# Letter Decision No. LET-C-A-129-2011

December 2, 2011

Complaint by Gabor Lukács against Air Canada with respect to its Canadian Domestic General Rules Tariff No. CDGR-1, in particular, Rules 37(B), 135(E), 240(B)(9), 240(C)(1), 240(D)(3), 250(I) and 260.

File No.:
M 4120-3/09-03560

## BACKGROUND

[1] On April 24, 2009, Air Canada filed with the Canadian Transportation Agency (Agency) certain amendments to its tariff applicable for travel to and from Canada. The purpose of these amendments was to promote passenger protection on Air Canada’s international flights.

[2] Chief among these amendments was the addition of a tariff provision which provided for additional service standard commitments for passengers in the event of flight overbooking and cancellation.

[3] At that time, the Agency evaluated the tariff amendments from the perspective of clarity pursuant to section 122 of the Air Transportation Regulations, SOR/88-58, as amended (ATR), and raised certain issues with Air Canada. One of the concerns raised by the Agency was that the provision set out three options to be exercised in the event of overbooking and cancellation, although it did not clearly state who, between Air Canada and the passenger, had the discretion to determine which option would be exercised. Air Canada proposed amendments to make the choice of option clear.

[4] In Decision No. 479-A-2009, the Agency made a determination on the clarity of this provision and accepted the amendments proposed by Air Canada. The Agency explicitly stated that it had not assessed the reasonableness of the provisions proposed by Air Canada, but had limited itself to the issue of clarity.

[5] Air Canada also revised its domestic tariff, Canadian Domestic General Rules Tariff No. CDGR-1 (Tariff), to include in Rule 37 the same provisions as those appearing in Air Canada’s tariffs applicable to travel to and from Canada.

[6] On June 8, 2009, Mr. Lukács filed a complaint with the Agency in which he challenged certain provisions of Air Canada’s international tariff, as well as the equivalent provisions of its domestic Tariff, namely Rules 37(2), 135(E), 240(B)(9), 240(C)(1), 240(D)(3), 250(I) and 260.

[7] On November 11, 2009, Mr. Lukács posed interrogatories to Air Canada in order to enable him to provide a complete reply to Air Canada’s submissions dated September 15, 2009 and November 9, 2009. By Decision Nos. LET-C-A-177-2009, LET-C-A-115-2010 and LET-C-A-140-2010, the Agency ordered Air Canada to provide full and complete answers to certain of the questions posed by Mr. Lukács. Air Canada subsequently filed its responses, but claimed confidentiality. The Agency determined in Decision No. LET-C-A-140-2010 that although the information filed by Air Canada was confidential, it should be disclosed to Mr. Lukács under certain conditions.

[8] On January 31, 2011, Mr. Lukács filed a reply addressing Air Canada’s submissions dated September 15 and November 9, 2009, as well as the information provided by Air Canada in response to the interrogatories. Air Canada responded to Mr. Lukács’ submission and Mr. Lukács filed a final reply.

[9] Mr. Lukács’ complaint primarily concerns whether these provisions are consistent with the principles of Article 19 of the Convention for the Unification of Certain Rules for International Carriage by Air, commonly known as the Montreal Convention (Convention).

[10] In his original complaint Mr. Lukács asked that the choice of option in certain provisions of Air Canada’s Tariff be made clear. However, as Air Canada has voluntarily amended its domestic provisions to clarify the choice of option issue, the parties agree that this aspect of the complaint is now moot.

[11] Pursuant to Mr. Lukács’ complaint, the Agency must now assess these Tariff provisions from a reasonableness perspective.

[12] It should be noted that Mr. Lukács has also filed complaints in the international context against Air Canada, WestJet and Air Transat. These complaints are being dealt with in separate proceedings. In the domestic context, Mr. Lukács also filed a complaint against WestJet. That complaint is also being dealt with in a separate proceeding.

[13] It should also be noted that Mr. Lukács states that his complaint does not extend to situations arising outside the control of a carrier. Accordingly, this Decision is related to an assessment of situations which are within the control of a carrier.

## APPLICABLE TARIFFS

[14] Since Mr. Lukács filed his complaint, Air Canada has amended its Tariff rules. Air Canada has changed the numbering of Rule 37(2) to 37(B) and has added a choice of option clarification in Rule 37(B). In all other respects, the provision remains the same and the submissions of the parties remain relevant.

[15] In Rules 135(E), 240(B)(9), 240(C)(1), 240(D)(3), and 260, the addition of a choice of option between the carrier and passenger is the only substantive and relevant change that has been made.

[16] As such, the following analysis and findings refer to the Tariff provisions that are currently in effect.

[17] Appendix A sets out the subject Tariff provisions both at the time of filing of the complaint by Mr. Lukács and as currently in effect.

## ISSUES

[18] In addressing Mr. Lukács’ complaint, the Agency will consider the following issues:

1. Are the principles of Article 19 of the Convention equally applicable to domestic carriage?
2. Do overbooking and cancellation constitute delay for the purpose of Article 19 of the Convention?
3. Is it reasonable that Air Canada’s current Tariff Rule 37(B)(2) reprotects passengers only on Air Canada’s own aircraft or on flight of other carriers with which it has an interline agreement? Is it reasonable that certain Tariff provisions do not leave the choice of option for reprotection to passengers?
4. Is it reasonable that Air Canada’s current Tariff Rules 37(B)(3), 240(C)(1)(d) and 260 only call for a refund of the unused portion of a ticket? Is it reasonable that certain Tariff provisions do not leave to the passenger the choice of option to obtain a refund?
5. Is it reasonable that Air Canada’s current Tariff Rule 37(B) does not state that a passenger has rights and remedies beyond those named in Rule 37(B)? Is it reasonable that current Tariff Rules 135(E) and 240(B)(9) refer to a sole remedy available to passengers?

### Issue 1: Are the principles of Article 19 of the Convention equally applicable to domestic carriage?

#### Submissions

[19] Mr. Lukács’ complaint challenges certain provisions of Air Canada’s International Passenger Rules and Fares Tariff NTA(A) No. 458, as well as identical or similar domestic Tariff provisions. As noted above, at paragraph 12, Air Canada’s international provisions are the subject of a separate proceeding.

[20] Mr. Lukács cites the Agency’s decision in Pinksen v. Air Canada, Decision No. 181-C-A-2007, and submits that this decision underscores the role of examining international instruments when determining the validity and reasonableness of domestic tariff rules. Mr. Lukács argues that as the impugned international provisions are unreasonable and/or unjust in the international context, any identical or similar domestic provisions are also unreasonable and/or unjust.

[21] Air Canada submits that the provisions of the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA) and the ATR are applicable to the case at hand and that the Agency’s jurisdiction over complaints concerning domestic tariffs is set out in sections 67, 67.1 and 67.2 of the CTA. Air Canada argues that the Carriage by Air Act, R.S.C., 1985, c. C-26, incorporating the Warsaw Convention1 and the Montreal Convention, does not apply to domestic travel and thus the text of the Convention cannot be used as the basis for liability in domestic transport.

[22] Air Canada points out that Mr. Lukács’ argument is that its domestic Tariff provisions are unreasonable and/or unjust because they are inconsistent with the Convention.

[23] As a preliminary point, Air Canada takes issue with Mr. Lukács’ use of the term “unreasonable and/or unjust” in relation to its domestic Tariff. Air Canada submits that the Agency has jurisdiction to act when tariffs are “unreasonable” or “unduly discriminatory”, but not when they are “unjust”. Air Canada states that as Mr. Lukács has made no allegation that the Tariff is unduly discriminatory, it will limit itself to the question of reasonableness.

[24] Air Canada further submits that the Warsaw and Montreal Conventions constitute special liability regimes with a view to unifying rules in international carriage. This regime is not in place for domestic carriage, where parties remain governed by the applicable common or civil law. As such, it is misguided to attempt to determine whether a provision is unreasonable because it is contrary to the Convention.

[25] Air Canada raises the example of domestic limits of liability for baggage. It claims that most carriers, except Air Canada, have limits of liability that are considerably less than those provided for in the Warsaw and Montreal Conventions. These, it claims, have been in place for years without any allegation of unreasonableness.

[26] Air Canada requests that Mr. Lukács’ complaint against its domestic Tariff provisions be dismissed as Mr. Lukács did not substantiate his claim beyond arguing that its domestic Tariff rules are unreasonable by reason of their inconsistency with the Convention.

[27] Mr. Lukács agrees with Air Canada that the Convention is not applicable to domestic transportation. However, citing the Pinksen case again, Mr. Lukács argues that the Convention is a persuasive authority as to the standard of care to which passengers are entitled and that air carriers should reasonably provide. As such, the Convention is helpful in determining what is reasonable.

[28] Mr. Lukács further submits that the authoritative nature of the Convention as a standard of care for the carriage of passengers has been recognized by the European Union, which adopted the Convention as part of its domestic law for transport within a state in Article 3(1) of Regulation (EC) No. 2027/97, as amended by Regulation (EC) No 889/2002 and Article 1 of the amended Regulation (EC) No. 2027/97. He concludes that Article 19 of the Convention should be used as a persuasive authority and guide respecting the reasonableness of a domestic tariff.

[29] Finally, Mr. Lukács disagrees with Air Canada’s statement that domestic tariff provisions concerning limits of liability for baggage have not been subject to allegations of unreasonableness. In this respect, Mr. Lukács refers to Lukács v. WestJet, Decision No. 483-C-A-2010, concerning a challenge to WestJet’s domestic limits of liability for baggage.

#### Analysis and findings

##### The “reasonableness” test pursuant to subsection 67.2(1) of the CTA

[30] Subsection 67.2(1) of the CTA states that, if on complaint the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

[31] In response to and accepting Air Canada’s submission that Mr. Lukács has made no allegations that its tariffs are unduly discriminatory, the Agency’s analysis will relate to only the reasonableness of Air Canada’s domestic Tariff provisions.

[32] The Agency has historically been of the opinion that, generally, air carriers should have the flexibility to establish their own terms and conditions of carriage as they see fit, subject to legislative or regulatory constraints, including that of reasonableness.

[33] However, the terms and conditions of carriage are set out by an air carrier unilaterally without any input from passengers. The air carrier sets its terms and conditions of carriage on the basis of its own interests, which may have their basis in purely commercial requirements. There is no presumption that a tariff is reasonable. In Lukács v. WestJet, Decision No. LET-C-A-51-2010, the Agency applied a balancing test previously established in Del Anderson v. Air Canada, Decision No. 666-C-A-2001, to assess whether a term or condition of carriage is “unreasonable” within the meaning of subsection 67.2(1) of the CTA. The test requires that a balance must be struck between the rights of passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.

[34] When balancing the passengers’ rights against the carrier’s obligations, the Agency must consider the whole of the evidence and the submissions presented by both parties and make a determination on the reasonableness or unreasonableness of the term or condition of carriage based on which party has presented the more compelling and persuasive case.

##### The applicability of the principles of the Montreal Convention to a domestic tariff provision

[35] The Agency determines on a case-by-case basis what constitutes reasonable terms and conditions of carriage, taking into account the submissions of the parties. In this case, the parties have filed submissions on the issue as to whether, as part of its consideration of the issue of reasonableness, the Agency may consider the principles of the Convention. In addressing this issue, the Agency will consider the relationship between international and domestic law.

[36] Professor Ruth Sullivan has considered the relationship between international and domestic law in the context of the statutory interpretation of legislation and has described international law’s growing role in domestic statutory interpretation as follows:

In recent years international law has expanded both in the scope of the matters it addresses and its impact on the lives of individuals around the world. It has become an increasingly important source of domestic law in most countries. It has been relied on extensively in interpreting the Charter. And it is now common to invoke it as an aid in interpreting domestic legislation.2

[37] Professor Sullivan goes on to state that while international law is not binding on Canadian legislatures, there is a presumption that domestic legislation is intended to comply with international law.3

[38] Further, Justice L’Heureux-Dubé of the Supreme Court of Canada speaking for the majority has stated that domestic legislation is presumed to respect the values and principles of international law in both an environmental and a human rights context :

30 To conclude this section on statutory authority, I note that reading s. 410(1) to permit the Town to regulate pesticide use is consistent with principles of international law and policy. My reasons for the Court in Baker v. Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (S.C.C.), [1999] 2 S.C.R. 817, at para. 70, observed that “the values reflected in international human rights law may help inform the contextual approach to statutory interpretation and judicial review”. As stated in Driedger on the Construction of Statutes, supra, at p. 330:

[T]he legislature is presumed to respect the values and principles enshrined in international law, both customary and conventional. These constitute a part of the legal context in which legislation is enacted and read. In so far as possible, therefore, interpretations that reflect these values and principles are preferred. [Emphasis added.]4

[39] Of particular additional interest, Lord Denning, Master of the Rolls, explicitly applied this same principle with respect to the Warsaw Convention when he stated:

The Warsaw Convention is an international convention which is binding in international law on all the countries who have ratified it: and it is the duty of these courts to construe our legislation so as to be in conformity with international law and not in conflict with it.5

[40] These cases and comments are illustrative of the link between international and domestic law and the examination of terms of international instruments as persuasive authority in interpreting domestic law.

[41] In the context of domestic flight itineraries, to which neither the Montreal Convention nor Warsaw Convention applies, the Agency itself has also looked to the principles of an international instrument, namely the Montreal Convention, for guidance in assessing whether a particular tariff provision relating to liability is reasonable.6

[42] In addition, with respect to Air Canada’s specific submission that most domestic carriers in Canada have baggage limits of liability that are lower than those provided for in the Convention, the Agency refers Air Canada to Lukács v. WestJet, Decision No. 483-C-A-2010. In that case, the Agency referred to the principles of the Convention to assist in determining what would be reasonable liability limits for lost or damaged baggage on domestic itineraries and concluded that WestJet’s domestic limits of liability should be equal to those of the Convention. A subsequent application by WestJet for leave to appeal Decision No. 483-C-A-2010 was denied by the Federal Court of Appeal.

[43] Accordingly, it is clear that the Agency is, and has been, of the view that the Convention is a useful interpretive tool to which the Agency may refer when applying its “reasonableness” test and striking the balance between passengers’ rights and the statutory, commercial and operational obligations of a carrier. In doing so the Agency takes into account the principles of the Convention rather than applying the Convention itself.

[44] The Agency is of the view that passengers should expect and be entitled to consistency in treatment irrespective of whether they are on a domestic or international flight. To that end, the principles set out in the Convention provide insight into what is reasonable to apply in a domestic context.

[45] Accordingly, the Agency finds that Mr. Lukács has persuasively argued that the Agency should apply to the present matter the findings the Agency has consistently made with respect to applying the principles of the Convention to domestic itineraries. As such, in assessing whether the impugned Tariff provisions are reasonable in the analyses of the particular issues that follow, the Agency, among other matters, will consider the principles of Article 19 of the Convention.

### Issue 2: Do overbooking and cancellation constitute delay for the purpose of Article 19 of the Convention?

#### Submissions

[46] Mr. Lukács takes the position that overbooking and cancellation are forms of delay and are captured by Article 19 of the Convention. From the point of view of a passenger, he states, the terminology is irrelevant as the effect is the same: the arrival time at destination is delayed.

[47] As set out in Issue 1, Mr. Lukács considers that the principles of the Convention, and specifically those found in Article 19, should be considered in evaluating Air Canada’s domestic Tariff provisions.

[48] Air Canada did not provide submissions on whether overbooking and cancellation constitute delay for the purpose of Article 19 of the Convention.

#### Analysis and findings

[49] In his original complaint impugning certain Air Canada international tariff provisions, as well as any equivalent domestic ones, a fundamental question raised by Mr. Lukács is whether instances of cancellation and overbooking fall within the scope of “delay” as found in Article 19 of the Convention. In the context of Air Canada’s domestic Tariff provisions, the question remains relevant as Mr. Lukács asserts that the principles of this Article should be taken into consideration when assessing the reasonableness of the Tariff provisions.

[50] Air Canada has not provided submissions on this question, presumably because it has taken the position, as outlined in Issue 1, that the Convention has no application in the domestic context.

[51] Mr. Lukács’ complaint, because it relates to the substance of Air Canada’s domestic Tariff provisions on overbooking and cancellation, initiates an Agency review and determination as to whether the impugned Tariff provisions are reasonable. The Agency will consider the complaint pursuant to subsection 67.2(1) of the CTA and, in so doing, will, among other matters and as more fully set out in issue 1, consider whether the Tariff is consistent with applicable principles of the Convention. A determination of whether overbooking and cancellation fall within the scope of “delay” under Article 19 of the Convention will assist and provide guidance in the Agency’s evaluation of the reasonableness of Air Canada’s Tariff.

[52] Article 19 of the Convention reads:

The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.

[53] As the term “delay” is not defined and its meaning is not clear from the text of Article 19 or the Convention as a whole, consideration must be given to supplementary sources.

[54] The modern principle of statutory interpretation applicable to international conventions takes a purposive reading of legislation. This approach has been adopted by Canadian courts.7

[55] Interpreting Article 19 of the Convention therefore requires an analysis that takes into account the ordinary meaning of the text, as well as contextual factors to give effect to the purpose of that Article. To that end, reference may be made to the working papers of both the Warsaw and Montreal Conventions, as well as Canadian and international doctrine and jurisprudence.

[56] The principle that emerges from the Minutes of discussions leading up to the adoption of the Convention is that the delegates intended to leave the definition of “delay” open-ended, and subject to a case-by-case assessment by the courts.

[57] Although the Warsaw and Montreal Conventions’ working papers show that the scope of Article 19 was not intended to extend to non-performance, the distinction between non-performance and delay was not made entirely clear.

[58] Turning to Canadian and international jurisprudence addressing the legal characterization of delay and the distinction between “delay” and “non-performance”, a review of cases reveals that there are contradictions and inconsistencies in reasoning.

[59] The cases of Weiss v. El Al Israel Airlines8 [8] and Minhas v. Biman Bangladesh9 provide an example of the contradictory characterization of “delay” by the courts. In Weiss, the District Court for the Southern District of New York considered a case where passengers were “bumped” from a flight from New York to Jerusalem. The plaintiffs, after being placed on stand-by and waiting for two days, eventually purchased a ticket to travel on the flight of another air carrier. The plaintiffs received no refund or compensation for bumping from the carrier. The Court asserted that the standard international position on the question of bumping was that it was akin to non-performance.

[60] In Minhas, a passenger had been “bumped” from her flight from India to the United States. The plaintiff attempted to secure a flight home with the carrier over a period of 45 days, until she eventually obtained a ticket from another carrier. The District Court for the Southern District of New York held that her claim constituted “delay” pursuant to Article 19 of the Convention.

[61] Although the facts canvassed in Weiss are substantially similar to those in Minhas, namely that the passengers in each case were bumped from their original flight and eventually resorted to purchasing tickets with another air carrier, this was determined to be contractual non-performance in Weiss (after two days of waiting) while characterized as delay in Minhas (after 45 days of waiting).

[62] There are further examples of contradictory characterizations of “delay”. Basing itself in no small part on the working papers of the Warsaw Convention, the U.S. Court of Appeals, Seventh Circuit, in Wolgel v. Mexicana Airlines10, drew a boundary between damages arising from “delay” under Article 19 of the Warsaw Convention, and damages arising from the act of being “bumped” from a flight.

[63] Wolgel was a case of overbooking. The passengers had confirmed reservations on an international flight but, upon arrival at the airport, were informed that they had been bumped. Plaintiffs sued in private law and cited a now-repealed section of the Federal Aviation Act11 . The Court held as follows:

This case is one of non-performance of a contract. The Wolgels are not attempting to recover for injuries caused by their delay in getting to Acapulco. Rather, their complaint is based on the fact that, as far as the record shows, they never left the airport. Because the Wolgels’ claim is for total non-performance of a contract, the Warsaw Convention is inapplicable.

[64] In the Canadian case of Lukács v. United Airlines Inc.,12 the plaintiff had been informed by air carrier personnel before arriving at the airport that his flight was cancelled. He went to the airport on the understanding that his ticket would be endorsed by another air carrier providing a flight that afternoon, but the process took so long that he ultimately decided not to travel at all. After hearing the position of the parties as to whether this event constituted “delay”, the Manitoba Court of Queen’s Bench ultimately decided that it came within the scope of Article 19 of the Convention.

[65] The facts in Wolgel and Lukács are similar insofar as the passengers, due to overbooking or cancellation, never left the airport. However, this situation was characterized as non-performance in the former case and delay in the latter.

[66] In recent years, U.S. courts have begun to trace the outline of a principled distinction between delay and non-performance, which (1) recognizes the possibility that the alternative categorizations can coexist, although each is governed by a different legal regime; and (2) makes their characterization dependent on specific factors.

[67] Building on this distinction is the case of In re Nigeria Charter Flights Contract Litigation,13 in which the Court attempted to synthesize several key distinctions between delay and contractual non-performance. The Court stated that in the case law, courts tended to find “delay” where one of three conditions is met:

1. The defendant airlines ultimately provided transportation;
2. The plaintiffs secured alternate transportation without waiting to see whether the airline would transport them or they refused an offer of a later flight; or
3. Plaintiffs never alleged non-performance.

[68] The Court held, in that case, that the claim for non-performance was founded because the air carrier simply refused to transport the plaintiffs. As such, the facts of that case were found to resemble those in Wolgel.

[69] This points to the conclusion that the legal characterization of an event depends on certain conditions relating to the actions of both parties (the air carrier’s willingness to provide transportation on the one hand and the passenger’s willingness to accept it on the other).

[70] Although there is contradiction and inconsistency in the meaning to be given the word “delay” as found in Article 19 of the Convention, what is clear is that the intent of Article 19 is to have the meaning of “delay” determined on a case-by-case basis. As is set out above, whether a situation of cancellation or overbooking constitutes delay will depend on the particular circumstances of a case, as well as the court’s interpretation of the questions of fact and law in issue. Layered on this, however, is that some courts, as illustrated by the Nigeria case, are setting out specific criteria for assessing whether a particular fact situation falls within the meaning of “delay” as found in Article 19 of the Convention.

[71] In all situations, however, one element is clear. At the core of overbooking or cancellation, the affected passenger is not in a position to proceed with their journey in the timeframe originally established. Accordingly, the Agency is of the preliminary opinion that overbooking and cancellation that are within an air carrier’s control constitute delay for the purpose of Article 19 of the Convention.

[72] The Agency recognizes, however, in keeping with the Nigeria case as set out above, that in limited situations there may be clear facts and circumstances that would evidence the alternative of non-performance of the contract of carriage. As further complaints, with different fact situations, are brought before the Agency, the Agency will be able to clarify the conditions that constitute non-performance.

[73] Considering that this issue is a key element of the matter before the Agency and that the parties have filed very limited submissions on the issue, this will be the subject of a show cause order in this Decision. This will provide the parties with a further opportunity to comment on this issue before a final determination is made.

### Issue 3: Is it reasonable that Air Canada’s Tariff Rule 37(B)(2) reprotects passengers only on Air Canada’s own aircraft or on flights of other carriers with which it has an interline agreement? Is it reasonable that certain Tariff provisions do not leave the choice of option for reprotection to passengers?

#### Submissions

##### Reprotection on the fastest available route

[74] In his original complaint impugning certain Air Canada international tariff provisions, as well as any equivalent domestic Tariff provisions, Mr. Lukács points out that Article 19 of the Convention requires carriers to “take all measures that could reasonably be required” to avoid damage to passengers. He submits that, in practical terms, this means the carrier has to ensure that passengers are transported to their destination in the fastest possible way.

[75] Mr. Lukács argues that, in applying the Agency’s reasonableness test, Air Canada’s Tariff Rule 37(B)(2) is unreasonable and should be substituted with the phrase “buy the passenger a seat on the earliest available flight of another airline.”

[76] Mr. Lukács submits that when a flight is cancelled or overbooked, another flight of the same carrier may be available only a few hours later or perhaps only on the next day, while flights of other carriers may be available sooner. He asserts that buying seats for affected passengers on flights of other carriers may significantly mitigate or possibly even eliminate the passenger’s damage arising from delay.

[77] Mr. Lukács argues that the question of whether rerouting takes place on flights of air carriers with which the carrier has a mutual interline traffic agreement is an extraneous consideration that is completely irrelevant to the obligation of the carrier. Mr. Lukács argues that most passengers are “stuck” with their itinerary because most tickets are non-refundable or carry a penalty in case a refund is requested. On the other hand, overselling or cancelling flights, for reasons within the carrier’s control, is a deliberate decision of the carrier, usually based on economic considerations. Mr. Lukács submits that it is unreasonable to make the travelling public pay for such decisions.

[78] In its motion to dismiss Mr. Lukács’ complaint on the grounds that abstract complaints should not be dealt with by the Agency, Air Canada makes certain arguments with respect to this question. Air Canada submits that “buying a passenger a seat on another carrier with whom it has a mutual interline traffic agreement could be considered an unreasonable term or condition if, for example, Air Canada systematically only had a very limited number of interline relationships, and only with small airlines with minor networks, on routes where numerous other carriers exist, when such airlines have a good safety record and a network that connects with Air Canada’s.” Air Canada states that other factors may need to be considered in performing an evaluation of reasonableness such as, for example, the extent of Air Canada’s own network on the same routes.

[79] Air Canada submits that there is no evidence to support Mr. Lukács’ conclusion that Rule 37(B) is unreasonable. Air Canada adds that Rules 135(E), 240(B)(9), 240(C)(1) and 240(D)(3), which it collectively calls its “IROP Reprotection Rules”, are also not unreasonable.

[80] Air Canada states that it would be unreasonable, in view of its commercial and operational obligations, if it were forced to systematically purchase a seat for a passenger on the “earliest available flight of another airline” if other air carriers with which it has interline relationships have flights departing regularly.

[81] Air Canada further states that it would be unreasonable to pay a competitor full fare for each affected passenger, even in circumstances completely beyond its control. Air Canada claims that it is more exposed to winter weather than its competitors, which means that reprotecting on the fastest available route would make schedule irregularities unmanageable.

[82] According to Air Canada, interline agreements may in fact make reprotection easier for passengers. An interline agreement allows for the settlement of revenue through an International Air Transport Association (IATA) set-up, so that a ticket can be issued without immediate concern over payment methods and the transfer of funds. Air Canada points out that IATA has a comprehensive set of rules for rebooking procedures in the event of schedule irregularities, on flights of carriers with which an interline agreement exists. It points out that rebooking is not a simple procedure and that it would be operationally unfeasible for Air Canada to rebook each affected passenger on the fastest available route.

[83] Air Canada submits that an interline agreement not only allows an air carrier to book capacity on another air carrier’s services, it also allows for the orderly transfer of checked baggage between the two airlines, and allows a system of tracking and settlement in circumstances when baggage is delayed. Air Canada submits that if it purchased a ticket for the passenger to travel with another air carrier, the passenger would be required to go back to the open section of the airport and check in with this air carrier and any checked baggage would need to be retrieved and re-checked with the non-participating air carrier. Should there be an ongoing segment to be completed, the process of retrieving the baggage and proceeding to check-in would need to be completed again.

[84] Finally, Air Canada points out that Transport Canada does not consider it unreasonable to reprotect passengers on flights of carriers with which an interline agreement exists as Transport Canada has included this measure in its Code of Conduct of Canada’s Airlines.

[85] Mr. Lukács takes issue with a number of Air Canada’s submissions. For one, he denies that Air Canada is more exposed to winter weather than its competitors. He points out that WestJet operates exclusively on the North American Continent and is, thus, more affected by winter weather than Air Canada. Furthermore, he points out that any carrier operating to or from Canada would be exposed to winter weather.

[86] Mr. Lukács states that Air Canada did not lead any evidence to suggest that it is cheaper for it to buy a seat for a flight operated by a carrier with which it has an interline agreement than on that of a “competitor”. Mr. Lukács asserts that there is no evidence to support a finding that this makes any difference for Air Canada from a financial point of view.

[87] He submits that if it does make some financial difference, then it is fair and reasonable that Air Canada bear this cost if it breaches its obligation to carry passengers by overselling or cancelling flights for reasons within its control. Mr. Lukács submits that overselling flights is not a commercial, operational or statutory obligation, and indeed, WestJet has been able to remain profitable without doing so.

[88] As for Air Canada’s argument concerning Transport Canada, Mr. Lukács claims that Air Canada is relying on a media release, and that there is no evidence that this issue has been raised at Transport Canada. Furthermore, Mr. Lukács states that the Agency is a quasi-judicial tribunal that must consider the issue independently.

[89] Mr. Lukács disputes Air Canada’s submissions concerning the orderly transfer of baggage on a carrier with which an interline agreement exists. He submits that Air Canada’s evidence on this point is contradictory. He points to an extract of Air Canada’s website, which states that when a flight is cancelled, a passenger should listen for announcements directing them to the appropriate baggage carrousel where they may retrieve their bag(s) and that if being rebooked, the passenger should retrieve their bags from their first flight and complete required security procedures for their replacement flight.

[90] In its final reply submissions, Air Canada argues that it is in fact more exposed to winter weather than WestJet, as its domestic network is much greater and its daily number of flight frequencies is higher. In an average week in February 2011, it points out that Air Canada served 59 cities, and WestJet only 27. On an average Thursday in February 2011, Air Canada operated 1,026 frequencies, and WestJet only 291.

[91] Air Canada further submits that it is at a disadvantage relative to its domestic, transborder and international competitors because winter weather can have a domino effect on its network stability as a whole. Compared to American carriers that do not primarily operate in winter weather conditions, Air Canada maintains that it is at a competitive disadvantage.

[92] Air Canada submits that it would be “incredibly onerous, financially and operationally,” to require it to purchase a ticket for travel on the flight of another air carrier, as this would have to be done at the last minute, subjecting Air Canada to full or near full fare prices. In such a case, Air Canada submits that it would not be able to fall back upon an existing negotiated settlement.

[93] Air Canada states that it is a well-known fact in the industry that air carriers engaging in the interlining of passengers depend on agreements to assist in the determination of each air carrier’s revenue. Specific provisions are commonly included in these interline agreements to cover situations where, due to an involuntary rerouting or flight interruption, carriage of passengers is ensured by a carrier other than that initially indicated. It is common practice that, where the interline agreement is silent, the provisions of IATA’s Multilateral Interline Traffic Agreement will apply. In both these cases, settlement is done for North American carriers on a pre-determined percentage of local fare, and for international carriers on a mileage share of the through fare or a negotiated fixed amount. Both methods of settlement are in general lower than the applicable last minute fare available.

[94] Air Canada disagrees with Mr. Lukács’ assertion that it would be breaching its obligation to carry its passengers by overselling its flights or by cancelling or delaying its flights for reasons within its control.

[95] Air Canada submits that overbooking is a practice recognized as being reasonable in light of a carrier’s operational and commercial obligations. It cites the 1976 U.S. Supreme Court decision in Nader v. Allegheny Airlines Inc.14 where the Court stated that “[s]uch overbooking is common industry practice, designed to ensure that each flight leaves with as few empty seats as possible...”

[96] Air Canada states that it carries out its overbooking practice in a reasonable manner, and that its overbooking is on average half the rate of U.S. carriers. Air Canada goes on to state that the Agency has recognized the reasonableness and validity of this practice in its Fly Smart guide under the section “Overbooking and Denied Boarding”, and in Kathleen Simcock v. Air Canada, Decision No. 181-C-A-2005, and B.J. Simcock v. Air Canada, Decision No. 180-C-A-2005, where the Agency stated that:

With respect to the matter of overbooking, the Agency notes that this practice is commonplace among air carriers and, in general, works to the advantage of both air carriers and passengers because the carriers are able to operate at maximum capacity, thus resulting in reduced prices for consumers.

[97] Air Canada submits that in contrast to WestJet, whose fares are all non-refundable, it offers certain products that are fully refundable in order to offer additional flexibility to its customers. By doing so, Air Canada is exposed to additional risk that certain passengers will not show up for travel. Further, as an international carrier and part of a worldwide alliance, Air Canada carries much more connecting traffic, thus engendering a risk of misconnections, which in turn results in additional no-shows. Therefore, Air Canada engages in the practice of overbooking in order to absorb some of this risk.

[98] Air Canada states that the practice of overbooking should not justify imposing on it a commercially and competitively disadvantageous obligation to buy a ticket for a passenger to travel on the flight of an air carrier with which it does not have an interline agreement.

[99] Air Canada states that with respect to flight cancellations or delays, it is not industry practice to purchase a seat to travel on the flight of a carrier with which it does not have an interline agreement. Air Canada asserts that passenger reprotection rules apply to all situations, both within and outside Air Canada’s control. Air Canada will not purchase a ticket on an air carrier with which it does not have an agreement providing for such transportation nor will it offer hotel accommodations and meal vouchers in situations beyond its control, unless the passenger has purchased On My Way, a product which the Agency has already assessed as being just and reasonable in PIAC v. Air Canada, Decision No. 565-C-A-2008. Air Canada submits that if a passenger wishes to have reprotection on flights of carriers irrespective of whether Air Canada has an agreement with them, it is suggested that they purchase the On My Way product.

[100] Air Canada submits that there is no contradiction in the evidence submitted concerning baggage transfers. The text quoted by Mr. Lukács from Air Canada’s Web site provides general information on delays and cancellations. The specific text with which Mr. Lukács takes issue is that in flight cancellation situations, passengers may be required to retrieve and recheck baggage based on certain airports and governmental requirements. Air Canada asserts that this does not take away from Air Canada’s submission that rebooking a passenger on the flight of another carrier with which it has an interline agreement allows for the orderly transfer of checked baggage and for a system of tracking and settlement when the baggage gets delayed.

[101] Air Canada concludes that its interline provisions are reasonable, and that given the frequency of Air Canada’s flights and the breadth of its network on which passengers can be reprotected within a reasonable time, it should not be held to incur additional costs by being forced to reprotect passengers on flights of carriers with which no interline agreement exists.

[102] In his final reply, Mr. Lukács disagrees with Air Canada’s argument that its larger network exposes it to more winter weather. He states that while carriers have certain “fixed costs”, the costs incurred by air carriers are predominantly “variable costs” that vary as a function of the number of flights operated, and the number of passengers carried. Mr. Lukács is of the opinion that having a larger network, and carrying more passengers, also means having more revenue, and that the correct question to be asked is the per passenger or per flight risk exposure of a carrier.

[103] Mr. Lukács submits that WestJet does not operate trans-Atlantic (or trans-Pacific) flights and that, therefore, its network is more vulnerable to weather issues affecting North America than Air Canada’s network. He further states that many U.S carriers are as affected by winter weather. Mr. Lukács submits that without detailed evidence to support Air Canada’s contention on the question of Air Canada’s exposure to winter weather, this sub-issue is lacking any merit and, as such, should not be considered by the Agency.

[104] Mr. Lukács further submits that even if there is a higher financial cost for Air Canada to buy seats on flights of carriers with which it does not have an interline agreement, this higher cost must be weighed against the rights of passengers to be transported to their destinations in a timely manner, as stipulated in the contract of carriage.

[105] Mr. Lukács states that overselling flights may have been held as the industry standard in the U.S. in 1976, but it is not commonplace among domestic carriers in Canada in 2011, and that WestJet has been able to remain profitable in spite of not overselling flights. The European Union has enacted strict compensation rules in case of overbooking precisely in order to fight the practice of overselling flights.

[106] Mr. Lukács submits that there has been no evidence to support Air Canada’s contention that all WestJet fares are non-refundable, and he is of the opinion that this statement is misleading. Further, it is his understanding that all WestJet passengers can cancel their itinerary and obtain a credit, less a small administrative fee, up to two hours before their flights.

[107] Mr. Lukács states that while it may be too onerous to require Air Canada to purchase a ticket to travel on another carrier’s flight in cases where the delay or cancellation is due to uncontrollable reasons, it is submitted that it is perfectly reasonable and consistent with the principles of the Convention to require Air Canada to do so when the event is within its control.

[108] Finally, with respect to the orderly transfer of baggage, Mr. Lukács states that his concern was not about Air Canada’s Web site, but rather the contradiction between the information provided by the Web site and the arguments advanced by Air Canada. Mr. Lukács submits that Air Canada failed to settle these contradictions, and thus the argument concerning orderly transfer of checked baggage has no merit.

##### Choice of option between finding a seat on another Air Canada flight or finding a seat on that of another carrier

[109] Mr. Lukács submits that Air Canada should show cause why it is not unreasonable that the ultimate choice of option between Rules 37(B)(1) and 37(B)(2) lies with Air Canada and not the passenger. He points out that a similar choice of option argument applies to other Tariff provisions.

[110] Air Canada submits that its systems, expertise and support teams allow it to rapidly determine which is the best option to get affected passengers to their destinations, taking into account potential connections, with the least amount of inconvenience to them. Air Canada submits it is in a better position to know what the various booking possibilities are, based on flight schedules and the availability of seats, and taking into account its operational and commercial obligations, as well as methods of ensuring seamless travel for passengers with checked baggage, connections or complex itineraries.

[111] Air Canada argues that its systems allow it to identify upcoming flights and the availability of seats on its own services and those of its partners and either automatically or manually book passengers on the most adequate flight, based on their itinerary. Air Canada also allows passengers to do so themselves through its systems or by contacting its reservations service.

[112] If a passenger is rebooked on an inappropriate flight, or if Air Canada is unable to find an appropriate flight option, passengers can either find their own flight, cancel their flight and obtain a refund or use the unused portion of their ticket for future travel with Air Canada, or wait for the next available flight.

[113] Air Canada states that it is attentive to its passengers’ needs and works with them on a case-by-case basis. The choice Air Canada makes can be adapted to each customer upon request, so it is not unreasonable that this choice lie with Air Canada.

[114] Finally, Air Canada argues that the rebooking process is purely procedural and complex, and does not belong in its tariffs. Moreover, because these steps are taken on a case-by-case basis, it is impossible to clearly and concisely express them in a stable document like a tariff. Instead, the information belongs on its Web site, which is updated regularly. It can also be obtained through customer service agents, who are always aware of schedule irregularities and solutions available to customers.

[115] Mr. Lukács states that Air Canada provides no evidence to support its argument that retaining the choice of option is best for passengers. In addition, Air Canada provides no explanation as to what constitutes the “most adequate flight” for passengers.

[116] He argues that the cost of buying a seat on a flight operated by another carrier is a significant incentive for Air Canada to prefer rebooking on another Air Canada flight. He states that Air Canada fails to address the question of the financial incentive for itself to prefer finding a seat on another Air Canada flight, even when finding a seat on a flight of another carrier would mitigate the passenger’s delay and damage.

[117] Mr. Lukács submits that it is reasonable for Air Canada to provide a recommendation and possibly to automatically rebook passengers, but he submits that the final decision to accept Air Canada’s recommendation should lie with the passenger, and if they prefer to be reprotected on the flight of another carrier, they should be allowed to do so without Air Canada’s approval or consent.

#### Analysis and findings

##### Legislative requirements

[118] Section 55 of the CTA defines an air carrier’s tariff as a “schedule of fares, rates, charges and terms and conditions of carriage.” Essentially, a tariff is the contract of carriage between the passenger and the air carrier and is a central feature of carriage by air because it sets out the terms and conditions that will apply to the applicable carriage. However, the carrier’s tariff is not the type of contract that is negotiated between two parties; it is a contract that is unilaterally imposed on the passenger by the carrier.

[119] There is a clear and definitive requirement for a carrier pursuant to paragraph 107(1)(n) of the ATR to set out in its tariff its terms and conditions of carriage and, in particular, to clearly state its policy in respect of, among other matters, compensation for denial of boarding as a result of overbooking, passenger rerouting, failure to operate the service and refunds for services purchased but not used.

[120] In addition, a carrier is required to not only clearly set out its policy with respect to overbooking and flight cancellations, but to also ensure that with respect to domestic flights, its tariff is just and reasonable within the meaning of subsection 67.2(1) of the CTA.

[121] Pursuant to subsection 67.2(1) of the CTA, if, on complaint in writing to the Agency by any person, the Agency finds that a holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

[122] The Agency has stated in previous decisions that in order to determine whether a term or condition of carriage applied by a carrier is “reasonable” within the meaning of subsection 67.2(1) of the CTA, a balance must be struck between the rights of the passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.15

##### Article 19 of the Convention

[123] As set out in Issue 2 above, the Agency is of the preliminary opinion that overbooking and cancellation that are within Air Canada’s control constitute delay which falls within the purview of Article 19 of the Convention, and, as set out above in Issue 1, the Agency has determined that the principles of Article 19 can be considered by the Agency when examining the issue of reasonableness in the domestic context. As such, the Agency will consider how the courts have approached the issue of reprotection when an action is brought pursuant to Article 19 of the Convention.

[124] The term “reprotect” is used here to refer to the act by a carrier of securing a passenger’s travel on another flight if, due to overbooking or cancellation, the passenger is prevented from travelling on their original flight as planned.

[125] A carrier, pursuant to Article 19 of the Convention, is liable for damage occasioned by delay in the carriage of passengers, but will not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or it was impossible for them to take such measures.

[126] This provision imposes on a carrier an obligation, namely to transport a passenger as contracted, without delay, failing which there will be a presumption of liability for damage arising from any such delay. With a presumption of liability for delay against a carrier, the Agency is of the preliminary opinion that there is a concomitant obligation for a carrier to mitigate such liability and address the damage which has or may be suffered by a passenger as a result of the delay. Article 19 anticipates this by providing a carrier with a defence to the liability if it can show that it took, or it was impossible to take, all measures that could reasonably be required to avoid the damage caused by the delay. This is consistent with an assumption that a carrier, when faced with a presumption of liability, will take whatever action is necessary or possible, within reason, to address an issue which arose as a result of a situation which was within its control.

[127] A central component of Mr. Lukács’ argument is that a carrier must rebook a passenger on the fastest available route. He relates this to the reasonableness test and also to Article 19 of the Convention and its reference to all reasonable measures. However, the Agency notes that Article 19 does not prescribe specific obligations for the carrier, nor does it state which measures could reasonably be required to exonerate a carrier from liability.

[128] As with the issue of the meaning of “delay” as discussed above, there is controversy and inconsistency in the jurisprudence as to what constitutes a carrier taking all measures that could reasonably be required to avoid damage.

[129] The cases are not consistent as to whether Article 19 extends to booking a passenger on a flight with a carrier for which there is no interline agreement if that is the fastest means for the passenger to arrive at their destination.

[130] In some instances, the courts have been satisfied with reprotection on the carrier’s next flight. In others, courts have required that passengers be put on whatever flight will get them to their destination. To a large extent, the approach taken depends on the particular facts of the case.

[131] For example, in Mohammad v. Air Canada,16 a case brought against Air Canada and Kuwait Airlines for joint carriage between Canada and Kuwait, the Court of Quebec Small Claims Division held that Air Canada, when faced with a flight cancellation, took all reasonable measures when it put passengers on its next available flight, described as a new flight created by the carrier. However, on a final segment of the same flight itinerary, Kuwait Airlines was found liable under the Convention on the grounds that it should have transferred passengers to another carrier given that its own flights were booked for the next several weeks. The New York City Civil Court has similarly held that reprotection on any other carrier may be reasonable where a carrier’s own flights are fully booked.17 However, the District Court for the Southern District of New York has held that where there are extensive administrative requirements and limited timeframes, reprotection on any other carrier may not be reasonable.18

##### Air Canada’s Tariff and the question of reprotection on the most timely flight

[132] Mr. Lukács’ complaint concerns the obligations of carriers in the case of overbooking and cancellation. The Agency is of the view that the complaint involves a consideration of the reasonableness of Air Canada’s Tariff provisions on overbooking and cancellation pursuant to subsection 67.2(1) of the CTA, which involves taking into account the principles of Article 19 of the Convention and the particular factors that Air Canada has raised on the issue of reprotection.

[133] Air Canada’s Tariff Rule 37(B) does not provide for the possibility that a passenger might, in the appropriate circumstances, be reprotected on a flight of any other carrier regardless of whether Air Canada has an interline agreement with that carrier.

[134] Instead, it provides a closed list of actions to be taken by the carrier following overbooking or cancellation. The purpose of this list is to set out the measures that Air Canada will take in an effort to avoid damage to a passenger that is occasioned by overbooking or cancellation.

[135] When considering the issue as to whether Tariff Rule 37(B) is reasonable, several factors must be considered and, as noted above at paragraph 122, the Agency must strike a balance between the rights of passengers to be subject to reasonable terms and conditions of carriage and the particular carrier’s statutory, commercial and operational obligations.

[136] On the one hand, in reviewing Air Canada’s Tariff from the passenger’s perspective, the provision does not leave open the possibility of reprotection on flights of carriers with which there is no interline agreement in situations of overbooking and cancellation.

[137] This is despite the fact that case law suggests, as set out in paragraphs 130 and 131, that in the appropriate circumstances, reprotection on flights of carriers with which no interline agreement exists might be necessary to establish that a carrier has taken all measures that could reasonably be required to avoid the damages caused by delay.

[138] Mr. Lukács provides insight into the passenger’s perspective on this question by arguing that the cost of rerouting on the fastest available route should be weighed against the economic considerations that lead Air Canada to overbook or cancel flights. He emphasizes that the only consideration for the carrier should be mitigating the passenger’s delay, which requires finding the fastest available route to destination for the passenger.

[139] The Agency is of the opinion that Mr. Lukács’ position is too restrictive and onerous in that it requires Air Canada to always provide the passenger with the fastest possible means of getting to their destination. Mr. Lukács has not shown that in every situation of overbooking or cancellation the fastest possible means for a passenger to get to their destination is reasonable.

[140] While the particular circumstances may call for reprotecting a passenger on the flight of a carrier with which no interline agreement exists, it cannot be said that this remedy must always be required.

[141] On the other hand, the balancing test also requires that the air carrier’s perspective, namely with regard to its statutory, commercial and operational obligations, be considered. Air Canada, in its submissions, argues that reprotecting a passenger on the flight of any air carrier regardless of whether an interline agreement is in place, would not be reasonable from an operational and commercial perspective and in this regard sets out a number of factors to be taken into consideration.

[142] Air Canada maintains that reprotecting a passenger on the flight of a carrier with which it has no interline agreement has significant financial implications and will put Air Canada at a competitive disadvantage. Air Canada argues that, in fact, reprotection of a passenger on another Air Canada flight or that of a carrier with which it has an interline agreement works to the advantage of the passenger in terms of the movement of baggage and the seamless rebooking of tickets. In addition, Air Canada argues that reprotecting a passenger by the means contemplated by Mr. Lukács might not be necessary given the breadth of its network.

[143] The Agency acknowledges that although reprotecting a passenger on the flight of any carrier whether an interline agreement exists or not may not always be necessary, it may be an appropriate option, given the circumstances. However, Air Canada’s current Tariff does not provide an option for those passengers where time is of the essence and reprotection on the flight of any other carrier may be the only means of addressing the time factor.

[144] Air Canada’s submissions argue against a tariff that would require it to reprotect a passenger on the flight of any carrier in every case. Indeed, such a requirement may be too stringent and, as set out above, the Agency is of the opinion that such an approach would be too restrictive and onerous on Air Canada.

[145] However, the Agency is of the preliminary opinion that it is unreasonable for Air Canada to take the restrictive approach as set out in Tariff Rule 37(B), as well as its other “IROP Reprotection Rules”, in dealing with overbooking and cancellation. A provision which is so overly restrictive as to outright exclude the possibility of reprotection on a flight of any carrier except those with which an interline agreement has been established cannot be considered reasonable.

[146] Air Canada’s approach of reprotecting a passenger only on its own flights or on those of another carrier with which it has an interline agreement is a carrier-focussed approach to remedying the situation of overbooking or flight cancellation. In contrast, the jurisprudence that deals with situations of overbooking and cancellation takes a more circumstance-focussed approach by generally looking to the particular circumstances of a situation in order to determine whether the carrier took all measures that could reasonably be required to avoid the damage. For example, the reasonableness of measures taken has been assessed in light of a passenger’s need to get to a work-related conference at a particular time, as in the case of Lukács v. United Airlines Inc.19 Similarly, where a flight delay prevented a passenger from boarding a cruise ship at a scheduled time and place, the carrier’s actions have been evaluated in that particular context.20 The time-sensitive nature of a passenger’s purpose of travel is a factor that has been considered by the courts in these cases.

[147] Based on the above, the Agency is of the preliminary opinion that a circumstance-focussed approach is a reasonable approach to addressing the issue of delay arising from overbooking and cancellation when the circumstances are made known to Air Canada.

[148] The circumstance-focussed approach is appropriate in particular situations in which overbooking or cancellation within Air Canada’s control has delayed a passenger and where the circumstances call for Air Canada to take measures to mitigate the passenger’s damage. This addresses the concerns of passengers directly affected by such delay and, therefore, does not require consideration by the Agency in this Decision of the broader topic of the reasonableness of the practice of overbooking in general.

[149] The Agency, having determined that Mr. Lukács has not shown that in every situation of overbooking or cancellation the fastest possible means for a passenger to get to his/her destination is reasonable and having determined that the circumstance-focussed approach to reprotection is reasonable, will now consider the particular commercial and operational factors that Air Canada has raised when addressing the issue of reasonableness.

[150] Air Canada raised a number of arguments in this regard. First, it submits that it has an extensive network and mutual interline relationships, which are important in considering the reasonableness of its interline provision. Second, it argues that reprotection on flights of carriers with which an interline agreement exists is an industry practice. Third, it argues that it would be operationally and commercially unfair for it to pay full fare for each affected passenger, even in circumstances beyond its control. To this end, Air Canada adds that it would be put at a competitive disadvantage given its particular exposure to winter weather. Fourth, Air Canada argues that reprotection of passengers on flights of interline carriers has various advantages for the passengers, as it simplifies the rebooking process in terms of payment and baggage transfer. Finally, Air Canada argues that a passenger wishing to benefit from reprotection on the fastest available route can avail themselves of its On My Way program, which the Agency has found to be reasonable.

[151] Air Canada has responded to the complaint on the basis that it would always, in a situation of overbooking or cancellation, be required to reprotect the passenger on the flight of whatever carrier will get them to their destination the soonest. However, the Agency has determined as more fully set out at paragraphs 146 and 147 above that this approach is unreasonable and has preliminarily determined that a circumstance-focussed approach is a reasonable means of addressing the situation of overbooking or flight cancellation.

[152] Air Canada has also filed submissions based on the assumption that the challenge to its reprotection rules includes both circumstances within and outside of its control. Mr. Lukács acknowledges that it might be too onerous to require Air Canada to reprotect a passenger on the flight of any other carrier for uncontrollable reasons. The Agency confirms that it is only looking at reasonableness in situations of delay within Air Canada’s control.

[153] Given the circumstance-focussed approach to reprotection, the Agency is of the preliminary view that as a result of Air Canada’s extensive network and mutual interline agreements, a less restrictive provision, that allows for, in appropriate circumstances, reprotecion on the flight of a carrier with which Air Canada does not have an interline agreement, will have minimal impact operationally and commercially on Air Canada. In all likelihood, Air Canada’s network will address many situations of overbooking and flight cancellation within its control, which in turn will have less of an impact both financially and operationally on Air Canada.

[154] The Agency notes Air Canada’s argument that interline agreements are an industry practice and that these agreements may simplify the rebooking process for passengers. However, an industry practice does not, in itself, mean that the practice is reasonable. Furthermore, the Agency is not concerned with the practice of reprotection on flights of carriers with which an interline agreement exists in general, but rather with those particular circumstances in which reprotection on the fastest available route may be a reasonable measure to avoid damage to passengers.

[155] Air Canada has argued that its On My Way program, for a fee, allows a passenger to rebook a flight on any carrier. Air Canada notes that the On My Way program is an additional benefit to passengers who want to ensure that they have the opportunity to take advantage of transportation on any air carrier in a situation where there is a disruption in service, whatever the circumstances, both within and outside the control of the carrier.

[156] The Agency is of the view that this may provide an added benefit to passengers who would want certainty in instances of flight delay without the requirement to justify a circumstance-focussed reason for transportation on the flights of another carrier with which Air Canada has no interline agreement. However, this additional fee service does not detract from the Agency’s preliminary determination above, namely that it is unreasonable for Air Canada to take the restrictive approach to reprotection as set out in Tariff Rule 37(B) in dealing with overbooking and cancellation.

[157] Accordingly, the Agency is of the preliminary opinion that Air Canada has not shown why requiring it to amend its Tariff provision to provide for reprotection on flights of carriers with which it does not have an interline agreement would be unreasonable.

##### Air Canada’s Tariff and the choice of option between finding a seat on another Air Canada flight or on that of another carrier

[158] Air Canada retains the choice of option to rebook a passenger on its own flights or those of a carrier with which it has an interline agreement in cases of overbooking or cancellation.

[159] Air Canada submits that it is in a better position than passengers to make this determination. It maintains that it takes a flexible approach to finding the most appropriate flight for each passenger. Furthermore, it argues that rebooking is a complex, procedural measure which cannot be appropriately reflected in a tariff.

[160] Mr. Lukács maintains that Air Canada has a financial incentive to prefer the option of rebooking passengers on its own flights rather than those of another carrier. He also argues that although it is reasonable for Air Canada to make recommendations to passengers, the choice of option should ultimately lie with the passenger.

[161] The Agency has stated that it is of the preliminary opinion that it is unreasonable for Air Canada to limit itself to finding a seat on the flight of a carrier with which it has an interline agreement. As such, the Agency considers, on a preliminary basis, that Air Canada’s Tariff should provide for the possibility that a passenger take another Air Canada flight, or a flight of any other carrier if it gets them to destination in the most timely manner for the passenger.

[162] In order to give effect to this preliminary finding, the Agency is of the preliminary opinion that, in applying the circumstance-focussed approach, a passenger must have some discretion to choose between these two options. Otherwise, Air Canada would have sole discretion to choose or reject the option of reprotecting a passenger on the timeliest flight for the passenger.

[163] Accordingly, the Agency is of the preliminary opinion that the impugned Tariff provisions are unreasonable.

### Issue 4: Is it reasonable that Air Canada’s current Tariff Rules 37(B)(3), 240(C)(1)(d) and 260 only call for a refund of the unused portion of a ticket? Is it reasonable that certain Tariff provisions do not leave to the passenger the choice of option to obtain a refund?

#### Submissions

##### Refund of the unused portion of a ticket

[164] In his complaint of June 8, 2009, Mr. Lukács submits that by refunding the unused portion of a ticket, Air Canada may unilaterally cancel the contract of carriage. In his view, providing a partial or full refund falls short of the obligation set out in Article 19 of the Convention, which is to take all measures that could reasonably be required to avoid damage to passengers, and bear the extra cost of those measures. He argues that if such a provision is contrary to Article 19 in the international context, it is unreasonable in the domestic context.

[165] He adds that while most passengers are not interested in a refund but rather in being transported to their destination in a timely manner, some would prefer a refund. As such, he argues that the choice to obtain a refund should be at the sole discretion of a passenger.

[166] Mr. Lukács claims that Air Canada’s Tariff Rules 37(B)(3), 240(C)(1)(d) and 260 are unreasonable as they provide for a refund which is involuntary, and only involve a refund of the unused portion of a ticket.

[167] Mr. Lukács provides an example to show how refunding only the unused portion of a ticket leaves a passenger with substantial financial losses. In his example, he points out that if a flight is overbooked at a connecting point during travel and causes such a delay that the passenger’s travel no longer serves a purpose, the passenger would be required to return to their point of departure without having completed their trip, and would only be refunded the unused portion of their ticket. He submits that this outcome is unreasonable.

[168] Mr. Lukács requests that the Agency order Air Canada to substitute the phrase “unused portion” in the impugned Tariff rules with language similar to Article 8(1) of Regulation (EC) No 261/2004, which, he states, is in many ways an implementation of the Convention and which is a persuasive authority as to what is a reasonable refund. He cites the following excerpt of Article 8(1):

[r]eimbursement […] of the full cost of the ticket at the price at which it was bought for the part or parts of the journey not made, and for the part or parts already made if the flight is no longer serving any purpose in relation to the passenger’s original travel plan, together with, when relevant,

-a return flight to the first point of departure, at the earliest opportunity.

[169] Mr. Lukács submits that while requiring Air Canada to apply this rule to domestic transportation might have financial consequences for it, this does not interfere with its statutory, commercial and operational obligations. According to Mr. Lukács, not implementing this rule has absurd consequences for the travelling public. Mr. Lukács submits that it is unreasonable to require passengers to bear the cost of Air Canada’s business decision to overbook or cancel flights.

[170] With respect to refunding the “unused portion” of a ticket, Air Canada states that it cannot know, control or be made responsible for the reason for which a passenger is travelling. Furthermore, Air Canada argues that it should not be required to incur additional costs to refund payment for services it has already rendered.

[171] Referring to Mr. Lukács’ example of a passenger who is bumped from a flight at a connecting point, with the result that their trip no longer serves a purpose, Air Canada points out that such passenger would presumably already hold a return ticket to their point of departure and, thus, would not have to pay out of pocket for a return ticket. Air Canada adds that it has customer service procedures in place to assist passengers in finding an appropriate flight. Because of these procedures, Air Canada states that it would be surprised if an event such as the one described by Mr. Lukács were to occur. Air Canada claims that in such a case, it would provide transportation to the passenger’s point of departure, as well as denied boarding compensation.

[172] Air Canada contests Mr. Lukács’ assertion that Regulation (EC) No. 261/2004 is an implementation of the Convention. It cites a European Court of Justice decision that states that Article 6 of the Regulation “simply operates at an earlier stage than the Montreal Convention.”21 The judgment states that the standardized and immediate assistance and care measures provided for in article 6 do not prevent passengers from making claims for damages under the Convention.

[173] Air Canada adds that the principles of the Convention are not applicable to domestic carriage. Moreover, Air Canada claims that it already applies Regulation (EC) No. 261/2004 to its covered flights, along with all of its competitors on applicable routes. It points out that applying this regulation on its domestic routes without its competitors doing the same would put it at a significant competitive disadvantage.

[174] Air Canada further submits that the compensation level in Article 8(1)(a) of Regulation (EC) No. 261/2004 is based on flight distances in a geography where countries are small and close by, and where levels depend on imperatives related to the European economy and political framework.

[175] Finally, Air Canada argues that refunding the unused portion of a ticket is an industry standard. IATA’s PSCRM Resolution 737 states that the involuntary refund of a ticket that has been partially used is the highest of “the difference between the fare paid and the fare for the transportation used or to be used” or “the amount equal to the one way fare less the same rate of discount, if any, that was applied in computing the original one way fare (…) and charges applicable (…)”.

[176] Air Canada therefore submits that refunding the unused portion of a ticket is far from unreasonable, taking into account its operational and commercial obligations.

##### The passenger’s choice of option to obtain a refund

[177] Mr. Lukács also argues that, in cases that do not involve the passenger’s own conduct, involuntary refunds are unreasonable. He submits that permitting Air Canada to unilaterally cancel the contract of carriage through an involuntary refund completely ignores the passenger’s right to be transported to their destination. Mr. Lukács submits that in balancing between the passenger’s and carrier’s interests and obligations, the carrier should be as much “stuck” with the obligation to transport a passenger as the passenger is “stuck” with the carrier.

[178] Mr. Lukács asks that the Agency disallow provisions in Air Canada’s Tariff that allow Air Canada to refund a passenger’s airfare without an explicit request from the passenger.

[179] With respect to involuntary refunds, Air Canada states that it is not aware of ever having refunded a passenger without their requesting a refund, nor is it aware of having received a complaint about refunding a passenger against their will.

[180] With respect to IATA Resolution 737, Mr. Lukacs states that it is of no relevance because IATA is an organization representing the interests of air carriers, and not passengers.

[181] Mr. Lukács maintains his position that the carrier should not only refund the unused portion of a ticket, but also any portion of the ticket that no longer serves any purpose in relation to the passenger’s original travel plan. He argues that the provision to allow passengers to seek a refund is meant to mitigate the passenger’s damages. He further submits that the carrier should also transport the passenger back to the point of origin free of charge if the passenger so requests.

[182] Mr. Lukács refers to Air Canada’s submission dated November 9, 2009 that it should not be required to refund the fare for services that it has already provided. Mr. Lukács states that he agrees with this principle, and submits that the heart of the dispute is what one considers “services provided”.

[183] Mr. Lukács submits that if a flight cancellation, delay, or denied boarding interferes with a passenger’s travel plans to the extent that it deprives the trip of any purpose, then the passenger was not provided any services, and Air Canada cannot expect to be paid. The service to be rendered is transporting the passenger to their destination in a timely manner, and, therefore, transporting the passenger only to a connecting point does not constitute providing the service.

[184] In response to Air Canada’s argument that it should not be held responsible for the purpose of a passenger’s trip, Mr. Lukács states that Air Canada ought to be held responsible for the passenger’s original travel plan and for fulfilling its obligations to carry passengers to their destination in a timely manner. In cases where the passenger’s trip ceases to serve a purpose because of a significant delay, cancellation or overbooking, then full restitution would involve being transported back to their point of origin and being refunded all fares paid.

[185] Mr. Lukács concludes that any cancellation or denied boarding that is within Air Canada’s control is a decision by Air Canada, which profoundly affects passengers and their travel plans. Any provision that relieves Air Canada from bearing the full financial consequences of its choices or omissions is unreasonable.

[186] With respect to involuntary refunds, Air Canada points out that since Mr. Lukács’ complaint was filed, it amended its Tariff to give the choice of refund to the passenger. However, Air Canada contends that it must retain the possibility of refunding passengers in the event it is unable to reprotect them within a reasonable time. According to Air Canada, it is important that it retain this flexibility to address unforeseen circumstances, such as the Haitian earthquake of 2010.

[187] In its final submissions, Air Canada reiterates its position and adds that IATA Resolution 737 has as one of its purposes to increase passenger convenience and ensure seamless travel, and is thus relevant to passenger rights. It is also relevant in outlining how the industry deals with involuntary refunds. Requiring Air Canada to refund amounts paid for services already rendered would go beyond industry standards and put Air Canada at a significant commercial and competitive disadvantage.

[188] In his final submissions, Mr. Lukács states that it would be of great assistance if the Agency provided some guidance as to the meaning of “rendered services”. Mr. Lukács repeats that a service should not be considered rendered unless the passenger arrives at their desired destination, and in a timely manner.

[189] Mr. Lukács repeats his position that IATA represents air carrier interests and that Resolution 737 reflects what IATA would like to see as an industry standard, and not what the industry standard really is. He argues that Article 8(1)(a) of Regulation (EC) No. 261/2004 has dramatically altered the industry standard not only for Europe but for all air carriers operating from European airports.

#### Analysis and findings

[190] With respect to domestic flights that are cancelled, delayed or diverted, the Agency is making its findings in this Decision only in respect of situations that are within the control of Air Canada. The parties are in disagreement over the information filed by Air Canada with respect to cancelled, delayed or diverted flights and further as to how that information should be applied in the context of “controllable” events. However, the evidence on which their submissions are based indicates that their submissions regarding such events are of limited assistance to the Agency. In addition, those submissions are not necessary for the Agency’s analysis of a circumstance-focussed approach to the rights of passengers. Accordingly, the Agency will not take the submissions as to what constitutes a “controllable” event within the context of cancelled, delayed or diverted flights into account for the purpose of the determinations in this Decision.

[191] During the pleadings process, interrogatories were directed to Air Canada concerning the method by which it calculates the unused portion of a passenger’s ticket. As set out in the following analysis, the Agency has determined, on a preliminary basis, that in cases of overbooking or cancellation within its control, it is unreasonable for Air Canada to restrict itself to providing a refund of the unused portion of a ticket as this may force a passenger to absorb some of the costs arising from the overbooked or cancelled flight. The specific method by which the unused portion of the ticket is calculated is not necessary for the Agency’s analysis, as the Agency has focussed on the impact on the passenger of only being refunded the unused portion of the ticket.

##### Refund of the unused portion of a ticket

[192] As the Agency has set out above under Issue 1, when considering the reasonableness of a tariff provision pursuant to subsection 67.2(1), it may, among other matters, refer to the principles of the Convention for guidance.

[193] Article 19 of the Convention does not specify exactly what type of damage would be compensated for in the case of delay, but some examples from the jurisprudence include expenses for accommodation and meals or the additional transportation costs that would be incurred as a result of overbooking or cancellation.22

[194] There is therefore a possibility that compensation for damages under the Convention would extend beyond a mere refund of the unused portion of the ticket. In fact, it is reasonable to assume that in many situations of overbooking or cancellation, a passenger would expect more than a refund for the unused portion of the ticket. However, the restrictive wording in the impugned Tariff provisions does not allow for broader remedies than a refund for the unused portion of a ticket.

[195] From a practical perspective, the subject Tariff provision may operate to leave a passenger without a flight to or from their destination and with nothing but a refund for the unused portion of the ticket and, in the case of overbooking, $100 cash or a$200 voucher applicable to future travel as denied boarding compensation. As Mr. Lukács submits, payment of a partial refund may force a passenger to absorb some of the costs directly associated with their delayed travel. Mr. Lukács points out, for example, that as flight costs rise the closer one comes to one’s departure date, refunding the unused portion of a ticket purchased long before might not cover the cost of buying a ticket from another carrier on that day if Air Canada was unable to make alternate travel arrangements that met the needs of the passenger.

[196] Mr. Lukács also submits that where delay or cancellation occurs at a connecting point during a trip, with the result that a passenger’s travel no longer serves the passenger’s purpose, the passenger could be required to pay the cost of returning to the point of origin.

[197] Another example of potential additional expenses could arise where a passenger pays, say, $500 for a flight from point A to C but only makes it as far as point B because the flight is cancelled for a reason within Air Canada’s control. In such a case, even if the passenger is returned to point A because they determine that there is no point in continuing their journey, they will not receive a$500 refund; they will receive a refund less the portion travelled between points A and B. The trip between points A and B served no useful purpose for the passenger and yet, through no fault of their own and for reasons within the control of the carrier, the passenger must pay for a portion of a trip that serves no purpose.

[198] In that example, the passenger travels to a connecting point but never reaches their intended destination. This transportation is not the service contracted for. Although Air Canada maintains that this is a service rendered, travel to a connecting point cannot be considered a service rendered if overbooking or cancellation at that point causes a passenger to decide their trip no longer serves a purpose and they would prefer to return to their point of departure. Transportation to a connecting point is a means of getting to the passenger’s destination; the actual service is to transport the passenger from their point of departure to their intended point of destination.

[199] All of the above examples are practical examples of what a passenger may face in instances of overbooking or cancellation within the control of a carrier. Accordingly, the Agency accepts Mr. Lukács’ submission that the actual costs, or damages, incurred by a passenger may exceed the mere refund of the unused portion of a ticket. This is not reasonable and does not reflect the principles of Article 19 of the Convention.

[200] Air Canada had submitted that it will be at a significant commercial and operational disadvantage vis-à-vis its competitors if it is required to provide full refunds on domestic routes. The Agency notes, however, that Air Canada has offered no evidence of the significant commercial and operational disadvantage that would result from refunding the full ticket price.

[201] Air Canada also points out that refunding the unused portion of the ticket is an established industry standard. However, the mere fact that the practice is an industry standard does not necessarily make it reasonable.

[202] Accordingly, the Agency is of the preliminary opinion that the parts of the Tariff that allow for a refund of the unused portion of the ticket only is unreasonable. Air Canada has not demonstrated why, given its commercial and operational obligations, it cannot refund the entire ticket cost. Futhermore, Air Canada has not addressed the question of returning a passenger to their point of origin, within a reasonable time and at no extra cost, in cases where delay or cancellation occurs at a connecting point during travel, with the result that a passenger’s travel no longer serves the passenger’s purpose. As Mr. Lukács argues, many situations can be envisioned in which a passenger could be forced to absorb the cost of a flight that does not meet their needs, fulfil their purpose of travel, and does not coincide with the transportation for which the passenger contracted.

##### The passenger’s choice of option to obtain a refund

[203] Air Canada’s Tariff allows the passenger to opt for a refund of the unused portion of their ticket. However, Air Canada also retains the right to provide a refund if it is unable to fulfill the first two options, consisting of finding alternative transportation on its own aircraft or on that of a carrier with which Air Canada has an interline agreement, within a reasonable time. This means that the passenger still remains subject to the decision of Air Canada regardless of what might work best for the passenger. In the event that a passenger would not want a refund of the unused portion of their ticket, Air Canada could still opt to provide this instead of securing alternative transportation for the passenger. In other words, Air Canada still retains some discretion over whether the passenger will continue travelling or receive a refund. By retaining some discretion over the selection of the choice of options from its Tariff provision, Air Canada may be limiting or avoiding the actual damage incurred by a passenger as a result of delay.

[204] Air Canada maintains that it is not aware of any cases or complaints where an involuntary refund was provided to a passenger and, thus, it appears that the impact of amending this provision would be minimal. Although Air Canada refers to the Haitian earthquake of 2010 as an example of the requirement to retain flexibility when it comes to the issue of refunds, the Agency is of the opinion that Air Canada has not shown how this would have an impact on Air Canada operationally or commercially. Furthermore, an event such as the Haitian earthquake would be considered to be outside the carrier’s control. Air Canada has not demonstrated why this flexibility would be necessary for events within its control.

[205] The Agency also notes that Air Canada has not demonstrated to the satisfaction of the Agency why, from an operational and commercial perspective, the choice of option could not lie exclusively with the passenger.

[206] Accordingly, the Agency is of the preliminary opinion that the impugned Tariff provisions are unreasonable.

### Issue 5: Is it reasonable that Air Canada’s current Tariff Rule 37(B) does not state that a passenger has rights and remedies beyond those named in Rule 37(B)? Is it reasonable that current Tariff Rules 135(E) and 240(B)(9) refer to a sole remedy available to passengers?

#### Submissions

[207] Mr. Lukács raises two arguments with respect to this issue: the first is that Rule 37(B) ought to clarify that passengers retain their rights for further legal action against the carrier even if they accept the assistance set out in Rule 37(B); and the second is that Air Canada should be required to remove, from Rules 135(E) and 240(B)(9), its statement that the remedies listed therein are the sole remedies available to passengers.

##### Rule 37(B)

[208] With respect to Rule 37(B), Mr. Lukács argues that the impugned Tariff rules ought to be clear and unequivocal in stating that the rerouting or refund provided to passengers does not affect their right to seek further compensation and other remedies against a carrier.

[209] He submits that while Rule 37(B) of Air Canada’s Tariff does not specifically preclude other remedies, it may mislead passengers and create such an impression. Mr. Lukács adds that the refund process used by most air carriers contains waivers for further rights of action, or, at least, it creates such an impression. As such, he requests that Air Canada rewrite Rule 37(B) to clarify and inform passengers of their right to take further legal action against a carrier.

[210] Air Canada argues that access to justice is a fundamental principle in a free and democratic society. It asserts that it does not have to state that a passenger has access to justice and it does not see how stating as much would clarify Rule 37(B).

[211] With respect to waivers, Air Canada points out that Rule 37(B) is only a reformulation of other principles found in the Tariff, and the purpose of Rule 37(B) is purely to reflect the principles of Flight Rights Canada and the Code of Conduct for Canada’s Airlines, set out by Transport Canada. Air Canada argues that Rule 37(B) must be interpreted in light of each relevant Tariff rule. Air Canada raises as an example Rule 245(E)(2), which states that if denied boarding compensation is accepted, it constitutes “full compensation for all actual or anticipatory damages, incurred or to be incurred.” Air Canada submits that, obviously, this does not stop a passenger from attempting to obtain additional compensation in common law courts.

[212] In his reply, Mr. Lukács states that in reading Rule 37 in light of other principles found in the Tariff, Rules 135(E) and 240(B)(9) are particularly relevant, as they purport to limit Air Canada’s liability and obligations by referring to a passenger’s sole remedy. In the presence of these two Rules, Rule 37(B) may be construed as a passenger’s sole remedy, while in fact its purpose is to provide an immediate remedy without prejudice to a passenger’s right to seek further remedies. He argues that Rule 37(B) should clearly state that accepting assistance under Rule 37(B) does not pre-empt or exclude further passenger claims.

[213] Air Canada submits that there is no condition in Rule 37(B) that it be the only recourse of the passenger in the case of domestic travel and there are no exclusions of other legal principles such as the obligation to repair tort caused or failure to perform a contract which is to be interpreted by the common law or civil law, as the case may be. It adds that when the provision of the Tariff constitutes the sole remedy, such a condition is specifically mentioned in the particular Tariff rule, such as in the case of Rules 135(E) and 240(B)(9).

[214] In his final reply, Mr. Lukács mentions that this argument is interwoven with his position on Rules 135(E) and 240(B)(9), and that should the Agency rule in his favour on the latter provisions, his argument on Rule 37(B) need not be decided by the Agency.

##### Rules 135(E) and 240(B)(9)

[215] Mr. Lukács impugns Rules 135(E) and 240(B)(9) of Air Canada’s Tariff, which effects, according to him, appear to be similar to Rule 37(B). Those provisions contain the phrase “as the passengers [sic] sole remedy”. Mr. Lukács submits that the effect of this phrase is to contractually pre-empt a passenger’s cause of action for damages against the carrier in cases covered by these rules. He further submits that if these rules are allowed to stand, they are likely to be enforced by courts. As such, he argues that the Agency is the only body that can offer an adequate remedy by disallowing such provisions.

[216] Mr. Lukács submits that in striking a balance between passengers and carriers, it should be observed that on the one hand, the sole remedy provisions entail shutting the door on passengers who wish to seek redress in court for damages. On the other hand, removing the reference to “sole remedy” in these provisions will not interfere with the carrier’s statutory, commercial or operational obligations. He therefore argues that the phrase “as the passenger’s sole remedy” should be removed from Rules 135(E) and 240(B)(9).

[217] Air Canada submits that Rules 135(E) and 240(B)(9) are not unreasonable and provide adequate compensation to passengers. Air Canada adds that both the civil and common law provide that limitations of liability do not apply in cases of gross negligence. As such, it argues that a court of law might grant a passenger additional damages against Air Canada in such circumstances. However, as its tariffs are not meant to be a litigation textbook, Air Canada submits that such explanations do not belong in its Tariff.

[218] Mr. Lukács reiterates that the effect of the “sole remedy” wording in Rules 135(E) and 240(B)(9) is to extinguish passenger rights of action against Air Canada in the events described by the rules, namely, Mr. Lukács claims, cases where the carrier fails to perform as stipulated in the contract of carriage. In such cases, the most obvious form of damages would be those related to delay. However, passengers are prevented from recovering their damages because of the “sole remedy” provisions.

[219] Mr. Lukács refers to the Agency’s balancing test and to its decision in Griffiths v. Air Canada, Decision No. 287-C-A-2009, where the Agency held that there is no presumption that a tariff is reasonable and that a mere declaration by the carrier that a term or condition is preferable is not sufficient to conclude that it is reasonable. He also submits that Air Canada failed to lead evidence as to why these rules are necessary in meeting its statutory, commercial and operational obligations. Instead, Air Canada merely states that the rules are reasonable; Mr. Lukács argues that this statement is insufficient to support a finding of reasonableness.

[220] Mr. Lukács goes on to argue that a complete exclusion of liability provided by the “sole remedy” provisions in Rules 135(E) and 240(B)(9) is inconsistent with the principles set out in the Warsaw and Montreal Conventions. Mr. Lukács requests that the “sole remedy” phrase be removed from Rules 135(E) and 240(B)(9).

#### Analysis and findings

[221] The Agency notes that Mr. Lukács’ argument concerning Rule 37(B) was largely treated as a clarity issue in the pleadings. Furthermore, Mr. Lukács, in his final submissions, claimed that if the Agency found in his favour on the “sole remedy” provisions contained in Rules 135(E) and 240(B)(9), then it would not be required to make a determination with respect to his arguments on Rule 37(B).

[222] The Agency is of the opinion that it is appropriate to address Mr. Lukács’ arguments concerning Rule 37(B), as well as those concerning Rules 135(E) and 240(B)(9). Furthermore, the Agency is of the opinion that Mr. Lukács’ arguments respecting the three provisions raise a question as to their reasonableness. Accordingly, the Agency will address Rules 37(B), 135(E) and 240(B)(9) from a reasonableness perspective.

[223] In its submissions on Rule 37(B), Air Canada does not dispute that passengers do, in fact, retain rights and remedies outside those contained in Rule 37(B). Air Canada simply argues that it should not be required to make this explicit in the provision. However, Air Canada has not provided evidence as to why it could not indicate as much in Rule 37(B) or that doing so would affect its statutory, commercial and operational obligations.

[224] Tariff Rule 37(B) does not indicate that passengers may have rights and remedies at law beyond those contained in Rule 37(B) in the event of overbooking or cancellation. In fact, the wording of Rule 37(B) may misrepresent to passengers that their rights and remedies are only determined within the context of the Tariff.

[225] Accordingly, the Agency is of the preliminary opinion that Rule 37(B) is unreasonable.

[226] As to the reasonableness of the sole remedy provisions, Rules 135(E) and 240(B)(9) set out the measures Air Canada will take in a code share context in the event of flight cancellations, inability to provide previously confirmed space, missed connections caused by a carrier and schedule irregularities. Many of the measures are similar to those provided for in Rule 37(B). However, these provisions state that the measures constitute the passenger’s sole remedy.

[227] Air Canada argues that the “sole remedy” provision may not preclude a passenger from seeking other remedies, particularly in cases of gross negligence. In other words, Air Canada admits that the measures set out in its Tariff provisions may not in fact be the sole remedy available to passengers. Nevertheless, Air Canada claims that it should not be required to state this in its Tariff. The Agency again notes that a passenger should be able to fully understand their rights in law simply by reading the Tariff, and without having recourse to external texts or legal principles. A passenger reading Air Canada’s Tariff provisions and their reference to the passenger’s sole remedy would likely not know that other rights or recourses are available to them.

[228] Air Canada further claims that Rules 135(E) and 240(B)(9) are reasonable and provide adequate compensation to passengers. Air Canada has provided no evidence in support of its position.

[229] As noted in Issue 1 above, the Agency will take the principles of the Convention into account when considering whether a tariff provision is reasonable. Article 19 of the Convention provides for a carrier’s liability for damage caused by delay.

[230] In Rules 135(E) and 240(B)(9) of its Tariff, Air Canada has restricted its liability in the circumstances addressed in those provisions, and indicates that a passenger has no other remedies but those provided for in those Rules. Specifically, Air Canada’s impugned Tariff provisions exclude it from any liability beyond finding alternative transportation, rerouting or refunding the passenger. The Tariff does not acknowledge that other types of damages might arise from schedule irregularities and overbooking. Such an approach is inconsistent with the principles contained in Article 19 of the Convention.

[231] Accordingly, the Agency is of the preliminary opinion that the “sole remedy” provisions contained in Tariff Rules 135(E) and 240(B)(9) are unreasonable.

## CONCLUSION

[232] The Agency has made preliminary findings on the specific Tariff provisions identified by Mr. Lukacs, with the exception of Rule 250(I). With respect to the preliminary findings, Air Canada will be provided with an opportunity to respond.

[233] There were no arguments presented with respect to Rule 250(I) and therefore the Agency has not addressed that provision in this Decision. The parties should be aware, however, that there may be an impact on this provision as well as other provisions of the Tariff arising from the final Decision.

## SHOW CAUSE

[234] Based on the above findings, the Agency provides Air Canada with the opportunity to show cause, within thirty (30) days from the date of this Decision:

### With respect to Issue 1:

i)why the principles of Article 19 of the Montreal Convention should not be equally applicable to domestic carriage.

### With respect to Issue 2:

ii) why overbooking and cancellation that are within Air Canada’s control should not fall within the meaning of “delay” as found in Article 19 of the Convention.

### With respect to Issue 3:

iii) why Air Canada’s current Tariff Rule 37(B)(2) should not be found unreasonable as per subsection 67.2(1) of the CTA for being too restrictive in dealing with issues of overbooking and cancellation and be worded on the basis of a passenger circumstance-focussed approach which provides for reprotection on flights of carriers with which there is no interline agreement.

iv) why Air Canada’s Tariff provisions not leaving the passenger a choice of options for reprotection should not be found unreasonable as per subsection 67.2(1) of the CTA.

### With respect to Issue 4:

why the parts of Air Canada’s current Tariff that allow for a refund of the unused portion of a passenger’s ticket only should not be found unreasonable as per subsection 67.2(1) of the CTA.

vi) why the parts of Air Canada’s current Tariff rules that leave with Air Canada the choice of option for compensation dealing with an overbooking or cancellation situation should not be found unreasonable as per subsection >67.2(1) of the CTA.

### With respect to Issue 5:

vii) why Air Canada’s current Tariff Rule 37(B) should not be found unreasonable as per subsection 67.2(1) of the CTA for failing to accurately and fully set out a passenger’s right to seek further compensation and other remedies against carriers.

viii) why Air Canada’s current Tariff Rules 135(E) and 240(B)(9) which refer to the “sole remedy” available to passenger should not be found unreasonable.

[235] Air Canada’s response will be copied, at the same time, to Mr. Lukács who will have 14 days to file comments with the Agency, copied to Air Canada. Air Canada will then have 7 days to file a response with the Agency, copied to Mr. Lukács.

## Rule 37- AC ADDITIONAL SERVICE STANDARD COMMITMENTS

The rules contained in this tariff, including rules 240, 245, and 250, shall be interpreted in accordance with the principles set out below, and adjusted in accordance thereto.

1. Given that passengers have a right to information on flight times and schedule changes, Air Canada will make reasonable efforts to inform passengers of delays and scheduled changes and to the extent possible, the reason for the delay or change.

2. Given that passengers have a right to take the flight they paid for, if the plane is over-booked or cancelled, Air Canada will:

a) Find the passenger a seat on another flight operated by Air Canada;

b) Buy the passenger a seat on another carrier with whom it has a mutual interline traffic agreement, or

c) refund the unused portion of the passenger’s ticket.

3. Given that passengers have a right to punctuality, Air Canada will undertake to do the following:

a) If a flight is delayed and the delay between the scheduled departure of the flight and the actual departure of the flight exceeds 4 hours, Air Canada will provide the passenger with a meal voucher.

b) If a flight is delayed by more than 8 hours and the delay involves an overnight stay, Air Canada will pay for overnight hotel stay and airport transfers for passengers who did not start their travel at that airport.

c) If the passenger is already on the aircraft when a delay occurs, Air Canada will offer drinks and snacks if it is safe, practical and timely to do so. If the delay exceeds 90 minutes and circumstances permit, Air Canada will offer passengers the option of disembarking from the aircraft until it is time to depart.

4) Given that passengers have a right to retrieve their luggage quickly, if the luggage does not arrive on the same flight as the passenger, Air Canada will take steps to deliver the luggage to the passenger’s residence/hotel as soon as possible. Air Canada will take steps to inform the passenger on the status of the luggage and will provide the passenger with an over-night kit as required. Compensation will be provided as per the provisions of this tariff.

5) Given that nothing in this present tariff would make Air Canada responsible for acts of nature or the acts of third parties, Air Canada will not be held responsible for inclement weather or the actions of third parties such as acts of government or air traffic control, airport authorities, security agencies, law enforcement or Customs and Immigration officials.

## Rule 135-AC CANCELLATION OF RESERVATIONS

E) In the even carrier is a codeshare carrier and the operating carrier cancels a flight, is unable to provide previously confirmed space, causes a passenger to miss a connecting flight on which he holds a reservation, carrier will as the passengers sole remedy, if the operating carrier fails to do so,

1) Carry the passenger on another of its passenger aircraft on which space is available without additional charge regardless of class of service; or

2) endorse to another carrier or transportation service, the unused portion of the ticket for purposes of re-routing; or

3) reroute the passenger to the destination named on the ticket or applicable portion thereof by its own or other air transportation services; and if the fare for the revised routing or class of service is higher than the refund value of the ticket or applicable portion thereof as determined from Rule 260 (Refunds, Involuntary), carrier will require no additional payment from the passenger but will refund the difference if it is lower.

4) Make involuntary refund in accordance with Rule 260 (Refunds, Involuntary).

## Rule 240-AC FAILURE TO OPERATE ON SCHEDULE OR FAILURE TO CARRY

### Schedule Irregularity

(B)(9) In the event carrier is a codeshare carrier and the operating carrier fails to operate according to schedule, fails to stop at a point to which the passenger is destined or is ticketed to stopover, substitutes a different type of equipment or class or service, is unable to provide previously confirmed space, causes a passenger to miss a connecting flight on which he holds a reservation, or the passenger is refused or removed in accordance with Rule 35 (Refusal to Transport) carrier will as the passenger’s sole remedy, if the operating carrier fails to do so,

a) Carry the passenger on another of its passenger aircraft on which space is available without additional charge regardless of the class of service; or

b) endorse to another carrier or transportation service, the unused portion of the ticket for purposes of re-routing; or

c) reroute the passenger to the destination named on the ticket or applicable portion thereof by its own or, other air transportation services; and if the fare for the revised routing or class of service is higher than the refund value of the ticket or applicable portion thereof as determined from Rule 260 (Refunds, Involuntary), carrier will require no additional payment from the passenger but will refund the difference if it is lower; or

d) Make involuntary refund in accordance with Rule 260 (Refunds, Involuntary).

(C) (1) When a passenger will be delayed due to a schedule irregularity involving an AC flight, or the invocation of the provisions of Rule 35 (Refusal to Transport-paragraphs (1)(A), (B),(E), (ii), (H)(ii), (iii) & (iv), (J), (K) and (M) and/or Rule 135 (CANCELLATION OF RESERVATIONS – paragraph (A) with the exception of labour disturbances and/or strikes;

(a) AC will transport the passenger without stopover on its next available flight and in the same class of service as his original flight.

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to (X) or Executive (J cabin) class on the first available flight.

EXCEPTION 2: A passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if the flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

(b) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, subject to the passenger’s concurrence, try to arrange transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, in the same class of service as applied to his original outbound flight on AC.

c) In the event space on AC is only available and used in a lower class of service than applied to the passenger’s original flight(s), the difference in fares will be refunded in accordance with Rule 260 (REFUNDS-INVOLUNTARY).

d) In the event AC is unable to arrange alternate air transportation acceptable to the passenger, AC will refund the unused ticket or portions thereof in accordance with Rule 260 (REFUNDS-INVOLUNTARY).

(D) Schedule Change In the event an AC schedule change requires the rerouting of a ticketed passenger, AC will:

(3) refund the ticket or unused coupon(s) in accordance with Rule 260 (REFUNDS- INVOLUNTARY).

## RULE 250-TRAVEL ASSISTANCE

I) When a passenger elects not to purchase ON MY WAY, the services and compensation provided by carrier in the event of Flight Cancellation is limited to the conditions set out below. In the case of a discrepancy between the text found below and the rules referred to herein, the rules referred to herein shall be deemed to contain the correct text. Except to the extend provided in this rule, AC shall not be liable for failing to operate any flight according to schedule or for changing the schedule or routing of any flight or adding stopovers, with or without notice to the passenger. Carrier assumes no responsibility for passengers making connections:

1) Except as provided in paragraph (I)(2) below, no service or compensation is provided and carrier is not liable when it cancels the reservation of a passenger whenever such action is necessary:

a) To comply with any governmental regulation, and/or

b) To comply with any governmental request for emergency transportation in connection with the national defence, or natural disasters, or

c) Whenever such action is necessary or advisable by reason of weather or other conditions beyond its control (including, without limitation, acts of god, force majeure, labour disturbances, strikes, civil commotions, embargoes, wars, hostilities or disturbances) actual, threatened or reported.

2) In the circumstances stated in paragraph (I)(1) above, carrier will at the request of the passenger:

a) Transport the passenger on another of its flights on which space is available; or

b) Refund an amount determined in accordance with paragraph (I)(7) below.

3) In accordance with Rule 240 (concerning failure to operate on schedule as applicable to confirmed and ticketed reservations), carrier shall not be liable if it fails to operate any flight according to schedule or changes the schedule of any flight, with or without notice to passenger, except that it shall, at the request of the passenger, apply paragraph (I)(3)(b) below:

For confirmed and ticketed reservations, and except in circumstance of labor disturbances and/or strikes, carrier will:

i) Transport the passenger without stopover on its next available flight and in the same class of service as his original flight.

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to or Executive (J cabin) class on the first available flight.

EXCEPTION 2: A passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if that flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

ii) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, subject to the passenger’s concurrence, try to arrange transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, class of service as applied to his original outbound flight on AC.

iii) In the event space on AC is only available and used in a lower class of service than applies to the passenger’s original flight(s), the difference in fares will be refunded in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

iv) In the event AC is unable to arrange alternate air transportation acceptable to the passenger, AC will refund the unused ticket or portions thereof in accordance with paragraph (I) (7) below (refunds-involuntary).

4) In accordance with Rule 240, paragraph (I)(3)(b) above will also apply in the case of a schedule irregularity. A schedule irregularity is defined as any of the following which occurs in the day of departure, but does not refer to disruptions resulting from labour disturbances and/or strikes:

a) Delay in scheduled departure or arrival of an AC flight resulting in a mis-connection; or,

b) Flight cancellation, omission of a scheduled stop, or any other delay or interruption in the scheduled operation of AC’s flight; or,

c) Substitution of AC’s equipment; or,

d) AC schedule changes which require rerouting a passenger who had not been given notice of the change prior to his arrival at the airport to check-in for the original flight.

5) Schedule Change

In accordance with Rule 240, in the event an AC schedule change requires the rerouting of a ticketed passenger, AC will:

a) Reroute the passenger without stopover on its next available flight and in the same booking class as his original flight, or,

b) At the request of the passenger, reroute him without stopover on its next available flight in a different booking class/class of service, upon payment, by him, of the difference in fares for the affected flight coupon(s); or

EXCEPTION: a passenger holding an Executive (J) or full Economy (Y cabin) fare ticket may upgrade, at no additional cost, to or executive (J cabin) class on the first available flight.

c) Refund the ticket of unused coupon(s) in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

6) Labor Disruptions and Strikes. In accordance with Rule 240:

a) In the event a labor disruption and/or strike against AC, by an AC union, requires a passenger to rerouted, AC will:

i) Reroute the passenger without stopover on its next available flight and in the same booking class as his original flight; or,

ii) At the request of the passenger, reroute him without stopover on its next available flight in a different class of service, upon payment, by him of the difference in fares for the affected flight coupon (s).

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to (X) or Executive (J cabin) class on the first available flight.

EXCEPTION 2: a passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if that flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

iii) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, subject to the passenger’s concurrence, try to arrange air transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, in the same/comparable booking class as applied to his original outbound flight on AC.

iv) Refund the ticket or unused coupon(s) thereof in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

b) AC will accept a passenger who is being involuntarily rerouted by another carrier, at no additional cost to the passenger, only in the same/comparable booking class on AC as applied to his transportation on the other carriers. In the event AC is requested by either the other carrier or the passenger to provide transportation on a booking class or class of service that results in a higher fare than was paid on the original ticket, such transportation will be provided only upon payment of the difference in fares for the affected flight coupon(s).

7) In accordance with Rule 260 concerning involuntary refunds, the refund rules applicable in this rule are:

a) If no portion of the ticket has been used: AC will refund an amount equal to the fare and charges applicable to the ticket issued to passenger. The amount of the refund shall not be greater than the amount paid for the ticket.

b) If a portion of the ticket has been used, an amount equal to the lowest applicable direct one way fare (or, on round, circle or open jaw trip tickets to which a discount applies, 50% of the round trip fare.) For the classes of service paid for less the same rate of discount that was applied in computing the original fare and charges applicable from the point of termination to the destination named on the ticket or to the point at which air transportation is to be resumed, via:

i) The routing specified on the ticket, if the point of termination was on the routing of the ticket, or

ii) The routing of any carrier(s) operating direct service between such points, if the point of termination was not on the routing specified on the ticket.

iii) In the event of death or illness, carrier will no longer refund cancellation penalty.

8) In addition to the provisions of this paragraph (I) only in cases of schedule irregularity caused by a situation within its control, Air Canada will offer:

a) For a schedule irregularity lasting longer than 4 hours, a meal voucher for use, where available, at an airport restaurant or our board cafe, of an amount dependant on the time of day.

b) For a schedule irregularity lasting longer than 6 hours, a voucher for future travel of an amount proportional to the length of the delay.

c) For a schedule irregularity lasting overnight, hotel accommodation and ground transportation between the airport and the hotel, when available. This service is only available for out-of-town passengers.

9) Day of flight notification: Passengers who register for a flight notification service on an AC website will be notified by email or SMS of a schedule cancellation or delay up to 15 minutes prior to departure. The first notification will not be sent more than 24 hours prior to departure, and the notifications will not be sent at intervals shorter than 15 minutes. Air Canada is not liable for non-delivery of messages and cannot quarantine the timeliness or reliability of email or SMS message receipt.

## RULE 260-AC REFUNDS – INVOLUNTARY

(A) The amount AC will refund upon surrender of the unused portion of the passenger’s ticket, pursuant to Rule 35 (Refusal to Transport), Rule 50 (Acceptance of Children) or Rule 240 (Failure to Operate on Schedule or Failure to Carry, will be:

(1) If no portion of the ticket has been used, an amount equal to the fare(s) and charge(s) paid.

(2) If a portion of the ticket has been used:

(a) One-way fares-an amount equal to the lowest comparable one way selling fare applicable to the booking class (es) on the ticket from the point of termination to the destination named on the ticket or the point from which transportation is to be resumed;

NOTE: Point of Termination shall also include any ticketed point at which AC is unable to provide service.

(b) Round, circle and open jaw trip fares – an amount equal to 50% of the round trip fare, calculated at the same level of discount used for the original fare(s) on the ticket, from the point of termination to the destination or the point from which transportation is to be resumed; via,

(i) the routing specified on the ticket, if the point of termination was part of that routing; or ,

(ii) the direct routing of any carrier operating between the point of termination and the destination named on the ticket or the point from which transportation is to be resumed, if the point of termination was not part of the original routing.

(c) If no fare of the type paid by the passenger is published between the point of termination and the destination or the point from which transportation is to be resumed, the refund shall be the same proportion of the normal Economy (Y cabin) fare published between the point of termination and destination or the point from which transportation is to be resumed, as was applicable to the original fare.

(d) Cancellation Penalties: In the event of the death or illness of the passenger, a member of his immediate family or a travelling companion, cancellation penalties will be refunded.

NOTE: For the purpose of this rule, immediate family shall be defined as: spouse, parents, children (including adopted), brothers, sisters, daughters and sons-in-law, mothers and fathers-in-law, grandparents and grandchildren.

(B) Substitution of Aircraft

When a substitution of aircraft results in the necessity to accommodate a passenger holding (X) or Executive (J cabin) class ticketed reservations in other than the applicable compartment, the refund shall be the difference, if any, between:

1) the amount equal to the involuntary refund value calculated in accordance with (A) above, and,

2) (i) the applicable Executive (J cabin) or Economy (Y cabin) class fare between the point of termination and the destination named on the ticket or the point from which transportation is to be resumed provided the carrier operated the affected sector(s) or,

(ii) 75% of the lowest direct one way (X) or “Business” (J cabin) class published fares where the carrier does not operate the affected sectors.

EXCEPTION: No refund will be made when the amount calculated in (2) above exceeds the amount calculated in (1) above.

## Rule 37- AC ADDITIONAL SERVICE STANDARD COMMITMENTS

Rules 240, 245, and 250 shall be interpreted in accordance with the principles set out below, and adjusted in accordance thereto.

(A) Given that passengers have a right to information on flight times and schedule changes, Air Canada will make reasonable efforts to inform passengers of delays and schedule changes and to the extent possible, the reason for the delay or change.

(B) Given that passenger have a right to take the flight they paid for, if the plane is over-booked or cancelled, Air Canada will:

1) Find the passenger a set on another flight operated by Air Canada: or at AC’s option

2) Buy the passenger a seat on another carrier with whom it has a mutual interline traffic agreement; or at passenger’s choosing or if Air Canada is unable to perform the option stated in (1) or (2) above within a reasonable amount of time

3) refund the unused portion of the passenger’s ticket.

(C) Given that passengers have a right to punctuality, Air Canada undertakes to do the following:

1) If a flight is delayed and the delay between the scheduled departure of the flight and the actual departure of the flight exceeds 4 hours, Air Canada will provided the passenger with a meal voucher.

2) If a flight is delayed by more than 8 hours and the delay involves an overnight stay, Air Canada will pay for overnight hotel stay and airport transfers for passenger, who did not start their travel at that airport.

3) If the passenger is already on the aircraft when a delay occurs, Air Canada will offer drinks and snacks if it is safe, practical and timely to do so. If the delay exceeds 90 minutes and circumstances permit, Air Canada will offer passengers the option of disembarking from the aircraft until it is time to depart.

(D) Given that passengers have a right to retrieve their luggage quickly, if the luggage does not arrive on the same flight as the passenger, Air Canada will take steps to deliver the luggage to the passenger’s residence/hotel as soon as possible. Air Canada will take steps to inform the passenger on the status of the luggage and will provide the passenger with an over-night kit as required. Compensation will be provided as per the provisions of this tariff.

(E) Given that nothing in this present tariff would make Air Canada responsible for acts of nature or the acts of third parties, the principles set out in this rule cannot have the effect of holding Air Canada responsible for inclement weather or the actions of third parties such as acts of government or air traffic control, airport authorities, security agencies, law enforcement or Customs and Immigration officials.

## Rule 135-AC CANCELLATION OF RESERVATIONS

E) In the even carrier is a codeshare carrier and the operating carrier cancels a flight, is unable to provide previously confirmed space, causes a passenger to miss a connecting flight on which he holds a reservation, carrier will as the passengers sole remedy, if the operating carrier fails to do so,

1) Carry the passenger on another of its passenger aircraft on which space is available without additional charge regardless of class of service; or at carrier’s option

2) endorse to another carrier or transportation service, the unused portion of the ticket for purposes of re-routing; or at carrier’s option

3) reroute the passenger to the destination named on the ticket or applicable portion thereof by its own or other air transportation services; and if the fare for the revised routing or class of service is higher than the refund value of the ticket or applicable portion thereof as determined from Rule 260 (Refunds, Involuntary), carrier will require no additional payment from the passenger but will refund the difference if it is lower.

4) At passenger’s option or if carrier is unable to perform the option stated in (1), (2) or (3) above within a reasonable amount of time, make involuntary refund in accordance with Rule 260 (Refunds, Involuntary).

### Schedule Irregularity

(B)(9) In the event carrier is a codeshare carrier and the operating carrier fails to operate according to schedule, fails to stop at a point to which the passenger is destined or is ticketed to stopover, substitutes a different type of equipment or class or service, is unable to provide previously confirmed space, causes a passenger to miss a connecting flight on which he holds a reservation, or the passenger is refused or removed in accordance with Rule 35 (Refusal to Transport) carrier will as the passenger’s sole remedy, if the operating carrier fails to do so,

a) Carry the passenger on another of its passenger aircraft on which space is available without additional charge regardless of the class of service; or at carrier’s option

b) endorse to another carrier or transportation service, the unused portion of the ticket for purposes of re-routing; or at carrier’s option

c) reroute the passenger to the destination named on the ticket or applicable portion thereof by its own or, other air transportation services; and if the fare for the revised routing or class of service is higher than the refund value of the ticket or applicable portion thereof as determined from Rule 260 (Refunds, Involuntary), carrier will require no additional payment from the passenger but will refund the difference if it is lower; or at passenger’s option or if carrier is unable to perform the option stated in (a) or (b) above within a reasonable amount of time;

d) Make involuntary refund in accordance with Rule 260 (Refunds, Involuntary).

(C) (1) When a passenger will be delayed due to a schedule irregularity involving an AC flight, or the invocation of the provisions of Rule 35 (Refusal to Transport-paragraphs (1)(A), (B),(E), (ii), (H)(ii), (iii) & (iv), (J), (K) and (M) and/or Rule 135 (CANCELLATION OF RESERVATIONS – paragraph (A) with the exception of labour disturbances and/or strikes;

(a) AC will transport the passenger without stopover on its next available flight and in the same class of service as his original flight.

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to Executive (J cabin) class on the first available flight.

EXCEPTION 2:   A passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if the flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

(b) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, at its option but, subject to the passenger’s concurrence, try to arrange transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, in the same class of service as applied to his original outbound flight on AC.

c) In the event space on AC is only available and used in a lower class of service than applied to the passenger’s original flight(s), the difference in fares will be refunded in accordance with Rule 260 (REFUNDS-INVOLUNTARY).

d) At passenger’s option or in the event AC is unable to arrange alternate air transportation acceptable to the passenger, AC will refund the unused ticket or portions thereof in accordance with Rule 260 (REFUNDS-INVOLUNTARY).

(D) Schedule Change In the event an AC schedule change requires the rerouting of a ticketed passenger, AC will:

(3) at the request of the passenger, refund the ticket or unused coupon(s) in accordance with Rule 260 (REFUNDS- INVOLUNTARY).

## RULE 250-TRAVEL ASSISTANCE

I) When a passenger elects not to purchase ON MY WAY, the services and compensation provided by carrier in the event of Flight Cancellation is limited to the conditions set out below. In the case of a discrepancy between the text found below and the rules referred to herein, the rules referred to herein shall be deemed to contain the correct text. Except to the extend provided in this rule, AC shall not be liable for failing to operate any flight according to schedule or for changing the schedule or routing of any flight or adding stopovers, with or without notice to the passenger. Carrier assumes no responsibility for passengers making connections;

(1) Except as provided in paragraph (I)(2) below, no service or compensation is provided and carrier is not liable when it cancels the reservation of a passenger whenever such action is necessary:

a) To comply with any governmental regulation, and/or

b) To comply with any governmental request for emergency transportation in connection with the national defence, or natural disasters, or

c) Whenever such action is necessary or advisable by reason of weather or other conditions beyond its control (including, without limitation, acts of god, force majeure, labour disturbances, strikes, civil commotions, embargoes, wars, hostilities or disturbances) actual, threatened or reported.

2) In the circumstances stated in paragraph (I)(1) above, carrier will at the request of the passenger:

a) Transport the passenger on another of its flights on which space is available; or

b) or at the passenger’s request if AC is unable to perform the options stated in (a) above within a reasonable amount of time, refund an amount determined in accordance with paragraph (I)(7) below.

3) In accordance with Rule 240 (concerning failure to operate on schedule as applicable to confirmed and ticketed reservations), carrier shall not be liable if it fails to operate any flight according to schedule or changes the schedule of any flight, with or without notice to passenger, except that it shall, at the request of the passenger, apply paragraph (I)(3).

For confirmed and ticketed reservations, and except in circumstance of labor disturbances and/or strikes, carrier will:

i) Transport the passenger without stopover on its next available flight and in the same class of service as his original flight.

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to or Executive (J cabin) class on the first available flight.

EXCEPTION 2:   A passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if that flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

ii) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, at its option but subject to the passenger’s concurrence, try to arrange transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, class of service as applied to his original outbound flight on AC.

iii) In the event space on AC is only available and used in a lower class of service than applies to the passenger’s original flight(s), the difference in fares will be refunded in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

iv) At passenger’s option or in the event AC is unable to arrange alternate air transportation acceptable to the passenger, AC will refund the unused ticket or portions thereof in accordance with paragraph (I) (7) below (refunds-involuntary).

4) In accordance with Rule 240, paragraph (I)(3) above will also apply in the case of a schedule irregularity. A schedule irregularity is defined as any of the following which occurs in the day of departure, but does not refer to disruptions resulting from labour disturbances and/or strikes:

a) Delay in scheduled departure or arrival of an AC flight resulting in a mis-connection; or,

b) Flight cancellation, omission of a scheduled stop, or any other delay or interruption in the scheduled operation of AC’s flight; or,

c) Substitution of AC’s equipment; or,

d) AC schedule changes which require rerouting a passenger who had not been given notice of the change prior to his arrival at the airport to check-in for the original flight.

5) Schedule Change

In accordance with Rule 240, in the event an AC schedule change requires the rerouting of a ticketed passenger, AC will:

a) Reroute the passenger without stopover on its next available flight and in the same booking class as his original flight, or,

b) At the request of the passenger, reroute him without stopover on its next available flight in a different booking class/class of service, upon payment, by him, of the difference in fares for the affected flight coupon(s); or

EXCEPTION: a passenger holding an Executive (J) or full Economy (Y cabin) fare ticket may upgrade, at no additional cost, to or executive (J cabin) class on the first available flight.

c) At the request of the passenger, refund the ticket of unused coupon(s) in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

6) Labor Disruptions and Strikes. In accordance with Rule 240:

a) In the event a labor disruption and/or strike against AC, by an AC union, requires a passenger to rerouted, AC will:

i) Reroute the passenger without stopover on its next available flight and in the same booking class as his original flight; or,

ii) At the request of the passenger, reroute him without stopover on its next available flight in a different class of service, upon payment, by him of the difference in fares for the affected flight coupon (s).

EXCEPTION 1: A passenger holding an Executive (J cabin) or full Economy (Y cabin) fare ticket may be upgraded, at no additional cost, to (X) or Executive (J cabin) class on the first available flight.

EXCEPTION 2: a passenger holding a discount type ticket will be upgraded to the next higher class of service, at no additional cost, only if that flight provides an earlier arrival at his destination, stopover or transfer point than the next flight on which space is available in the original class of service.

iii) If AC is unable to provide reasonable alternate air transportation on its own services, AC will, at its option but subject to the passenger’s concurrence, try to arrange air transportation on the services of another air carrier or combination of air carriers with which AC has agreements for such transportation. In such cases, the passenger will be transported without stopover and at no additional cost to himself, in the same/comparable booking class as applied to his original outbound flight on AC.

iv) or at passenger’s option or if AC is unable to perform the options stated in i), ii), or iii) above within a reasonable amount of time, refund the ticket or unused coupon (s) therefore in accordance with paragraph (I)(7) below (REFUNDS – INVOLUNTARY).

b) AC will accept a passenger who is being involuntarily rerouted by another carrier, at no additional cost to the passenger, only in the same/comparable booking class on AC as applied to his transportation on the other carriers. In the event AC is requested by either the other carrier or the passenger to provide transportation on a booking class or class of service that results in a higher fare than was paid on the original ticket, such transportation will be provided only upon payment of the difference in fares for the affected flight coupon(s).

7) In accordance with Rule 260 concerning involuntary refunds, the refund rules applicable in this rule are:

a) If no portion of the ticket has been used: AC will refund an amount equal to the fare and charges applicable to the ticket issued to passenger. The amount of the refund shall not be greater than the amount paid for the ticket.

b) If a portion of the ticket has been used, an amount equal to the lowest applicable direct one way fare (or, on round, circle or open jaw trip tickets to which a discount applies, 50% of the round trip fare.) For the classes of service paid for less the same rate of discount that was applied in computing the original fare and charges applicable from the point of termination to the destination named on the ticket or to the point at which air transportation is to be resumed, via:

i) The routing specified on the ticket, if the point of termination was on the routing of the ticket, or

ii) The routing of any carrier(s) operating direct service between such points, if the point of termination was not on the routing specified on the ticket.

iii) In the event of death see Rule 272.

8) In addition to the provisions of this paragraph (I) only in cases of schedule irregularity caused by a situation within its control, Air Canada will offer:

a) For a schedule irregularity lasting longer than 4 hours, a meal voucher for use, where available, at an airport restaurant or our board cafe, of an amount dependant on the time of day.

b) (X)

c) For a schedule irregularity lasting overnight, hotel accommodation and ground transportation between the airport and the hotel, when available. This service is only available for out-of-town passengers.

d) If passengers are already on the aircraft when a delay occurs, AC will offer drinks and snacks if it is safe, practical and timely to do so. If the delay exceeds 90 minutes and circumstances permit, AC will offer passengers the option of disembarking from the aircraft until it is time to depart.

9) Day of flight notification: Passengers who register for a flight notification service on an AC website will be notified by email or SMS of a schedule cancellation or delay up to 15 minutes prior to departure. The first notification will not be sent more than 24 hours prior to departure, and the notifications will not be sent at intervals shorter than 15 minutes. Air Canada is not liable for non-delivery of messages and cannot quarantine the timeliness or reliability of email or SMS message receipt.

## RULE 260-AC REFUNDS – INVOLUNTARY

A) The amount AC will refund to the original form of payment upon surrender of the unused portion of the passenger’s ticket, pursuant to Rule 35 (Refusal to Transport), subject to any restrictions contained in applicable fare rules, Rule 50 (Acceptance of Children) or Rule 240 (Failure to Operate on Schedule or Failure to Carry, will be:

(1) If no portion of the ticket has been used, AC will refund an amount equal to the fare and charges paid applicable to the ticket issued to passenger. The amount of the refund shall not be greater than the amount paid for the ticket.

(2) If no portion of the ticket has been used:

(a) One-way fares-an amount equal to the lowest comparable one way selling fare applicable to the booking class (es) on the ticket from the point of termination to the destination named on the ticket or the point from which transportation is to be resumed;

NOTE: Point of Termination shall also include any ticketed point at which AC is unable to provide service.

(b) Round, circle and open jaw trip fares – an amount equal to 50% of the round trip fare, calculated at the same level of discount used for the original fare(s) on the ticket, from the point of termination to the destination or the point from which transportation is to be resumed; via,

(i) the routing specified on the ticket, if the point of termination was part of that routing; or ,

(ii) the direct routing of any carrier operating between the point of termination and the destination named on the ticket or the point from which transportation is to be resumed, if the point of termination was not part of the original routing.

(c) If no fare of the type paid is published between the point of termination and the destination or the point from which transportation is to be resumed, the refund shall be the same proportion of the normal Economy (Y cabin) fare published between the point of termination and destination or the point from which transportation is to be resumed, as was applicable to the original fare.

(d) Cancellation Penalties: In the event of the death see Rule 272.

NOTE: For the purpose of this rule, immediate family shall be defined as: spouse, parents, children (including adopted), brothers, sisters, daughters and sons-in-law, mothers and fathers-in-law, grandparents and grandchildren.

(B) Substitution of Aircraft

When a substitution of aircraft results in the necessity to accommodate a passenger holding (X) or Executive (J cabin) class ticketed reservations in other than the applicable compartment, the refund shall be the difference, if any, between:

1) the amount equal to the involuntary refund value calculated in accordance with (A) above, and,

2) (i) the applicable Executive (J cabin) or Economy (Y cabin) class fare between the point of termination and the destination named on the ticket or the point from which transportation is to be resumed provided the carrier operated the affected sector(s) or,

(ii) 75% of the lowest direct one way (X) or “Business” (J cabin) class published fares where the carrier does not operate the affected sectors.

EXCEPTION: No refund will be made when the amount calculated in (2) above exceeds the amount calculated in (1) above.

1. Convention for the Unification of Certain Rules Relating to International Carriage by Air, signed in Warsaw on 12 October 1929.
2. Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. LexisNexis, 2008 at 537.
3. Ibid. at 538.
4. 114957 Canada Ltée (Spraytech, Société d'arrosage) v. Hudson (Town)), [2001] 2 S.C.R. 241
5. Corocraft Ltd. v. Pan American Airways Inc. [1968] 2 QB 740 at 757.
6. Pinksen v. Air Canada, Decision No. 181-C-A-2007; Kipper v. Westjet, Decision No. 309-C-A-2010; and in the preliminary ruling in Lukács v. Air Canada, Decision No. LET-C-A-29-2011
7. Plourde c. Service aérien FBO inc. (Skyservice),2007 QCCA 739; Connaught Laboratories Ltd. v. Britsh Airways, 61 O.R.(3d)204 at paras. 44 and 50; Attorney General of Canada v. Flying Tiger Line, Inc., [1987] O.J. No. 914 at para 7.
8. 433 F. Supp 2d 361 (U.S.D.N.Y.2006).
9. 1999 U.S.Dist.LEXIS 9849 (U.S.D.N.Y).
10. 821 F.2d 442(U.S.C.A.7th Cir.1987).
11. The Federal Aviation Act of 1958.
12. 2009 MBQB 29 [Application for leave to Appeal dismissed: 2009 MBCA 111].
13. 520 F. Supp. 2d 447 – (E.D.N.Y. 2007).
14. U.S. 290 (1976).
15. See for example Del Anderson v. Air Canada; Holloway v. Air Canada, Decision No. 546-C-A-2006.
16. 2010 QCCQ 6858.
17. McMurry v. Capitol Intern. Airways, 102 Misc. 2d 720 at 722.
18. Cohen v. Delta Air Lines Inc., 09 Civ. 6709 (S.D.N.Y.) (2010 U.S. Dist. Lexis 118164).
19. Supra note 12.
20. Assaf c. Air Transat A.T. Inc., [2002] J.Q. no 8391 (QCCQ).
21. Assaf c. Air Transat A.T. Inc., [2002] J.Q. no 8391 (QCCQ).
22. See for example Balogun v. Air Canada, [2010] O.J. No. 663 (S.C.J.); Lukács v. United Airlines Inc., supra note 12.

## Member(s)

J. Mark MacKeigan
John Scott
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