility insurance benefits for those who might become disabled in the future and "altruism benefits" for those in the general public who are willing to pay something for the existence of a 1P1F policy as a human right. Dr. Lewis asserts that standard economic practice recognizes three sources of such economic value relating to a 1P1F policy: mobility value, option value and existence value, which are examined below.

a) Mobility value

[729] Dr. Lewis explains that the mobility value of a 1P1F policy arises in the form of additional opportunities that arise for persons with disabilities to participate in daily life activities, including work and non-work opportunities.

[730] In terms of work-related opportunities, Dr. Lewis explains the importance of a 1P1F policy in light of the fact that the Canadian labour market has become essentially national in scope such that people are using air travel for business purposes. Dr. Lewis also points out that labour market mobility also requires access to interview opportunities in cities that cannot be reached by surface transportation in a practical amount of time. Dr. Lewis comments that improved labour market access is known to reduce unemployment among persons with disabilities which raises income levels and living standards, thereby reducing pressure on social welfare systems and fiscal burdens.

[731] In terms of non-work-related opportunities, Dr. Lewis speaks to the need for people to travel by air for medical purposes, to visit family and friends and to take vacations. Finally, Dr. Lewis notes that there is a social benefit to those persons with disabilities who can use the savings arising from a 1P1F policy to redirect to housing, nutrition, medical expenses, etc.

b) Option value

[732] Dr. Lewis explains that option value arises from the actuarial reality that everyone in society stands a statistical chance of becoming permanently or temporarily disabled. Dr. Lewis asserts that people are willing to pay up to some amount (whether through taxes or fares) for the insurance of having sustained access to air travel in the event of their own disability. Dr. Lewis recognizes that people are not willing to pay above a particular level for this insurance value; however, he states that most people would be willing to accept the cost of the option value related to a 1P1F policy on the basis that he estimates that fares would be expected to rise by 80¢ on a $500 ticket if a 1P1F policy were implemented.

c) Existence value

[733] Existence value is explained in Dr. Lewis' report as arising from the reality that society, whether or not there is a personal benefit to be gained, is willing to pay up to some amount (also through taxes or prices) to ensure or preserve the existence of certain resources, rights or privileges. Dr. Lewis cites as an example that people are willing to pay more for timber products to preserve forested areas even though they would not visit such areas. Concerning accessibility for persons with disabilities, Dr. Lewis asserts that society is demonstrably willing to pay up to some amount to be part of a society that offers rights of access to persons with disabilities. Dr. Lewis notes that, as in the case of option value, he is of the opinion that most people would be willing to accept the cost of the existence value related to a 1P1F policy on the basis that he estimates that fares would be expected to rise by 80¢ on a $500 ticket if a 1P1F policy were implemented.

[734] Dr. Lewis concludes that economic benefits would also accrue to persons with disabilities in the form of more affordable air transportation and, for some, enhanced mobility, and economic benefits to the general public in the form of the existence value of a 1P1F policy as a human right. Dr. Lewis acknowledges that he has not done "the willingness to pay test" to be able to say definitively whether people would be willing to pay for the cost of 1P1F policy in terms of higher ticket prices; however, he submits that intuitive and common sense belief would say, based on his 30 years of experience in this area, that the cost to the general public or the shareholder, if the cost is not passed on, is 30¢ on a $300 ticket, then his opinion is that the social benefits of the 1P1F policy would exceed the related financial and social costs.

[735] The carrier respondents did not provide any evidence in respect of the foregoing and did not challenge Dr. Lewis' evidence in this regard. However, in cross-examination by counsel for the applicants, Dr. Tretheway acknowledged that, in terms of conducting a cost-benefit analysis of a 1P1F policy, there would be benefits both to users of the service (i.e., those who would travel pursuant to a 1P1F policy) and to everyone else in society, such that universal access is a category of benefits to which society will attach a value.

Agency analysis

[736] The parties have presented evidence concerning the economic implications of a 1P1F policy in terms of: competitive disadvantages, cross-subsidization and positive economic effects.

[737] In terms of the competitive disadvantages that might arise as a result of a 1P1F policy, the Agency notes, as previously discussed in paragraph 554, that the evidence is that Air Canada and WestJet together represent at least 80 percent and as much as 93 percent of the domestic market and are the only two carriers in a broad set of markets. The Agency further notes its finding that, while acknowledging that the carriers face a certain level of competition on a route-by-route basis, the carrier respondents did not provide any evidence regarding the extent and impact of this competition. In light of the foregoing, the Agency is not convinced that the nature of the competitive disadvantages that may be experienced by the carrier respondents will have a material impact on them.

[738] In terms of the carrier respondents' argument that the adoption of a 1P1F policy would result in them, relative to carriers who do not have a 1P1F policy, receiving most of the demand by persons with disabilities who require additional seating and incurring the associated revenue losses, the Agency acknowledges this possibility. Specifically, given that the carrier respondents together represent approximately 90 percent of the domestic market and that, at this time, any order by the Agency regarding a 1P1F policy would apply only to the carrier respondents, Air Canada and WestJet may attract most of the demand by persons with disabilities who require additional seating to travel by air and thereby incur the associated revenue losses.

[739] The Agency notes the carrier respondents' argument that because they will attract a disproportionate amount of demand by these persons with disabilities, they will similarly incur disproportionately higher operating costs relating to such things as additional time required from customer service and reservations agents. The Agency notes that the carrier respondents provided reports prepared by Ernst & Young for Air Canada and by Siebert/Pask for WestJet, which provided details of the amounts expended by the carriers on various types of accessibility services and accommodations for passengers with disabilities in general. However, as noted in paragraph 758 that follows, the Agency finds that these reports fail to specifically identify and substantiate the specific component of total operating costs that pertains to the provision of assistance and services to persons with disabilities who require additional seating to travel by air. The Agency further finds that these reports provide no evidence of the impact, including any impact on the carriers' current and projected financial position, of the additional operating costs that the carriers might incur as a result of a 1P1F policy. As a result, whatever additional operating costs that might be incurred to accommodate persons with disabilities who require additional seating to travel by air were not identified, such that the carrier respondents provided no evidence of the possible related impact of such costs.

[740] Moreover, having taken the strategic position that it is impossible to effectively screen persons with disabilities for eligibility for the benefits of a 1P1F policy, the carrier respondents did not identify any costs related to this matter. However, as discussed in paragraphs 320 to 330, the Agency rejects this position on the basis that the carrier respondents have existing screening mechanisms designed to assess persons' fitness to travel by air, including the requirement to travel with an Attendant, and conditions to which they are required to adhere to travel on the carrier respondents' flights. The Agency further rejects the carrier respondents' position on the basis of the evidence presented by Dr. Lewis that screening mechanisms are routinely used by other service providers, including those in the transportation industry, and that there are experts who can be consulted to obtain advice on the design and implementation of such screening mechanisms.

[741] Regarding the carrier respondents' arguments that a 1P1F policy, absent a direct government subsidy, will lead to a form of cross-subsidy, the Agency notes Dr. Tretheway's testimony that cross-subsidization exists when a product or service is provided to one group of customers below the incremental cost of the product or service consumed by them. However, in the case of an additional seat provided by Air Canada and WestJet pursuant to a 1P1F policy, the Agency notes that, in both cases, the fare paid by the person with a disability will cover the marginal cost of the seat occupied by the person and the seat that is occupied by the person's attendant. This is borne out by the average fares of $244 and $140 and the marginal costs of $39.11 and $14.00 for Air Canada and WestJet, respectively. As such, the Agency finds that, from this perspective, the carrier respondents have not demonstrated that a 1P1F policy, absent a direct government subsidy, will result in cross-subsidization.

[742] Moreover, with respect to Dr. Tretheway's testimony that human rights legislation imposes a duty to accommodate that necessarily results in cross-subsidization, the Agency notes the applicants' submission that the Supreme Court, in its decision in the CCD v. VIA case, expressly contemplates that the costs of accommodation can raise ticket prices, noting that all other legitimate expenditures such as wages and fuel contribute to the price and accommodations for persons with disabilities should be no different. The Agency is of the opinion that the Supreme Court's position in this regard provides a clear indication of the Court's acceptance of cross-subsidization as being reasonable for the achievement of important societal goals such as the accommodation of persons with disabilities.

[743] Finally, concerning the evidence regarding the positive economic effects of a 1P1F policy as presented by Dr. Lewis on behalf of the applicants, it goes without saying that these represent important benefits. In this regard, the Agency notes that the Supreme Court, in the CCD v. VIA case, states:

A factor relied on to justify the continuity of a discriminatory barrier in almost every case is the cost of reducing or eliminating it to accommodate the needs of the person seeking access. This is a legitimate factor to consider: Central Alberta Dairy Pool v. Alberta (Human Rights Commission), 1990 2.S.C.R. 489, at pp. 520-21. But, as this Court admonished in Grismer, at para. 41, tribunals "must be wary of putting too low a value on accommodating the disabled".

[744] While the Agency notes that Dr. Lewis did not conduct a study to assess the willingness of people to pay for the positive economic benefits of a 1P1F policy, the Agency agrees with Dr. Lewis that a 1P1F policy would create economic value, not only for persons with disabilities, but also for society as a whole. In terms of the broader social benefits of a 1P1F policy, the Agency recognizes those cited by Dr. Lewis, namely economic values relating to:

  • a reduction in pressure on social welfare systems and fiscal burdens relating to increased income levels and living standards attributable to increased work-related mobility for persons with disabilities;
  • insurance value from having sustained access to air travel in the event of disability, recognizing that it is an actuarial reality that everyone in society stands a statistical chance of becoming permanently or temporarily disabled; and
  • ensuring or preserving the existence of the right of access to persons with disabilities.

[745] The Agency is of the opinion that the social benefits of a 1P1F policy could outweigh the associated financial and social costs, depending on the magnitude of the cost. In this regard, the Agency has determined that the estimated cost of a 1P1F policy in terms of the increase in ticket price for an average fare is 77¢ for Air Canada and 44¢ for WestJet. The Agency is of the opinion that these increases in ticket prices are relatively small, both in absolute dollar terms and as a percentage of average domestic fares, such that these increases in ticket prices are reasonable, particularly in light of the above-noted economic values in addition to the improved access to the federal transportation network for persons with severe disabilities that would result from a 1P1F policy. The Agency notes that the positive economic effects described by Dr. Lewis, which were acknowledged by Dr. Tretheway in terms of the benefits of universal access and reinforced by the Supreme Court of Canada in the CCD v. VIA case, are reflective of the fundamental principles of accessibility referred to earlier in this Decision, which must be weighed in the Agency's undueness analysis of a 1P1F policy.

Agency conclusion on undue hardship of the economic implications of a 1P1F policy

[746] As reflected above, the Agency is not convinced that the nature of the competitive disadvantages that may be experienced by the carrier respondents will have a material impact on them. The Agency also has determined that although the carrier respondents argued that they would incur disproportionately higher operating costs as a result of a 1P1F policy, they failed to specifically identify those operating costs relevant to the target population and to specifically demonstrate the impact of those costs. Further, the Agency has determined that the carrier respondents failed to demonstrate that the adoption of a 1P1F policy would lead to cross-subsidization but that, even if they had done so, the Agency is of the opinion that the Supreme Court recognizes cross-subsidization as being reasonable for the achievement of the accommodation of persons with disabilities.

[747] In light of the foregoing, the Agency concludes that Air Canada and WestJet have not demonstrated that the economic implications of a 1P1F policy in the domestic market, when considered individually, constitute undue hardship to them.

C. Financial implications of the cost of a 1P1F policy

[748] As previously noted, the cost of a 1P1F policy, in and of itself, is not determinative of whether such a policy would cause undue hardship to the carrier respondents. Rather, the cost of a 1P1F policy must be examined in the context of the related impacts on the carrier respondents so that the Agency can consider the cost constraint in its weighing of the benefits of a 1P1F policy to persons with disabilities who require additional seating to travel by air against the various operational, economic and financial constraints that the carriers would be confronted with if such a policy were implemented.

[749] This section examines the impact of the cost a 1P1F policy in terms of the related financial implications to the carrier respondents in terms of the arguments presented by the applicants and carrier respondents in respect of:

  • the historical costs of accommodation; and
  • the carrier respondents' ability to absorb the cost of a 1P1F policy.
1. Historical costs of accommodation

[750] In its reply to the application, the carrier respondents assert that they already bear a heavy financial burden in terms of employee training and "special" services and equipment by reason of the actions that they are required to take for the benefit of persons with disabilities. The carrier respondents argue that "A further increase of this already considerable burden would be an undue and unreasonable hardship."

[751] A substantial portion of the carrier respondents' evidence presented during the May 2005 hearing dealt with the costs of accommodation that they were currently expending in respect of passengers with disabilities. Reports were also submitted by the carrier respondents' experts providing details of the amounts expended on various types of accessibility services and accommodations, which were later updated with more complete data.

[752] Ernst & Young's report dated November 25, 2005 set out annual costs totalling $9,363,400 in operating costs and $241,000 in annual capital expenditures incurred by Air Canada to provide assistance to persons with disabilities. Approximately 87 percent of the total costs relates to the services provided by Air Canada's Special Attention Team, which comprise 153 full-time equivalent employees.

[753] A similar report prepared by Siebert/Pask for WestJet dated December 1, 2005, disclosed that the carrier incurred total costs related to providing services to persons with disabilities of $1,586,000 in 2003, $1,750,000 in 2004, and prorated costs for 2005 in the amount of $1,913,000. Of these amounts, capital expenditures represented $428,000 in 2003, $100,000 in 2004, and an estimated $42,000 in 2005.

[754] In a submission dated May 17, 2007, counsel for the carrier respondents states that the purpose of the reports was to put in evidence the costs which they are incurring to make all of their services accessible to persons with disabilities, including the applicants. Counsel for the carrier respondents asserts that the Supreme Court decision in the CCD v. VIA case vindicates this approach and makes it clear that the central inquiry in this case is the accessibility of the system as a whole. Counsel further asserts that this reflects the applicants' position that where the most inclusive accommodation possible is associated with undue costs, it may still be necessary to consider less inclusive accommodations. Counsel submits that the Ernst & Young and Siebert/Pask reports substantiate that such accommodations are already in place and that the associated costs are significant. It is further argued that the Agency must, as part of its undueness analysis, consider these accommodations as part of the carriers' systems and operations and that, in doing so, this does not mix groups of potential future applicants, as the Supreme Court warned against in CCD v. VIA; rather, such an approach addresses the carrier respondents' current environment and the costs affecting this environment, which must be included in any analysis to determine undue hardship.

[755] Further, counsel for the carrier respondents asserts that the ability of the applicants in these proceedings to access the network for air transportation services in a way which is safe and secure and which respects their dignity and comfort is undoubtedly increased by the funds spent on medical clearance procedures, special reservation assistance, assistance within the airport environment, transfers between personal wheelchairs and boarding chairs; transfers between boarding chairs and passenger seats and assistance with mobility needs within the cabin, "special" washrooms and detailed training of personnel. Counsel asserts that an important consideration for the issue of undue hardship is that the carrier respondents currently expend approximately $13 million annually to accommodate persons with disabilities, including the class of applicants represented by CCD's application, and asserts that:

  • the accommodation requested by the applicants is unreasonable;
  • the obstacles identified are not undue; and
  • the steps already taken by Air Canada and WestJet to provide accommodation for the applicants constitute reasonable accommodations.

[756] In a submission dated May 29, 2007, counsel for the applicants submits that many of the services included in the Siebert/Pask and Ernst & Young reports are not relevant to applicant group and cites the "meet and assist" service as not being needed for those who travel with attendants or who are obese. Further, the applicants argue that it is an error to consider the totality of all costs of accommodation for all persons with disabilities when considering whether the cost of a particular accommodation for certain persons with disabilities would be undue. The applicants refer to the Supreme Court's decision in the CCD v. VIA case wherein it submits that "This is not a fight between able-bodied and disabled persons to keep fares down by avoiding the expense of eliminating discrimination." The applicants further pointed to that part of the Supreme Court's decision wherein it states:

224 It has never been the case that all forms of disability are engaged when a particular one is said to raise an issue of discrimination. While there are undoubtedly related conceptual considerations involved, they may nonetheless call for completely different remedial considerations. A "reasonable accommodation", "undue hardship", or "undue obstacle" analysis is, necessarily, defined by who the complainant is, what the application is, what environment is being complained about, what remedial options are required, and what remedial options are reasonably available. Given the nature of the application before it, the Agency would have acted unreasonably in seeking representations about all conceivable forms of disability.

[757] The applicants submit that the carrier respondents' position, in arguing that the historical costs of accommodation are relevant, is that it is sufficient that only parts of their system need to be accessible such that it is not necessary for them to address obstacles relating to those persons with disabilities who require additional seating to travel by air. It is submitted by the applicants that such a position is contrary to the Supreme Court's determination in the CCD v. VIA case that the whole system must be accessible. Finally, the applicants assert that the fact that accommodations have been made for one person offers no special defence justifying discrimination against another. The applicants argue that, on the basis of the foregoing, the Ernst & Young and Siebert/Pask reports are completely irrelevant to the Agency's determination of the undueness of a 1P1F policy for the carrier respondents in the domestic market.

Agency analysis

[758] While the expert reports submitted by the carrier respondents disclose overall historical costs of accommodation for all persons with disabilities, they do not identify the component costs associated with providing services and facilities to persons with disabilities who require additional seating to accommodate their Attendants or themselves and who might be entitled to benefit from a 1P1F policy. In this regard, the Agency is of the opinion that these historical costs, which are largely mandated in respect of domestic air services pursuant to Part VII of the ATR, are only relevant to its adjudication of this case insofar as they are part of the carrier respondents' overall operating and fixed costs and insofar as the carrier respondents provide evidence of the impact of the additional cost of a 1P1F policy on their financial health. In addition to any operational constraints arising from a 1P1F policy, the Agency's determination of whether the cost of a 1P1F policy represents an undue obstacle to Air Canada and WestJet must be answered in the context of the economic and financial implications of this cost, and this is not determined by how much is already being spent on existing accommodation and accessibility services.

2. The carrier respondents' ability to absorb the cost of a 1P1F policy

[759] Evidence regarding the ability of the carrier respondents to absorb the cost of a 1P1F policy was provided in terms of the following:

  1. the cyclical nature of the domestic air industry;
  2. impact of a 1P1F policy on the carrier respondents' market capitalization; and
  3. impact of a 1P1F policy on the carrier respondents' gross revenues and credit ratings and cost of capital.
a) The cyclical nature of the domestic air industry

[760] The carrier respondents presented evidence indicating that the airline industry is cyclical in nature and that it is influenced by events outside of their control. As a result, they need to maintain strong control over costs.

[761] Mr. MacKay indicates that from 1998 to 2006, during his tenure as president and chief executive officer of the Air Transport Association of Canada, he observed the cyclical nature of the airline industry on a year-over-year basis, including:

  • a "very rapid growth" in airline passenger traffic throughout the latter part of the nineties, peaking in 2000 and early 2001;
  • a "very, very precipitous decline" beginning prior to September 11, 2001 and continuing through to the "SARS period", about a year and a half later; and
  • a "flattening out and then a gradual growth", which in the 12 months prior to November 2006 has accelerated to some degree.

[762] Mr. MacKay also described the cyclical nature of the airline industry on an annual basis in terms of:

  • a "peaking" of traffic in Canada in the summer period;
  • a "falling off" of traffic in the fall period;
  • "spikes" in traffic around Christmas; in January through early March, primarily in charter traffic; and in March for school break; and
  • a "trail off" until the summer break.

[763] Mr. MacKay states that the "absolute preoccupation" of the members of ATAC while he was president was the management of costs, given that the airline business model is such that there is no control over costs of air navigation services, fuel, airport services and ancillary costs associated with other government activities, such as immigration. Mr. MacKay adds that the labour market, a major input, is "very difficult".

[764] During cross-examination by counsel for the applicants, Mr. MacKay points out that the degree to which air carriers can set prices to meet costs is very difficult even in an "upside market" given that "any shock to the system, geopolitical or otherwise, throws the pricing model out very quickly." In this regard, and with respect to the prospect of "open skies" with the United States of America, Mr. MacKay acknowledges that this will be a boon for Canadian carriers if it is a "reciprocal reasonable business deal".

[765] Mr. Dunleavy submits that in years where the economy is strong and there are no major external disruptions, such as an outbreak of a communicable disease or illness, such as SARS, a major act of terrorism, such as that which occurred on September 11, 2001, or the war in Iraq, air carriers can make reasonable profits. With respect to WestJet's financial record of 31 consecutive quarters of profitability, Mr. Dunleavy submits that it is good relative to other air carriers.

[766] Mr. Dunleavy explained the relative impacts on legacy carriers and low cost carriers during a downturn of the world economy. Specifically, Mr. Dunleavy notes that if nothing is charged for a seat, demand will be maximized and the marketplace will be saturated eventually leading to a threshold at which point the fare levels lead to a dramatic drop in demand. In terms of the legacy carriers, Mr. Dunleavy explains that they have organizations and cost structures that rely on the ability to charge relatively high fares and that, during periods when the economy is strong, carriers increase their fleets to absorb capacity, but when the economy dramatically weakens, given the need to retain the same level of demand to cover the high fixed costs related to their aircraft, carriers are forced to significantly reduce fares. Mr. Dunleavy submits that this reflects the general problem faced by the aviation industry of achieving consistent and sustained profitability and explains why legacy carriers lurch from profitability to loss when the world economy cycle changes.

[767] Concerning the relative experience of low-cost carriers during a significant economic downturn, Mr. Dunleavy explains that because of their lower cost structure, such carriers are able to stimulate significant increases in demand as a result of their low fares. Mr. Dunleavy states that low-cost carriers are only required to implement a small fare decrease to maintain the same level of traffic.

[768] During cross-examination, Mr. Dunleavy noted, as a concern related to the long-term nature of a potential ruling by the Agency that WestJet is required to implement a 1P1F policy, that despite the fact that the current world economy and the "business motivation" are fairly strong such that traffic loads are good, such conditions are not sustainable in the long run. Mr. Dunleavy expresses the view that the economic cycle is typically seven to ten or eleven years in duration. He emphasizes his concern in terms of a situation where there is a massive downturn in the world economy leading to a very rapid disappearance of traffic, resulting in revenue losses but cost structures remaining.

[769] In terms of the above-noted cost structures, Mr. Dunleavy notes that purchasing and maintaining aircraft remains a very expensive business, such that the challenge occurs when there is a weak period where the traffic "simply disappears". Mr. Dunleavy cites, as an example, the events of September 11, 2001. In response to this, counsel for the applicants points out that WestJet has a business model that survived 2001 and the fuel crisis.

[770] Ms. Guillemette describes the market for air travel as extremely dynamic. She also suggests that events outside of Air Canada's control may impact the market and demand. As previously noted in paragraph 578, during cross-examination, when presented with Air Canada's 2005 annual report wherein it is stated that the carrier's business model is "robust and resilient [...] because the corporation's $258 million net profit was achieved despite soaring world crude prices that pushed our jet fuel costs by $592 million [...].", Ms. Guillemette states that this is not an indication that Air Canada can handle some fairly major cost increases, but, rather, a reflection of very stringent cost controls and other initiatives in terms of cost reduction, manpower and the introduction of a new business model for different ways of generating revenue.

[771] During cross-examination by counsel for the applicants, Dr. Tretheway expresses the opinion that, at the time, with fuel prices coming down, an economy that is doing reasonably well and the removal of capacity due to the withdrawal by Jetsgo and Canjet, Air Canada and WestJet are "kind of at the peak of their business cycle." Dr. Tretheway states that both carriers are enjoying the fact that capacity has been removed from the market. However, as previously noted, Dr. Tretheway states that it is likely that the economy will soften at some point in the future. Finally, Professor Lazar describes the air travel industry as being cyclically sensitive and fragile.

[772] In response to a suggestion that the discount model followed by WestJet and Air Canada's move away from a legacy cost model would improve the likelihood that the costs can be passed on to consumers, Mr. Crosson states during cross-examination by counsel for the applicants that he is not certain whether there is a relationship. Mr. Crosson expresses this same lack of certainty regarding the relationship between the steady increase in average domestic fares and the expectation, as put forth by Mr. MacKay, that this new trend is expected to continue, and an increased likelihood that costs could be passed on. Finally, Mr. Crosson also states that he could not see any relationship between "open skies", as referred to above, and an increased ability to pass on costs.

Agency analysis

[773] Although the Agency recognizes that the airline industry is, in some ways, particularly vulnerable to economic downturns, especially given its relatively high fixed costs and the leisure travel component of its business, the Agency is of the opinion that most businesses operate, to some degree, in a cyclical environment, and the fact that an entity operates in an industry which is cyclical is not determinative of the question of whether accommodation costs are undue. Further, the Agency is of the opinion that to simply state, as did Dr. Tretheway, that an economic downturn is, in and of itself, likely insufficient to demonstrate that the carriers, or any business entity for that matter, cannot incur a cost. What is required is to establish that the carriers cannot weather a future economic downturn. As such, the Agency finds the evidence provided by Dr. Tretheway and Messrs. MacKay and Dunleavy with respect to the historical ups and downs of the Canadian airline industry and the annual seasonality of demand to be of little assistance in determining the matter at hand.

[774] However, it is evident from recent history and from the carrier respondents' evidence, which the Agency accepts, that it is essential that carriers maintain strong control over costs to be able to react in the face of significant economic downturns in a way which sustains adequate levels of traffic and that the low-cost business model and stringent cost controls better enables carriers to do so.

[775] In light of the foregoing, the Agency finds that the evidence submitted by the carrier respondents regarding the cyclical nature of the airline industry, when considered together with the evidence regarding their enhanced ability to sustain significant negative economic events as a result of an increased focus on cost controls, failed to demonstrate that they would be unable to sustain the impact of a 1P1F policy.

[776] Moreover, the Agency finds Dr. Tretheway's assertion that Air Canada and WestJet are at the peak in their business cycle to be perhaps illustrative of favourable financial results and the positive economic environment in which the carriers currently operate. The Agency is of the opinion, however, that this is not indicative of the imminency or impact of a future decline in performance which should be given consideration. Indeed, as noted previously, the carrier respondents' own witness, Mr. MacKay, testified that air carriers have, for the first time in the better part of 15 years, been able to sustain fare increases which, in his view, have been the reason for some reasonable levels of profit for the first time in many years. He also noted that passenger loads have continued to grow. Furthermore, the Agency notes that WestJet has been able to survive and maintain, as a direct result of having adopted a low cost business model, 31 consecutive quarters of profitability during the significant economic downturns, which were precipitated by events such as the outbreak of SARS, the terrorist attacks on September 11, 2001, and the war in Iraq. Similarly, the Agency notes Ms. Guillemette's explanation of Air Canada's favourable financial performance in 2005 as being attributable to very stringent cost controls. In this regard, the Agency finds it reasonable to assume that Air Canada has, since its emergence from creditor protection, implemented measures to control costs to protect itself against unfavourable economic events and to be able to compete with low cost carriers.

b) Impact of a 1P1F policy on the market capitalization of Air Canada and WestJet

[777] Notwithstanding every opportunity to produce evidence on the implications of the cost of a 1P1F policy, the carrier respondents only decided to introduce evidence during the second week of the November 2006 hearing regarding the significance of the financial implications of a 1P1F policy. The introduction of this evidence followed concerns raised by the applicants that the carrier respondents had, to date, failed to produce such evidence. The Agency had previously decided not to order the carrier respondents to produce particular evidence regarding the financial impact of a 1P1F policy, but, rather, at their insistence, to allow them to decide what evidence they would file in order to make their case. The Agency agreed, however, that this type of evidence would be beneficial to the Agency's investigation provided that the carrier respondents could put it on the record in a manner which did not prejudice the applicants. With the Agency's consent, on November 22, 2006 the carrier respondents introduced a submission prepared by Mr. Crosson of Ernst & Young dated November 21, 2006, the purpose of which was expressed as providing "a range of indicative value factors, such that the Agency can assess the approximate value impact on Air Canada and WestJet of the adoption of a 1P1F policy Rule."

[778] Counsel for the carrier respondents explains that Mr. Crosson had been instructed to prepare it, based on the assumption that the cost of a 1P1F policy will not be passed on to consumers. Mr. Crosson notes several limitations of the submission, including the fact that the scope of the work was limited to a general consideration of the factors and approaches relevant to the assessment of the present value of a reduction in the annual pre-tax earnings of Air Canada and WestJet; the fact that a comprehensive industry study or investment return analysis was not conducted; the fact that the report is not a valuation report as that term is defined in "CICBV Standard 110"; and the fact that no attempt was made to assess the impact of a 1P1F policy on the market capitalization or share values of Air Canada and WestJet.

[779] The submission sets out two approaches for assessing the value impact on the carrier respondents: a "market approach" and an "income approach".

[780] The basis for a "market approach" is explained as the valuation of an asset or security based upon what investors are paying for similar assets or securities in the marketplace and the application of trading multiples derived from earnings or revenue measures to earnings which are adjusted for expenses such as taxes and interest. In this regard, the report concludes that the most appropriate trading multiple is the ratio of total enterprise value (TEV) to earnings before interest and taxes (EBIT). During cross-examination, Mr. Crosson explains that due to the volatility in individual companies' trading multiples, a broader range of multiples is taken from comparable companies in the same industry, meaning those companies that are operating and profitable. Mr. Crosson concludes that, for assessing the value impact of a 1P1F policy, considering the range of multiples exhibited by air carriers considered to be comparable to Air Canada and WestJet, "EBIT trading multiples" in the range of 11 to 13 times annual pre-tax costs of a 1P1F policy are appropriate.

[781] The "income approach" is stated to be based on the premise that the value of a security or asset is the present value of the future earning capacity attributable to the security or asset that is available for distribution to the investors. Mr. Crosson notes that the most commonly used "income approach" is a discounted cash flow analysis, which involves forecasting a cash flow stream over a period of time and then discounting it back to a present value at a discount rate. Mr. Crosson explains during examination-in-chief, that the "income approach" is also used to assess the impact on negative cash flows and, as such, can be used to assess the impact of the cost of a 1P1F policy. Mr. Crosson concludes that, for assessing the value impact of a 1P1F policy, income multiples in the range of 9 to 11 times the annual pre-tax costs of such a policy are appropriate.

[782] Mr. Crosson draws the overall conclusion that when considering both the market and the income approaches, the negative-value impact of the adoption of a 1P1F policy would be approximately 9 to 13 times the resulting annual pre-tax cost of a 1P1F policy. More specifically, Mr. Crosson concludes that for each $1 million of additional pre-tax cost attributable to a 1P1F policy, Air Canada and WestJet will experience an estimated present value loss of between $9 million and $13 million.

[783] Although he qualified his response by noting that he did not audit the application of the methodology reflected in the submission, Dr. Lewis agrees with counsel for the carrier respondents that the methodology used by Mr. Crosson was appropriate for estimating the impact of a 1P1F policy on the total enterprise value of the carriers, if it is assumed that the cost cannot be passed on to consumers. However, during examination-in-chief, Dr. Lewis states that his understanding of Mr. Crosson's submission is that it does not address any implications of the cost of a 1P1F policy for the commercial viability of the carriers.

[784] During cross-examination, Mr. Crosson agrees that the stated trading multiples do not assist in drawing conclusions about the economic viability of Air Canada or WestJet in light of the estimated revenue losses associated with the carrier respondents adopting a new 1P1F policy.

[785] When asked whether the submission suggests that the cost of a 1P1F policy will inevitably have an impact on the market capitalization of the carriers, Mr. Crosson asserts that even if it is not known whether the cost could be passed on to consumers, it is highly unlikely that the impact would be neutral. Mr. Crosson explains that the basis for his view in this regard is "General business knowledge and understanding of the impact of the imposition of costs on a commercial enterprise [...] any change in cost conditions for an enterprise has an impact on its business and on its value." With respect to the latter, however, Mr. Crosson states that he did not think that analysts' reports on Air Canada would have revealed the change in market capitalization of Air Canada when the scope of the discounts offered under its attendant fare policy was decreased from all applicable fares to just the full economy fares.

[786] Mr. Crosson submits, during cross-examination, that as part of the business valuation process, it is necessary to estimate the percentage of the related cost that is going to be passed on to consumers to assess the impact on a business value of a particular policy change. Specifically, Mr. Crosson states that if the task is to fully explore the impact of a 1P1F policy on airline value, while information within his expertise as a business valuator would need to be considered, consideration would also have to be given to what each of the carriers would do from a business standpoint. This includes whether, in the context of existing fare pricing models, fares would be changed. Mr. Crosson notes that the latter would include the work done by Professor Lazar with respect to price elasticities.

[787] Dr. Lewis applied the findings of the Ernst & Young submission in terms of market multipliers to his estimate of the cost of a 1P1F policy and assessed this value impact in the context of the daily changes in market capitalization of Air Canada and WestJet associated with the fluctuation in share prices.

[788] Using an estimated market capitalization for Air Canada of $18 billion, his estimate of $5.1 million for the cost of a 1P1F policy to Air Canada, and a trading multiple of 12, Dr. Lewis estimated that the present value impact on Air Canada of adopting a 1P1F policy is $61 million. Dr. Lewis concludes that assuming that none of the costs of a 1P1F policy are passed on to consumers, the present value impact on Air Canada of implementing a 1P1F policy would equate to a decrease in the market value of the company of 0.3 percent ($61 million ÷ $18.0 billion).

[789] Dr. Lewis submits, based on a study of Class A common shares held by ACE Aviation Holdings Inc. (hereinafter ACE) over a three-month period, that Air Canada's market capitalization fluctuates on a daily basis by approximately 1.5 and 2 percent with a standard deviation of 1.3 percent. Dr. Lewis submits that the 0.3 percent decrease in value that he calculated would result from adopting a 1P1F policy, compared to 1.3 percent, is "so small, so tiny in comparison to market cap, that it would be [...] impossible for a statistician or a stock analyst to discern in their day-to-day fluctuation of the share price." Dr. Lewis also submits that, on this basis, the change in market capitalization represented by the cost of a 1P1F policy, if not passed on to consumers, would not be "material" as that concept is defined in terms of serious erosion of the commercial viability of a company.

[790] During cross-examination, Dr. Lewis expresses the opinion that if the percentage calculation of the impact on the market capitalization of the cost of a 1P1F policy is larger than the variance in the day-to-day value of the carriers' share prices, this would be considered to be discernable or measurable. Dr. Lewis also expresses the opinion that a percentage change of 2 to 3 percent would be discernable by the market or, in other words, would be "at least as great, if not greater than the variance due to day-to-day random or [...] expected fluctuations [...]" in share prices. Dr. Lewis clarifies that something can be measurable and discernable without being "material". Dr. Lewis emphasizes that apart from a situation in which something were to render a company at risk of bankruptcy, "where the line – short of that [...] is in my experience, a matter for the court in a regulatory matter."

[791] Later during cross-examination, Dr. Lewis agreed to a correction, specifically that Air Canada's market capitalization was in fact $1.8 billion as opposed to the $18 billion previously relied on by him to calculate the percentage impact on the company's value of a 1P1F policy. Dr. Lewis further agreed, given this, that the impact of an estimated $5 million cost of a 1P1F policy on Air Canada would be 3 percent of market capitalization, which he also agreed would be greater than "noise".

[792] During cross-examination, to a suggestion by counsel for the applicants that the concept of "noise" in the marketplace means things that are within the margin of error or invisible in terms of impact on stock prices, Mr. Crosson expressed the view that "noise" is generally all of the things that are happening in the background that make it difficult to see the particular impact of an event. Mr. Crosson stated that something in the area of 0.3 percent is not "noise" on the basis that it is definable and the impact can be estimated.

Agency analysis

[793] In terms of qualifying the impact of the cost of a 1P1F policy on Air Canada and WestJet, the Agency notes the assessment that Dr. Lewis, as the applicants' expert, presented. Dr. Lewis compared the estimated reduction in enterprise value from implementing a 1P1F policy with market noise to illustrate the significance of the impact of the cost of a 1P1F policy on the business values of the carrier respondents.

[794] Market noise is generally considered to be share price and volume fluctuations that are not reflective of overall market sentiment and can obscure market direction. Market noise includes small corrections and daily volatility, caused by random events which are not thought to have a sustained impact on the value of the enterprise. The Agency understands that Dr. Lewis has presented the context of market noise as a benchmark, indicating changes in enterprise value which occur on a daily basis and, as such, are of a magnitude which, by definition, can be considered non-threatening to the health of the organization.

[795] Specifically, Dr. Lewis calculated market noise based on the average daily high/low variation in share prices, expressed as a percentage of share price, and using a sample of ACE's Class A share data, collected in the three months preceding the November 2006 hearing.

[796] Dr. Lewis then compared market noise with the estimated reduction in the present value of Air Canada from implementing a 1P1F policy. Dr. Lewis calculated the reduction in the present value of Air Canada using a trading multiple of 12 and expressed the reduction as a percentage of the carrier's market capitalization. Although the Agency notes that Dr. Lewis submitted that the reduction in the present value of Air Canada resulting from a 1P1F policy should be calculated using the mid-point of the range of trading multiples submitted by Mr. Crosson (the range being from 9 to 13), Dr. Lewis used 12 for this value.

[797] The Agency notes that the carrier respondents did not question Dr. Lewis' approach for illustrating the impact of the cost of a 1P1F policy nor did they question the validity of the sample share data used by Dr. Lewis, including the size of the sample, the period of time represented by the sample, or the source of the sample, namely ACE shares. Despite an error in Dr. Lewis' calculation, the Agency further notes that the carrier respondents did not question whether the use of daily high/low variations in share prices provide an accurate representation of market noise, nor did they disagree with the use of the mid-point of the trading multiples submitted by Mr. Crosson, recognizing that Dr. Lewis ultimately used 12 as opposed to 11. More fundamentally, the carrier respondents did not disagree with Dr. Lewis' use of market noise as a valid context for assessing the significance of the cost of a 1P1F policy.

[798] The methodology proposed by Dr. Lewis for calculating market noise includes consideration of both the magnitude of high/low variations in share prices and the magnitude of the share price itself, during the selected sample period. However, given that market noise reflects random variations in share prices which are transitory in nature and which do not translate into sustained changes in share values, the Agency finds it inappropriate to express daily high/low variations in share prices as a percentage of share prices. Rather, the Agency is of the opinion that it is more appropriate to express market noise as the change in enterprise value, as expressed by the absolute dollar value of the daily high/low variations in market capitalization.

[799] In light of the foregoing, the Agency calculated the daily high/low variations in market capitalization in respect of the carriers' publicly-traded share classes using the daily high/low variations in trading prices, multiplied by the number of outstanding shares in each share class. The result for each share class was then aggregated to reflect the total in daily high/low variations in market capitalization for each of the carrier respondents. (See Appendix E for the share price data used by the Agency)

[800] Using the same three-month period used by Dr. Lewis in his value impact analysis (August 1, 2006 to October 31, 2006), the Agency determined that the daily high/low variations in Air Canada's market capitalization for this period tend to fall within the range of $16 million to $124 million.

[801] Using a trading multiple of 11, being the middle value in the range submitted by Mr. Crosson, the Agency estimates that the implementation of a 1P1F policy will have an impact of approximately $78 million ($7.1 million in annual net revenue losses x 11 market multiplier) on Air Canada's total enterprise value. As this value falls within the range of daily high/low variations in Air Canada's market capitalization as determined by the Agency, the analysis indicates that the impact of a 1P1F policy is indistinguishable from daily market fluctuations. Indeed, the analysis indicates that there are days on which market noise will have a greater impact on Air Canada's enterprise value than the implementation of a 1P1F policy.

[802] The Agency performed the same analysis for WestJet and found that the daily high/low variations in WestJet's market capitalization for the same period fall within the range of $10 million to $90 million. Again, using a trading multiple of 11, the Agency estimates that the implementation of a 1P1F policy will have an impact of approximately $25 million ($2.3 million in annual net revenue losses x 11 market multiplier) on WestJet's total enterprise value. The Agency notes the same conclusion for WestJet, specifically, that there are days on which random events, which manifest themselves as market noise, will have a greater impact on the carrier respondent's total enterprise value than the implementation of a 1P1F policy.

[803] Based on the foregoing, the Agency finds that the analysis presented by Dr. Lewis provides a useful and relevant context for assessing the significance of the impact of the cost of a 1P1F policy on the enterprise values of both Air Canada and WestJet. The Agency further notes that the impact of a 1P1F policy on the enterprise value of the carrier respondents is expected to fall within the range of variation in market capitalization associated with market "noise".

[804] The Agency notes that Mr. Crosson's submission states that it was prepared so that the Agency can assess the approximate value impact on the carriers of a 1P1F policy. While the evidence provided by carrier respondents reveals some steps taken to illustrate an approximate value impact of a 1P1F policy in terms of the reduction in their enterprise values, the carrier respondents provided no evidence to address the significance of the impact on them. More specifically, with respect to the impact of a 1P1F policy on the market capitalization of Air Canada and WestJet, although the evidence indicates that the impact of the cost of such a policy would be comparable to "noise", as expressed in terms of the daily fluctuations in the carrier respondents' share prices, the carrier respondents chose not to produce any evidence to demonstrate that the impact of the cost would be harmful to them, except in the most general of ways by stating that "any change in cost conditions for an enterprise has an impact on its business and on its value." In terms of their overall approach in making their case, counsel for the carrier respondents submitted in a September 27, 2006 submission that the expectation was not to offer an expert opinion regarding the carrier respondents' ability to incur costs, which counsel clarified during the hearing by submitting that this type of evidence "goes to the ultimate issue which the Panel must decide and they don't propose to tender such evidence." Counsel for the carrier respondents argued that to introduce opinion evidence to the effect that the carrier respondents would be unable to incur the cost of a 1P1F policy would usurp the jurisdiction of the Agency to determine the matter at hand. The Agency disagrees, however, with this position of the carrier respondents and emphasizes that the onus is entirely on the respondents to prove undue hardship.

[805] Again, while it is not necessary to demonstrate that the cost of accommodation would make the respondent unviable so as to prove undue hardship, it is necessary to produce evidence of the significance of the impact of the cost for the respondent to meet its burden of proof and demonstrate that the cost and the significance of its impact would be harmful to it to the point that it would be unreasonable, impracticable or impossible for it to provide the accommodation requested. Having taken the position that they would not introduce opinion evidence to the effect that the carrier respondents would be unable to incur the cost of a 1P1F policy, the Agency concludes that the carrier respondents failed to meet their burden of proof regarding the significance of the financial implications of a 1P1F policy.

c) Impact of a 1P1F policy on the carrier respondents' gross revenues, credit ratings and cost of capital

[806] In his July 21, 2006 report, Dr. Lewis examines the financial effects of a 1P1F policy to the carrier respondents in terms of foregone revenue and/or a corresponding increase in fares. In this regard, Dr. Lewis concludes that his estimates of the financial effects of a 1P1F policy would not constitute a material net burden on the carrier respondents' business performance; "materiality" being gauged by: (i) the potential decline in airline net revenue as a proportion of airline gross receipts; (ii) the market power of air carriers to avert such decline in revenue through increased fares to the travelling public without incurring market resistence; and (iii) the effect of a 1P1F policy on airline company credit ratings and cost of capital.

[807] In terms of the potential decline in net revenues attributable to a 1P1F policy, Dr. Lewis concludes that the decline in annual gross revenues for Air Canada, based on his estimate of a $5.1 million annual cost of a 1P1F policy, would be one-fifteenth of one percent (0.15 percent). He concludes that the comparable amount for WestJet would be one-nineteenth of one percent (0.19 percent), based on his estimate of a $2.2 million annual cost of a 1P1F policy to the carrier.

[808] Concerning the market power of air carriers to avert such a decline in revenue through increased fares to the travelling public without incurring market resistence, as previously noted in paragraph 581, Dr. Lewis expresses the opinion that, in terms of his estimate of the cost of a 1P1F policy being 30¢ to 40¢ on a $300 ticket, because it represents about a tenth of one percent, it is very unusual, based on his experience conducting econometric elasticity studies, for there to be statistical traction on the effect of a fare increase of that tiny magnitude. Dr. Lewis notes that fares rise and fall periodically by more than this for all sorts of other market reasons and asserts that the sheer smallness of increase in ticket prices is such that the cost of a 1P1F policy would not be discernable, statistically, in fare increases and there would be no statistically measurable or "documentable" shrinkage in passenger traffic.

[809] Further, Dr. Lewis expresses the opinion that lenders would regard the prospective impact of a 1P1F policy that is less than 0.2 percent of gross revenues as being "within the margin o[f] error in general revenue expectations and thus non-threatening to financial performance or to the air carriers' cost of capital." Dr. Lewis submits during examination-in-chief that, in his experience, an impact of 0.2 percent of gross revenues would not affect the pricing of debt capital or bond insurance, noting that "a change of 0.2 percent lies outside the band width [...] or accepted uncertainty that one would have to live with in any case in general." Dr. Lewis stated that he was giving his opinion in terms of his experience providing risk analysis and credit worthiness analysis for financial institutions that are considering opportunities which are heavily dependent on the quality of revenue forecasts. Finally, in terms of whether an impact of 0.2 percent of gross revenues would pose a threat to viability, Dr. Lewis notes that such an impact is "smaller than the kind of costs that I'm familiar with seeing as considered evidence of material financial harm or [...] of the need in the financial markets [...] to reprice debt."

[810] Mr. Crosson agreed with counsel for the applicants that an impact on gross revenues of 0.2 percent would be within the margin of error in terms of general revenue expectations, noting that he did not think that analysts projecting airline revenues would think that their projections are accurate to 0.2 percent.

[811] The carrier respondents did not provide specific evidence with respect to the question of the impact of a 1P1F policy on the carrier respondents' gross revenues, credit ratings and cost of capital. Rather, they made general statements regarding the financial health of the airline industry and the carriers themselves, which is reflected herein as it relates to the financial effects of a 1P1F policy.

[812] As previously noted, Mr. MacKay spoke to the health of the airline industry, stating that air carriers have, for the first time in the better part of 15 years, been able to sustain fare increases which, in his view, have been the reason for "some reasonable profit numbers for the first time in many, many years." Mr. MacKay also notes that passenger loads have continued to grow, but he emphasizes that, during his tenure at the ATAC, the preoccupation of the industry was the management of costs.

[813] In response to counsel for the applicants' characterization of WestJet's financial record of 31 consecutive quarters of profitability as being "incredible", Mr. Dunleavy comments that it is "good based on the reference points, which is [...] other air carrier participants."

[814] In reference to Air Canada's 2005 annual report wherein it is stated that the carrier's business model is "robust and resilient [...] because the corporation's $258 million net profit was achieved despite soaring world crude prices that pushed our jet fuel costs by $592 million [...].", Ms. Guillemette states that she did not agree with counsel for the applicants that Air Canada can handle some fairly major cost increases.

[815] During cross-examination by counsel for the applicants, Dr. Tretheway submits that carriers are not making an adequate rate of return on equity and that he is "not inclined to view Air Canada as being healthy when less than two years ago it liquidated all of the wealth of its shares and much of its debt." With respect to WestJet, Dr. Tretheway states that "WestJet has been very healthy in the past, but in the most recent business cycle, its performance is weakened, indeed its share price is much lower." Further, Dr. Tretheway states that, from his perspective, the health of an air carrier is to be assessed in the context of whether it would survive the next economic downturn that might coincide with another terrorism incident and, in this regard, expresses the view that the air carriers in Canada at the moment are not making an adequate return on equity to lead him to believe that they could attract sufficient financial capital to enable them to do that and survive the entire next business cycle.

Agency analysis

[816] The Agency accepts the proposition presented by Dr. Lewis that, through a comparison with gross revenues, it is possible to obtain an indication of the relative significance of the estimated annual net revenue losses attributable to a 1P1F policy. More specifically, the Agency accepts Dr. Lewis' submission, which was agreed to by Mr. Crosson, that an impact on gross revenues of 0.2 percent would be within the margin of error in terms of general revenue expectations. The Agency further accepts Dr. Lewis' submission, which was not contested by the carrier respondents, that a 0.2 percent decline in gross revenues would be less than that typically associated with evidence of material financial harm or of the need in financial markets to re-price debt.

[817] As previously set out in paragraph 667, the Agency has determined that the cost of a 1P1F policy to Air Canada is estimated to be $7.1 million in annual net revenue losses (before-tax) and the Agency notes that, in 2005, Air Canada reported passenger revenues of approximately $8.2 billion. Based on these figures, the Agency estimates a 0.09 percent decrease in Air Canada's passenger revenues from implementing a 1P1F policy domestically. For WestJet, the annual net revenue losses (before tax) are estimated to be $2.3 million, compared to "Guest Revenues" and "Charter and other Revenues" of $1.4 billion in 2005, such that the Agency estimates a 0.16 percent decrease in WestJet's passenger revenues from implementing a 1P1F policy domestically. As such, the revenue losses to the carrier respondents from implementing a 1P1F policy would be less than 0.2 percent of their passenger revenues.

[818] In light of the foregoing, the Agency is of the opinion that in terms of the Air Canada's and WestJet's gross passenger revenues, the cost of a 1P1F policy would not be material when considered in the context of the implications for credit ratings and reaction by the financial markets, as the impacts for both carriers would be within the margin of error in terms of general revenue expectations.

Agency conclusion on undue hardship of the financial implications of a 1P1F policy

[819] The applicants, in their submissions regarding the Supreme Court's decision in the CCD v. VIA case, note that the Supreme Court stated that the threshold of undue hardship is not mere efficiency and that, ultimately, the bottom line in relying on costs is the demonstration of substantial interference with a service provider's enterprise. The applicants assert that a respondent relying on a cost defence will be expected to prove that the accommodation would threaten its survival or alter its essential character. They further assert that a service provider's capacity to shift and recover costs throughout its operation will lessen the likelihood that undue hardship will be established. In making these assertions, the applicants state that, in essence, the Court adopted the statements made in the Ontario Human Rights Commission's "Policy and Guidelines on Disability and the Duty to Accommodate". Finally, the applicants state that, despite having ample opportunity to do so, the respondents did not produce any evidence to suggest that the principle of 1P1F would cause a substantial interference with their business, particularly when the ability to shift any associated expenses throughout the whole of the business enterprise is considered.

[820] The carrier respondents, in their submission regarding the Supreme Court's decision in the CCD v. VIA case, state that they take "the strongest exception" to the proposal that undueness is reached only when all reasonable means of accommodation are exhausted and costs would threaten the survival or essential character of the enterprise. The carrier respondents disagree with the applicants' proposition that the Supreme Court of Canada has adopted the principles set out in the Ontario Human Rights Commission's "Policy and Guidelines on Disability and the Duty to Accommodate".

[821] The Agency has considered the foregoing submissions of the parties and is of the opinion that undue hardship relating to a cost constraint can be demonstrated by a respondent in the absence of demonstrating that the cost would render the respondent unviable. Notwithstanding, if a respondent demonstrates that the cost of accommodation would threaten its viability or that it would be impossible for the respondent to absorb the cost, then the cost would almost certainly be found to constitute undue hardship. Further, the Agency agrees with the carrier respondents that the threshold for undueness is not when all reasonable means of accommodation are exhausted and costs would threaten the survival or essential character of an enterprise. This said, to meet its burden of proof, a respondent is required to produce evidence to demonstrate the significance of the impact of a cost and, further, to demonstrate that the cost would constitute undue hardship, the respondent must demonstrate that the cost and the significance of its impact would be harmful to it to the point that it would be unreasonable, impracticable or impossible for it to provide the accommodation requested.

[822] As set out above, the Agency has determined that although the carrier respondents argue that they would incur disproportionately higher operating costs if they were to implement a 1P1F policy and provided reports detailing historical costs of accommodation, the carrier respondents failed in two respects:

  • to specifically identify those costs relevant to the target population of persons with disabilities that is affected by the Agency's determination in this matter, and
  • to specifically identify the impact of the foregoing costs on them.

[823] As such, the Agency rejects these historical costs as being irrelevant to its examination of the financial implications of a 1P1F policy on the carrier respondents.

[824] Concerning the carrier respondents' ability to absorb the cost of a 1P1F policy, the Agency has determined, in its examination of the cyclical nature of the domestic air industry, that the evidence submitted by the carrier respondents regarding the cyclical nature of the airline industry, when considered together with the evidence regarding their enhanced ability to sustain significant negative economic events as a result of increased focus on cost controls, failed to demonstrate that the impact of a 1P1F policy on the carrier respondents would be harmful to them to the point that it would be unreasonable, impracticable or impossible for them to provide the accommodation requested.

[825] In terms of their overall approach in making their case, counsel for the carrier respondents submitted in a September 27, 2006 submission that the expectation was not to offer an expert opinion regarding the carrier respondents' ability to incur costs, which counsel clarified during the hearing by submitting that this type of evidence "goes to the ultimate issue which the Panel must decide and they don't propose to tender such evidence."

[826] Counsel for the carrier respondents argued that to introduce opinion evidence to the effect that the carrier respondents would be unable to incur the cost of a 1P1F policy would usurp the jurisdiction of the Agency to determine the matter at hand. The Agency disagrees, however, with this position of the carrier respondents and emphasizes that the onus is entirely on the respondents to prove undue hardship. Again, while it is not necessary to demonstrate that the cost of accommodation would make the respondent unviable, it is necessary to produce evidence of the significance of the impact of the cost for the respondent to meet its burden of proof and demonstrate that the cost and the significance of its impact would be harmful to it to the point that it would be unreasonable, impracticable or impossible for it to provide the accommodation requested. Having taken the position that they would not introduce opinion evidence, the carrier respondents failed to meet their burden of proof regarding the significance of the financial implications of a 1P1F policy.

[827] More specifically, with respect to the impact of a 1P1F policy on the market capitalization of Air Canada and WestJet, although the evidence indicates that the impact of the cost of such a policy would be comparable to "noise" as expressed in terms of the daily fluctuations in the carrier respondents' share prices, the carrier respondents chose not to produce any evidence to demonstrate that the impact of the cost would be harmful to them except in the most general of ways by stating that "any change in cost conditions for an enterprise has an impact on its business and on its value."

[828] In terms of the impact of a 1P1F policy on the carrier respondents' gross revenues and credit ratings and cost of capital, as noted above, the Agency accepts Dr. Lewis' submission, which was agreed to by Mr. Crosson, that an impact on gross revenues of 0.2 percent would be within the margin of error in terms of general revenue expectations. The Agency also accepts Dr. Lewis' submission, which was not contested by the carrier respondents, that a 0.2 percent decline in gross revenues would be less than that typically associated with evidence of material financial harm or of the need in financial markets to re-price debt. In light of the fact that the estimated annual net after-tax cost of a 1P1F policy calculated by the Agency represents less than a 0.2 percent decline in the carrier respondents' gross revenues, the Agency concludes that the cost of a 1P1F policy would not be material in terms of implications for credit ratings and reactions by the financial markets.

Agency conclusion on cost constraints

[829] In light of the foregoing, the Agency concludes that both Air Canada and WestJet have failed to demonstrate that the cost constraints that they have raised and presented in terms of the economic and financial implications of a 1P1F policy in the domestic market and that have been considered by the Agency in this Decision constitute undue hardship to them. Accordingly, the Agency finds that the cost constraints raised do not, on the basis of the evidence provided, constitute undue hardship.

Operational constraints

[830] The carrier respondents have raised the argument that it is impossible to have an effective screening mechanism for the determination of eligibility for a benefit under a 1P1F policy for two categories of persons with disabilities:

  • those who request an additional seat to accommodate an Attendant; and
  • those who request an additional seat to accommodate themselves due to obesity.

[831] As different submissions were made on each category, the Agency will consider each category separately.

A. The determination of eligibility for persons with disabilities who require an attendant

Carrier respondents' position

[832] As previously set out in paragraphs 279 to 281 above as to the impact of abuse on Incidence Factor 1 for this target population of persons with disabilities, the carrier respondents assert that "an effective screening process is not possible".

[833] Dr. Bekeris, Air Canada's Senior Medical Officer and the acting Senior Director of Occupational Health Services, testified about Air Canada's current screening process by which persons with disabilities are currently assessed for fitness to and conditions of travel. He described Meda Desk as a specialized group of customer service agents at the reservations office that work with persons with disabilities to accommodate their needs. Meda Desk agents collect medical data from persons with disabilities and their medical providers using the Fitness for Air Travel form, and once this form is completed, it is then forwarded to Dr. Bekeris' group, Occupational Health Services, where it is assessed by physicians and/or occupational health nurses. Occupational Health Services may require more information and may communicate directly with the medical provider to get more insight and/or understand the circumstances, before making its determination whether the person is fit to travel and if so, whether conditions should be imposed for travel. Dr. Bekeris indicates that his staff sometimes reach a conclusion that is different from the person's medical provider's advice and, while his staff will speak to the medical provider to try to reconcile their differences, his group's determination will prevail if it has been determined to be in the interests of safety. The decision of his group is forwarded back to Meda Desk which is responsible for conveying the decision to the person with a disability as well as for making whatever arrangements are necessary in terms of booking accommodation.

[834] In the case of Attendants, Dr. Bekeris indicates that persons with disabilities may need to travel with an Attendant for one of three reasons:

  • for medical reasons, such as where a medical action, therapy or intervention is required, including monitoring;
  • for safety reasons, where persons cannot meet their physical needs in the event of an emergency evacuation or decompression; and
  • for personal care reasons, where persons cannot meet their own personal care needs, such as eating, taking medication and using the toilet.

[835] He asserts that his office will determine the need for an Attendant in the first two instances and can make determinations that a person requires an Attendant, contrary to the advice of the person's medical provider. He also indicates that while it is possible that his office could contradict an expressed need for an Attendant where it is for medical reasons, he could not recall a case where they had done so. On the other hand, he claims that his office is unable to assess passengers who claim to need Attendants for personal reasons. He states that the need for an Attendant to assist with meals, taking oral medication and using the toilet is not assessed and cannot be objectified medically. He adds that he does not typically see the person being assessed, and that conclusions are made on the basis of the medical data provided by the person's medical provider.

[836] By way of example, Dr. Bekeris referred to passengers who use wheelchairs or who are blind. If these persons declared a need for an Attendant to meet personal needs, they would not normally require a medical note to confirm that need, and Dr. Bekeris states that he would not be in a position to contradict their expressed need. Employee witnesses Juliane Lambert for Air Canada and Lisa Puchala for WestJet agree that they would not be able to contradict an expressed need for an Attendant by persons from either of these groups; however, they acknowledge that most persons who use wheelchairs or who are blind are self-reliant and travel independently, without an Attendant.

[837] Dr. Bekeris states that the level of self-reliance of, for example, persons who use wheelchairs and persons who are blind are "matters that are not determined medically, but are determined functionally somehow." He went on to express the opinion that these types of functional assessments are very involved and time-consuming, that the current screening process used by Air Canada would not be able to ensure that only people who legitimately need an Attendant would be eligible, and that they could not perform this function.

[838] In response to an undertaking given at the November 2006 hearing to provide the number of Attendants approved by the medical office, Dr. Bekeris produced records for 2005 which showed that of the 3,074 medical clearances that were processed by his group that year:

  • 368 requests for medical clearance were accepted with modification;
  • 98 requests for medical clearance were rejected; and
  • 1,224 requests for clearance for Attendants were accepted.

[839] Counsel for the carrier respondents explains, however, that, with respect to clearances for Attendants, "no clearance is necessary for persons who meet the examples of non-self reliant persons set out in the tariffs."

[840] Counsel for the carrier respondents submits, during final oral argument, that a functional assessment would be required for persons with disabilities who claim the need for Attendants and that, according to some examples from Canadian courts, these assessments are difficult and controversial. He also refers again to the potential consequences of a wrong assessment. In this regard, the carrier respondents refer to Dr. Lewis' testimony wherein he expresses the view that the responsibility for making a decision about whether someone needs an Attendant should not be left to one person because of the moral dilemma of the employee being responsible for the loss of human life should the person's choice to travel with an attendant or companion be denied.

Applicants' position

[841] The applicants' position is that, contrary to the carrier respondents' assertions, effective screening mechanisms are currently in use in the transit sector, and it is possible to develop and implement a proper one such that a 1P1F policy could be adequately administered. The applicants refer to the evidence of Dr. Lewis who submitted that access to a benefit created by a 1P1F policy is a controllable situation as evidenced by the existence of monitoring processes in numerous transit systems all over the country and in the United States.

[842] Counsel for the applicants expresses the opinion that as the carrier respondents will set the standard, administer the procedure and police the tariff, it would not be an impossible policy for the carrier respondents to administer because, as he puts it, "It's not like disabled people rule the world". By way of example, he refers to Dr. Lewis' suggestion that by starting with Ms. Furrie's 1.5 percent of all Canadian adults with disabilities living in households who require an attendant on a full time basis, it would be very easy to establish objective, documented proof of need for an Attendant for this subgroup of the population.

[843] The applicants assert that this position is also supported by the fact that Air Canada already has a mechanism in place that is used to assist in the screening of persons with disabilities for, among other things, fitness to travel, and the need to travel with an Attendant including eligibility for the 50-percent Attendant fare reduction. They note that, contrary to Dr. Bekeris' testimony that the carrier respondents could not say no to requests from persons with disabilities who say they require Attendants, Dr Bekeris' evidence regarding medical clearances from his department indicate that they rejected the self-determination of 98 people in one year. In addition, Ms. Lambert's testimony confirms that the Meda Desk may require person with disabilities to undergo an assessment and that they do in fact assess persons with disabilities to determine whether they are fit to travel, self-reliant, or non-self reliant and require an Attendant to travel by air.

[844] The applicants also refer to the fact that although WestJet does not have a fare discount for persons who require Attendants, they do have a mechanism in place for the assessment of persons with disabilities, to assess factors such as self-reliance and fitness to travel.

[845] In response to the carrier respondents' argument that they could not control eligibility, the applicants emphasize that there was no evidence presented that Air Canada was overwhelmed with demand when there was an unrestricted 50-percent fare reduction for Attendants, and they express the view that if there was such evidence, the carrier respondents would have brought it forward.

[846] Finally, in support of their position that the carrier respondents can restrict and control eligibility, the applicants refer to a document entitled "Comments of Air Canada and Air Canada Jazz to the U.S. Department of Transportation Office of the Secretary, on the US Notice of Proposed Rulemaking - Nondiscrimination on the Basis of Disability in Air Travel", dated March 4, 2005. The applicants submit that those comments demonstrate that Air Canada is opposed to the removal of limits on the number of passengers with disabilities who may travel on their flights, and the imposition of the right to self-determination as an absolute right. The applicants point out that the carrier respondents specifically stated in this document: "While passengers generally can best determine whether they can be self-reliant during a flight, there may be situations in which the carrier is concerned about or disagrees with that determination." The applicants indicate that as Air Canada wanted to continue to be part of the determination process, this confirmed and demonstrated Air Canada's acceptance that the determination is not left solely to persons with disabilities to decide.

[847] Similarly, WestJet submitted comments on this subject wherein it objected to the proposal that it would be prohibited from limiting the number of persons with disabilities per flight and that it would be prohibited from requesting a medical certificate if there is a belief that medical assistance may be required during the flight. WestJet also submitted that it should be permitted to make determinations on a case-by-case basis whether persons with disabilities require an Attendant for either personal care reasons or safety-related reasons.

Agency analysis

[848] The Agency has already determined in paragraphs 320 to 330 above that it is possible for the carrier respondents to eliminate abuse through the proper identification of those persons with disabilities who are required, under the terms of the carrier respondents' tariffs, to travel with an Attendant so that certain essential safety and personal care needs can be met in-flight, as distinct from other persons, with disabilities or not, who want to travel with a family member or friend as a companion as a matter of personal preference. Accordingly, this section is limited to the Agency's consideration of the arguments related to the feasibility of an effective screening mechanism to permit this proper identification process to occur.

[849] The Agency is of the opinion that the carrier respondents' position that an effective screening process is not possible is, on the face of it, unreasonable. Eligibility screening mechanisms are common in our society, and there is no doubt that persons with disabilities are subject to assessments for a wide variety of purposes, including the establishment of eligibility for financial and other benefits in many contexts such as income tax, income security and public transit.

[850] The Agency notes that the carrier respondents' expert, Professor Lazar, acknowledged on cross-examination, that if the airlines determine who is eligible, they are "going to greatly restrict the numbers and the numbers at the end of the day would be extremely small and whatever cost there might be for the airlines would be quite small, probably much smaller than the cost of challenging this". Although he discussed the difficulty of drawing the line the next day, his original position clearly contradicts the carrier respondents' position that they cannot assess the need for an Attendant and eligibility to a benefit under a 1P1F policy.

[851] It is clear from the evidence that the carrier respondents can and do assess persons with disabilities for purposes such as establishing fitness to travel, determining self-reliance and assessing the necessity of conditions to travel. Both carrier respondents already have screening processes in place: Air Canada uses its Meda Desk while WestJet uses Medlink. In the course of fulfilling this function, the evidence established that the carrier respondents can and do take positions that are contrary to the person's self-declared needs and which, in some cases, may also be contrary to the advice of the person's medical care provider. This is consistent with the Agency's past experience with this function, as reflected in previous decisions under section 172 of the CTA (Decision Nos. 604-AT-A-2006, 647-AT-A-2006 and 684-AT-A-2006).

[852] While the right to self-determination, that is the ability to identify one's own circumstances and needs, is considered to be an important principle of accessibility and fundamental to respect that persons with disabilities should be afforded in society, this, like the other principles of accessibility, is not an absolute. The Agency has long accepted that carriers must have the right to ultimately substitute their own assessments of disability-related needs for that of the person with a disability, where appropriate, and provided that this is done only after a proper consultative process is completed.

[853] Furthermore, the Agency agrees with the applicants that, contrary to the carrier respondents' claim that they do not and cannot restrict the number of persons with disabilities on flights, the carrier respondents' tariffs reflect guidance issued by Transport Canada which recommends that limits on the number of persons with disabilities per flight by disability and aircraft type be enforced for safety purposes.

[854] The Agency also notes Air Canada's comments to the US DOT proposed extension of the following American rules to its operations, which clearly support the reasonableness of the Agency's above conclusions:

  • 14 CFR 382.17, which provides that "a carrier may not limit the number of disabled persons to be transported on any given flight" - in response, Air Canada notes that "Canada's civil aviation authority and several of the Department's other sister aviation agencies" do limit the number of passengers with reduced mobility who may be carried on any particular flight for safety reasons and submits that DOT "cannot usurp the primary safety oversight functions exercised by other civil aviation authorities";
  • 14 CFR 382.21 and 14 CFR 382.23, which would "limit quite sharply a carrier's right to request a medical certificate from its passengers, and would not seem to permit carriers to question any of the determinations made in such certificates" - in response, Air Canada notes that questions about medical certificates can and do arise, and that carriers should be "permitted to ask specific questions about a passenger's ability to handle conditions they might encounter on a particular flight" with a view to permitting the carriers to "satisfy themselves of the passenger's fitness to fly, or self-reliance during flight", perhaps by seeking "further medical evidence via its own medical advisers";
  • 14 CFR 382.29, which reflects that "it is always the passenger's choice as to whether he/she will require ‘assistance with personal function or activities', and carriers never can require passengers to have attendants to help with such functions. Carriers may only require passengers to travel with an assistant only if that assistance is ‘essential for safety'." - in response, Air Canada asserts that "there have been cases in which the carrier has legitimately disagreed with a self-determination [...]. In such cases, carriers are within their rights to require that such passengers travel with a safety assistant [...]. With regard to personal functions, [...] in such rare cases (where a carrier disagrees with a self-determination of self-reliance) the carrier should be permitted to require that a companion travel with the passenger."

[855] The Agency notes that Air Canada's comments reflect the Agency's understanding, based on its previous adjudications, of the reality of these issues (i.e., that air carriers can limit the number of persons with disabilities on any flight, and can and do contradict the self-determination of persons with disabilities, including where supported by medical evidence, as appropriate). The Agency also notes that the carrier respondents have now taken a position in this proceeding that is contrary to this reality.

[856] While counsel for the carrier respondents submitted during final oral argument that the functional assessments that would be required for persons with disabilities who claim the need for Attendants are regarded as "difficult and controversial", no evidence was provided to support this statement. He also referred to the potential consequences of a wrong assessment and Dr. Lewis' testimony wherein he expressed the view that the responsibility for making a decision about whether someone needs an Attendant should not be left to one person because of the moral dilemma of the employee being responsible for the loss of human life should the person's choice to travel with an attendant or companion be denied.

[857] While the Agency acknowledges that assessments of fitness to and conditions of travel may, in some cases, be difficult and even controversial, especially in cases where the assessment by a carrier respondent differs from that of a person with a disability or his/her medical practitioner, this, in and of itself, does not substantiate the unreasonableness, the impracticability or the impossibility of creating or modifying screening and assessment processes to assess, in an effective and sensitive manner, the need for a person with a disability to travel with an Attendant.

[858] With respect to the carrier respondents' argument that they cannot deny a person's choice to travel with an attendant or companion, considering the potential consequences of such a denial, the Agency also does not accept this argument. The Agency does not call into question a person's right to self-determination as well as that person's choice to travel with a companion; however, this right does not automatically result in a right to benefit economically from a 1P1F policy. It is again important to emphasize that the Agency defines Attendant for the purposes of this proceeding in accordance with the carrier respondents' tariff provisions as being a person required, pursuant to the carrier respondents' tariffs, to travel with a person with a disability for specific and clearly defined reasons related to self care and/or safety, and does not include travel companions, family members, or friends travelling with persons for other personal reasons. This Decision is not to be interpreted as expanding eligibility over and above the criteria currently in place in the tariffs for determining a need for an Attendant.

[859] The Agency notes the testimony of Dr. Lewis regarding the feasibility of establishing effective eligibility screening mechanisms, and accepts that there are experts in this field who specialize in the development of functional assessments that would maintain the dignity of person with disabilities and at the same time serve the carrier respondents' purpose of screening for eligibility. In fact, the carrier respondents did not deny that this expertise exists and there is no concrete evidence before the Agency that would indicate otherwise. The Agency notes Dr. Lewis' opinion that the functional limitations that would lead a person with a disability to be required to travel with an Attendant, such as the inability to independently take medication, eat and use the toilet, are easier to administer than the criteria being applied in the transit industry. The Agency notes that the carrier respondents already have mechanisms in place and experience in this type of screening, albeit for different purposes. The Agency is of the opinion that, with the proper expertise, this mechanism could be built upon and refined to perform this function.

Agency conclusion on undue hardship of the determination of eligibility for persons with disabilities who require an Attendant

[860] While Dr. Lewis acknowledged that it may be difficult to find an objective test, he is of the opinion that it can be done, particularly with the appropriate outside expertise. Based on the evidence presented to the Agency, the Agency accepts his opinion as reasonable. The fact that the carriers do not conduct this type of assessment at this time does not mean that they cannot do so in the future. The Agency concludes that the carrier respondents failed to demonstrate, on a balance of probabilities, that there are operational constraints preventing them from operationalizing the application of a 1P1F policy in respect of the category of persons with disabilities who are required, by the carrier respondents' tariffs, to travel with an Attendant.

B. The determination of eligibility for persons who are disabled by obesity

Carrier respondents' position

[861] Both carrier respondents assert that a 1P1F policy for persons who are disabled by obesity will be impossible to administer. They indicate that although they provide ad hoc accommodation to this category of persons with disabilities at the airport on the day of travel, where load factors permit, it is unreasonable to expect that they could put in place a screening mechanism that would operate on anything other than an ad hoc basis.

[862] The carrier respondents also assert that screening persons who are obese for "fit" into an aircraft seat to determine if they are disabled by obesity is untenable, as it is impossible to apply an objective test for fit and comfort. On the contrary, they submit that this test is, by its very nature, subjective.

[863] Many people will complain about lack of comfort in an aircraft seat and Professor Katzmarzyk notes that in Professor Allison's study, the complaints about lack of comfort extended to people of normal weight. As both obese and non-obese persons may express discomfort, the carrier respondents submit that their ability to deny someone's claim for an extra comfort seat will be closely related to the plausibility of the person's complaint of lack of comfort or of pain.

[864] The carrier respondents emphasize the importance of discomfort or pain in the determination of "fit" and assert that the concept of "fit" will be very problematic, given that all of the subjects in Professor Allison's project could "fit" in the seat. Counsel submits that the fact that Ms. McKay-Panos did not fit in the seat means that she could not use that seat with an acceptable level of comfort, which, in his submission, leads to the difficult and subjective area of determining what is an acceptable level of comfort, or an acceptable level of pain.

[865] The carrier respondents note that, during cross-examination, Ms. Ringaert, expert for the intervener, agreed with the proposition that respect must be given for the self-determination of the person in question, as pain is a subjective experience. The carrier respondents add that they are not in a position to contradict a person's experience of pain. The carrier respondents submit that both Professor Katzmarzyk and Dr. Bekeris were in agreement that there is no way to negate a report of discomfort.

[866] This position, the carrier respondents assert, is further complicated by the fact that it is not a matter of sitting for 15 minutes either; it is a matter of sitting for three or more hours on a domestic flight. The carrier respondents emphasized that the conflict with the seat can only be expected to become greater as the journey progresses.

[867] Finally, the carrier respondents submit that the use of the "armrest test" as measure of "fit" is "completely unworkable", and they assert that the intervener's expert, Ms. Ringaert, admitted as much when she agreed that the problems of subjectivity will arise again if it is the passenger who decides whether the armrest can go down.

Applicants' position

[868] The applicants assert that the test for operationalizing the application of 1P1F policy for persons who are obese and may not fit in a seat has to be objective and that this type of test is feasible, as evidenced by the "armrest test" used by Southwest Airlines. The applicants submit that this test is not based on what people feel, but is administered by a major air carrier in the United States, with no apparent problems. The applicants assert that the carrier respondents' expert Professor Allison agrees with this proposition when he acknowledged that it is the most objective test that he has heard of and that he could not come up with something more objective.

Intervener's position

[869] Counsel for the intervener asserts that the carrier respondents' focus on the notion of comfort or discomfort in a seat is problematic because the concept of comfort is "nebulous". In her view, the notion of comfort is irrelevant because very few people are comfortable sitting in an aircraft seat regardless of their body stature or whether they are obese. Rather, counsel for the intervener notes that the "definitive gauge" for a customer of size under the Southwest Airlines policy is whether the armrests can be lowered.

[870] When asking the question of whether an individual fits into a seat, Ms. Ringaert asserts that one must take into account the sensations felt by the individual in that seat and respect the individual's declaration. The act of a person sitting in a seat and lowering the armrest is one measure, but she questioned whether it was the full measure. She identified other factors to be taken into consideration when assessing comfort in respect of an airline seat, including whether there are levels of pain being experienced, whether parts of the body are in the aisle, whether there is a good base of support under the buttocks, and whether the person can put on his or her seatbelt.

Agency analysis

[871] The Agency acknowledges the problems with the objectification of notions such as comfort and discomfort as evidenced by the results of Professor Allison's dynamic anthropometric study, as detailed in his third report, which showed:

  • a higher percentage of people who are not obese reporting severe discomfort in some aircraft seats than did the people who were obese, and
  • all subjects, regardless of BMI and girth measurements that appear to clearly exceed the dimensions of the seats, reported as being able to sit in the seat.

[872] These results support the proposition that "fit" cannot be equated with "comfort".

[873] Professor Katzmarzyk indicates that he is aware of ergonomic approaches that would have provided a more objective measure of comfort, such as the electrodes and pressure monitors used to measure comfort with backpacks and wheelchairs. Professor Katzmarzyk also makes the important point that, in the absence of obesity and dimensions that exceed those of seat, asking whether a person is in pain is not relevant as that person will not fall within the target population of persons disabled by obesity, and the expressed pain could be assumed to arise for another reason.

[874] As recognized by the Agency in the Calgary Decision, obesity per se is not a disability for purposes of Part V of the CTA. Having said that, as in other cases of disability, there may be some instances where it will be obvious through the carrier's initial screening process that a person who is disabled by obesity will not be able to fit in the aircraft seat used by the carrier such that the person, after being assessed, can be accommodated at reservation. However, the nature of this disability is such that an individual assessment of the person's ability to fit in the aircraft seat may be required; in particular, where a person's inability to fit in an aircraft seat used on the flight in question is not obvious, there will be a need to assess that individual in the aircraft seat to determine eligibility.

[875] It is apparent to the Agency from the results detailed in Professor Allison's third report that the assessment of the more subjective notion of "comfort" is fraught with difficulty, resulting in an apparent under-reporting of "fit" problems, which led to the decision to rely only on the observers' assessment of "fit", and the dramatic over-reporting of "comfort" problems by subjects who were not obese and for whom there was no question that they "fit" in the aircraft seats.

[876] However, the evidence regarding the experience of Southwest Airlines is clear and straightforward that an objective test is possible. Furthermore, the Agency has already determined, at paragraph 394 above, that this is evidence which must be considered carefully and given considerable weight by the Agency in this proceeding in the balancing of the opinions and assumptions presented by the other experts, and this is particularly true in this instance where Southwest Airlines is the only major carrier in North America that has experience with the administration of a test for the assessment of "fit" in an aircraft seat to determine eligibility for a financial benefit. The very fact that Southwest Airlines personnel administer this armrest test on the day of travel to determine eligibility for accommodation contradicts the carrier respondents' position that this test is unworkable. There is no doubt that this is the best evidence that the Agency has before it and the closest thing to a dynamic anthropometric study that even mimics some of the other conditions, such as an increased incentive to declare eligibility given the considerable financial benefit available under Southwest Airlines's 1P1F policy. The fact that this evidence was produced by way of an agreed statement of fact signed by both the applicants and the carrier respondents supports the Agency's use of this evidence as uncontroverted. Accordingly, in the absence of evidence to the contrary, the Agency accepts that the evidence detailing the operationalization of a 1P1F policy for Southwest Airlines does support the proposition that the operational constraints raised by the carrier respondents can be overcome.

Agency conclusion on undue hardship of the determination of eligibility for persons who are disabled by obesity

[877] The Agency is of the opinion that the difficulties in administering an objective test can be overcome, as illustrated by the evidence presented to the Agency by way of an Agreed Statement of Facts Concerning South West Airlines' Customer of Size Policy. The Agency concludes that the carrier respondents failed to demonstrate, on a balance of probabilities, that there are operational constraints preventing them from operationalizing the application of a 1P1F policy in respect of the category of persons who are disabled by obesity.

Agency conclusion on operational constraints

[878] Both carrier respondents raised operational constraints related to their ability to disqualify persons with disabilities from receiving a benefit under a 1P1F policy. However, as was pointed out by the applicants, the proper analysis asks the question of how to properly assess eligibility for a benefit under this policy. The evidence before the Agency, particularly that of Dr. Lewis, clearly establishes that these constraints can be addressed effectively and efficiently with some effort on the part of the carrier respondents through the development and use of a professional eligibility criteria screening process for persons with disabilities who require an Attendant to travel by air or who are disabled by obesity.

[879] While the Agency recognizes that the carriers' current assessment systems do not presently address the screening of persons who may be disabled by obesity and that the assessment process in these cases will be more complex, the experience of Southwest Airlines would support the proposition that this complexity can be addressed with the development and sensitive implementation of a test, such as the armrest test used by Southwest Airlines. While the Agency does not intend to dictate to the carrier respondents the means by which they should assess eligibility, it is apparent to the Agency that there are reasonable and practicable means to do so. An assessment process that may include an initial medical assessment coupled with possibly an objective screening test such as that used by Southwest Airlines may be perceived by persons who are obese as being onerous and difficult. However, the Agency is of the opinion that this type of assessment provides objectivity to this assessment and is reasonable given the financial benefit that would be available under a 1P1F policy.

[880] Although the carrier respondents suggested that one of the problems with the implementation of a 1P1F policy is that it would have negative impacts on the yield management system including the skewing of algorithms, the carrier respondents did not produce any evidence to support this submission. Despite hearing extensive evidence from several witnesses about the carrier respondents' yield management systems, this issue was never raised at the hearing and, as such, the Agency will not consider this argument further.

[881] Accordingly, the Agency concludes that the carrier respondents failed to demonstrate that there are operational constraints that would prevent them from operationalizing the implementation of a 1P1F policy in respect of the target populations of persons with disabilities. Furthermore, while there is no doubt that there will be challenges in operationalizing the application of a 1P1F policy, the Agency finds that the carrier respondents have not demonstrated that these challenges constitute undue hardship.

Part VI - Undue obstacle analysis and findings in relation to Air Canada's and WestJet's domestic air services

[882] The Agency determined that the arguments that the carrier respondents made about their perceived inability to deny a person the right to travel with an attendant or travel companion are in relation to the criteria required to assess eligibility and, thus, properly considered in the context of incidence and operational constraints. No further submissions were made regarding safety constraints.

[883] As set out above, the Agency is of the opinion that while the operational concerns raised by the carrier respondents may be valid in that the implementation of a 1P1F policy will have to be carried out carefully and with due attention to be paid to eligibility criteria mechanisms, the evidence before the Agency establishes that these mechanisms are available, effective and used routinely by other service providers, including transportation service providers. In fact, the Agency has noted that both carrier respondents already have in place eligibility criteria mechanisms used for persons with disabilities for other purposes such as to assess fitness to travel and that these mechanisms could be further developed to perform this function. Accordingly, the Agency concluded that the carriers failed to demonstrate that the operational concerns raised by them constitute undue hardship.

[884] Concerning the cost constraints, based on a balanced appreciation of the evidence filed, the cost estimated by the Agency of implementing a 1P1F policy for Air Canada and for WestJet is significantly lower than that estimated by the carrier respondents and their experts. While the Agency acknowledges that the cost of implementing a 1P1F policy for Air Canada and for WestJet in terms of annual net revenue losses is not insignificant, the Agency has determined that the cost only represents a revenue loss of 41 ¢ and 16 ¢ per domestic passenger trip for Air Canada and WestJet, respectively. The Agency has further determined that the cost of implementing a 1P1F policy for the carrier respondents only represents an approximate 0.09 percent decrease in Air Canada's passenger revenues and an estimated 0.16 percent decrease in WestJet's passenger revenues, based on 2005 reported passenger revenues. In weighing the evidence, the Agency has determined that the carrier respondents have not satisfied their onus of establishing that the economic and financial implications of the cost of implementing a 1P1F policy for them constitute undue hardship.

[885] In summary, both Air Canada and WestJet have failed to demonstrate that any of the constraints raised by them to the accommodation requested by persons with disabilities who require additional seating to accommodate their disabilities, when considered individually or even collectively, constitute undue hardship to these transportation service providers.

Reasonable alternatives

[886] Although the evidence shows the application by the carrier respondents of some alternatives to the requested accommodation of a 1P1F policy, the Agency has found no evidence that the application of a 1P1F policy by the respondents would constitute undue hardship to the respondents. Accordingly, in light of the nature of the test for undueness set out in Part IV beginning at paragraph 171 above, there is no need for the Agency to review the alternatives as they are not reasonable by virtue of the fact that they provide for lesser levels of accommodation than that already found to be reasonable by the Agency in this Decision. However, the Agency finds that there may be value in providing comments on the submissions which were made regarding alternatives.

[887] In their May 17, 2007 submission, the carrier respondents refer to all of the other services that are provided by them to persons with disabilities, both of their own initiative as well as in response to regulatory requirements and code of practice provisions, such as the provision of onboard wheelchairs and other specialized equipment and assistance, including at the time of making reservations, in the airport and on board the aircraft, and they note that the applicants are "served by these accommodations". In that same document, the carrier respondents assert that "the steps already taken by these carriers to provide accommodation for the applicants constitute reasonable accommodations" such that "to require these carriers to provide the additional accommodations sought (being the application of a 1P1F policy), and incur the additional costs, would be to force those carriers to undergo undue hardship."

[888] While the Agency has agreed with the carrier respondents' assertion that the cost of these services does form part of the overall cost environment that the Agency must consider in this proceeding (See paragraph 758 above), the Agency is of the opinion that they in no way form reasonable alternatives to the accommodation being sought by the applicants in this proceeding. The applicants stated that they are seeking to have the respondents' discriminatory fare policies removed such that they can use domestic air services at the same cost as other passengers and the fact that they can also access a range of other accessibility services such as wheelchair assistance does not in any way address the obstacle to their mobility posed by the discriminatory fare policy.

[889] There is no evidence before the Agency that either the Gander International Airport Authority or WestJet considered any economic alternatives to accommodate persons with disabilities affected by their pricing policies. Rather, both of these respondents took the position that their pricing policies were reasonable regardless of their discriminatory impact on persons with disabilities, that being: in the case of the Gander International Airport Authority, based on the nominal amount of the airport improvement fee; and in the case of WestJet, based on the already discounted nature of the fares offered by the carrier and its position that it "is not applicable to the modern realities faced by low cost carriers. WestJet argued that "current pricing models for LCCs (low cost carriers) operate on such thin margins/high volume that, such further discounting of fares would result in a significant erosion of their income." However, the Agency has already determined that there is no concrete evidence that the cost of implementing a 1P1F policy would constitute undue hardship from a financial or economic perspective and, thus, the Agency does not find this to be a reasonable position.

[890] Air Canada, on the other hand, has applied a number of different alternative economic policies to these persons with disabilities over the past 15 years. For example, with respect to attendant air fares, in 1995, the proposed Attendant Air Fare Regulations were returned to the Agency by the Minister of Transport with a direction to fully explore consensual means of achieving accessibility standards before seeking to promulgate regulations. Following this, ATAC announced that its members would voluntarily provide a 50-percent discount on the fare paid by the person with a disability for an Attendant. The evidence before the Agency establishes that while Air Canada initially offered the 50-percent discount for Attendants on the fare level paid by the person with a disability for his or her seat, at some point its policy changed and the 50-percent discount was only offered on full fares (such as Latitude fares), such that persons with disabilities were not as likely to use the Attendant air fare discount because purchasing two tickets using reduced fares (which are now known as Tango fares) was generally less expensive than purchasing one ticket and one ticket with an Attendant fare reduction on a full fare under this policy.

[891] While Air Canada, in its May 17, 2007 submission, objects to the applicants' characterization of this change in policy as "backtracking", the fact remains that, for these persons with disabilities, it represented a significant deterioration in benefit or accommodation. Air Canada added that the other steps that it had taken and costs that had been incurred to improve the accessibility of its network when these other services are not alternatives to the accommodation being requested by the applicants.

[892] Finally, the carrier respondents offer ad hoc accommodation to persons with disabilities who require additional seating to accommodate themselves, particularly to persons who are disabled by obesity, in that they may offer, at no additional charge, additional seating required to accommodate such a person at the airport on the day of travel. However, the Agency is of the opinion that for accommodation to be considered a reasonable alternative, it must respect the dignity of persons with disabilities. As was evidenced from Ms. McKay-Panos' account of her experiences with Air Canada, which was read into the record as part of her opening statement at the November 2006 hearing, the ad hoc accommodation offered by the carrier respondents is dependent on there being empty seats on the aircraft and, as such, there is no certainty to persons with disabilities that they will be properly accommodated and/or be able to travel on the day in question, either due to full or oversold flights or, worse, due to the refusal by carrier personnel to apply the policy. As a result, these persons may not be able to travel as planned or they may be treated to undignified, humiliating and potentially unsafe circumstances if they must travel in a seat that does not accommodate their disability-related needs.

[893] Accordingly, in the absence of some means of providing certainty to persons with disabilities that their disability-related transportation needs can be met, the Agency does not find this to be a reasonable alternative to accommodation. As such, it cannot be used to justify the existence of the carrier respondents' fare policies. However, as set out at the beginning of this section, the Agency does not need to make this determination in light of its finding that the respondents have not established the defence of undue hardship.

Undue obstacles analysis and findings

[894] The Agency finds it appropriate at this time to restate some of the principles of accessibility which are set out earlier in this Decision.

[895] The importance attached by Parliament to a federal transportation network that is accessible to persons with disabilities is reflected in Canada's national transportation policy, which provided, inter alia, that each carrier or mode of transportation, as far as is practicable, should carry traffic to or from any point in Canada under fares, rates and conditions that do not constitute an undue obstacle to the mobility of persons, including persons with disabilities.

[896] Consistent with the national transportation policy, the Agency has recognized a number of long-standing principles of accessibility which are consistent with those reflected in general human rights jurisprudence. These principles reflect the interests of the community of persons with disabilities and are used by the Agency both in its determinations of the existence of obstacles and in its assessment of the undueness of any obstacle found, which requires a weighing of those interests with the interests of industry.

[897] One of these principles is that persons with disabilities have the same rights as others to full participation in all aspects of society and equal access to transportation is critical to the ability of persons with disabilities to exercise that right. The right to equal access to transportation recognizes that persons with disabilities have the same needs to travel as others - for example, for business, for pleasure, and for medical reasons - should have the same travel options that are provided to others, such as those respecting mode of transportation, departure times, cost, quality of service and the ability to travel with friends, family or colleagues.

[898] Another fundamental principle of accessibility is that persons with disabilities are to be treated with dignity and respect. Part of the entitlement to be treated with dignity is the notion that all persons with disabilities are entitled to be treated in the same manner regardless of the underlying reason for their disability and the fact that there should be no discrimination between persons with disabilities in terms of entitlement to benefits. This principle was recently reinforced by the Supreme Court of Canada in the Tranchemontagne v. Ontario (Director, Disability Support Program), [2006] 1 S.C.R. 513. While the Federal Court of Appeal in the McKay-Panos v. Air Canada case stated that:

[44] In this regard, the relative ease with which the existence of a disability can be established at the first stage should not be construed as preventing the Agency from having regard to all relevant considerations at the undue obstacle stage of the analysis including, for instance, etiology if it is shown to be relevant.

[899] The Agency finds that to consider etiology in the case of persons disabled by obesity in its consideration of the undueness of obstacles found to exist would be inconsistent with this principle.

[900] An important aspect of the entitlement of persons with disabilities to equality that is particularly relevant to the present case is that persons with disabilities should not be placed at an economic disadvantage as a result of their disabilities and should not have to pay more for their transportation services than do other passengers who do not have disabilities, including in circumstances where transportation service providers must provide different services to ensure equivalent access to the federal transportation network. This principle of accessibility forms the basis of what is commonly referred to in the community of persons with disabilities as the principle of 1P1F.

[901] In determining whether an obstacle faced by a person with a disability is undue, a balance has to be struck between the various responsibilities of transportation service providers and the rights of persons with disabilities to travel without encountering undue obstacles, and it is in the weighing of this balance that the Agency applies the concepts of undueness and undue hardship.

[902] Where a transportation service provider can justify providing something less than equivalent access, including no accommodation, the Agency would not find an undue obstacle in the accommodation. However, if the Agency finds that the respondent transportation service provider has failed to demonstrate that the accommodation provided is reasonable in the circumstances, then the Agency may find an undue obstacle and require the taking of corrective measures to eliminate that undue obstacle.

[903] With respect to the principle of 1P1F, the Agency has determined that both the additional fares that are charged by Air Canada and WestJet in respect of certain persons with disabilities who require additional seating to accommodate their disabilities, either for themselves or for their Attendants, and the Improvement fees that are charged by the Gander International Airport Authority for the Attendants required by certain persons with disabilities to travel by air represent an economic disadvantage which effectively limits travel opportunities in respect of employment, education, leisure, medical care and emergencies available to persons who require additional seating to travel by air.

[904] Although the Agency recognizes that a requirement that the respondents implement a 1P1F policy would entail costs and operational challenges, the Agency has concluded that, based on the evidence presented, these would not result in undue hardship to them. Specifically, the Agency has determined that the Gander International Airport Authority did not provide any evidence and, thus, did not meet its burden of proof to demonstrate that it is unreasonable, impracticable or impossible for it to accommodate persons with disabilities who require an Attendant without causing undue hardship. Additionally, the Agency has determined that the annual net revenue losses to the carriers attributable to a 1P1F policy, which represent less than 0.2 percent of their annual gross passenger revenues and 41¢ and 16¢ in foregone revenue per domestic trip for Air Canada and WestJet, respectively; the economic and financial implications of these costs to them; and the need for the carrier respondents to develop new or modify existing eligibility screening mechanisms so that they can properly apply the new policies do not, based on the evidence provided to the Agency, constitute undue hardship to them.

[905] Furthermore, the Agency has carefully considered the decision of the Supreme Court of Canada, in the CCD v. VIA case, wherein it states:

A factor relied on to justify the continuity of a discriminatory barrier in almost every case is the cost of reducing or eliminating it to accommodate the needs of the person seeking access. This is a legitimate factor to consider: Central Alberta Dairy Pool v. Alberta (Human Rights Commission), 1990 2.S.C.R. 489, at pp. 520-21. But, as this Court admonished in Grismer, at para. 41, tribunals "must be wary of putting too low a value on accommodating the disabled".

[906] The Agency recognizes the evidence presented by the applicants' expert of the following positive social and economic impacts of a 1P1F policy:

  • a reduction in pressure on social welfare systems and fiscal burdens relating to increased income levels and living standards attributable to increased work-related mobility for persons with disabilities;
  • insurance value from having sustained access to air travel in the event of disability, recognizing that it is an actuarial reality that everyone in society stands a statistical chance of becoming permanently or temporarily disabled; and
  • ensuring or preserving the existence of the right of access to persons with disabilities.

[907] The Agency is of the opinion that the estimated increases in ticket prices resulting from a 1P1F policy of 77¢ and 44¢ in respect of domestic flights on Air Canada and WestJet, respectively, are reasonable in light of the improved access to the federal transportation network for persons with severe disabilities that would result from a 1P1F policy.

[908] It is important to persons with disabilities that they have access to a federal transportation network that is free of undue obstacles. In this case, the limitations to that access are:

  • the Improvement fees charged by the Gander International Airport Authority for Attendants that are required by persons with disabilities to travel on domestic air services; and
  • Air Canada's and WestJet's policies for charging additional fares for seating required by persons with disabilities to travel on domestic air services.

[909] The Agency must weigh this right to access against the failure of the Gander International Airport Authority to produce any evidence to establish undue hardship and the failure of Air Canada and WestJet to demonstrate that the cost (in terms of the related economic and financial implications) and operational constraints that they would face in implementing a 1P1F policy constitute undue hardship. In this regard, the Agency finds that:

  • the fare policies of the carrier respondents Air Canada, Air Canada Jazz and WestJet related to domestic air services, and
  • the airport improvement fee policy of the Gander International Airport Authority

constitute undue obstacles to persons with disabilities who require additional seating to accommodate their disabilities to travel by air insofar as they require these persons with disabilities to pay additional fares and charges for transportation services that are over and above what other passengers pay for the same transportation services to have their disability-related needs accommodated.

[910] While all of the factors set out in the national transportation policy as described in section 5 of the CTA are to be taken into consideration in an undueness analysis, it is clear that the cost factor is central to the Agency's analysis in the present case. The issue is the determination of the estimated cost to each respondent associated with the removal of the economic barriers faced by persons with disabilities who would qualify for a benefit under a IPIF policy and the financial and economic implications of this cost for each of the respondents.

[911] The Agency is satisfied that the estimate of incidence it has relied on in coming to this Decision provides a sufficient and reasonable basis for its determination of the undueness of the cost of a 1P1F policy in terms of the economic and financial implications for the carrier respondents. This said, the Agency recognizes that, with experience in implementation, the accuracy of estimates of incidence and cost may improve over time. Unlike a fixed cost associated with a structural modification to improve accessibility, the cost associated with a IPIF policy is an ongoing cost that may vary over time such that the associated economic and financial impacts on the respondents may also vary.

[912] In light of the particularity of this case, the Agency finds it appropriate to draw attention to a mechanism available under the CTA. Section 32 of the CTA provides the Agency with the power to review a decision when there is sufficient justification to do so, such as where a change in circumstances, including new facts or new evidence, not available at the time of the making of the decision, is sufficient to trigger this jurisdiction. Such a change in circumstances could arise if the parties' experience with implementing and administering the policy required by the Decision is significantly different from the evidence and its interpretation which formed the basis of this Decision.

Part VII - Order for corrective measures

[913] As set out above, the Agency has determined that the fare policies of the carrier respondents, namely Air Canada, Air Canada Jazz and WestJet, related to domestic air services and the airport improvement fee policy of the Gander International Airport Authority constitute undue obstacles to persons with disabilities who require additional seating to accommodate their disabilities to travel by air on domestic air services. The Agency hereby requires the respondents to amend their current policies and procedures to incorporate a 1P1F regime for these persons with disabilities by implementing the following corrective measures in the manner described below:

1. The Gander International Airport authority

[914] For travel on domestic air services, the Gander International Airport Authority shall not charge or collect an airport improvement fee for additional seats needed by persons with disabilities who are required to travel with Attendants under an air carrier's domestic tariff.

[915] The Agency recognizes that there may be complexities in the co-ordination required as between the Authority and the air carriers who collect the Improvement fee on its behalf pursuant to the terms of the MOA with ATAC. However, both the Authority and ATAC declined to participate in the oral hearings such that the Agency has no specific information in this regard. Accordingly, the Agency finds it appropriate to provide the Gander International Airport Authority with 12 months to implement the corrective measures to allow it sufficient time to establish a procedure to determine how best to identify those passengers with disabilities who are required by air carrier tariffs to travel with an Attendant to ensure that an Improvement fee is not collected from these persons.

2. Air Canada, Air Canada Jazz and WestJet

[916] The carrier respondents shall not charge a fare for additional seats provided to the following persons with disabilities:

  • those persons who are required, under the terms of the carriers' tariff set out earlier in this Decision, to be accompanied by an Attendant;
  • those persons who are disabled by obesity; and
  • those other persons who require additional seating for themselves to accommodate their disability to travel by air.

[917] With respect to the implementation of corrective measures, the Agency is of the opinion that given that corrective measures have been determined to be necessary in the interests of the human rights of persons with disabilities, the implementation of the corrective measures must take place within a reasonable period of time such that there is no unnecessary delay in the process.

[918] However, the Agency also recognizes that, for the corrective measures to be effective, sufficient time must be provided to the respondents to develop new or modify existing eligibility screening mechanisms so that they can properly apply the new policies. Given the evidence of Dr. Lewis that professional expertise may be required to assist in this task and the importance of having an effective eligibility screening mechanism in place before implementing the policy, the Agency recognizes that the time required for the implementation of the corrective measures may vary. In this particular case and in view of the fact that the carrier respondents will have to develop and implement eligibility assessment mechanisms possibly using outside expertise, the Agency is of the opinion that a 12-month period is reasonable for the finalization and implementation of the corrective measures ordered.

[919] The Agency hereby orders Air Canada, Air Canada Jazz, WestJet and the Gander International Airport Authority to implement the corrective measures within 12 months from the date of this Decision. The Agency is satisfied that this is sufficient time for the carriers based on the fact that they already have assessment processes in place and there is professional expertise available to provide assistance in the development of appropriate screening processes for these target populations.

Part VIII - Costs

[920] The applicants are hereby required to make their written submissions in support of their application for costs within seven (7) days following the issuance of this Decision. The respondents will then have seven (7) days to file their responses to the applicants' submissions, following which the applicants will have three (3) days to file their reply, if any.

Members

  • Gilles Dufault
  • Beaton Tulk

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

  1. This Executive Summary does not form part of the Agency's Decision and is not to be relied on for the purpose of applying or interpreting the Decision
  2. Following Mr. Norman's death in 2006, the application was continued on his behalf by his Estate
  3. While Marian Robson and Baljinder Gill were also assigned to the Panel and participated in the hearing of this matter at different times, Mrs. Robson's term expired on June 30, 2006, and Mr. Gill's term expired on April 25, 2007.
  4. For the purposes of this Decision, any remedy will not be available in relation to the domestic segment of an international air trip that is purchased on a single fare as the domestic portion of the trip is considered to be part of the international air service and not a domestic air service.
  5. In this Decision, the Agency uses the term "Attendant" to refer to persons who are required under the carrier respondents' domestic tariffs to accompany certain persons with disabilities to meet specific disability-related personal care needs in-flight and/or safety-related needs in the event of an emergency evacuation or decompression. This is to be distinguished from the term "attendant" which is used broadly to refer both to Attendants and to other travel companions such as family members or friends who may travel with persons with disabilities for other reasons.
  6. Note that there are persons with disabilities who are non-self-reliant for the purposes of longer flights, but who can travel independently for shorter flights if they do not require personal care assistance for the shorter duration of the flight.
  7. Air Canada Jazz and WestJet have never offered stretcher service and, thus, were never able to accommodate this category of persons with disabilities
  8. Statistics Canada, A Portrait of Persons with Disabilities
  9. In response to an undertaking given at the second oral hearing, Dr. Bekeris, the Senior Medical Officer and the acting Senior Director of Occupational Health Services at Air Canada, indicated that 1,224 medical clearances were given to persons with disabilities to travel with Attendants in 2005; however, he indicated that this number does not include the number of clearances with modifications that were given, nor the number of persons who were cleared for a period of time and did not need a new clearance for their Attendant.
  10. It should be noted that this last number was used by Professor Lazar as representing the number of trips which were taken on Air Canada's domestic and transborder flights by passengers travelling on tickets for which their Attendants received an Attendant air fare discount
  11. In his first report dated November 25, 2005, Professor Lazar produced a low estimate of 832,000 persons with disabilities who travel by air in Canada and a high estimate of 882,000. In his second report dated June 1, 2006, he refers to these estimates, but uses the values 833,000 and 881,000 instead.
  12. 1991 HALS data pertains to adults, ages 15 and over, who reside in households in Canada and is projected to 1995
  13. "Persons with transportation disabilities" was defined in the Goss Gilroy report as those individuals who, because of their health problem(s) or condition(s), are unable to use transportation services; or, use transportation services with more difficulty than those in the general population.
  14. For the purposes of the calculations herein, the value of 3.636...[26,000 ÷ 715,000] will be used, being the quotient obtained by dividing the source values presented in the Goss Gilroy report used by Dr. Lewis in his development of the 3.6 percent. Specifically, these values are the 26,000 persons with disabilities who reported having difficulty, which limited their travel, when travelling long distances by air and the 715, 000 persons with disabilities who reported taking long distance trips by air.
  15. In 1995, 715,000 persons with disabilities travelled by air out of a total population of persons with disabilities of 3.8 million.
  16. As noted in paragraph 334 , for the purposes of the calculations herein, the value of 3.636... [26,000 ÷ 715,000] will be used, being the quotient obtained by dividing the source values presented in the Goss Gilroy report used by Dr. Lewis in his development of the 3.6 percent, a value of 3.636...
  17. Professor Katzmarzyk testified that the recently-released results of the National Population Health Survey did not deal with the prevalence of the different classes of obesity, but that the 2005 data recently released by Statistics Canada showed an overall prevalence of obesity of 24 percent with a breakdown among Classes I-III that showed "negligible differences" between the 2004 Class I-III numbers in Table 1 of Professor Allison's first report and the new 2005 Class I-III numbers.
  18. Sturm et al (2004), using data from the United States of America Behaviour Risk Surveillance Survey
  19. Professor Allison used data from the 1991 United States of America NHANES III survey as a proxy for the current Canadian population in terms of body size, and used raw data from the survey to create a subset of 16,233 non-pregnant adults over 18 years who had no missing data on their biacromial (shoulder to shoulder) breadth, bi-iliac (hip to hip) breadth, waist circumference, buttock circumference and thigh circumference.
  20. Professor Allison defined "relevant disability" as reported in the United States of America NHANES III survey as people who had difficulty walking ten steps without rest, had difficulty lifting ten pounds, had difficulty walking room to room on one level, needed a device such as a cane or walker to get around, or were observed in a wheelchair.
  21. The Air Canada seat was between 17 3/4" and 18 1/8" in the front. WestJet's seat was between 17 1/4" and 17 5/16" in the front.
  22. For the purposes of the calculations herein, the value of 75.732... [24,439,244 ÷ 32,270,507] will be used, being the quotient obtained by dividing the 2005 Canadian population ages 20 and over by the total Canadian population for 2005, as indicated by Statistics Canada 2005 Annual Demographic Statistics, 2005, Catalogue no. 91-213-XIB [pg 50]
  23. Goss Gilroy reported that 17.7 percent of persons with disabilities do not take long distance trips due to their condition or health problem
  24. Transportation in Canada 2005, Annual Report, Page 91, published by Transport Canada.
  25. Price elasticities are expressed in this Decision as positive or absolute numbers.
  26. Agency analysis suggests that recognizing the 1,124 trips taken under the Air Canada Attendant Airfare Policy in the calculation of revenue losses would result in a reduction in revenue losses of less than $95,000.
  27. 1,124 people claimed a 50-percent reduction under the Air Canada Attendant Airfare Policy during a 12-month period from May 2005 to April 2006.
  28. Aviation Statistics Centre Service Bulletin, Publication 51-004, Volume 37, Number 4
  29. Canada, Department of Finance, Air Travel Demand Elasticities: Concepts, Issues and Measurement (www.fin.gc.ca/consultresp//Airtravel/airtravStdy_Ie.html)
  30. This methodology is consistent with the methodology used in the section beginning at paragraph 483 to determine the carrier respondent's Domestic Air Passenger Traffic as a percentage of Total Air Passenger Traffic.
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