Decision No. 99-P-A-2001

March 7, 2001

March 7, 2001

IN THE MATTER OF a complaint by Dan Motisca concerning the fares offered by Air Canada on the Vancouver-Prince Rupert route.

File No. M4370/A74/00-274


COMPLAINT

On August 10, 2000, Dan Motisca (hereinafter the complainant) filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

The complainant submits that the fare of approximately $440.00 offered by Air Canada for a round-trip flight between Prince Rupert and Vancouver is not acceptable. The complainant further submits that he found this fare while conducting research on Air Canada's Internet site on or about August 10, 2000.

By letter dated August 23, 2000, both the complainant and Air Canada were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) sets out the jurisdiction of the Agency over complaints concerning fares applied by air carriers for domestic services. More particularly, both parties were advised that, pursuant to subsection 66(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint.

At the same time, Air Canada was requested to provide the Agency and the complainant with its comments with respect to the preliminary issue raised by the complaint - whether Air Canada was the only person providing a domestic service between Prince Rupert and Vancouver.

On September 13, 2000, Air Canada requested an extension of time to file its answer in respect of the preliminary issue raised by the complaint and, by Decision No. LET-P-A-278-2000 dated September 19, 2000, the Agency granted Air Canada an extension until September 29, 2000. Air Canada filed its answer to this aspect of the complaint on September 29, 2000. On October 11, 2000, the complainant filed his reply to Air Canada's answer.

On October 20, 2000, Air Canada was requested to provide the Agency and the complainant with its comments with respect to the fare-related issues raised in the complaint, including the information outlined in subsection 66(3) of the CTA. On November 20, 2000, Air Canada requested an extension of time to file its answer to this aspect of the complaint and, by Decision No. LET-P-A-365-2000 dated November 28, 2000, the Agency granted Air Canada an extension until December 4, 2000. On December 5, 2000, Air Canada filed its answer to the fare-related issues raised in the complaint. On December 16, 2000, the complainant filed his reply to Air Canada's answer.

PRELIMINARY MATTER

Although Air Canada filed its answer 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 and necessary to its consideration of this matter.

ISSUES

The issues to be addressed in this complaint are:

  1. whether Air Canada, including affiliated licensees (hereinafter Air Canada), was the only person providing a domestic service between Prince Rupert and Vancouver within the meaning of section 66 of the CTA on or about August 10, 2000; and, if so,
  2. whether the fare offered or published by Air Canada in respect of its service between Prince Rupert and Vancouver, which is the subject of the complaint, was unreasonable.

POSITIONS OF THE PARTIES

The complaint concerns the round-trip fare of approximately $440.00, including taxes and related charges, offered by Air Canada for its domestic service between Prince Rupert and Vancouver on or about August 10, 2000. The complainant submits that this fare is "less than acceptable" when compared to the round-trip fare, including taxes and related charges, of approximately $200.00 offered by Air Canada for its domestic service between Prince George and Vancouver. The complainant further submits that Air Canada is the only carrier providing a domestic service between Prince Rupert and Vancouver, whereas the route between Prince George and Vancouver is served by both Air Canada and WestJet Airlines Limited (hereinafter WestJet).

In its answer to the preliminary issue raised by the complaint, Air Canada advises that it "was the only person providing a domestic service between Prince Rupert and Vancouver, within the meaning of section 66 of the CTA, at the time of Mr. Motisca's complaint". At the time of the complaint, this service was provided by Canadian Regional Airlines, an affiliated licensee of Air Canada.

In its answer to the fare-related issue raised in the complaint, Air Canada submits that it was not able to locate the $440.00 round-trip fare for its domestic service between Prince Rupert and Vancouver in its records of sales for the period in question. Air Canada further submits that the closest fare was the V14SNR fare of $398.00, excluding applicable taxes and charges. According to Air Canada, the V14SNR fare was an excursion economy fare available year-round, was not limited to specific flights or specific times or days of travel, must have been purchased fourteen days in advance of travel and required a minimum Saturday night stay.

Air Canada maintains that the fares it offered in respect of its domestic service between Prince Rupert and Vancouver on August 10, 2000 were lower than those offered for identical fare classes on May 1, 1999 when the Prince Rupert-Vancouver market was served by both AirBC and Canadian Regional Airlines. Air Canada states that it was unable to undertake an historical comparison of the V14SNR fare because it did not offer such a fare in May of 1999.

With respect to its service between Prince George and Vancouver, Air Canada contends that the fares it offers on this route are lower than those offered on its Prince Rupert-Vancouver route for the following reasons: a) the population of Prince George is larger than that of Prince Rupert; b) the fixed costs per passenger are lower in larger population centres such as Prince George; and, c) the Prince George-Vancouver route is served by WestJet in addition to Air Canada.

ANALYSIS AND FINDINGS

Section 66 of the CTA sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers for 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 offered or published 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;
  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

Was Air Canada the only person providing a domestic service between Prince Rupert and Vancouver within the meaning of section 66 of the CTA on or about August 10, 2000?

In making its finding in respect of the preliminary issue raised by the complaint, the Agency has carefully reviewed and considered all of the pleadings in the complaint as well as information available both publicly and within the Agency concerning air services provided between Prince Rupert and Vancouver, including the Internet, the Official Airline Guide and published flight schedules. On the basis of this information, as well as Air Canada's statement that it was the only person providing a domestic service between Prince Rupert and Vancouver at the time of the complaint, the Agency has determined that Air Canada was the only person providing a domestic service between Prince Rupert and Vancouver within the meaning of section 66 of the CTA on or about August 10, 2000.

Fare-related Issues

Was the V14SNR fare offered by Air Canada in respect of its service between Prince Rupert and Vancouver on or about August 10, 2000 unreasonable?

In making its findings in respect of the fare-related issues raised in the complaint, the Agency has carefully reviewed and considered all of the pleadings in the complaint as well as information available both publicly and within the Agency concerning air services provided between Prince Rupert and Vancouver 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, published flight schedules and airline tariffs published by the Airline Tariff Publishing Company. As required by subsection 66(3) of the CTA, the Agency has also considered historical data respecting fares applicable to domestic services offered between Prince Rupert and Vancouver as well as 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, Air Canada did not provide the Agency with such information.

Historical data respecting fares applicable to domestic services between Prince Rupert and Vancouver

The Agency is of the opinion that, since the V14SNR fare, which is the subject of the complaint, was not introduced by Air Canada in this market until March 2000, an historical analysis is not relevant.

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 "non-competitive" routes are offered fares which are broadly comparable in level and range to those offered to travellers on "competitive" routes. Since it could be argued that each domestic service offered by a carrier is essentially unique and, therefore, that there are no truly comparable services, the Agency is of the view that a liberal approach should be taken in identifying "similar domestic services" for the purposes of paragraph 66(3)(b) of the CTA. Accordingly, 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. at the time of the complaint, Air Canada operated its domestic service between Prince Rupert and Vancouver using medium aircraft, as defined in the Air Transportation Regulations;
  2. the distance between Prince Rupert and Vancouver is approximately 469 air miles; and
  3. the origin-destination passenger volume between Prince Rupert and Vancouver was 41,200 passengers in 1998 (the last complete year for which information is available).

The complainant suggests that the domestic service offered by Air Canada between Prince Rupert and Vancouver was similar to the service Air Canada offered between Prince George and Vancouver. Accordingly, the Agency analyzed Air Canada's service between Prince George and Vancouver at the time of the complaint. On the basis of its consideration of the factors set out above, the Agency has determined that:

  1. WestJet operated a domestic service between Prince George and Vancouver in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Prince George and Vancouver using medium aircraft, as defined in the Air Transportation Regulations;
  3. the distance between Prince George and Vancouver is approximately 325 air miles; and
  4. the origin-destination passenger volume between Prince George and Vancouver was 156,400 passengers in 1998.

The Agency is of the opinion that the Prince George-Vancouver service is not similar to the Prince Rupert-Vancouver service when taking into account distance and passenger volume.

The Agency also conducted a similar analysis of the domestic services offered by Air Canada between Regina and Winnipeg, Winnipeg and Saskatoon and Calgary and Victoria and has determined that, based on its consideration of the factors outlined above, the service which was most similar to that offered by Air Canada between Prince Rupert and Vancouver within the meaning of paragraph 66(3)(b) of the CTA at the time of the complaint was Air Canada's service between Winnipeg and Saskatoon for the following reasons:

  1. WestJet and Athabasca Airways Ltd. operated domestic services between Winnipeg and Saskatoon in addition to the service operated by Air Canada;
  2. Air Canada operated its service between Winnipeg and Saskatoon using medium aircraft, as defined in the Air Transportation Regulations;
  3. the distance between Winnipeg and Saskatoon is approximately 438 air miles; and
  4. the origin-destination passenger volume between Winnipeg and Saskatoon was 57,800 passengers in 1998.

Fares offered by Air Canada in respect of its domestic services between Prince Rupert and Vancouver and between Winnipeg and Saskatoon

With respect to the fares offered by Air Canada in respect of its domestic service between Prince Rupert and Vancouver at the time of the complaint, information before the Agency includes the following details about the V14SNR fare:

  • the $398.00 round-trip V14SNR fare represented a 57 percent (or $520.00) discount off the Y1 unrestricted round-trip economy fare of $918.00;
  • the V14SNR adult fare was the lowest fare offered by Air Canada on or about August 10, 2000 for round-trip travel;
  • the V14SNR fare provided Air Canada with a revenue per mile of $0.42;
  • the V14SNR fare was not limited to specific flights or specific flight times or days of travel;
  • the V14SNR fare required that reservations for all sectors be made at least 14 days before departure;
  • the V14SNR fare required that ticketing be completed within 7 days after reservations were made or at least 14 days before departure, whichever was earlier;
  • return travel on the V14SNR fare from last stopover must have commenced no earlier than the first Sunday after departure;
  • return travel on the V14SNR fare from last stopover must have commenced no later than 365 days after departure;
  • the V14SNR fare was not refundable after purchase;
  • the V14SNR fare provided the traveller with the ability to make changes to the ticket before and after departure for a fee of $100.00.

With respect to the fares offered by Air Canada in respect of its domestic service between Winnipeg and Saskatoon at the time of the complaint, information before the Agency indicates that the lowest fares offered by Air Canada for return travel by an adult between those two points were the two L-14VALU fares: the LW14VALU fare of $230.00 and the LX14VALU fare of $200.00. Information before the Agency includes the following details in respect of Air Canada's $230.00 LW14VALU fare offered for return travel between Winnipeg and Saskatoon on August 10, 2000:

  • the $230.00 weekend round-trip LW14VALU fare represented a 76 percent (or $748.00) discount off the Y1 unrestricted round-trip economy fare of $978.00;
  • the LW14VALU fare provided Air Canada with a revenue per mile of $0.26;
  • the LW14VALU fare was limited to travel on Thursday, Friday, and Sunday only.

Information before the Agency also provides the following details in respect of Air Canada's $200.00 LX14VALU fare offered for return travel between Winnipeg and Saskatoon on August 10, 2000:

  • the $200.00 mid-week round-trip LX14VALU fare represented an 80 percent (or $778.00) discount off the Y1 unrestricted round-trip economy fare of $978.00;
  • the LX14VALU fare provided Air Canada with a revenue per mile of $0.23;
  • the LX14VALU fare was limited to travel on Monday, Tuesday, Wednesday, and Saturday only.

Information before the Agency also indicates that Air Canada's L-14VALU fares offered for return travel between Winnipeg and Saskatoon on August 10, 2000 were subject to the same terms and conditions of carriage as its V14SNR fare offered for return travel between Prince Rupert and Vancouver on August 10, 2000, with the following exceptions:

  • ticketing must have been completed within 1 day after reservations were made or at least 14 days before departure, whichever was earlier;
  • when originating on Saturday, return travel from last stopover must have commenced no earlier than the first Sunday after departure or when originating Sunday through Friday, return travel from last stopover must have commenced no earlier than 2 days after departure.

The Agency has carefully examined and analysed the fares offered by Air Canada in respect of its domestic services between Prince Rupert and Vancouver and between Winnipeg and Saskatoon and is of the opinion that,

  1. although the requirement to complete ticketing for the L-14VALU fares offered on the Winnipeg-Saskatoon route was more restrictive than that for the V14SNR fare on the Prince Rupert-Vancouver route, the minimum stay requirement for the V14SNR fare on the Prince Rupert-Vancouver route was more restrictive than that for the L-14VALU fares offered on the Winnipeg-Saskatoon route; and
  2. the significant difference in both the amount of discount off the Y1 unrestricted round-trip economy fare and the revenue per mile is not justified by the minor differences in the terms and conditions of carriage applicable to Air Canada's V14SNR fare offered in respect of its service between Prince Rupert and Vancouver and the terms and conditions of carriage applicable to Air Canada's L-14VALU fares offered in respect of its service between Winnipeg and Saskatoon.

On the basis of its consideration of the comparative analysis of the V14SNR fare offered by Air Canada on the Prince Rupert-Vancouver route and the L-14VALU fares offered by Air Canada in respect of its similar domestic service between Winnipeg and Saskatoon, as set out above, the Agency has determined that the $398.00 V14SNR fare published or offered by Air Canada in respect of its domestic service between Prince Rupert and Vancouver on or about August 10, 2000, was unreasonable.

CONCLUSION

Based on the above findings, the Agency intends, pursuant to paragraph 66(1)(b) of the CTA, to direct Air Canada to amend its tariff by reducing the V14SNR fare offered in respect of its service between Prince Rupert and Vancouver so that the V14SNR fare is comparable to the L-14VALU fares Air Canada offers in respect of its domestic service between Winnipeg and Saskatoon. The Agency will direct that this V14SNR fare be made available by Air Canada for the same duration, and in the same proportion regarding seat availability, as it offers the L-14VALU fares with respect to its Winnipeg-Saskatoon service.

Prior to making such a direction, however, subsection 66(5) of the CTA requires the Agency to consider any representations Air Canada may make with respect to what is reasonable in the circumstances. Accordingly, Air Canada is hereby provided with the opportunity to make such representations to the Agency, and serve a copy on the complainant, within ten (10) days from the date of this Decision.

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