Decision No. 181-C-A-2005

March 29, 2005

File No. M4370/A74/03-404

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COMPLAINT

[1] On August 26, 2003, Kathleen Simcock filed with the Air Travel Complaints Commissioner (hereinafter the ATCC) the complaint set out in the title.

[2] On September 13, 2004, at the request of Ms. Simcock, the complaint was referred to the Canadian Transportation Agency (hereinafter the Agency) for consideration as the complaint raised a tariff issue that falls within the jurisdiction of the Agency.

[3] Between April 1, 2003 and September 30, 2004, Air Canada was under court-sanctioned protection from its creditors under the Companies' Creditors Arrangement Act, R.S.C., 1985, c. C-36. As part of that process, the Ontario Superior Court of Justice issued an order suspending all proceedings against Air Canada and certain of its subsidiaries. The Agency was, therefore, prohibited from dealing with any complaints or investigations involving Air Canada during that 18-month period.

[4] On October 20, 2004, Air Canada was advised that Ms. Simcock had filed a complaint with the Agency. As comments regarding Ms. Simcock's complaint were filed by both parties with the ATCC, Agency staff also sought the parties' agreement to have the comments they filed with the ATCC considered as pleadings before the Agency.

[5] On October 29, 2004, Ms. Simcock agreed that the Agency consider the comments she filed with the ATCC as pleadings before the Agency. On November 2, 2004, Air Canada advised the Agency that the carrier agreed that the Agency consider the comments filed by Air Canada with the ATCC as pleadings before the Agency. Air Canada also advised that it intended to file an additional submission.

[6] On November 8, 2004, Air Canada filed a submission concerning this matter and on November 29, 2004, Ms. Simcock responded to Air Canada's submission.

[7] In its Decision No. LET-C-A-15-2005 dated January 17, 2005, the Agency, pursuant to subsection 18(1) of the National Transportation Agency General Rules, SOR/88-23, requested further information from Ms. Simcock and Air Canada.

[8] Ms. Simcock responded to Decision No. LET-C-A-15-2005 on January 24, 2005, and Air Canada responded on January 31, 2005.

[9] Pursuant to subsection 29(1) of the Canada Transportation Act, S.C., 1996, c. 10, (hereinafter the CTA), the Agency is required to make its decision no later than 120 days after the application is received unless the parties agree to an extension. In this case, Ms. Simcock and Air Canada have agreed to an extension until March 28, 2005.

PRELIMINARY MATTER

[10] Although the submissions of Air Canada and Ms. Simcock of November 8, 2004 and November 29, 2004, respectively, were filed outside of the pleadings, the Agency, pursuant to section 4 of the Canadian Transportation Agency General Rules, SOR/2005-35, accepts these submissions as being relevant and necessary to its consideration of this matter.

ISSUES

[11] The issues to be addressed are:

1. whether Air Canada applied the terms and conditions relating to denied boarding as set out in Air Canada's International Passenger Rules and Fares Tariff (hereinafter Air Canada's tariff), and
2. whether Air Canada's tariff provision, which establishes a 30-day deadline for redemption of a travel voucher, issued in response to a denied boarding situation, is just and reasonable within the meaning of section 111 of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR).

POSITIONS OF THE PARTIES

[12] On June 27, 2003, Ms. Simcock and members of her family, including her brother, B.J. Simcock, were scheduled to return to Manchester from Toronto on Air Canada Flight No. 0840. When they arrived to check in, they were informed that the flight was oversold, and that they would be put on standby for the next available flight. Ms. Simcock submits that she is extremely unhappy with the manner in which Air Canada handled the situation, and with the carrier's offer of compensation of a travel voucher, valued at CAD$500, or a cheque for CAD$200.

[13] Ms. Simcock initially requested that Air Canada refund her the cost of her ticket, the additional expenses that she incurred because of the situation, and 25 (pounds) for each hour that she was delayed in arriving at her destination. Ms. Simcock maintains that the practice of over-selling is "immoral", and that the costs of this practice should be borne by the carriers.

[14] Air Canada submits that it is a common industry practice to overbook so as to fully utilize aircraft seating and to overcome, to the extent possible, the "ever present no-show factor", and that certain procedures are followed when overbooking occurs.

[15] Ms. Simcock maintains that in further correspondence from Air Canada, she was informed that no additional compensation would be forthcoming because she had already received a CAD$500 travel voucher. Ms. Simcock states that, as she does not intend to travel with Air Canada again, the travel voucher is of no value to her, and requests that this voucher be converted to CAD$500 in cash, instead.

[16] Air Canada maintains that because of the time that elapsed between the date of issuance of the voucher, and Ms. Simcock's request that the voucher be exchanged for cash, the carrier is unable to agree to the request. Air Canada indicates that it usually exchanges vouchers for cash "within a month or so" of the date of issue.

[17] Ms. Simcock submits that it was her understanding that the travel voucher was valid for a period of two years, as was the cash equivalent, and that, if this is not the case, Air Canada should have made this clear at the outset. Ms. Simcock advises that she is now prepared to accept CAD$200 in compensation to bring this matter to a conclusion.

[18] Air Canada submits that the Agency does not have the jurisdiction to require the carrier to refund a ticket or order the payment of expenses, as section 113 of the ATR only allows the Agency to suspend or disallow a tariff, or establish and substitute a tariff or portion thereof that has been disallowed. Air Canada maintains that its tariff provisions relating to denied boarding are just and reasonable and not unjustly discriminatory, and that other carriers have similar provisions.

[19] Air Canada submits that it correctly applied its tariff and that, by failing to return the CAD$500 travel voucher within 30 days of receipt, Ms. Simcock accepted such voucher as compensation, thereby relieving the carrier of any further liability. Air Canada notes that, as a goodwill gesture, it offered to exchange the travel voucher for cash on July 11, 2003, or to extend the period of validity of the voucher for one further year on July 13, 2004, but this offer was rejected by Ms. Simcock.

[20] In reply to Decision No. LET-C-A-15-2005, whereby the Agency inquired, inter alia, as to whether Ms. Simcock received a written notice from Air Canada at the time of denied boarding, setting out the carrier's policy with respect to denied boarding, as required by Air Canada's tariff, Air Canada submits that it discussed this issue with operational personnel, and that it is not in a position to confirm definitively that the written notice was provided. In this regard, Air Canada notes that the Passenger Name Record does not contain such information, and that Air Canada does not maintain historical records of specific denied boarding situations. Air Canada submits that its Airport Manager at Toronto-Lester B. Pearson International Airport has confirmed that the carrier's agents are aware of Air Canada's obligation to distribute written notices when denied boarding occurs.

[21] Ms. Simcock advises that neither she nor her brother received a written notice from Air Canada setting out its denied boarding policy, and reiterates that Air Canada never indicated that there was a deadline associated with the exchange of the travel voucher for cash.

ANALYSIS AND FINDINGS

[22] In making its findings, the Agency has carefully reviewed and considered all of the evidence submitted by the parties. The Agency has also examined Air Canada's denied boarding policy set out in Rule 89 of Air Canada's tariff.

Applicable regulatory provisions

[23] The Agency's jurisdiction over the present complaint is set out in subsection 110(4), and sections 113.1, 111 and 113 of the ATR.

[24] Subsection 110(4) of the ATR provides that:

110(4) Where a tariff is filed containing the date of publication and the effective date and is consistent with these Regulations and any orders of the Agency, the tolls and terms and conditions of carriage in the tariff shall, unless they are rejected, disallowed or suspended by the Agency or unless they are replaced by a new tariff, take effect on the date stated in the tariff, and the air carrier shall on and after that date charge the tolls and apply the terms and conditions of carriage specified in the tariff.

[25] Section 113.1 of the ATR states:

Where a licensee fails to apply the fares, rates, charges, terms or conditions of carriage applicable to the international service it offers that were set out in its tariffs, the Agency may

(a) direct the licensee to take corrective measures that the Agency considers appropriate; and

(b) direct the licensee to pay compensation for any expense incurred by a person adversely affected by the licensee's failure to apply the fares, rates, charges, terms or conditions of carriage applicable to the international service it offers that were set out in its tariffs.

[26] Section 111 of the ATR provides 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,
   
   1. make any unjust discrimination against any person or other air carrier;
   2. give any undue or unreasonable preference or advantage to or in favour of any person or other air carrier in any respect whatever; or
   3. subject any person or other air carrier or any description of traffic to any undue or unreasonable prejudice or disadvantage in any respect whatever.
3. The Agency may determine whether traffic is to be, is or has been carried under substantially similar circumstances and conditions and whether, in any case, there is or has been unjust discrimination or undue or unreasonable preference or advantage, or prejudice or disadvantage, within the meaning of this section, or whether in any case the air carrier has complied with the provisions of this section or section 110.

[27] 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:

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).

Application of the tariff

[28] Part 1, paragraph E of Rule 89 of Air Canada's tariff provides, in part, that:

Denied Boarding Compensation

. . .

(2) Amount of Compensation
Subject to the provisions of (E)(1)(a), AC will tender liquidated damages in the amounts in cash or a credit voucher good for travel on AC as follows: . . .

	Draft	MCO (credit voucher)
. . .	. . .	. . .
Canada to all other destinations	CAD 200.00	CAD 500.00
. . .	. . .	. . .

(3) Time of Offer of Compensation
(a) Compensation will be offered to, and if accepted, receipted by the passenger on the day and at the place where the denied boarding occurs.

. . .

[29] Part 1, paragraph F of Rule 89 of Air Canada's tariff provides, in part, that:

(F) Notice provided to passengers
The following written notice shall be provided to all passengers who are involuntarily denied boarding on flights for which they hold confirmed reservations.

. . .

Passenger's Options

Acceptance of the compensation (by endorsing the check or draft or not returning Credit Voucher to AC within 30 days) relieves AC from any further liability caused by our failure to honour your confirmed and ticketed reservations. However, you may decline the payment and seek to recover damages in a court of law or in some other manner within thirty (30) days from the date on which the denied boarding occurred.

1) Did Air Canada apply the terms and conditions relating to denied boarding as set out in Rule 89 of its tariff?

[30] With respect to the issue of whether Air Canada applied its terms and conditions relating to denied boarding, at the outset, the Agency finds that Air Canada applied subparagraph (E)(2) of Part 1, Rule 89 in the carrier's dealings with Ms. Simcock and her family by providing Ms. Simcock with a CAD$500 travel voucher at the time of denied boarding. The Agency notes that this travel voucher has now expired.

[31] Concerning the matter of whether Air Canada provided a written notice to Ms. Simcock, setting out the carrier's denied boarding policy, the Agency finds that Air Canada has failed to provide evidence to demonstrate that Ms. Simcock received the written notice set out in paragraph (F) of Part 1, Rule 89 of Air Canada's tariff. The Agency further finds that, based on the evidence on file, Air Canada did not advise Ms. Simcock, in any other manner, of a deadline associated with the exchange of the travel voucher. In this regard, the Agency notes that Air Canada, in its letter to Ms. Simcock dated July 11, 2003, which was sent 14 days after the denied boarding occurred, offered to exchange the travel voucher for the cash amount of CAD$200, but did not inform her that the offer had any time limit.

[32] In light of the foregoing, the Agency finds that Air Canada has contravened subsection 110(4) of the ATR.

[33] 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.

2) Are Air Canada's terms and conditions, which establish a 30-day deadline for redemption of a travel voucher, issued in response to a denied boarding situation, "unreasonable" within the meaning of section 111 of the ATR?

[34] According to the principles of statutory interpretation, words of a statute are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the statute as well as the intention of Parliament. As stated by Justice Rouleau of the Federal Court in ECG Canada Inc. v. M.N.R., [1987] 2 F.C. 415:

There is no question that the literal approach is a well established one in statutory interpretation. Nevertheless, it is always open to the Court to look to the object or purpose of a statute, not for the purpose of changing what was said by Parliament, but in order to understand and determine what was said. The object of a statute and its factual setting are always relevant considerations and are not to be taken into account only in cases of doubt.

[35] Therefore, the word "unreasonable" must be read not only within the context of section 111 of the ATR, but also keeping in mind the scheme and object of the CTA.

[36] Although the scope of the word "unreasonable" as it relates to terms and conditions of carriage has not been judicially considered in Canada, the meaning of the word has repeatedly been examined by courts (for example, in C.U.P.E. v. New Brunswick Liquor Corporation, [1979] 2 R.C.S. 227; Canadian Foundation for Children, Youth and the Law v. Canada (Attorney General), [2004] 1 S.C.R. 76; and Alberta Union of Provincial Employees v. Lethbridge Community College, [2004] 1 S.C.R. 727). While it is difficult to extrapolate distinct principles on the meaning of the word "unreasonable" from these cases, the courts have consistently held that:

• There is no clear test, there is an element that is objective, although it has an element of subjectivity;
• A contextual meaning must be given to the word; and
• In general terms, the word means "without a rational basis" or "not in accordance with reason".

[37] In the Agency's opinion, the specific wording of section 111 of the ATR reflects a recognition by Parliament that regulation was needed in order to attain the stated objective of the national transportation policy found in section 5 of the CTA, which provides, in part, that:

. . .

(g) each carrier or mode of transportation, as far as is practicable, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute

1. an unfair disadvantage in respect of any such traffic beyond the disadvantage inherent in the location or volume of the traffic, the scale of operation connected with the traffic or the type of traffic or service involved,

. . .

[38] This position is also in harmony with section 12 of the Interpretation Act, R.S.C., 1985, c. I-21, which provides that:

Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

[39] In determining whether a term or condition of carriage applied by a carrier is "unreasonable" within the meaning of section 111 of the ATR, the Agency must therefore ensure that it does not interpret the provision in such a way that impairs or jeopardizes the ability of the travelling public to efficiently use the recourse put in place by Parliament to protect it against the unilateral setting of terms and conditions of carriage by air carriers.

[40] Conversely, the CTA dictates that the Agency must also take into account:

• the operational and commercial obligations of the particular air carrier that is the subject of the complaint;
• the other consumer protection provisions found under Part II of the CTA which compel air carriers to publish, display or make available for public inspection tariffs that contain the information required by the ATR and only apply the terms and conditions of carriage set out in those tariffs; and
• the fact that air carriers are required to establish and apply terms and conditions of carriage designed to apply collectively to all passengers as opposed to one particular passenger.

[41] The Agency is therefore of the opinion that in order to determine whether a term or condition of carriage applied by a carrier is "unreasonable" within the meaning of section 111 of the ATR, 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.

[42] In weighing the submissions of the parties, the Agency finds that Air Canada's current tariff provision, establishing a 30-day deadline for the exchange of the travel voucher for cash, is just and reasonable, and not contrary to section 111 of the ATR. In this regard, the Agency is of the opinion that the 30-day period provides a person affected by denied boarding sufficient time to determine whether to choose, as compensation, the travel voucher or cash. The Agency is also of the opinion that, for Air Canada's accounting purposes, it is reasonable for the carrier to set a deadline for the exchange of a travel voucher for cash.

CONCLUSION

[43] Based on the foregoing, the Agency hereby finds that, in respect of this matter, Air Canada did not comply with its tariff, as required by subsection 110(4) of the ATR, by not providing the written notice set out in paragraph (F) of Part 1, Rule 89 of Air Canada's tariff to persons who are denied boarding, and as such, orders Air Canada, pursuant to paragraph 113.1(a) of the ATR, to compensate Ms. Simcock CAD$200, within 21 days from the date of this Decision; and dismisses Ms. Simcock's allegation that Air Canada's tariff provision, establishing a 30-day deadline for the exchange of a travel voucher for cash, is unreasonable.

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DISSENT BY MEMBER DELISLE

[44] I have had the benefit of reading the decision of my two colleagues. Although I agree with the finding of my colleagues on the second issue, that is to dismiss Ms. Simcock's allegation that Air Canada's tariff provision establishing a 30-day deadline for the exchange of a travel voucher for cash is unreasonable. I do not agree with the finding of my colleagues on the first issue addressed. That is to say, I would dismiss the allegation that Air Canada did not apply the terms and conditions relating to denied boarding as set out in Rule 89 of its tariff.

[45] Now dealing with the first issue as to whether Air Canada applied the terms and conditions relating to denied boarding as set out in the carrier's tariff.

Analysis and findings

[46] For the purpose of making a determination on the first issue of this case, it is important to look at Air Canada's tariff which contains its terms and conditions of carriage relating to denied boarding. The notice provision is contained in Section (F) of Tariff Rule 89. In my opinion, the notice provision raises three questions which need to be addressed: (1) Did Air Canada offer compensation in cash or a credit voucher good for travel on Air Canada?; (2) Did Air Canada offer the compensation on the day and at the place where Ms. Simcock was denied boarding?; and (3) Did Air Canada provide an option to Ms. Simcock to exchange her voucher for CAD$200 in cash instead of the CAD$500 travel voucher?

[47] On the first question, I note that when Ms. Simcock was denied boarding, Air Canada not only gave her notice of her entitlement to compensation, it actually provided the compensation by way of a credit voucher good for travel on Air Canada in the amount of CAD$500. Ms. Simcock felt that the compensation was "derisory", but kept the CAD$500 travel voucher that was given to her. Air Canada therefore complied with this aspect of its tariff.

[48] On the second question, I note that Air Canada actually provided the travel voucher as compensation on the day and at the place where Ms. Simcock was denied boarding. Air Canada therefore complied with this aspect of its tariff.

[49] As to the third question, I note that the written notice in accordance with Rule 89 (F) of the tariff is to be provided to all passengers who are involuntarily denied boarding for the purpose of advising the passengers of their right to be compensated for denied boarding and the amount of the denied boarding compensation. I also note that the tariff is silent as to when such notice is to be provided, and as to its form. The written notice can therefore be provided at any time and in any form. In this case, Air Canada gave Ms. Simcock a CAD$500 travel voucher as provided for in its tariff. The only question remaining is whether Ms. Simcock was given the option to receive cash instead of the voucher. Rule 89 (F) of the tariff provides for the passengers' options. This section does not contemplate further notice to be given, rather it specifies that if the voucher is not returned to Air Canada within 30 days it is deemed to have been accepted by the passenger. In this case, Air Canada actually wrote to Ms. Simcock on July 11, 2003, 14 days after the denied boarding took place, and offered to exchange the voucher for cash. Air Canada's Customer Relations Coordinator in the United Kingdom wrote to Ms. Simcock as follows: "The compensation offered is either 500cad on a voucher or 200cad in the form of a cheque, if you would prefer the cash please send in the voucher and I will be pleased to do this for you." Once this offer had been made in writing to Ms. Simcock, she was well aware of her rights under Air Canada's tariff. She was not entitled to any more. Nevertheless, Ms. Simcock rejected what she was entitled to under the tariff. In my opinion, Air Canada correctly provided to Ms. Simcock all of the necessary information for her to make an informed decision in the circumstances as to her right to receive denied boarding compensation, the amount of the denied boarding compensation, and her option to accept either cash or a voucher. I have noted that Air Canada extended the validity of the voucher for the benefit of Ms. Simcock; however, such an extension did not, in my view, create an obligation to also extend the option for a cash payment.

Conclusion

[50] I would dismiss Ms. Simcock's allegation that Air Canada did not apply the terms and conditions relating to denied boarding as set out in Rule 89 of the carrier's tariff.