Decision No. 112-A-2006

[1] On November 25, 2005, Alitalia Linee Aeree Italiane, S.p.A. (hereinafter Alitalia) filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

[2] On December 1, 2005, the Agency provided a copy of the complaint to LTU Lufttransport-Unternehmen GmbH carrying on business as LTU International Airways (hereinafter LTU). LTU was required to provide its answer to the complaint within three working days from the date of the letter, and Alitalia was advised that it would have one working day from the date of receipt of the answer to file a reply.

[3] On December 2, 2005, LTU filed its answer to the complaint, and on the same date Alitalia filed its reply.

ISSUE

[4] The issue to be addressed is whether certain prices applicable to LTU for transportation from Canada to Italy are unjust and unreasonable, and subject other air carriers to an undue disadvantage.

POSITIONS OF THE PARTIES

[5] Alitalia objects to LTU's prices applicable to transportation from Canada to Italy bearing the fare basis codes TLPX6MCA, THPX6MCA and MHEE (hereinafter the disputed prices) because such prices undercut the prices applicable to the designated air carriers operating services from Canada to Italy.

[6] In its answer to Alitalia's complaint, LTU submits that according to the German Federal Ministry of Transport, Building and Housing, there is an agreement in place between the carriers of the European Union (hereinafter EU) Community that allows free pricing on a reciprocal basis also for carriage in the framework of sixth freedom traffic. LTU adds that this exemption is granted for air transport between the EU Member States and third countries outside of the EU.

[7] In its reply, Alitalia argues that LTU has no right to undercut the third and fourth freedom airlines operating services from Canada to Italy, and therefore requests that LTU's prices be disallowed.

ANALYSIS AND FINDINGS

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

Jurisdiction of the Agency

[9] The Agency's jurisdiction over complaints concerning prices and terms and conditions of carriage applicable to international transportation to and from Canada is set out in sections 111 and 113 of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR), and section 77 and subsection 78(1) of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA), .

[10] Subsections 111(1) and (2) of the ATR provide that:

(1) All tolls and terms and conditions of carriage, including free and reduced rate transportation, that are established by an air carrier shall be just and reasonable and shall, under substantially similar circumstances and conditions and with respect to all traffic of the same description, be applied equally to all that traffic.

(2) No air carrier shall, in respect of tolls or the terms and conditions of carriage,

(a) make any unjust discrimination against any person or other air carrier;

(b) give any undue or unreasonable preference or advantage to or in favour of any person or other air carrier in any respect whatever; or

(c) subject any person or other air carrier or any description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatever.

[11] Further, if the Agency finds that the air carrier has contravened section 111 of the ATR, the Agency may, pursuant to section 113 of the ATR:

(a) suspend any tariff or portion of a tariff that appears not to conform with subsections 110(3) to (5) or section 111 or 112, or disallow any tariff or portion of a tariff that does not conform with any of those provisions; and

(b) establish and substitute another tariff or portion thereof for any tariff or portion thereof disallowed under paragraph (a).

[12] Section 77 and subsection 78(1) of the CTA provide that:

77. Where the Agency is identified as the aeronautical authority for Canada under an international agreement, convention or arrangement respecting civil aviation to which Canada is a party, or is directed by the Minister to perform any duty or function of the Minister pursuant to any such agreement, convention or arrangement, the Agency shall act as the aeronautical authority for Canada or perform the duty or function in accordance with the agreement, convention, arrangement or direction, as the case may be.

78.(1) Subject to any directions issued to the Agency under section 76, the powers conferred on the Agency by this Part shall be exercised in accordance with any international agreement, convention or arrangement relating to civil aviation to which Canada is a party.

[13] Therefore, the Agency must exercise its powers under section 113 in accordance with the terms of the applicable international agreements relating to civil aviation to which Canada is a party. In this case, the tariffs filed by a designated German air carrier between points in Canada and points in third countries via Germany must be considered in light of the provisions of the Air Transport Agreement between the Government of Canada and the Government of the Federal Republic of Germany signed on March 26, 1973 (hereinafter the Air Transport Agreement). An agreement in place among the air carriers of the EU is not an agreement or arrangement to which Canada is a party.

LTU's Tariff

[14] As LTU has been designated by the Government of the Federal Republic of Germany, the carrier's tariffs for transportation to or from Canada are required to be consistent with the terms of the Air Transport Agreement.

[15] With respect to prices for carriage between the territories of the Contracting Parties and third countries, the Air Transport Agreement provides that each Contracting Party shall apply its rules and policies on prices between its territory and third countries without discrimination to the air carriers of both Contracting Parties, and that the price to be applied by a designated air carrier of one Contracting Party shall not be lower than the lowest price charged in the marketplace for scheduled international air services by the air carrier(s) of the other Contracting Party in that market, unless otherwise authorized by the aeronautical authorities of that other Contracting Party.

[16] Accordingly, pursuant to this provision, the Agency may consider this matter within the context of section 111 of the ATR, provided that any corrective action ordered by the Agency does not discriminate against the air carriers of the other Contracting Party.

[17] The Agency has reviewed the disputed prices and notes that with the exception of prices for travel between Montréal, Canada and Rome, Italy, LTU's prices are lower than prices applicable to designated air carriers of Canada in the Canada-Italy market, namely Air Canada and Air Transat A.T. Inc. carrying on business as Air Transat. Also, the conditions of the prices establishing maximum stay of the disputed prices are more liberal.

[18] The Agency notes that with respect to prices for travel between Montréal and Rome, the prices filed by Air Transat in tariffs with the Agency are lower than the prices filed by LTU.

[19] The Agency is of the opinion that the application by LTU of lower prices and more liberal conditions of carriage in a sixth freedom market, without the approval of the Agency, is contrary to the terms of the Air Transport Agreement.

[20] The Agency is also of the opinion that LTU has failed to provide substantive evidence to demonstrate why the disputed prices should not be disallowed.

[21] Accordingly, the Agency finds that certain of the disputed prices are unjust and unreasonable, contrary to subsection 111(1) of the ATR, and subject the designated air carriers of Canada to an undue disadvantage in the Canada-Italy market, contrary to paragraph 111(2)(c) of the ATR.

CONCLUSION

[22] Based on the above findings, and pursuant to paragraph 113(a) of the ATR, the Agency hereby disallows LTU's prices for transportation from Canada to Italy bearing the fare basis codes TLPX6MCA, THPX6MCA and MHEE, except those applicable to transportation from Montréal to Rome.

[23] In accordance with subsection 129(1) of the ATR, LTU shall immediately file with the Agency an amendment to its tariff, to become effective not less than one working day after the date of filing, that removes the prices disallowed by this Decision.

[24] Following the filing of the amended tariff, the Agency will review the document and determine whether further action is required in this matter.

Members

• Guy Delisle
• Baljinder Gill