Decision No. 617-P-A-2002

November 13, 2002

November 13, 2002

IN THE MATTER OF a complaint by Dr. Felix Bassoon concerning the $1,949.50 adult and $1,634.50 child fares offered by Air Canada on July 5, 2000 for round-trip travel between Toronto and Inuvik, departing Toronto on August 5, 2000, and returning from Inuvik on August 20, 2000.

File No. M4370/A74/00-499


COMPLAINT

On September 7, 2000, Dr. Felix Bassoon filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

By letter dated October 12, 2000, both Dr. Bassoon and Air Canada were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. More particularly, both parties were advised that, pursuant to subsection 66(1) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint.

In that same letter, Air Canada was requested to provide the Agency and Dr. Bassoon with its answer to the complaint, including the information outlined in subsection 66(3) of the CTA. On November 13, 2000, Air Canada requested an extension until November 16, 2000 to file its answer to the complaint and, by Decision No. LET-P-A-337-2000 dated November 16, 2000, the Agency granted Air Canada the requested extension. On November 17, 2000, Air Canada filed its answer to the complaint. On November 22, 2000, Air Canada submitted supplemental material which it had inadvertently omitted from the carrier's November 17, 2000 answer to the complaint. On November 28, 2000, Dr. Bassoon filed his reply to Air Canada's answer.

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

PRELIMINARY MATTER

Although Air Canada filed its answer to the complaint after the prescribed deadline set out in the National Transportation Agency General Rules, SOR/88-23, the Agency, pursuant to section 6, accepts this submission as being relevant to its consideration of this matter.

ISSUES

The issues to be addressed are:

  1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was, on or about July 5, 2000, the only person providing a domestic service between Toronto and Inuvik within the meaning of section 66 of the CTA; and, if so,
  2. whether the fares published or offered by Air Canada in respect of its service between Toronto and Inuvik on July 5, 2000, which are the subject of the complaint, were unreasonable.

POSITIONS OF THE PARTIES

Dr. Bassoon submits that on July 5, 2000, he purchased from Air Canada, four round-trip tickets for himself, his wife and their two children to travel from Toronto to Inuvik between August 5 and August 20, 2000. Dr. Bassoon further submits that he found the $7,947.48 total cost of the four tickets, including taxes and charges, to be "totally outrageous". He adds that in order to obtain "the cheapest fares possible", he and his family stayed overnight in Edmonton on August 5, 2000. Upon arriving in Inuvik on August 6, 2000, he noticed a number of advertisements by First Air for a $599 fare for round-trip travel between Edmonton and Inuvik and a $399 fare for round-trip travel between Yellowknife and Inuvik. As a result, Dr. Bassoon contacted Air Canada and was told that the reason why his fare was more expensive than First Air's advertised fares was due to the fact that he had purchased a combination fare.

Dr. Bassoon submits that Air Canada is engaging in "price gouging" and is requesting that Air Canada refund the amount he believes he was overcharged.

In its answer to the preliminary issue raised by the complaint, Air Canada submits that, in conjunction with its affiliates, Canadian Airlines International Ltd. (hereinafter Canadian Airlines) and First Air, it provides connecting service between Toronto and Inuvik and that no other person offered a service between those points at the time of the complaint.

With respect to the fare-related issues raised by Dr. Bassoon's complaint, Air Canada submits that both the adult and child fares are not unreasonable. Through research of its passenger name records, Air Canada identified the fare basis codes and related amounts to which the adult and the child fares purchased by Dr. Bassoon for each sector of the itinerary relate.

Based on Air Canada's records, the adult fare was $1,949.50 per person, exclusive of applicable charges and taxes, and was equal to the sum of: a) half of the $609 QHCANADA fare attributable to a uni-directional flight from Toronto to Edmonton; b) half of the $1,079 HH7LNV fare attributable to a uni-directional flight from Edmonton to Inuvik; c) half of the $832 HH7SNV fare attributable to a uni-directional flight from Inuvik to Yellowknife; d) half of the $752 HH7SNV fare attributable to a uni-directional flight from Yellowknife to Edmonton; e) half of the $128 QW14RBSTL fare attributable to a uni-directional flight from Edmonton to Calgary; and, f) half of the $499 LH7NITE fare attributable to a uni-directional flight from Calgary to Toronto.

Air Canada's records also identified that the child fare was $1,634.50 per person, exclusive of applicable charges and taxes, and was equal to the sum of: a) half of the $546 QHSKYRDR fare attributable to a uni-directional flight from Toronto to Edmonton; b) half of the $891 QHSKYRDR fare attributable to a uni-directional flight from Edmonton to Inuvik; c) half of the $648 QHSKYRDR fare attributable to a uni-directional flight from Inuvik to Yellowknife; d) half of the $602 QHSKYRDR fare attributable to a uni-directional flight from Yellowknife to Edmonton; e) half of the $83 LKID fare attributable to a uni-directional flight from Edmonton to Calgary; and, f) half of the $499 LH7NITE fare attributable to a uni-directional flight from Calgary to Toronto.

With respect to these fares, Air Canada submits that, except for special fares offered to youth standbys or senior citizens, the adult and child fare for each sector of the itinerary represented either the lowest or second lowest published fare for that sector on July 5, 2000 based on the season and the day of travel.

With respect to the $599 fare offered by First Air for round-trip travel between Edmonton and Inuvik, Air Canada submits that this "M1RT" fare was published on July 13, 2000, and as such was not available for purchase by Dr. Bassoon. According to Air Canada, had Dr. Bassoon made his travel arrangements on or after July 13, the cost of the tickets would have been less with respect to the Edmonton-Inuvik, Inuvik-Yellowknife, and Yellowknife-Edmonton sectors of his itinerary.

Lastly, Air Canada submits that when it "competed with Canadian Airlines and Canadian Northern" on the Toronto-Inuvik route on July 5, 1999, Air Canada's year-round fares were no more than 6 percent lower than the fares it offered on the route on July 5, 2000. According to Air Canada, general fare increases of approximately 3 percent were implemented in August and November 1999 primarily due to higher fuel costs. Air Canada submits that there have been no fare increases since January 2000, when it acquired Canadian Airlines.

ANALYSIS AND FINDINGS

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

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

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

Pursuant to subsection 66(4) of the CTA, the Agency's jurisdiction over complaints concerning fares may be extended to domestic routes served by more than one licensee where the Agency is of the opinion that none of the other services between those two points provides a reasonable alternative taking into consideration the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.

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

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

Preliminary issue

Whether Air Canada was, on or about July 5, 2000, the only person providing a domestic service between Toronto and Inuvik within the meaning of section 66 of the CTA

The Agency has reviewed the information available to it, as well as Air Canada's statement that it was the only person providing a domestic service between Toronto and Inuvik at the time of the complaint, and has determined that, on or about July 5, 2000, Air Canada was the only person providing a domestic service between Toronto and Inuvik within the meaning of section 66 of the CTA. Accordingly, the complaint falls within the purview of section 66 of the CTA.

Fare-related issues

Whether the $1,949.50 adult and $1,634.50 child fares published or offered by Air Canada in respect of its service between Toronto and Inuvik on July 5, 2000 were unreasonable

In addition to the material and information described above, the Agency, as required by subsection 66(3) of the CTA, has considered historical data respecting fares applicable to domestic services offered between Toronto and Inuvik as well as the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft including terms and conditions of carriage.

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

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

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

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

  1. on July 5, 2000, Air Canada operated its domestic service between Toronto and Inuvik using large aircraft, as defined in the Air Transportation Regulations (hereinafter the ATR);
  2. according to the OAG, the distance between Toronto and Inuvik is approximately 2,886 air miles; and
  3. the origin-destination passenger volume between Toronto and Inuvik was approximately 1,160 passengers in 1999 (the last complete year for which information is available).

The Agency conducted the same analysis in respect of nearly 170 domestic services offered by Air Canada to identify the services which have characteristics similar to those of the service Air Canada provided between Toronto and Inuvik. Based on its consideration of the factors outlined above, the Agency has determined that, due to the significantly small passenger volume, none of Air Canada's domestic services had characteristics that were similar to those of the service it provided between Toronto and Inuvik. Therefore, the Agency will base its analysis on historical data respecting fares applicable to domestic services between Toronto and Inuvik.

Data respecting fares applicable to domestic services between Toronto and Inuvik

The Agency has reviewed the fares offered by air carriers in respect of the domestic services operated between Toronto and Inuvik on July 5, 1998, 1999, and 2000, that is, from a point in time when this route was served by both Air Canada and Canadian Airlines, including their affiliates, to the date of the complaint.

As identified above, the $1,949.50 adult fare and the $1,634.50 child fare, exclusive of applicable charges and taxes, applicable for round-trip travel between Toronto and Inuvik are the subject of the complaint. However, because each fare is based on a combination of no less than six different fares for various sectors of the Bassoon family's itinerary, it would be difficult for the Agency to replicate the exact combination of fares in previous years as those purchased by Dr. Bassoon on July 5, 2000. Since Dr. Bassoon was attempting to obtain the "cheapest fares possible" for travel between Toronto and Inuvik, the Agency then tried to find the lowest fare applicable to round-trip travel by an adult and by a child that was offered on the route on July 5, 1998, 1999 and 2000.

The Agency has determined that on July 5, in 1998, 1999 and 2000, with the exception of senior fares for which neither Dr. nor Mrs. Bassoon were eligible, the lowest fare offered by Air Canada for round-trip travel by an adult between Toronto and Inuvik was the HH7LNR fare. Further, with the exception of youth standby fares, the lowest fare offered by Air Canada for round-trip travel by a child between Toronto and Inuvik on those same three dates was the QHSKYRDR fare. The HH7LNR and QHSKYRDR fares will be analyzed below.

In conducting its analysis, the Agency considered Air Canada's HH7LNR and QHSKYRDR fares in relation to the other fares offered by Air Canada on the Toronto-Inuvik route, as well as the discounts off the full economy Y1 round-trip fare which the fares represented, the year-over-year increases in the fares and the terms and conditions of carriage applicable to the fares on each of the routes. Furthermore, the Agency considered the HH7LNR and QHSKYRDR fares offered by Air Canada on July 5, 2000 in respect of its service between Toronto and Inuvik in relation to the $1,949.50 adult and $1,634.50 child fares Dr. Bassoon purchased from Air Canada on July 5, 2000 for travel on its service between Toronto and Inuvik.

1. General overview

An overview of the fares published by Air Canada in respect of its domestic service between Toronto and Inuvik on July 5 in 1998, 1999, and 2000, shows that a selection of fares was offered by Air Canada with respect to its service on the route. All fares offered by Air Canada on the Toronto-Inuvik route were economy-type fares with the exception of the carrier's offering of a premium, unrestricted business (i.e., J class) fare on the route. Most of the economy-type fares were non-refundable, round-trip fares which required an advance purchase as well as a minimum stay and were discounted off the full economy Y1 round-trip fare by varying percentages. On this route, the Y1 fare is the economy fare which allows passengers the most flexibility to book or cancel reservations or make changes in the itinerary; however, it is the most expensive economy-type fare. Air Canada's Y1 fare serves as the basis for determining the price levels of other fares offered on the route.

The Agency's review indicates that on July 5 in each of 1998, 1999 and 2000, Air Canada offered the identical number of full and discounted fares on the Toronto-Inuvik route and offered fares with the same fare basis codes. In addition, each fare was discounted off the Y1 fare by the same percentage on the date under review in 1998,1999 and 2000.

2. The HH7LNR and QHSKYRDR Fares

The Agency's research shows that the HH7LNR and the QHSKYRDR fares offered by Air Canada were two discounted, round-trip, non-refundable fares which required an advance purchase as well as a minimum stay. An HH7LNR and a QHSKYRDR fare were available for sale on the Toronto-Inuvik route on each of the dates under review and were consistently discounted at approximately 52 and 57 percent, respectively, off the full economy Y1 round-trip fare.

The Agency's research shows that between July 5, 1998 and July 5,2000, the HH7LNR and QHSKYRDR fares offered by Air Canada on the Toronto-Inuvik route each increased by a total of 18 percent. Both fares were increased by 12 percent between July 5, 1998 and July 5,1999 and by a further 6 percent between July 5, 1999 and July 5,2000. Information available to the Agency indicates that the increase in the two fares over the three year period was applied by Air Canada from July 30, 1998 through to December 2, 1999, inclusive, when both Air Canada and Canadian Airlines operated their respective services on the route.

The Agency notes that between July 5, 1998 and December 2, 1999 similar increases were applied to the HH7LNR fare offered by Air Canada on several routes on which it competed with Canadian Airlines where the mileage between the two points and where the type of aircraft used was similar to that on the Toronto-Inuvik route.

The Agency notes that the $2,035 HH7LNR fare and $1,831 QHSKYRDR fare offered by Air Canada on July 5, 2000 in respect of its direct, non-stop flight service between Toronto and Inuvik are approximately 4 and 12 percent higher, respectively, than the $1,949.50 adult and $1,634.50 child combination fares purchased by Dr. Bassoon from Air Canada on July 5, 2000 for travel on its connecting service between Toronto and Inuvik.

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

Agency investigations into fare-related complaints include the examination of fares offered by other carriers who provided a service on the route which is the subject of the complaint. On July 5, 1998 and 1999, Canadian Airlines also offered fares for travel between Toronto and Inuvik.

On July 5, 1998 and July 5,1999, Air Canada offered fares at the same level and offered the same selection of fares with the same terms and conditions of carriage and levels of discounts on the Toronto-Inuvik route as did Canadian Airlines.

4. Summary

The Agency has carefully examined and analyzed the HH7LNR and QHSKYRDR fares offered by Air Canada in respect of its domestic service between Toronto and Inuvik on July 5, in 1998, 1999 and 2000. Neither the terms and conditions of carriage attached to the fares nor the percentages by which the fares were discounted off the Y1 round-trip fare changed on the three dates under review. Furthermore, Air Canada's HH7LNR and QHSKYRDR fares offered on the Toronto-Inuvik route were higher than the adult and child fares that Dr. Bassoon actually purchased.

On the basis of the foregoing analysis and based on the factors set out in subsection 66(3) of the CTA, the Agency is of the opinion that, on July 5, in 1998, 1999 and 2000, the HH7LNR and QHSKYRDR fares offered by Air Canada for direct, non-stop service on the Toronto-Inuvik route were treated in a similar manner with respect to level of discount, terms and conditions of carriage and year-over-year increases. Furthermore, the Agency notes that in respect of the year-over-year increases, between July 5, 1998 and December 2, 1999, Air Canada applied similar increases to the HH7LNR fare offered on the Toronto-Inuvik as it did to the HH7LNR fare it offered on several routes on which it competed with Canadian Airlines where the mileage between the two points and the type of aircraft used was similar to that on the Toronto-Inuvik route. The Agency also notes that the $2,035 HH7LNR and $1,831 QHSKYRDR fares offered by Air Canada on July 5, 2000 in respect of its direct, non-stop flight service between Toronto and Inuvik are approximately 4 and 12 percent higher, respectively, than the $1,949.50 adult and $1,634.50 child combination fares purchased by Dr. Bassoon from Air Canada on July 5, 2000 for travel on its connecting service between Toronto and Inuvik.

5. Agency Findings

In light of the foregoing, the Agency finds that the $2,035 HH7LNR and $1,831 QHSKYRDR fares published or offered by Air Canada in respect of its domestic service between Toronto and Inuvik on July 5, 2000, were not unreasonable. Since the two $1,949.50 adult and two $1,634.50 child combination fares purchased on July 5, 2000 by Dr. Bassoon for travel between Toronto and Inuvik were less expensive than the HH7LNR and QHSKYRDR fares offered for direct, non-stop travel on the route, the Agency finds that the $1,949.50 adult and $1,634.50 child combination fares offered by Air Canada on July 5, 2000 in respect of its connecting service between Toronto and Inuvik were also not unreasonable.

CONCLUSION

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

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