Decision No. 144-A-2014

INTRODUCTION

[1] The purpose of this Determination is to establish the approach to interline baggage rules that air carriers should apply for tickets purchased on and after October 1, 2014, when participating in an interline itinerary issued on a single ticket, where the origin or ultimate destination is a point in Canada.

BACKGROUND

[2] For several decades, the International Air Transport Association (IATA) has defined basic worldwide baggage industry standards, including how carriers should apply baggage rules to a passenger’s itinerary. Carriers’ baggage allowances, depending on the point of origin, were either assessed on a piece or weight basis. Travel to/from or within North America was based on the piece system. This simplified standard approach became obsolete due to new industry practices, including à la carte pricing, carriers’ objective to maximize revenue from baggage, and regulatory change.

[3] As a result, carriers began to apply their own rules to interline journeys. This resulted in confusion because interline passengers were subjected to differing and unexpected baggage allowances and charges while en route. Due to the failure to disclose, passengers could be surprised with unexpected restrictions and fees. The more complex the journey, the more likely issues would emerge.

[4]In this context, different methodologies that assist in the determination of the applicable baggage rules on interline itineraries exist. These include:

1. IATA’s Resolution 302 (for text refer to section 7.1.1 of the Agency’s Interpretation Note entitled Interline Baggage Rules for Canada);
2. United States Department of Transportation (U.S. DOT) requirements under 14 C.F.R. Rule 399.87;
3. the Agency’s current practices that require the marketing carrier to apply its tariff for each and every segment of an itinerary, resulting in multiple baggage rules applicable to a single journey.

IATA Resolution 302

[5] In dealing with the interline baggage issue, IATA created the “Most Significant Carrier” (MSC) approach which defines which air carrier’s baggage rules in code-share/interline situations would apply. A MSC would be determined at each point where a passenger checks or rechecks their baggage to the next stopover at which point the passenger retrieves their baggage. Each MSC’s baggage rules would be applied to its respective portion of the passenger’s itinerary. IATA’s Resolution 302 as it is currently in effect is inconsistent with the Agency’s position that the baggage rules of the marketing carrier should apply in code-share situations due to the fact that Resolution 302 relies on the application of the rules of the operating carrier. Many IATA member carriers currently apply Resolution 302, including for transportation to/from Canada, with the exception of travel to/from the United States.

U.S. DOT Rule 399.87

[6] Upon its examination of the issue, the U.S. DOT established its own rules as an alternative to Resolution 302. The U.S. DOT determined that the first marketing carrier on the first flight segment of an itinerary would establish which baggage rules apply to the passenger’s entire itinerary (regardless of stopovers or other carriers who are part of the itinerary). In the case of code-share flights that form part of an itinerary where the ultimate ticketed origin or destination is a point in the United States, United States and foreign carriers must apply the baggage allowances and charges selected by the first marketing carrier throughout the itinerary. In addition, all carriers must establish their baggage policies via their tariffs on file with the U.S. DOT and very importantly, passengers must be informed of the baggage rules applicable to their journey on their itinerary/receipt.

[7] Due to its far reaching application, U.S.. DOT Rule 399.87 is currently applicable when travel is between Canada and the United States.

The Agency’s practices

[8] Prior to this Determination, the Agency had not issued an all-encompassing approach to interline baggage. Baggage rules for air travel to/from Canada were established by individual carriers by stipulating their baggage rules in their tariffs for application to their own traffic, even when part of an itinerary involved multiple air carriers. This approach was sufficient under the circumstances as essentially all carriers had similar tariff provisions that reflected a generous free baggage allowance based on the piece system that had existed at that time.

[9] The Agency did however express a clear position with respect to baggage rules in code-sharing arrangements, where one air carrier (the marketing carrier) sells transportation in its name (and under its own two-letter designator code) on flights operated by the partner air carrier (operating carrier). The Agency has always required the marketing carrier to apply its tariff (encompassing its baggage rules) to its own traffic in a code-sharing arrangement.

Consultations

[10] Given that the different approaches to interline baggage rules were inconsistent and conflicting, the Agency sought views on the best approach to interline baggage rules via an industry workshop and online public consultations, followed by extensive discussions with affected parties.

[11] During the consultations, the industry expressed views that it required clarification and direction as to which approach to interline baggage best suited the needs of consumers and carriers on routes to, from and within Canada. There was an indication that conflicting interline baggage rules approaches would fragment the industry and would significantly impede interline travel and this is not in the best interest of either carriers or passengers.

[12] The Agency’s consultations revealed significant consensus that the Agency should not develop a unique approach but rather should align with an existing system. In addition, a large majority expressed support for harmonized North American interline baggage rules.

[13] Following the consultations, the Agency, in a Notice to Industry issued during the summer of 2013, committed to determine the baggage rules that will apply to travel arrangements involving multiple air carriers to, from and within Canada, for checked and carry-on baggage.

Legislation

[14] The Agency is mandated by Parliament to administer, interpret and enforce the Canada Transportation Act, S.C., 1996, c. 10, as amended (CTA) and associated regulations. The Agency’s legislative authority and regulatory role regarding air carrier’s tariffs is an important aspect of this mandate.

[15] “Tariff” is defined in section 55 of the CTA as “a schedule of fares, rates, charges and terms and conditions of carriage applicable to the provision of an air service and other incidental services”.

[16] A carrier’s tariff constitutes the contract of carriage between the carrier and the passenger and is legally enforceable. The following are some requirements of the Air Transportation Regulations, SOR/88-58, as amended (ATR), which relate to the issue being addressed by the Agency:

• Subsection 110(1) of the ATR requires the filing of a tariff with the Agency before the commencement of an international air service.
• Subsection 110(4) of the ATR requires carriers to apply the provisions of their tariffs as filed and in effect with the Agency.
• Subsection 110(5) of the ATR requires carriers to apply only what is on file and in effect in their tariffs.
• Subsection 111(1) of the ATR requires that all terms and conditions of carriage established by an air carrier be just and reasonable and not unduly discriminatory.
• Paragraph 111(2)(c) of the ATR requires that, in respect of terms and conditions of carriage, no carrier shall subject any person or other carrier or any description of traffic to any undue or unreasonable prejudice or disadvantage.
• Subsection 111(3) of the ATR allows the Agency to determine whether traffic is to be, is, or has been subject to unjust discrimination or undue or unreasonable preference or advantage, or prejudice or disadvantage.
• Paragraph 122(c) of the ATR states that every carrier’s tariff shall contain terms and conditions of carriage that clearly state its policies.

[17] Rules related to the transportation of baggage are terms and conditions of carriage and are required to form part of a carrier’s tariff filed with the Agency for international transportation. Tariffs for domestic transportation are published by carriers, but are not required to be filed with the Agency.

[18] All authorities for international carriage currently in effect require the application of the marketing carrier’s tariff when traffic is carried on a code-share flight (for an example see Decision No. 13-A-2013).

ISSUE

[19] The Agency, after considering all of the views, information and facts gathered during the consultations, must determine which approach to interline baggage rules would best serve the Canadian market so as to:

1. establish terms and conditions of carriage that are considered to be just and reasonable pursuant to subsection 111(1) of the ATR;
2. ensure that traffic would not be disadvantaged or prejudiced contrary to paragraph 111(2)(c) of the ATR;
3. be consistent with the code-share authorities granted to carriers by the Agency.

[20] In doing so, the Agency is also mindful that any approach must be reflected in carriers’ tariffs, pursuant to subsection 110(1) of the ATR and carriers must clearly state their policies in their tariffs with respect to their interline baggage rules, pursuant to paragraph 122(c) of the ATR.

ANALYSIS

Principles for the Agency’s consideration

[21] Based on the Agency’s interpretation of the legislation, the results of its consultations and to make an informed determination, the Agency’s approach to interline baggage rules is guided by two fundamental principles:

1. A seamless and transparent baggage regime for passengers;
   • passengers should have a seamless travel experience throughout their interline itinerary issued on a single ticket;
   • passengers should be informed of which carrier’s baggage rules apply to their interline itinerary.
2. A harmonized and practical regime for industry;
   • the Canadian approach should avoid imposing unique requirements that conflict with other jurisdictions and particularly within the North American context;
   • the Canadian approach should take into account the operational challenges faced by the industry and not impose unnecessary burdens.

Considerations and findings

[22] Presently, any of the existing baggage rules application methodologies (IATA Resolution 302, the U.S. DOT approach or the Agency’s existing practices) are applicable in Canada. The Agency’s practices apply notwithstanding the fact that IATA Resolution 302 is being applied to all international itineraries (except for transportation to/from the United States) and the U.S. DOT Rule 399.87 applies to transportation between Canada and the United States Due to the conflicting approaches, the Agency has concluded that harmonization and consistency in the application of interline baggage rules is necessary.

[23] The Agency notes that both IATA Resolution 302 and U.S. DOT Rule 399.87 have required industry system changes to be developed internationally to support their implementation. The Agency does not doubt that considerable expense and disruption could result if it implements a third approach to interline baggage rules.

[24] The Agency has considered the costs and benefits of developing a unique Canadian approach and concluded that it would result in additional costs with no obvious benefits to passengers given that there is already an approach in place that the Agency would find to be consistent with the legislative provisions that it administers. Accordingly, in consideration of which approach would be most suitable to Canada, the Agency finds that a third “made in Canada” approach is not necessary.

[25] Having concluded that a unique Canadian approach would be costly and unnecessary, the Agency considered the features of two international approaches currently in place.

[26] After examination, the Agency finds that IATA’s Resolution 302 is inconsistent with the principles adopted by the Agency and the legislative provisions that the Agency administers. Therefore, it is not the best option for Canadian application for three fundamental reasons:

1. Passengers would not be provided with a seamless travel experience as there could be many MSCs on a more complex itinerary resulting in a passenger encountering differing and conflicting baggage rules while en route;
2. It is inconsistent with the Agency’s requirement that the marketing carrier’s tariff apply (including baggage rules) in code-share situations, given that the IATA rules are applicable to the operating carrier;
3. Resolution 302 is silent on the disclosure requirements to passengers, resulting in a lack of transparency to passengers of the applicable baggage rule.

[27] However, the Agency finds that the U.S. DOT approach has many desirable features that best satisfy the Agency’s principles and the legislative provisions that it administers as it:

1. provides for a single set of baggage rules for itineraries issued on a single ticket which minimizes contradiction, conflict and confusion on interline itineraries and provides for a seamless travel experience;
2. provides for an explicit requirement to disclose to passengers the applicable baggage rules for their interline itinerary resulting in greater transparency to passengers;
3. mirrors the Agency’s position, with respect to code sharing in that the marketing carrier’s - not the operating carrier’s - baggage rules apply to an itinerary:
4. clearly impacts Canadian carriers that participate in interline transportation to the United States, which represents Canada’s major international market. Harmonization with this approach would help to avoid imposing unique requirements on industry that conflict with other jurisdictions, particularly within the North American context.

[28] Therefore, the Agency concludes that alignment with U.S. DOT Rule 399.87 is in conformity with its own legislative provisions and, is reasonable, and that U.S. DOT Rule 399.87 does not create undue prejudice to the passengers.

[29] Accordingly, the Agency, pursuant to subsection 111(3) of the ATR, finds that:

1. alignment establishes terms and conditions of carriage that are considered to be just and reasonable pursuant to subsection 111(1) of the ATR.
2. unless carriers apply a single set of baggage rules for transportation when issued on a single ticket, interline traffic to/from Canada would be prejudiced or disadvantaged contrary to paragraph 111(2)(c) of the ATR.
3. unless interline baggage rules applicable to transportation to/from Canada that is on a single ticket are disclosed to passengers on their e-ticket or on any summary page of a carrier’s Web site at the end of an online purchase, such traffic would be disadvantaged or prejudiced contrary to paragraph 111(2)(c) of the ATR.

[30] Furthermore, the Agency finds that interline baggage rules applicable for transportation to/from Canada must be consistent with the code-share authorities granted to carriers by the Agency.

[31] Lastly, the Agency finds that this approach for interline and code-share baggage rules, if accurately reflected in carriers’ tariffs and applied by carriers and ticket sellers, is clear, just and reasonable, and does not impose upon passengers an undue prejudice or disadvantage consistent with the requirements of the ATR. Accordingly, all carriers participating in interline traffic to/from Canada are reminded that, pursuant to subsection 110(1) of the ATR, they must file interline baggage rules with the Agency. Furthermore, pursuant to paragraph 122(c) of the ATR, they must clearly state in tariffs their policies respecting interline baggage.

[32] As a consequence of these findings, the Agency has issued a Reservation against IATA’s Resolution 302 modifying its application to/from Canada in order to allow it to play a complementary role in establishing interline baggage rules on an international itinerary, but at the same time it must be made to conform with the Agency’s regulatory requirements and approach. To align with the Agency’s approach, the Agency’s Reservation modifies IATA’s Resolution 302 as it applies to/from Canada in order to:

1. recognize the significance of tariffs;
2. be consistent with the code-share authorities granted to carriers;
3. ensure that a single set of baggage rules will be applied throughout a passenger’s interline itinerary issued on a single ticket where the origin or ultimate ticketed destination is a point in Canada, regardless of stopovers; and,
4. indicate that for international itineraries, including domestic segments of an international itinerary, only the baggage rules of carriers with tariffs on file and in effect with the Agency are eligible to apply to a passenger’s travel.

GUIDANCE

[33] In light of the above, the Agency determines that, for international itineraries involving multiple air carriers, to and from Canada, purchased on a single ticket issued on or after October 1, 2014, carriers should:

1. apply a single set of baggage rules to the entire itinerary; and
2. disclose the applicable rules on the itinerary receipt or e-ticket.

[34] In support of this Determination, the Agency has issued an Interpretation Note (IN) – Interline Baggage Rules for Canada. The purpose of the IN is to provide guidance on how to align with this determination. It also provides consumers with an explanation of the background to the interline baggage rules and a basis on which to establish their own expectations as to what to anticipate from their carriers and ticket sellers.

MONITORING AND COMPLIANCE

[35] The Agency expects carriers to apply the above findings and approach for transportation to, from and within Canada for tickets purchased on and after October 1, 2014.

[36] Agency staff will work with air carriers and industry stakeholders to foster understanding of the Agency’s findings to ensure compliance by October 1, 2014.

[37] The Agency is prepared to use its own motion authority, where required.