Decision No. 12-C-A-2018

SUMMARY

[1] Jeffrey Cuthbert filed an application with the Canadian Transportation Agency (Agency) alleging that Rule 90(E)(2) of Air Canada’s International Passenger Rules and Fares Tariff, NTA(A) No. 458 (Tariff) is unreasonable as it does not respect the Agency’s order in Decision No. 71‑C‑A‑2017.

[2] In response to Mr. Cuthbert’s application, Air Canada argues that Rule 90(E)(2) of its Tariff is reasonable and in compliance with the Agency’s order. In the alternative, should the Agency disagree with its position, Air Canada requests a review of Decision No. 71-C-A-2017, pursuant to section 32 of the CTA, given that the circumstances have materially changed since the Agency’s decision was rendered on May 1, 2017.

[3] The Agency will address the following issues:

1. Is Rule 90(E)(2) of Air Canada’s Tariff, regarding denied boarding compensation for flights departing from international points to Canada, reasonable within the meaning of subsection 111(1) of the ATR?
2. Is there a change in facts or circumstances to constitute a review of Decision No. 71‑C‑A‑2017?

[4] For the reasons provided below, the Agency finds that Rule 90(E)(2) of Air Canada’s Tariff Rule 90(E)(2) is unreasonable, and that the evidence presented by Air Canada does not meet the definition of a change in the facts or circumstances within the meaning of section 32 of the CTA.

BACKGROUND

[5] On May 1, 2017, the Agency issued Decision No. 71-C-A-2017 in which it found that the denied boarding compensation offered by Air Canada for flights departing from Costa Rica to Canada was unreasonable. Air Canada was ordered to amend Rule 90(E)(2) of its Tariff such that it is comparable to the terms and conditions of other Canadian air carriers who are operating scheduled international services between Canada and Costa Rica.

[6] On June 1, 2017, Air Canada filed a motion for leave to appeal Decision No. 71-C-A-2017 with the Federal Court of Appeal.

[7] On July 7, 2017, Air Canada’s motion for leave to appeal was dismissed.

[8] On August 9, 2017, Air Canada amended its denied boarding compensation for flights departing from Costa Rica to Canada as found in Rule 90(E)(2) of its Tariff.

[9] Between August 14, 2017 and August 18, 2017, Air Canada and Mr. Cuthbert (parties) both filed submissions on the reasonability of the amended Rule 90(E)(2) of its Tariff. These pleadings were made outside of any formal pleadings process. Consequently, on September 20, 2017, the Agency issued Decision No. LET-C-A-57-2017, wherein it accepted the submissions filed, and provided the parties an opportunity to file additional comments with respect to:

1. Air Canada’s compliance with Decision No. 71-C-A-2017; and,
2. Air Canada’s request under section 32 of the CTA.

[10] On October 6, 2017, Air Canada further amended Rule 90(E)(2) of its Tariff so that its denied boarding compensation would apply to all its flights departing from international points to Canada, not just to those departing from Costa Rica to Canada. It also changed its denied boarding compensation such that it is to be calculated based on the length of delay experienced by a passenger.

[11] On October 10, 2017 and on October 12, 2017, Mr. Cuthbert and Air Canada, respectively, responded to Decision LET-C-A-57-2017. On October 15, 2017, Mr. Cuthbert replied to Air Canada’s comments, and on October 18, 2017, Air Canada replied to Mr. Cuthbert’s comments.

THE LAW

[12] Subsection 111(1) of the ATR requires that a carrier’s terms and conditions of carriage be just and reasonable, and provides as follows:

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.

[13] If the Agency finds that a carrier’s tariff is unjust or unreasonable, section 113 of the ATR empowers the Agency to:

1. 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
2. establish and substitute another tariff or portion thereof for any tariff or portion thereof disallowed under paragraph (a).

[14] Rule 90(E)(2) of Air Canada’s Tariff sets out the denied boarding compensation applicable to flights from international points to Canada, based on the length of time a passenger is delayed upon arrival:

• For a delay of up to four hours: CAD$200 cash or a credit voucher of CAD$400;
• For a delay of over four hours: CAD$400 cash or a credit voucher of CAD$800.

[15] Section 32 of the CTA enables the Agency to review, rescind or vary any decision or order made by it or may re-hear any application before deciding it if, in the opinion of the Agency, since the decision or order or the hearing of the application, there has been a change in the facts or circumstances pertaining to the decision, order or hearing.

IS RULE 90(E)(2) OF AIR CANADA’S TARIFF, REGARDING DENIED BOARDING COMPENSATION FOR FLIGHTS DEPARTING FROM INTERNATIONAL POINTS TO CANADA, REASONABLE WITHIN THE MEANING OF SUBSECTION 111(1) OF THE ATR?

Positions of the parties

[16] Mr. Cuthbert states that the amendments made by Air Canada to Rule 90(E)(2) of its Tariff do not comply with the Agency’s order in Decision No. 71-C-A-2017. In particular, he claims that Air Canada’s denied boarding compensation amounts for flights departing from Costa Rica to Canada should be at least as high as the denied boarding compensation amounts that Air Canada currently provides for flights departing from Canada to Costa Rica.

[17] Air Canada contends that its denied boarding compensation for flights departing from Costa Rica to Canada is reasonable. It submits that it was ordered to amend its Tariff to compare with the terms and conditions of other Canadian air carriers serving Costa Rica. Air Canada argues that given that Air Transat, Sunwing, and WestJet all service Costa Rica, and that the denied boarding compensation amounts between these carriers differ significantly, it established its compensation amounts based on the range of compensation offered by these carriers.

[18] Air Canada states that Rule 90(E)(2) of its Tariff offers twice the cash compensation and four times the value of a travel voucher compared to what is offered by Air Transat. Therefore, Air Canada contends that it has respected the Agency’s order in accordance with Decision No. 71-C-A-2017.

[19] Mr. Cuthbert argues that neither Air Canada’s nor Air Transat’s denied boarding compensation meets the minimum threshold of CAN$800 that is established in Decision No. 71-C-A-2017. In addition, he contends that the travel voucher amounts offered, in lieu of cash compensation, are also unreasonable. Mr. Cuthbert maintains that the voucher amounts do not reflect the Agency’s findings in Decision No. 342-C-A 2013. He argues that in that decision, the Agency ruled that if a travel voucher is offered as an alternative to a cash compensation, its value must not be less than three hundred percent of the amount of the cash compensation.

[20] Air Canada submits that in Decision No. 71-C-A-2017, the Agency stated that “it is unreasonable that Air Canada provides a much higher compensation on the same route if the flight departs Canada instead of Costa Rica”. Air Canada contends that this statement only means that denied boarding compensation must not be significantly higher for flights departing from Canada to Costa Rica as opposed to flights departing from Costa Rica to Canada, and that it does not imply that the compensation must be the same. Air Canada maintains that this reasoning is consistent with Decision No. 442-C-A-2013.

[21] Air Canada also argues that the findings made in Decision No. 342-C-A-2013, as cited by Mr. Cuthbert, respecting credit vouchers, applies only to domestic flights. Thus, Air Canada submits that the findings made in Decision No. 342-C-A-2013 are “inapplicable” and “irrelevant” to the issue currently before the Agency.

[22] In response, Mr. Cuthbert states that there is nothing in Decision No. 71-C-A-2017 that would suggest that it would be reasonable for Air Canada to provide lower denied boarding compensation for flights departing from Costa Rica to Canada as opposed to flights departing from Canada to Costa Rica.

[23] With regard to Air Canada’s statement that the findings made in Decision No. 342-C-A-2013 are only applicable to domestic transportation, Mr. Cuthbert argues that in that decision, the Agency specifically considered the ratio of cash compensation to the value of travel vouchers for international flights. He maintains that, in particular, the Agency found that “in light of the ratio applicable to cash compensation versus values of travel vouchers for international carriage, the ratio of 1:3 proposed by Mr. Lukács is reasonable”.

Findings of Fact

[24] In Decision No. 71-C-A-2017, the Agency ordered Air Canada to amend its denied boarding compensation applicable to flights departing from Costa Rica to Canada, as found in Rule 90(E)(2) of its Tariff, to be comparable to the denied boarding compensation that is provided by other Canadian scheduled air carriers servicing that route.

[25] At the time of Mr. Cuthbert’s application, the denied boarding compensation set out in Rule 90(E)(2) of Air Canada’s Tariff applied solely to flights departing from Costa Rica to Canada. However, on October 6, 2017, Air Canada changed the applicability statement of Rule 90(E)(2) of its Tariff, and the denied boarding compensation amounts found therein, such that it applies to all flights departing from international points to Canada. This Rule still governs flights from Costa Rica to Canada and is still applicable to this case. Furthermore, given that Air Canada voluntarily amended Rule 90(E)(2) of its Tariff so that it applies to other markets beyond Costa Rica, the Agency’s ruling in this Decision will now relate to all international points to Canada, not just from Costa Rica to Canada.

[26] At the time of this Decision, Air Transat, Sunwing, and WestJet all operated scheduled international services between Costa Rica and Canada.

[27] Air Transat’s denied boarding compensation, as filed with the Agency, is as follows:

[…]

i. The Carrier will tender liquidated damages in the following amounts: for flights of less than 5 hours duration – CAD 100.00; for flights of 5 hours length or more – CAD 200.00 (or equivalent in local currency) regardless of final destination or fare paid.

[…]

iii. The Carrier may, at its option, offer to compensate the passenger with credit for free transportation on the Carrier in lieu of monetary compensation. The credit offered will be of a value equal to or higher than that of the monetary compensation due to the passenger […]

[…]

[28] Sunwing’s denied boarding compensation, as filed with the Agency, is as follows:

[…] Passengers travelling with a reserved seat on an oversold flight of the Carrier who are denied boarding involuntarily from an oversold flight are entitled to:

i. No compensation if the Carrier offers alternate transportation that is planned to arrive at the Passenger’s destination or first Stopover not later than one hour after the scheduled arrival of the Passenger’s original flight;

ii. 200% of the total Fare to the Passenger’s destination or first Stopover, with a maximum of $650 CAD if the Carrier is able to place the Passenger on alternate transportation that is planned to arrive at the Passenger’s destination or first Stopover more than one hour but less than four hours after the scheduled arrival time of the Passenger’s original flight; and

[(iv)] 400% of the total Fare to the Passenger’s destination or first Stopover, with a maximum of $1,300 CAD, if the Carrier does not offer alternate transportation that is planned to arrive at the airport of the Passenger’s destination or first Stopover less than four hours after the scheduled arrival time.

[…]

[29] WestJet’s denied boarding compensation, as filed with the Agency, is as follows:

[…]

Eligible passengers, as per paragraph (F) above, who are denied boarding involuntarily from oversold flight are entitled to:

1. No compensation if the carrier offers alternate transportation that is planned to arrive at the passenger’s destination or first stopover not later than one hour after the planned arrival time of the passenger’s original flight;
2. 200% of the total price to the passenger’s destination or first stopover, with a maximum of [C]USD/CAD $675, if the carrier offers alternate transportation that is planned to arrive at the passenger’s destination or first stopover more than one hour but less than four hours after the planned arrival time of the passenger’s original flight; and
3. 400% of the total price to the passenger’s destination or first stopover, with a maximum of [C]USD/CAD $1350, if the carrier does not offer alternate transportation that is planned to arrive at the airport of the passenger’s destination or first stopover less than four hours after the planned arrival time of the passenger’s original flight.

[…]

Analysis and determinations

[30] To assess whether a term or condition of carriage is “unreasonable”, the Agency has traditionally applied a balancing test, which requires that a balance 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.

[31] Air Canada argues that, as the amounts offered as denied boarding compensation vary significantly between Air Transat, Sunwing, and WestJet, in order to comply with the order from Decision No. 71-C-A-2017, Air Canada established its denied boarding compensation for flights departing from Costa Rica to Canada in consideration of the “range” of compensation amounts set out by these carriers. The Agency notes that it is unclear how Air Canada’s denied boarding compensation amounts relate to the “range” offered by Air Transat, Sunwing, and WestJet, as it appears that Air Canada has only considered the amounts offered by Air Transat. The Agency notes further that Air Transat’s denied boarding compensation amounts are very low (i.e. maximum $200 cash compensation). In past decisions, such as in Decision No. 204-C-A-2013, the Agency has stated that the mere fact that a carrier’s term and condition of carriage is comparable to that applicable to other carriers does not render that term and condition reasonable.

[32] Based on the finding made in Decision No. 71-C-A-2017and Decision No. 442-C-A-2013, Mr. Cuthbert contends that Air Canada’s denied boarding compensation for flights departing from Costa Rica to Canada should be the same as that offered for flights departing from Canada to Costa Rica.Air Canada argues that these Decisionsdo notconclude that Air Canada’s denied boarding compensation for flights departing from Costa Rica to Canada must be the “same” as that offered for flights departing from Canada to Costa Rica, only that compensation must not be “significantly” higher for flights departing from Canada to Costa Rica as opposed to flights departing from Costa Rica to Canada.

[33] However, Air Canada’s denied boarding compensation for flights departing from Canada to international destinations (CAN$400 cash for a delay at arrival of up to four hours, and CAN$800 cash for a delay at arrival of over four hours) is one hundred percent higher than the cash amounts offered for flights departing from international points to Canada, except where foreign legislation applies, (CAN$200 cash for a delay at arrival of up to four hours, and CAN$400 cash for a delay at arrival of over four hours). The Agency considers a one hundred percent difference to be “significant”, and agrees with Mr. Cuthbert that nothing in Decision No. 442-C-A-2013 suggests that it would be reasonable for Air Canada to provide a lower denied boarding compensation for flights departing from Costa Rica to Canada compared to flights departing from Canada to Costa Rica. In addition, Air Canada has not made any arguments suggesting that it would be at a commercial disadvantage if it were to increase its denied boarding compensation for flights departing from international points to Canada to match the denied boarding compensation amounts that it currently offers for flights departing from Canada to international points.

[34] With respect to the denied boarding compensation that Air Canada offers in the form of a travel voucher (CAN$400 for a delay at arrival of up to four hours, and CAN$800 for a delay at arrival of over four hours), Mr. Cuthbert contends that these amounts are unreasonable as they do not represent three hundred percent of the amount of the cash compensation equivalent; a percentage found reasonable in Decision No. 342-C-A-2013. Air Canada maintains that the findings in Decision No. 342-C-A-2013 apply only to domestic transportation and, therefore, they do not apply to this matter. However, the Agency finds that the reasoning in Decision No. 342-C-A-2013 does apply equally to international travel and domestic travel. Thus, if travel vouchers are offered as a form of denied boarding compensation, they should be three hundred percent of the amount of the cash compensation equivalent.

IS THERE A CHANGE IN FACTS OR CIRCUMSTANCES TO CONSTITUTE A REVIEW OF DECISION NO. 71-C-A-2017?

Positions of the parties

[35] Air Canada states that if the Agency disagrees with its position that it has complied with Decision No. 71-C-A-2017, it requests that the Agency modify, suspend or reopen pleadings for the following reasons:

1. Decision No. 71-C-A-2017 erroneously states that WestJet is the only Canadian carrier to provide scheduled international services between Canada and Costa Rica;
2. The Government of Costa Rica is reviewing a Bill aimed at regulating denied boarding compensation for flights departing from Costa Rica;
3. The Government of Canada introduced Bill-C49 which is expected to regulate denied boarding compensation amounts.

[36] Air Canada argues that Decision No. 71-C-A-2017 is “fundamentally flawed” as it erroneously stated that the only other Canadian air carrier that operates a scheduled international service to Costa Rica was WestJet. Air Canada argues that the Agency used this as a point of comparison in the evaluation of the reasonableness of Rule 90(E)(2) of its Tariff. Air Canada asserts that this “error must be equated with a change in the facts or circumstances pertaining to the decision.”

[37] Air Canada claims that a proper assessment of the reasonableness of its Tariff provision should include an analysis of what other foreign carriers offer as compensation, and argues that there is no reason to base the analysis only on the policies of Canadian carriers. Air Canada states that denied boarding is an industry-wide practice, and comparing Air Canada to a single air carrier that does not use overbooking as part of its business model is inappropriate, as has been well established by the Agency in several of its decisions.

[38] Air Canada also argues that if this matter falls within the scope of Bill C-49, it would be more efficient and in the interests of justice to provide an opportunity for this issue to be addressed through that process, which includes broad consultations with stakeholders, experts, and interested Canadians. Air Canada contends that the Decision should be suspended until the scope of Bill C‑49 is finalized.

[39] Mr. Cuthbert argues that the reasons provided by Air Canada are not significant enough to warrant a review, rescission or variance of Decision No. 71-C-A‑2017. In particular, he argues that Air Canada had an opportunity in Decision No. 71-C-A‑2017 to justify why its denied boarding compensation should be compared to foreign carriers and not just Canadian carriers. However, the Agency found that “[…]Air Canada submitted insufficient evidence to justify that the air carriers it listed are valid comparators or competitors[…]”.

[40] With respect to a proposal by the Government of Costa Rica to introduce a Bill aimed at regulating denied boarding compensation for flights departing Costa Rica, Mr. Cuthbert states that this Bill is not law. He further argues that even if the Bill becomes law, the passing of such a law would generally have no impact on the amount of denied boarding compensation offered by Canadian air carriers for flights departing from Costa Rica to Canada because Canadian air carriers already provide significantly higher amounts for denied boarding compensation than the minimum amounts being proposed by the Government of Costa Rica.

[41] With regard to Air Canada’s arguments that Decision No. 71-C-A-2017 should be suspended until Bill C-49 has been adopted and the new regulations have been finalized by the Government of Canada, Mr. Cuthbert contends that Bill C-49 is not a law, but merely proposed legislation being considered by the Parliament of Canada. Furthermore, he argues that if the Decision is suspended, consumers travelling from Costa Rica to Canadian destinations with Air Canada who are involuntarily denied boarding would be subject to unjust and unreasonable denied boarding compensation. He argues that consumers have been subject to unjust and unreasonable terms and conditions relating to compensation for involuntary denied boarding for flights departing from Costa Rica “in excess of 10 years”, and submits that if the Agency were to suspend Decision No. 71-C-A-2017, this time period would be extended even further and, in his view, the “public interest would not be well served”.

Analysis and determinations

[42] Section 32 of the CTA outlines the statutory framework through which the Agency can exercise its power to review its decisions. The Agency’s jurisdiction under this section is limited and only arises if, in its opinion, there has been a change in the facts or circumstances pertaining to a particular decision since its issuance.

[43] Accordingly, in dealing with an application for review of a decision pursuant to section 32 of the CTA, the Agency must first determine whether, since the decision, there has been a change in the facts or circumstances pertaining to the decision. Of importance, the facts or circumstances cannot be those known to or discoverable by the parties at the time of the original hearing. If there has been no change in the facts or circumstances since the decision, then the decision stands.

[44] If, however, the Agency finds that there has been a change in the facts or circumstances since the issuance of the decision, it must then determine whether the change is sufficient to warrant a review, rescission, or variance of the decision.

[45] The burden of proof rests on the party requesting the review to provide the Agency with some substance and explanation demonstrating that the alleged change in the facts or circumstances has arisen since the decision. The party making the request must also explain how the alleged change affects the outcome of the matter.

[46] In this case, Air Canada states that Decision No. 71-C-A-2017 is “fundamentally flawed” as it erroneously states that the only other Canadian air carrier operating a scheduled international service to Costa Rica was WestJet. However, the fact that both Sunwing and Air Transat operate scheduled international services to Costa Rica does not constitute a change in facts or circumstances since the decision was issued, but rather, was discoverable at the time of the original hearing. Regardless, the consideration of Sunwing’s and Air Transat’s denied boarding compensation would not alter the Agency’s decision. Sunwing’s denied boarding compensation amounts are almost identical to those of WestJet. Air Transat’s compensation amounts are negligible, and so it would have been unreasonable for the Agency to use Air Transat’s denied boarding compensation as a valid comparator.

[47] With respect to Air Canada’s arguments that a proper assessment of the reasonableness of its Tariff provision should include an analysis of what other foreign carriers offer as compensation, the Agency agrees with Mr. Cuthbert that Air Canada had an opportunity to make such arguments in Decision No. 71-C-A-2017. However, it did not, and the Agency found that Air Canada’s original evidence was insufficiently persuasive. In light of this, to allow pleadings to be re-opened on this matter would run the risk of allowing Air Canada to reargue its case, which is contrary to the intention of the Agency’s review power.

[48] Air Canada also argues that Decision No. 71-C-A-2017 should be stayed until the Bills of the Government of Costa Rica and the Government of Canada addressing denied boarding compensation are finalized. The Agency also agrees with Mr. Cuthbert on this point that neither of these proposed Bills have been passed into law, and therefore they have no impact on the Agency’s order.

CONCLUSION

[49] Based on the forgoing, the Agency finds that Rule 90(E)(2) of Air Canada’s Tariff is unreasonable, and does not comply with the order made in Decision No. 71-C-A-2017. In addition the Agency finds that Air Canada has not met its burden to demonstrate that there has been a change in the facts or circumstances pertaining to Decision No. 71-C-A-2017 since it was issued that is sufficient to warrant a variance of that Decision pursuant to section 32 of the CTA.

ORDER

[50] Pursuant to paragraph 113(b) of the ATR, the Agency orders Air Canada to amend the amounts that it provides as denied boarding compensation for its flights departing from international points to Canada, as found in Rule 90(E)(2) of its Tariff, to match the denied boarding compensation amounts that it provides for its flights departing from Canada to international points. Air Canada is to file a revised provision of its Tariff as soon as possible, and no later than March 12, 2018.