Decision No. 79-P-A-2003

February 20, 2003

February 20, 2003

IN THE MATTER OF a complaint by Douglas Baldwin concerning the $2,060.82 fare and the range of fares offered by Air Canada on or about July 25, 2000 for travel between Toronto, Ontario and Saskatoon, Saskatchewan.

File No. M4370/A74/00-130


COMPLAINT

On July 26, 2000, Douglas Baldwin filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

By letter dated September 28, 2000, both Mr. Baldwin and Air Canada were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. More particularly, both parties were advised that, pursuant to subsections 66(1) and 66(2) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint.

In that same letter, Air Canada was requested to provide the Agency and Mr. Baldwin with its answer to the complaint. On October 30, 2000, Air Canada filed its answer. Mr. Baldwin was out of the country from October 31 to November 18, and on November 20 applied for an extension until November 24, 2000 to file his reply. By Decision No. LET-P-A-358-2000, the Agency granted the requested extension, and on November 22, 2000, Mr. Baldwin filed his reply.

On February 21, 2001, Air Canada clarified that one of the seat sales to which it referred in its answer was actually a price realignment and not a seat sale.

By Decision No. LET-P-A-231-2001 dated May 10, 2001, the Agency advised both parties of the results ensuing from the completion of its preliminary analysis of the complaint, and invited the carrier to comment upon, and provide an explanation concerning, its preliminary findings. On May 15, 2001, and again on June 11, 2001, Air Canada filed with the Agency requests for extensions until June 11 and June 25, respectively, to file its representations in respect of the Agency's preliminary findings. By Decision No. LET-P-A-247-2001 dated May 22, 2001, and Decision No. LET-P-A-280-2001 dated June 14, 2001, the Agency granted the carrier's requested extensions. On June 25, 2001, Air Canada filed its comments and, with respect to a portion of the information included in its filing, made a claim for confidentiality which the Agency accepted by Decision No. LET-P-A-328-2001 dated July 11, 2001.

Although pleadings had closed, on July 3, 2001, Mr. Baldwin filed his comments with respect to Air Canada's representations. By Decision No. LET-P-A-327-2001 dated July 10, 2001, the Agency accepted Mr. Baldwin's further comments and forwarded a copy to Air Canada with an invitation to comment upon Mr. Baldwin's July 3 submission if it chose to do so. On July 17, 2001, Air Canada advised that it did not intend to provide a response.

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

ISSUES

The issues to be addressed are:

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

POSITIONS OF THE PARTIES

Mr. Baldwin submits that the round-trip economy fare offered by Air Canada on its Toronto-Saskatoon route was $2,060.82, with no special fares offered unless he was willing to stay over a Saturday night. He maintains that he could travel by air to England or to Vancouver for much less than he can to Saskatoon. Mr. Baldwin further submits that, before the acquisition of Canadian Airlines International Ltd. by Air Canada, competition existed on the route and seat sales were offered.

In its answer to the preliminary issue raised by the complaint, Air Canada submits that it was not the only person providing a domestic service between Toronto and Saskatoon. The carrier submits that the connecting service provided by WestJet Airlines Ltd. (hereinafter WestJet) between Hamilton and Saskatoon was not an unreasonable alternative to the service offered by Air Canada between Toronto and Saskatoon.

With respect to the first fare-related issue raised by the complaint, Air Canada submits that the Agency cannot make a finding that the economy fare it offered in respect of its domestic service between Toronto and Saskatoon was unreasonable. The carrier states that, while the specific fare of $2,060.82 was not found in its records on or about July 25, 2000, Air Canada's highest economy (Y1) fare was $953 one-way (that is, $1,906 round-trip), excluding applicable taxes and charges. It adds that there were no terms and conditions of carriage attached to the fare and it was completely refundable. Air Canada further submits that a year earlier, on July 25, 1999, when it competed with Canadi*n on the route, Air Canada offered the one-way economy (Y1) fare for $898, and that the nominal increase of 6.1 percent represented a general fare increase which was introduced in August and November 1999 "to primarily offset higher fuel costs".

Air Canada adds that the price of a one-way economy fare on this route was not more than the price of the same non-restrictive fare for travel between Toronto and London, England, and between Toronto and Vancouver. The carrier submits that the one-way fares were $1,357 and $1,450, respectively.

With respect to the second fare-related issue - the range of fares - raised by the complaint, Air Canada submits that the Agency cannot make a finding that Air Canada is offering an inadequate range of fares. In support of its position, Air Canada maintains that it offered the entire range of fare classes in respect of its service between Toronto and Saskatoon on July 25, 2000, and that the same range of fare classes was offered on July 25, 1999. Air Canada adds that, since the acquisition of Canadi*n in January 2000, it had launched five seat sales - on January 5, March 21, June 7, September 5 and October 25. (In subsequent discussions between Agency staff and Air Canada, it was revealed that the June 7 date should, in fact, have read July 7, and that the fare action on July 7 was not a seat sale; rather, it was a realignment of certain fares applicable to travel comprising regional and mainline components.)

ANALYSIS AND FINDINGS

In making its findings in respect of the preliminary issue and the fare-related issues raised by the complaint, the Agency has considered all of the evidence submitted by the parties during the pleadings, as well as information available both publicly and within the Agency concerning air services provided between Toronto and Saskatoon 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 subsections 66(1) and 66(2) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that

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

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

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

Preliminary Issue

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

The Agency has reviewed the information available to it with respect to the domestic service offered between Toronto and Saskatoon. The Agency has also considered Air Canada's position that WestJet's service between Hamilton and Saskatoon constitutes a reasonable alternative domestic service to that provided by Air Canada between Toronto and Saskatoon because the Hamilton and Toronto airports are essentially in the same catchment area.

Pursuant to section 66 of the CTA, the Agency may inquire into complaints concerning passenger fares and cargo rates published or offered in respect of certain domestic services provided "between two points". The word "point" is not defined in the CTA. However, The Canadian Oxford Dictionary defines "point" as "a specific place or position" and, in its mathematical sense, as "that which is conceived as having a position, but no extent, magnitude or dimension". The denotation of the word "point", therefore, is very specific and is much more narrow than "catchment area". The Agency has considered whether interpreting the word "point" in section 66 of the CTA as "catchment area" would be consistent with the spirit and intent of the CTA as a whole and notes that the word "point" is used frequently in the CTA. The Agency also notes that The Canadian Oxford Dictionary defines "catchment area" as "the area served by a school, hospital, etc." Accordingly, the parameters of a "catchment area" are not very well defined and may be quite subjective. The Agency is therefore of the opinion that interpreting the word "point" in section 66 of the CTA as "catchment area" could lead to inconsistency and ambiguity.

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

In response to the Agency's preliminary finding that Air Canada was the only person providing a domestic service between Toronto and Saskatoon, Air Canada reiterated its position that it was not the only person providing a service between Toronto and Saskatoon. The carrier noted that "Mr. Baldwin's office is located in Mississauga, which is extremely convenient for access to the Pearson Airport. That said, from his office, he has an approximate 30 minute drive (or approx. 50 kilometres) from John C. Munro Hamilton International Airport".

In his reply to Air Canada's representations, Mr. Baldwin disputed Air Canada's claim that WestJet provided an alternative service to that of Air Canada, pointing out that "the service goes from Hamilton not Toronto". Mr. Baldwin advised the Agency that his office is 80 kilometres from the Hamilton airport, and not 50 kilometres as suggested by Air Canada. He maintained that at rush hour, when he is usually travelling to the airport from his office, it is a ten minute journey to the Toronto-Lester B. Pearson International Airport and a one-and-a-half to two-hour journey to the Hamilton airport (and not the 30 minutes suggested by Air Canada). He added that the Air Canada direct flight from Toronto to Saskatoon, including travel time to the airport, is less than three hours compared to over eight hours for WestJet's out of Hamilton, adding at least one day, and most likely two days to his trip. As such, travelling on WestJet's service operated from the Hamilton airport is an unacceptable alternative from a business standpoint.

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.

The Agency is of the opinion that, on July 25, 2000, in addition to being served by Air Canada, the Toronto-Saskatoon route was served by Royal Aviation Inc. carrying on business as Royal and/or Conifair (hereinafter Royal).

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

  • approximately 35 direct, non-stop flights per week and 7 one-stop flights per week;
  • service provided every day of the week;
  • a total weekly capacity of approximately 5,700 seats;
  • large aircraft, as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR), used on all flights; and
  • a total travel time between Toronto and Saskatoon of approximately three hours and twenty minutes for non-stop flights and four hours and twenty minutes for the one-stop flights.

Available information also indicates that Royal's service between Toronto and Saskatoon during the week of July 25, 2000 consisted of:

  • approximately 1 direct, non-stop flight per week and 1 one-stop flight per week;
  • service provided on Wednesday;
  • a total weekly capacity of approximately 450 seats;
  • large aircraft, as defined in the ATR, used on all flights; and
  • a total travel time between Toronto and Saskatoon of approximately three hours for the non-stop flight and four hours and fifty minutes for the one-stop flight.

The Agency has carefully examined and analyzed the services provided by both carriers between Toronto and Saskatoon during the week of July 25, 2000 and, on the basis of the factors set out in subsection 66(4) of the CTA, is of the opinion that the service offered by Royal between Toronto and Saskatoon did not provide travellers with a reasonable alternative to that offered by Air Canada.

Air Canada also proposed as an alternative to its service between Toronto and Saskatoon a combination of the services provided by Canada 3000 Airlines Limited (hereinafter Canada 3000) or Royal between Toronto and Winnipeg and the service provided by WestJet between Winnipeg and Saskatoon. The Agency is of the opinion that two distinct domestic air services would constitute a reasonable alternative to the domestic service provided by Air Canada only if they offered a joint fare to the traveller, that is, if a traveller could: make arrangements with one carrier for domestic travel from origin through to destination; make changes to the travel itinerary with the carrier with whom the original travel arrangements had been made, regardless of which carrier is operating the flight on a particular leg of the trip; reasonably expect to have baggage transferred between carriers by the carriers themselves; and, in the event of the cancellation or delay of a flight prior to the last leg of a trip, rely upon the cooperation of the carrier who cancelled or caused the delay to assist in rebooking the next flight at no cost to the traveller.

The Agency's research has revealed that, on or about July 25, 2000, WestJet, Canada 3000 and Royal offered separate domestic services and did not have a joint-fare arrangement with one another in place at the time of the complaint. In such circumstances, a traveller would have to make travel arrangements with, and purchase a ticket from, each carrier separately. Any changes to travel arrangements would have to be made with the appropriate carrier, and the traveller, rather than one of the carriers, would have to transfer the baggage from one carrier to the other. In the event of a flight cancellation or delay prior to the last leg of a trip, the traveller would not have been protected with respect to the remainder of the trip, as would have been the case on a flight where a joint fare was used. The entire onus for rebooking travel arrangements for the remainder of the trip would rest with the traveller who could potentially lose the cost of the fare for the missed portion of the journey if the ticket for that portion were non-refundable, or incur a fee for making changes to flight arrangements. Also, in the event of a cancellation or delay of a flight, a traveller would have to be concerned with the availability of a continuing flight which would depend on the frequency of the service offered by the carrier to be used on the next leg of the trip.

In light of the foregoing, the Agency has determined that, on or about July 25, 2000, Air Canada was the only person providing a domestic service between Toronto and Saskatoon 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 $2,060.82 fare published or offered by Air Canada was unreasonable and whether the range of fares offered by Air Canada was inadequate in respect of its service between Toronto and Saskatoon on or about July 25, 2000

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 Saskatoon and the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft including terms and conditions of carriage. The Agency notes that, although Air Canada was given the opportunity to identify fares applicable to similar domestic services offered by Air Canada and one or more other licensees as well as the number of seats available at those fares, the carrier did not provide the Agency with such information.

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 25, 2000, Air Canada operated its domestic service between Toronto and Saskatoon using large aircraft, as defined in the ATR;
  2. according to the OAG, the distance between Toronto and Saskatoon is approximately 1,382 air miles; and
  3. the origin-destination passenger volume between Toronto and Saskatoon was approximately 85,680 passengers in 1999 (the last complete year for which such information is available).

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

  1. Royal and WestJet operated domestic services between Ottawa and Winnipeg, in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Ottawa and Winnipeg using large aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Ottawa and Winnipeg is approximately 1,048 air miles; and
  4. the origin-destination passenger volume between Ottawa and Winnipeg was approximately 115,500 passengers in 1999.

The Agency, in relating to Air Canada the results of its preliminary analysis, asked the carrier to comment upon the Agency's choice of the service offered between Ottawa and Winnipeg as a similar domestic service. Air Canada submitted that the factors to be considered in choosing a similar domestic service are dependent on the circumstances of each case, and that the Agency "may have regard" to such factors as the population bases, the total number of flights per day operated out of the airports in question, the passenger mix (i.e., premium/high/low split), the network contribution and a comparison of the trend of fares on the two routes. Otherwise, Air Canada did not comment upon the Agency's choice of Air Canada's service between Ottawa and Winnipeg as one that is similar to its service between Toronto and Saskatoon nor did it propose a service which it considered to be more appropriate for comparison purposes.

Data respecting fares applicable to domestic services between Toronto and Saskatoon and between Ottawa and Winnipeg

The Agency's research has identified that the $2,060.82 fare which is the subject of the complaint is the sum of Air Canada's Y1 one-way, base fare of $953 sold on a round-trip basis for $1,906, the $5 airport improvement fee collected by Air Canada at the time of ticketing on behalf of the Greater Toronto Airports Authority for domestic departures from the Toronto-Lester B. Pearson International Airport, the $15 round-trip surcharge Air Canada applied to the Y1 base fare to cover the fees that it pays for the operation of Canada's air navigation system, and the Goods and Services Tax of $134.82. Of these components, the Agency will conduct its analysis and make its determination with respect to the $953 Y1 base fare, which will be analyzed below. The Agency also analyzed the range of fares offered by Air Canada in respect of its service between Toronto and Saskatoon.

In conducting its analysis, the Agency considered the one-way Y1 base fare (hereinafter the Y1 fare) offered by Air Canada on the Toronto-Saskatoon route in relation to the Y1 fare it offered on the Ottawa-Winnipeg route and the year-over-year increases in the fares on each of the routes. The range of fares Air Canada offered on its Toronto-Saskatoon route was compared to the range it offered on its Ottawa-Winnipeg route with respect to the span of fares, the number of fares, distribution of discounts off the Y1 fare calculated on a round-trip basis (hereinafter the Y1 round-trip fare), the similarity of fare classes offered on the two routes, the terms and conditions of carriage associated with each fare, and historical ranges, including the levels of the fares themselves and the year-over-year changes.

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

As mentioned earlier, after completing its preliminary analysis, the Agency advised Air Canada of its preliminary findings and asked the carrier to comment upon them. Air Canada's comments are included in the appropriate sections below. Generally, Air Canada maintained that economic theory justifies fare differentials from route to route, and submitted a statement prepared by Professor William J. Baumol, "a pre-eminent economist from New York University with extensive experience relating to the economics of the airline industry", in support of its position. Professor Baumol maintained that differential pricing is widespread and is not to be interpreted as a manifestation of monopoly power exercised as a means to obtain excessive profits, and that it is not unreasonable for an airline to publish and apply a fare on one route (e.g., a competitive route) but not to apply the same fare on another route (e.g., a non-competitive route).

1. General overview

An overview of the fares published by Air Canada in respect of its domestic services between Toronto and Saskatoon and between Ottawa and Winnipeg on July 25 in 1998, 1999 and 2000 shows that Air Canada offered a selection of fares on each route. The carrier's fare structure on each route included the Y1 fare on which the price levels of the other fares offered on the route are based. The Y1 fare is the economy-type fare for one-way travel which allows passengers the most flexibility with respect to booking or cancelling reservations or making changes in their itinerary; however, it is the most expensive economy-type fare. With the exception of a premium, business-type (J-class) fare, most of the other fares offered by Air Canada on the Toronto-Saskatoon and the Ottawa-Winnipeg routes were discounted off the Y1 round-trip fare and were non-refundable, round-trip fares which required an advance purchase.

The Agency's analysis shows that, on July 25 in 1998, 1999 and 2000, Air Canada offered a greater number of discounted fares on the Ottawa-Winnipeg route than on the Toronto-Saskatoon route. The fares which were available on both routes were higher on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route, but, with the exception of the 'NITE' fares, were discounted off the Y1 round-trip fare by relatively similar percentages.

Canadian Airlines International Ltd. carrying on business under the firm name and style of Canadian Airlines International or Canadi*n Airlines or Canadi*n (hereinafter Canadi*n) offered fares for travel on the Toronto-Saskatoon route on July 25, 1998 and 1999, and Royal offered fares in all three years.

2. The Y1 fare

The Agency's research shows that the Y1 fare offered by Air Canada on the Toronto-Saskatoon route was for one-way travel and was fully refundable.

As a result of its preliminary investigation, the Agency asked Air Canada to provide comments concerning its findings in respect of the fare-related issues under investigation. Air Canada reiterated its position that the fare in question is a fare of $2,060.82 and the closest available fare was the Y1 economy class fare of $953 one-way, or $1,906 round-trip, excluding applicable taxes and charges. In discussing the Y1 fare, Air Canada provided a historical analysis of its QHCANADA, QLCANADA, VHCANADA, VLCANADA and Y1 fares as examples of how fares remained unchanged since Air Canada competed with Canadi*n on the route in 1999. Air Canada's analysis shows an increase of approximately 3-6 percent in these fares which, it stated, occurred prior to the merger of the two airlines. The carrier thus contended that, because the fares it offered at the time of the complaint had not changed from the time when there was competition on the route, the fare which is the subject of the complaint is prima facie reasonable.

Air Canada stated that the difference of 15.2 percent between the Y1 fare it offered for travel on the Toronto-Saskatoon route and the Y1 fare it offered for travel on the Ottawa-Winnipeg route is related to the difference in the distances of the routes. (According to the OAG, the distance between Toronto and Saskatoon is 1,382 air miles, while the distance between Ottawa and Winnipeg is 1,048 air miles, a difference of 32 percent.) Air Canada maintained that one way to compare fares on routes of differing mileage is to reduce the fare to a per-mile basis, which, it stated, yields a per-mile rate of $0.69 on the Toronto-Saskatoon route and $0.78 on the Ottawa-Winnipeg route. Air Canada thus submitted that, on a revenue-per-mile basis alone, it is earning less revenue per mile on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route.

Air Canada also maintained that the smaller volume of traffic on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route and the fact that Saskatoon has a smaller population than Winnipeg are reasonable explanations for charging higher fares on the Toronto-Saskatoon route. Air Canada argued that centres with smaller populations or those with lower passenger volumes generally have higher fixed costs per passenger.

The Agency's analysis of historical fares indicates that the Y1 fare was higher in each year on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route; however, it was increased by the same percentage on both routes from 1998 to 2000, as assessed on July 25 of each year. The Y1 fare which Air Canada offered on the Toronto-Saskatoon route was consistently 15 percent higher than the Y1 fare it offered on the Ottawa-Winnipeg route on each of the dates under review.

The Agency has carefully examined and analyzed the Y1 fares offered by Air Canada in respect of its domestic services between Toronto and Saskatoon and between Ottawa and Winnipeg on July 25 in 1998, 1999 and 2000. On the basis of the foregoing analysis and based on the factors set out in subsection 66(3) of the CTA, the Agency is of the opinion that, with respect to fare levels and year-over-year changes in the Y1 fare, Air Canada treated the Toronto-Saskatoon and the Ottawa-Winnipeg routes in a similar manner on the dates under review.

With respect to Air Canada's stated position that the difference in the Y1 fares is related to the difference in the air distances, the Agency recognizes that the Toronto-Saskatoon route is longer than the Ottawa-Winnipeg route, and has taken that fact into account in its analysis of the fares. It has also considered the difference in the volume of passengers moved on the two routes, as reported by Statistics Canada, rather than the population of the centres involved, as it is only a portion of the population that chooses to travel by air.

3. Range of fares

As a result of its preliminary investigation, the Agency also asked Air Canada to provide comments concerning certain findings in respect of the LH7NITE fare - that is, the fare at the low end of the range of fares which it offered for travel between Toronto and Saskatoon at the time of the complaint. The Y1 fare is the fare at the upper end of the range. Air Canada was also asked to submit its comments with respect to the Y1 fare; the salient points are mentioned in the preceding section. Air Canada was asked to explain why it discounted the LH7NITE fare - the least expensive fare in the range of discounted fares - by 76 percent off the Y1 round-trip fare on the Ottawa-Winnipeg route and by only 70 percent on the Toronto-Saskatoon route, resulting in a difference of $170, or nearly 43 percent, in the level of the lowest fares it offered on the two routes.

Air Canada argued in its comments concerning the Agency's preliminary analysis that the LH7NITE fare is not the subject of the complaint and that, if it were, it would be for Mr. Baldwin to assert and not the Agency. Thus, in its submission, Air Canada did not address the Agency's request for information with respect to the LH7NITE fare, nor did it discuss whether the range of fares it offered on the route on July 25, 2000 was adequate. The Agency notes that, in its letter of September 28, 2000, it advised Air Canada that it would be considering the complaint pursuant to both subsections 66(1) and 66(2) of the CTA. As subsection 66(2) gives the Agency the power to take remedial action where it finds that a licensee is offering an inadequate range of fares, the Agency is of the opinion that it has the jurisdiction to review each and every one of the fares offered by Air Canada for travel between Toronto and Saskatoon.

3a) Span of fares

In each of the years under review, Air Canada's Y1 fare was 15 percent higher on the Toronto-Saskatoon route than the Y1 fare it offered on the Ottawa-Winnipeg route: it was $212 higher on July 25, 1998, $236 higher on July 25, 1999, and $252 higher on July 25, 2000. At the opposite end of the range, the lowest fare Air Canada offered in each of the three years on the Toronto-Saskatoon route was 42-43 percent higher than the lowest fare it offered on the Ottawa-Winnipeg route: on July 25, 1998, the difference was $152, and on July 25 in both 1999 and 2000, the difference was $170.

On the Toronto-Saskatoon route, the difference between the Y1 round-trip fare and the lowest fare increased from $1,101 on July 25, 1998 to $1,337 on July 25, 2000, an increase of 21 percent. The fare class for the lowest fare was not the same in each of the three years.

On the Ottawa-Winnipeg route, the difference between the Y1 round-trip fare and the lowest fare increased from $1,041 on July 25, 1998 to $1,255 on July 25, 2000, also an increase of 21 percent. On this route, the fare class for the lowest fare was identical in each of the three years.

Thus, Air Canada's fares were higher on the route which is the subject of the complaint. However, as noted previously, the Toronto-Saskatoon route is 32 percent longer in distance than the Ottawa-Winnipeg route so it is reasonable to expect that the applicable fares would be higher.

3b) Number of fares

On July 25 in 1998 and 1999, Air Canada offered four round-trip fares discounted off the Y1 round-trip fare and on July 25, 2000 it offered six such fares on the Toronto-Saskatoon route. On July 25, 1998, the carrier offered six round-trip fares discounted off the Y1 round-trip fare on the Ottawa-Winnipeg route, and offered seven such fares on July 25 in 1999 and 2000. As such, Air Canada offered a slightly greater number of round-trip discounted fares on the Ottawa-Winnipeg route than on the Toronto-Saskatoon route: it offered two more in 1998 and three more in 1999, but by July 25, 2000, it offered only one more.

On July 25, 1998, Air Canada offered a deeply-discounted 'NITE' fare only on the Ottawa-Winnipeg route. On July 25, 1999, Air Canada offered two deeply-discounted 'NITE' fares - the QH7NITE fare and the LH7NITE fare - on the Ottawa-Winnipeg route, but none on the Toronto-Saskatoon route. However, on July 25, 2000, Air Canada offered the two 'NITE' fares on both routes, thereby improving the selection of fares on the Toronto-Saskatoon route so that, by the time of the complaint, the selection of fares was quite similar on both routes.

3c) Distribution of discounts off the Y1 round-trip fare

On July 25 in 1998 and 1999, Air Canada offered four round-trip fares on the Toronto-Saskatoon route which were discounted off the Y1 round-trip fare. The discount applicable to each of the fares was the same in both years on the Toronto-Saskatoon route. The four fares, which bore the same fare class codes in both years, were discounted at 23, 57, 65 and 68 percent. On July 25, 2000, Air Canada offered six round-trip fares which were discounted at 23, 57, 66, 67, 69, and 70 percent. Thus, the introduction of the two new fares changed the distribution of fares in that there was an even greater number of fares clustered at the low end of the range.

On the Ottawa-Winnipeg route on July 25, 1998, Air Canada offered six fares discounted at 23, 57, 64, 67, 71 and 74 percent. In 1999 and 2000, the carrier offered seven such fares: in 1999 the discounts were 23, 57, 62, 65, 69, 71, and 74 percent, and in 2000 the discounts were 23, 57, 62, 66, 69, 72, and 76 percent. Thus, the discounts did not change significantly over the review period.

The foregoing illustrates that, on July 25, 2000, with respect to the distribution of discounts off the Y1 round-trip fare, the routes were treated in a similar manner, with the concentration of discounts clustered at the least expensive end of the range on both routes.

3d) Fare classes

On July 25 in each of the three years under review, Air Canada offered the Y1 (full economy-type) fare and the J1 (premium business-type) fare on both routes. In addition, on July 25, 1998, Air Canada offered discounted B-, H-, V- and Q-class fares on both the Toronto-Saskatoon and the Ottawa-Winnipeg routes. It also offered an L-class fare on the Ottawa-Winnipeg route. The L-class fare was the least expensive fare on the route and was discounted at 74 percent. By July 25, 2000, Air Canada offered discounted fares in each of the B-, H-, V-, Q-, and L-classes of fares on both routes. It offered one additional B-class fare on the Ottawa-Winnipeg route which it did not offer on the Toronto-Saskatoon route.

For those fare classes common to both routes, the terms and conditions of carriage associated with each fare were identical and thus were equally restrictive on both routes.

As such, the two routes were not treated in a dissimilar fashion with respect to the variety of fare classes offered on the dates under review.

3e) Historical ranges

i) Levels of Fares

The Agency's examination of the range of fares offered for travel by Air Canada on the Toronto-Saskatoon route compared to that it offered on the Ottawa-Winnipeg route on July 25 in 1998, 1999 and 2000 shows that the Y1 fares increased by the same percentages on both routes from July 25, 1998 to July 25, 2000. Where year-round fares with the same fare class codes were offered on both routes in a given year, they were higher on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route; the fares were 15-26 percent higher in 1998, 15-17 percent higher in 1999, and 15-43 percent higher in 2000. However, after taking into account the 32 percent difference in distance between the two routes, the fares were not dissimilar.

ii) Year-over-year changes

Between July 25, 1998 and July 25, 1999, Air Canada raised the fares on the Toronto-Saskatoon route by 11-12 percent. The increases on the Ottawa-Winnipeg route ranged from 11-20 percent during that time. By July 25, 2000, Air Canada had increased all of the fares by 4-6 percent from the previous year's levels on both routes, except for the 'NITE' fares on the Ottawa-Winnipeg route which remained at 1999 levels.

Thus, Air Canada generally did not raise the fares it offered on its Toronto-Saskatoon route by a greater amount than it had on its Ottawa-Winnipeg route on the dates under review.

3f) Summary

With respect to the range of fares offered by Air Canada, the Agency is of the opinion that, although the fares offered by Air Canada on the Toronto-Saskatoon route were higher than those it offered on the Ottawa-Winnipeg route, the difference in distance would necessarily result in higher fares on the former route. Further, the number of fares on the Toronto-Saskatoon route had improved by July 25, 2000, thereby providing the traveller with an increased selection of fares at that date. The levels of discount were similar to those offered on the Ottawa-Winnipeg route. With respect to year-over-year changes, fares available year-round were treated either the same on both routes or slightly more favourably on the Toronto-Saskatoon route than on the Ottawa-Winnipeg route.

4. Review of the fares offered by other carriers on the Toronto-Saskatoon route

Agency investigations into fare-related complaints include the examination of the fares offered by other carriers who provided service on the route which is the subject of the complaint. Since the Agency analyzed the fares offered by Air Canada in respect of the domestic services operated between Toronto and Saskatoon on July 25 of 1998, 1999 and 2000, the same review dates were used to identify all other carriers that provided a service on the route.

The Agency's research shows that, on July 25 in 1998 and 1999, Canad*an offered fares for travel between Toronto and Saskatoon. The research shows that, with the exception of one mid-range, flight-specific fare offered only by Canad*an on those dates, Air Canada offered the same fares for travel between Toronto and Saskatoon as did Canad*an.

The Agency's research indicates that, on July 25 in 1998, 1999 and 2000 Royal also offered fares for travel between Toronto and Saskatoon. The Agency's research shows that, generally, Air Canada's fares were higher than those offered by Royal. However, in each year, Air Canada offered a wider range of fares than did Royal and Air Canada's fares were discounted at a much higher percentage off the Y1 round-trip fare than were Royal's.

5. Agency findings

In light of the foregoing, the Agency finds that the $953 one-way Y1 base fare published or offered by Air Canada in respect of its service between Toronto and Saskatoon on or about July 25, 2000, which is the subject of the complaint, was not unreasonable.

The Agency also finds that the range of fares offered by the carrier in respect of its service between Toronto and Saskatoon on or about July 25, 2000, which is the subject of the complaint, was not inadequate after taking into account the difference in distance.

CONCLUSION

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

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