Decision No. 100-A-2004

March 4, 2004

APPLICATION by Polar Air Cargo, Inc. for authority and a program permit to operate fifth freedom entity charter cargo flights between Canada and Europe from December 21, 2003 to March 21, 2004 using a B747-400 freighter aircraft.

File No. M5000/P280

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APPLICATION

[1] On November 17, 2003, Polar Air Cargo, Inc. (hereinafter Polar) applied to the Canadian Transportation Agency (hereinafter the Agency) for the authority and a program permit to operate a series of 14 Canadian originating fifth freedom entity charter cargo flights between Halifax and Liège, Belgium from December 21, 2003 to March 21, 2004, utilizing a B747-400 freighter aircraft carrying a maximum of 70,000 kgs of fresh seafood and live lobsters per flight on behalf of Northstar Worldwide Inc. (hereinafter Northstar).

[2] Under Licence No. 980136, Polar is authorized to operate a non-scheduled international service to transport goods on a charter basis between points in the United States of America and points in Canada.

[3] Letters in support of the application were received from the Halifax International Airport Authority, the Department of Transportation and Public Works of the Province of Nova Scotia, Kintetsu World Express (Canada) Inc. and the Department of Agriculture and Fisheries of the Province of Nova Scotia.

[4] On November 26, 2003, notice of the application was given to Canadian carriers for comments. Canadian carriers were provided until 10:00 a.m. December 10, 2003 to file interventions and Polar was provided until 5:00 p.m. December 15, 2003 to reply to any interventions. The application and the charter contract were also provided to Canadian carriers.

[5] On December 5, 2003, Polar requested a further abridgement of the time frames as the charterer Northstar was concerned that the short time frame would not provide the shipper sufficient time to seek alternative transportation.

[6] On December 8, 2003, Cargojet Airways Ltd. (hereinafter Cargojet) filed an intervention in opposition to Polar's application. Cargojet's intervention included a list of interrogatories that it requested the Agency direct to Polar.

[7] By Decision No. LET-A-243-2003 dated December 9, 2003, the Agency denied Polar's request for a further abridgement of time due to the already short period of time provided to Canadian carriers for comments.

[8] On December 9, 2003, Cargojet requested an extension of time to file its supplementary submissions in support of its intervention of December 5, 2003 until two business days after it received the full and complete responses to the interrogatories.

[9] By Decision No. LET-A-246-2003 dated December 11, 2003, the Agency directed Polar to respond to the interrogatories of Cargojet. Polar was provided until December 29, 2003 to respond and Cargojet was provided until January 2, 2004 to reply to Polar's response. Also, in light of the imminent departure of the flights and the holiday season, the Agency granted the necessary authority to Polar to operate the flights on December 21 and 28, 2003 and on January 4 and 11, 2004.

[10] On December 12, 2003, Cargojet requested that the time periods set by the Agency with respect to Polar responding to the interrogatories and Cargojet replying to such responses be abridged to December 17, 2003 and December 22, 2003 respectively.

[11] By Decision No. LET-A-253-2003 dated December 17, 2003, the Agency, in light of the difficulty for Cargojet to reply within the period of time provided and taking into consideration the Christmas and New Year's holidays, provided Cargojet until 5:00 p.m. January 9, 2004 to reply.

[12] On December 29, 2003, Polar responded to the interrogatories set out in Decision No. LET-A-246-2003. Polar maintained that the information is of a commercially sensitive and proprietary nature and should not be disclosed for competitive reasons. Polar advised, however, that it would comply with any request from the Agency to provide such information directly to the Agency on a confidential basis. On January 5, 2004, Cargojet advised that it was dissatisfied with the reasons given by Polar for not providing a full and adequate response to the interrogatories. Cargojet also requested that the Agency order Polar to provide it with the requested information and documentation or, in the alternative, an abridged version of the information.

[13] By Decision No. LET-A-2-2004 dated January 7, 2004, the Agency directed Polar to provide certain information and documents with the Agency on a confidential basis and required Polar to provide reasons for the claim of confidentiality and, where it is asserted that specific direct harm would likely result if the documents were made public, Polar was to provide details as to the nature and extent of the harm. The Agency also directed Polar to file an abridged version of the information that, in its opinion, could be made public and provided to Cargojet.

[14] On January 9, 2004, Polar filed the requested information and its reasons for maintaining this material confidential.

[15] In light of the fact that the Agency must render a decision on Polar's request for confidentiality of documentation submitted, that Cargojet must be provided an opportunity to comment on the abridged information and that Polar be given an opportunity to reply to any such comments, the Agency granted, by Decision No. LET-A-8-2004 dated January 16, 2004, program permit number CECF-64EU to Polar for the operation of two Canadian originating fifth freedom entity charter cargo flights on January 18 and January 25, 2004.

[16] By Decision No. LET-A-12-2004 dated January 21, 2004, the Agency, after carefully weighing the request for disclosure and the potential harm that would likely result if the financial and commercially-sensitive information were placed on the public record, determined that Polar had answered the interrogatories and that the public disclosure of the information requested by Cargojet would likely result in specific direct harm to Polar, Northstar and its customers. Accordingly, the Agency provided Cargojet until 5:00 p.m. January 23, 2004 to file its final submission.

[17] On January 23, 2004, Cargojet requested an extension of time to file its final submission. By Decision No. LET-A-23-2004 dated January 23, 2004, the Agency provided Cargojet until 5:00 p.m. January 27, 2004 to file its final submission.

[18] On January 27, 2004, Cargojet filed its final submission.

[19] By Decision No. LET-A-29-2004 dated January 29, 2004, the Agency provided Polar until 5:00 p.m. February 2, 2004 to file its reply to Cargojet's final submission. In addition, as the Agency must render a decision after all submissions have been made, the Agency granted program permit No. CECF-64EU to Polar for the operation of one Canadian originating entity charter cargo flight on February 1, 2004.

[20] On February 2, 2004, Polar filed its response to Cargojet's final submission.

POSITIONS OF THE PARTIES

[21] Cargojet raises as a first preliminary legal issue whether the Polar flights are contemplated by law. Cargojet relies on the International All-Cargo Charter Air Services Policy Statement of the Minister of Transport, dated May 29, 1998 (hereinafter the Charter Cargo Policy) and the exemption order wherein the Agency exempts Polar from certain entity charter provisions of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR) to submit that in order to be a charter flight within the meaning of the Charter Cargo Policy and the exemption order, the entire capacity of each Polar flight must be chartered to one or more third party charterers.

[22] In support of its argument, Cargojet refers to Decision No. LET-A-12-2004 dated January 21, 2004, wherein the Agency stated that:

[23] Polar submits that there is no Charter Agreement in place nor is one intended with U.S. shippers on this aircraft. Polar accommodates common-carriage shippers on this flight (PO410), but reserves up to 70,000 kg of capacity for the use of Northstar under its charter contract. However, if Northstar cannot use the full capacity it has contracted, Polar is free to sell this capacity and retain the revenue.

[24] In view of the above, Cargojet submits that it is clear that Polar's Canadian charterer, Northstar, does not charter the entire capacity of the aircraft. Cargojet adds that it is equally clear that no one else charters the balance of the capacity of the aircraft. Therefore, Cargojet concludes that the existing and proposed Polar charter flights do not comply with either the Charter Cargo Policy or the Polar exemption order and that the Agency should deny Polar's application.

[25] As its second preliminary legal issue, Cargojet refers to its interrogatories whereby it requested complete details as to the current charter arrangements Polar has with Northstar, including the charter rate being charged by Polar and paid by Northstar for each flight operated under Polar's existing authority along with evidence of such payment and the timing of such payment. Cargojet states that while the Agency refused to provide the information, it did state that there were some minor tariff irregularities in the documents submitted and that it would deal with the irregularities directly with Polar. Based on this, Cargojet submits that the Agency should have provided it with full information with respect to this interrogatory and, while Cargojet is unable to assess the extent of the irregularities, it is clear that Polar's operations are not in compliance with the charter tariff and the relevant air transportation regulations relating thereto.

[26] Given the Agency's refusal to provide the information requested, Cargojet states that it does not have sufficient information to make full submissions with respect to this matter. Notwithstanding this, Cargojet submits that it would appear that rather than having Northstar pay a fixed amount per flight, it is paying a variable amount per flight tied to the number of pounds of cargo shipped on the particular flight. In other words, Cargojet submits, as a third preliminary legal issue, that Polar is in fact charging a rate per pound which is a unit toll rate rather than a charter rate. Cargojet adds that a combination of Polar operating regularly scheduled flights and charging Northstar on a de facto unit toll basis results in Polar flights not being charter flights as described in both the Charter Cargo Policy and the exemption order.

[27] Furthermore, Cargojet submits that it is doubtful that Polar is and will be complying with the provisions of subsection 118(1) of the ATR which require that Polar's published tolls must be applicable to the entire capacity of the aircraft.

[28] With respect to the Charter Cargo Policy, Cargojet submits that the existing and proposed Polar flights do not comply with the Charter Cargo Policy, which also provides for a balancing of interests of shippers and carriers.

[29] Cargojet submits that the existing and proposed Polar flights have had and will continue to have a material adverse effect on Cargojet's scheduled all-cargo services. On this issue, Cargojet explains that while the back haul traffic from Atlantic Canada and, in particular, Halifax to central Canada is substantially less than the inbound traffic, Cargojet submits that such traffic is vital to Cargojet in order to maintain the frequency of service and cost of service required by its customers. Cargojet adds that a substantial volume of back haul seafood product carried by Cargojet is carried onwards by one or more of Cargojet's international scheduled air carriers.

[30] Cargojet explains that it has been operating a weekly Boeing 727 cargo flight on Saturday from Halifax to Hamilton since May 2000. The main purpose of these flights was to carry fresh seafood and live lobster for onward carriage by Korean Airlines Co., Ltd. (hereinafter Korean Airlines) on its cargo flight from Toronto to Seoul. Average loads during high season are approximately 55,000 pounds and during low season approximately 35,000 pounds. Cargojet submits that with the implementation of the Polar charter flights, the average loads on the flights in question were reduced to approximately 10,000 pounds. Cargojet states that the viability of this flight has now been threatened as a result of the diversion of traffic by Polar. Furthermore, Cargojet states that at the beginning of January 2004, it was forced to temporarily suspend its Saturday Halifax-Hamilton flight connecting with Korean Airlines as a result of the Polar charter flights. Cargojet agreed to reinstitute the flight on a temporary basis subject to another viability assessment.

[31] Cargojet is concerned that the continued operation of Polar flights will materially impair its other Atlantic Canada flights and, in particular, its Halifax cargo flights. Cargojet states that a number of its customers have expressed concerns about the effect of the Polar flights on the domestic scheduled services of Cargojet to and from the Atlantic provinces and, in particular, Halifax.

[32] With respect to the charter permit criteria set out in subparagraph 22(a)(i) and paragraphs 22(b) and (d) of the ATR, Cargojet submits that the existing and proposed Polar flights are not and will not be in accordance with the relevant provisions of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) and the ATR, nor will they be in accordance with the Charter Cargo Policy.

[33] On the issue of the effect or potential effect of Polar's service on Cargojet, Polar refers to the difficult starting times it experienced given that it was new to the market and came in at the time that Hurricane Juan hit the Atlantic provinces. Polar explains that it agreed to persevere at the urging of Northstar and its customers.

[34] Polar submits that since the commencement of the charters in September 2003 to the present time, Polar has transported a total of 920,714 pounds of seafood and live lobsters from Halifax to Liège. If averaged across the 16 flights conducted, the seafood export uplift amounted to 57,544 pounds each flight.

[35] Polar points out that its once-weekly charter services are provided in addition to the more extensive and long-standing services offered by Air Canada, Cargojet, Purolator, Federal Express, United Parcel Service (hereinafter UPS), and other carriers in the Halifax market. Polar indicates that it operates its charter flights each Sunday, the single day of the week that Cargojet and all-cargo operators do not offer service from Halifax.

[36] Polar adds that its charter operations not only represent an increase in available capacity to exporters in the region and occur on a day of the week when no other comparable services are offered, they also represent an improvement in shipper options. Polar explains that its direct service from Halifax to Liège, with the capability of transferring shipments on-airport at Liège for onward transportation, satisfies the demands of perishable product for less time in transit and less handling overall.

[37] With respect to the overall service provided by the different carriers to the shippers, Polar submits that Air Canada's B767 made available each Saturday since November 2003 offers a similarly high level of service to Halifax shippers. Polar submits that this stands in contrast to the Saturday Cargojet flights from Halifax to Hamilton with an overland trucking connection to Toronto to meet a Korean Airlines flight to Seoul. In Polar's view, a seamless connection in transportation is altogether better for perishable product, but in the instance of live lobsters, Polar submits that given the comments from the shippers, it is particularly important in minimizing the mortality rate of the product.

[38] Polar indicates that the operation of a Polar charter on Sunday was requested by Northstar and its customers to satisfy a requirement for lift on that specific day of the week and the support it has received is proof-positive that this service met that requirement. Polar submits therefore that the cargo tendered to Air Canada and Cargojet each Saturday is proof that there is still a need for cargo lift on Saturday as well.

[39] In response to Cargojet's argument that the Polar flights are threatening the viability of Cargojet's operations, Polar replies that, according to the market, Korean Airlines and various seafood shippers have shifted an increasing amount of their Saturday business to Air Canada for a variety of reasons, including the direct connection at Toronto to the Korean Airlines flight to Seoul. Polar also submits that without any fact or reasons it is impossible to respond to Cargojet's claim that the Sunday operation of Polar threatens to undermine not only Cargojet's Saturday flight but "materially impairs" the six weekly flights operated by Cargojet from Halifax.

[40] Polar submits that it is conducting the fifth freedom charter flights in accordance with the laws, relevant air transportation regulations and exemptions applicable to their operation. Polar adds that its operations are supported by the Charter Cargo Policy, which, among other things, seek to balance the needs of Canadian shippers and air carriers. Polar indicates that of the air carriers serving Halifax today, none but Cargojet has opposed the Polar service. Polar adds that of the shippers in Atlantic Canada that are reliant on the transportation of their products to foreign markets, not one has spoken against Polar's service, rather, all have expressed a wish to see it continue.

Relevant statutory provisions

[41] The following provisions of the ATR provide as follows:

[42] 2. In these Regulations and Part II of the Act,

(...)

"entity charter" means a flight operated according to the conditions of a charter contract under which

(a) the cost of transportation of passengers or goods is paid by one person, corporation or organization without any contribution, direct or indirect, from any other person, and

(b) no charge or other financial obligation is imposed on a passenger as a condition of carriage or otherwise in connection with the transportation; (vol affrété sans participation)

[43] 22. The issuance or deemed issuance of any category of permit referred to in section 22.1 in respect of an international charter is subject to the following conditions, namely, that the operation of the charter

(a) be in accordance with

(i) the Act and these Regulations,

(ii) any terms and conditions of the licence pursuant to which the international charter is operated,

(iii) where applicable, any conditions of the permit, and

(iv) the terms and conditions of a charter contract that are set out in these Regulations;

(b) be consistent with Canada's national and international transportation policies and Canada's other policies that affect, directly or indirectly, air transportation, as set out in applicable legislation or in other documents of the Government of Canada;

(c) be in accordance with any applicable international agreement, convention or arrangement respecting civil aviation to which Canada is a party; and

(d) on balance, best serve the needs of travellers, shippers and air carriers.

[44] 22.2 (1) Notwithstanding any other provision of this Part, where the Agency determines that the operation of an international charter referred to in section 22 is contrary to any of the conditions referred to in that section, the Agency may

(a) deny an application for, or cancel a program permit, in whole or in part, referred to in subsection 32(1) or (2), section 34 or 37.1, subsection 43(2.3) or section 48.1;

(b) cancel a small carrier charter permit that is deemed to have been issued pursuant to section 32.1, 36.1, 42.1, 44 or 48.2;

(c) deny an application for or cancel an approval referred to in paragraph 73(4)(c); or

(d) before issuing or cancelling a permit, require an air carrier to take measures to ensure that the operation of the charter will comply with the conditions.

(2) When determining whether the operation of an international charter may contravene paragraph 22(b), (c) or (d), the Agency shall take into consideration international reciprocity in matters of air transportation.

[45] 118. (1) Subject to subsection (2), every air carrier operating a non-scheduled international service on a charter basis shall publish all its tolls for those services at a rate per mile, where distance can be measured, or at a rate per hour where distance cannot be measured, which tolls shall be applicable to the entire capacity of the aircraft.

(2) An air carrier that operates a non-scheduled international service on a charter basis may, in lieu of tolls described in subsection (1), establish specific point-to-point flat sum charter prices.

[46] The relevant provisions of the Air Transport Agreement between the Government of Canada and the Government of the United States of America (hereinafter the Canada-USA Agreement) provide as follows:

[47] Article 4 - Fair Competition

[...]

3. Neither Party shall impose on the other Party's designated airlines a first-refusal requirement, uplift ratio, no-objection fee, or any other requirement with respect to capacity, frequency or traffic that would be inconsistent with the purposes of this Agreement.

[...]

[48] Annex III - Charter Air Transportation

[...]

In the performance of services covered by this Annex, designated airlines of each Party shall also have the right:

(1) to make stopovers at any points whether within or outside of the territory of either Party;

(2) to carry transit traffic through the other Party's territory; and

(3) to combine on the same aircraft traffic originating in one party's territory with traffic that originated in the other Party's territory.

Each Party shall on the basis of comity and reciprocity consider applications by airlines of the other Party to carry traffic not covered by this Annex.

ANALYSIS AND FINDINGS

[49] In making its findings, the Agency has considered all of the evidence submitted by the parties during the pleadings.

[50] Cargojet submitted that Polar does not charter the entire capacity of the aircraft and is therefore in contravention of the Charter Cargo Policy and the Agency's exemption order. Cargojet's argument refers more particularly to the Marketing Restrictions part of the Charter Cargo Policy which is written in the following terms:

[51] Scheduled and charter air services are distinguished by different characteristics, including how the respective services are marketed. Where all-cargo charter services are concerned, this policy will continue to require that:

the entire capacity of an aircraft be chartered; and
direct sales by a carrier at a toll per unit be prohibited.

[52] With respect to the Agency's exemption order, Cargojet referred to the part of Order No. 2003-A-593, which states that "The entire capacity of an aircraft must be chartered". In support of its argument, Cargojet refers to Decision No. LET-A-12-2004 dated January 21, 2004, referred to above in the "Positions of the parties" section.

[53] Based on the foregoing, Cargojet submitted that Polar's Canadian charterer, Northstar, does not charter the entire capacity of the aircraft and that no one else charters the balance of the capacity of the aircraft. Therefore, according to Cargojet, the Polar charter flights do not comply with either the Charter Cargo Policy or the exemption order.

[54] Cargojet's preliminary issues dealt with the requirement that the full capacity of the aircraft be chartered. The Agency is of the opinion that Cargojet's interpretation according to which the full capacity of the aircraft must be chartered is too restrictive and must be understood as including the chartering, by a combination of Canadian and foreign charterers, of the total capacity of the aircraft for both Canadian and foreign originating charter traffic. In other words, the full capacity to which Cargojet referred must be understood as referring to the full capacity available to be chartered out of Canada, taking into account Canadian and foreign originating charter traffic. This interpretation is in accordance with the Agency's long standing interpretation of the same requirement with respect to the operation of passenger charters. It is also in accordance with the balance that the Agency must strike between the interests of the shippers and the interests of the affected Canadian carriers and the carriers of the other country. The interpretation finds support in the Canada-USA Agreement, which is contemplated in paragraph 22(c) of the ATR. It also finds support in the Charter Cargo Policy to which Cargojet referred and which is contemplated in paragraph 22(b) of the ATR. It finally finds support in paragraph 22(d) and subsection 22.2 (2) of the ATR.

Reciprocity in air transportation matters: the Charter Cargo Policy and the Canada-USA Agreement

[55] The Agency first notes that the Polar charter flights are entity charter flights within the meaning of section 2 of the ATR. There is no reference to the capacity of the aircraft. Furthermore, the concept of entity charter has been given a broader scope by the Minister of Transport in the Charter Cargo Policy. The policy allows several shippers or charterers to charter space on an all-cargo aircraft and to allow freight forwarders, who resell cargo space to other shippers, to act as charterers. One of the purposes of this expansion was to support Canada's international trade and business objectives by facilitating the operation of international all-cargo charter air services to and from Canada in order to meet the needs of stakeholders and to foster the growth of Canadian all-cargo services. Pending the modification of the ATR to reflect the broadening interpretation given to entity charters, the Agency uses its exemption power to implement the Charter Cargo Policy.

[56] With respect to reciprocity, the Agency notes that reciprocity in international air transportation issues is a recognized principle both under the CTA and the ATR. Subsection 78(1) of the CTA requires the Agency to exercise its powers in accordance with any international agreement. Paragraph 22(c) of the ATR also requires that before issuing an international charter permit, the operation of the international charter flight must be consistent with any applicable international agreement. Furthermore, pursuant to subsection 22.2(2) of the ATR, in exercising its powers to decide whether an international charter flight contravenes paragraphs 22(b), (c) or (d) of the ATR, the Agency must take into consideration international reciprocity in matters of air transportation.

[57] In the present case, the Canada-USA Agreement applies. Article 4, paragraph 3 precludes the aeronautical authorities from offering a right of first refusal or imposing an uplift ratio requirement to the operations of the air carriers of the other Party. These prohibitions specifically address a Canadian regulatory requirement to deny any request by a foreign carrier to operate an entity charter between points in Canada and points in third countries if a Canadian carrier indicated that it was able to provide equivalent transportation. They also address United States and Canadian past practices of balancing economic opportunities by requiring foreign carriers to offer at least a percentage of transportation from its home country in the bilateral market. These practices had, in the past, limited opportunities to air carriers to operate fifth freedom charters from Canada and the United States.

[58] Annex III (charter air transportation) of the Canada-USA Agreement states, as a matter of general principle, that the rules of the country of origin of the charter are applicable to the transportation of traffic from that country. Air carriers are also permitted to combine traffic originating in one country with traffic originating in the other country and to carry traffic through the territory of the other country enroute to third countries. While primarily specifying the rights of designated airlines in the operation of transborder charters, the Annex includes a provision under which applications for charter services not covered by the Annex are to be considered on the basis of comity and reciprocity. Consideration based on comity and reciprocity requires the aeronautical authorities to consider the benefits available to all of its air carriers in future similar applications before the other aeronautical authorities and the potential harm to those air carriers if a denial is found to negatively affect the reciprocity previously established. No evidence has been filed in the present case indicating that applications by Canadian carriers for approval for similar operations from points in the United States have been denied by the authorities of the United States.

[59] Based on this principle of comity and reciprocity, Canadian carriers have enjoyed numerous opportunities to operate fifth freedom charters from the United States. The combination of foreign and Canadian charterers and foreign and Canadian origin charter traffic has been accepted by the Agency as meeting the Canadian requirement that the full capacity of the aircraft is chartered.

[60] Under the concept of rules of the country of origin, the traffic taken on by Polar at New York and carried through Halifax would be subject to the regulations of the United States authorities. It would obviously be inappropriate and contrary to the Agreement for the Agency to apply Canadian policy and regulation with respect to direct sales and charter contracts to that portion of the operation.

[61] Therefore, in light of these provisions of the Agreement and the principle of reciprocity, the Agency finds that for the purposes of fifth freedom entity charters, full capacity of an aircraft refers to the full capacity available to be chartered out of Canada.

[62] The Agency is also of the opinion that the cancellation of the permits granted to date and denial of permits for the remaining flights would not be appropriate in view of the Charter Cargo Policy and the Canada-USA Agreement. The irregularities to which Cargojet refers appear to be of a technical nature. They relate to the amendment of the contract and the application of the tariff on file with the Agency and they can be addressed by requiring Polar to take specific measures to ensure future compliance with the ATR. Denying Polar's request on that basis would be putting aside or ignoring the whole purpose of the Charter Cargo Policy and the Canada-USA Agreement. The Agency will deal with the tariff irregularities in a separate proceeding.

Balancing the interests of shippers and carriers

[63] Paragraph 22(b) of the ATR provides that the operation of an international charter must be consistent with Canada's national and international transportation policies and Canada's other policies that affect, directly or indirectly, air transportation. The Charter Cargo Policy is again relevant to this issue. As mentioned previously, the policy was adopted to meet the needs of the aviation industry and to foster economic growth. With respect to fifth freedom all-cargo charter services, the policy states that:

[64] The interests of shippers in such services will have to be balanced with the interests of affected carriers of Canada and of the other country. However, while the interests of Canadian carriers will be taken into consideration when assessing fifth freedom all-cargo charter applications by foreign carriers, such applications will not be denied solely on the grounds that Canadian carriers can offer the service instead.

[65] Paragraph 22(d) of the ATR also provides that the operation of a charter must, on balance, best serve the needs of travellers, shippers and carriers. In establishing this balance, the Agency must take into consideration the impact of Polar's weekly Sunday cargo flight on Cargojet's operations and the needs of the shippers. On this issue, the onus of proof resides with the carrier alleging harm from the all-cargo charter competitor.

[66] The Agency recognizes that Polar's Sunday flights may have an impact on Cargojet's Saturday flights given the reduction in capacity experienced by Cargojet since Polar started its operations. However, there is no evidence on file to suggest that this reduction "materially impairs" the five other weekly flights operated by Cargojet from Halifax. Furthermore, while Polar's Sunday flights may have an impact on Cargojet's business on Saturday, the Agency recognizes that there are other routes whereby seafood can be shipped from Halifax. Therefore, the Agency is not in a position to conclude that the reduction imposed on Cargojet's operations is entirely due to Polar's operations and even if such were the case, it would not in itself justify the Agency dismissing Polar's application. Consideration of the shippers' needs must also be taken into account.

[67] With respect to the shippers' needs, Cargojet stated that a number of its customers have expressed concerns about the effect of the Polar flights on the domestic scheduled services of Cargojet to and from the Atlantic provinces and, in particular, Halifax. Polar stated that the operation of its charter on Sunday was requested by Northstar and its customers to satisfy a requirement for lift on that specific day of the week. Polar submitted that its direct service from Halifax to Liège, with the capability of transferring shipments on-airport at Liège for onward transportation, satisfies the demands of perishable product for less time in transit and less handling overall, which is particularly important in minimizing the mortality rate of the product. Polar indicated that the support it has received is proof-positive that this service meets these requirements.

[68] The Agency notes that the Halifax International Airport Authority, the Department of Agriculture and Fisheries of the Province of Nova Scotia, the Department of Transportation and Public Works of the Province of Nova Scotia and Kintetsu World Express (Canada) Inc. have all expressed their support for the Polar flights, explaining in letters sent to the Agency that air access services are critical for the fishing industry.

[69] The Agency notes that the Polar's Sunday charters were requested by Northstar and its customers in response to a demand for transportation on that specific day of the week when no other carrier offers a similar service. The Agency recognizes that shipment of fresh products such as seafood and live lobsters is a delicate operation and is also a vital one for the Atlantic fishing industry. Shippers must be assured that their perishable product will reach the market place in a timely fashion so that the freshness of the product is not put in jeopardy. The Agency is of the opinion that handling is a key element. The more handling the perishable product is exposed to, the more time it takes for it to reach the market, the greater the risk to its freshness and the more expensive it gets. If the shippers do not have to ship their product from Halifax to Hamilton or have it trucked to the United States before it is put on a plane for Europe, they not only save time, but they also save money. Less handling may also allow shippers to receive a better competitive price because a shorter transit time allows a much fresher product to be delivered in a timely fashion and may open up new markets for the shippers. The Agency is thus of the opinion that shippers' needs are best served with a direct flight from Halifax to Europe rather than with a flight from Halifax to Hamilton, where the product is then trucked to the Toronto airport before it is put on a flight to Asia.

[70] The Agency also notes that Polar's charter flights from Halifax are operated on Sundays and that Cargojet does not offer any service from Halifax on Sundays. Air service to Liège and then to the European and Asian markets for which Polar is requesting a permit is not offered by Cargojet.

[71] Based on the foregoing, the Agency finds that the need expressed by shippers for a cargo charter service on Sunday from Halifax, the direct service from Halifax to Liège offered by Polar to the shippers, the less handling time the direct flight offers and the consequential benefits shippers derived from such service in terms of freshness of product, timely delivery to the markets and the greater potential access to other markets, together with the fact that no other carrier offers a similar service from Halifax on Sundays, outweigh the business reduction Cargojet experiences on its Saturday flight from Halifax to Hamilton.

CONCLUSION

[72] In light of the above, pursuant to subsection 74(1) of the CTA, the Agency deems it appropriate to add the following condition to Polar's non-scheduled international Licence No. 980136:

[73] The Licensee is authorized to operate seven (7) Canadian originating fifth freedom entity charter cargo flights from February 8 to March 21, 2004 utilizing a B-747-400 freighter aircraft on the routing New-York-Halifax-Liège carrying fresh seafood and live lobsters on behalf of Northstar Worlwide Inc. on the condition that the capacity of the aircraft available out of Canada is chartered by a combination of charterers.

[74] Further, the Agency hereby grants program permit number CECF-64/03 for the above referenced flights.

[75] In addition, in light of the tariff irregularities referred to above, the Agency, pursuant to paragraph 80(1)(c) of the CTA, hereby orders that Polar be exempt from the application of subsection 110(4) of the ATR, with respect to the operation of the above flights. This exemption is subject to Polar complying with the terms and conditions of the contract with Northstar Worldwide Inc.

[76] Polar is also reminded to contact Transport Canada or the local airport authority regarding permission either to operate at specific times or to use any airport facility and for compliance with the security requirements of Transport Canada. Regarding the availability of clearance services, Polar is reminded to contact the Canada Border Services Agency. This authority must be carried on board the aircraft.

[77] It should be noted that the authority granted in this Decision is based on the merits of the present application and should not be relied upon as justification for similar applications in the future as the Agency assesses each application on a case-by-case basis.

[78] This Decision takes effect on February 5, 2004, the date on which the approval of the flights was communicated verbally to the parties of record.