Order No. 2002-A-442

October 31, 2002

File No. M4110/A74-4

By Decision No. LET-A-409-2001 dated September 28, 2001, Air Canada was permitted to implement an insurance surcharge of 3.00 Canadian dollars/2.00 U.S. dollars applicable to transportation between Canada and points throughout the world (Special Permission No. 67423), subject to the surcharge bearing an expiry date no later than 6 months following the effective date of the surcharge. By Decision No. LET-A-94-2002 dated March 28, 2002, this expiry date was extended to October 31, 2002.

On October 8, 2002, Airline Tariff Publishing Company, Agent, on behalf of Air Canada, filed with the Canadian Transportation Agency (hereinafter the Agency) an application to amend the carrier's Tariff NTA(A) No. 458 Rule 24 on less than the required period of notice as found in subsection 115(1) of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR). The proposed amendment would extend the current insurance surcharge until March 31, 2003. Air Canada submits that it's request is based upon the fact that insurance premiums have not declined since the introduction of the insurance surcharge on October 4, 2001.

Subsection 115(1) of the ATR requires that every tariff or amendment thereto shall be filed with the Agency not later than the commencement of a period of at least 45 days before the tariff or amendment becomes effective.

The Agency has considered this matter and is of the opinion that compliance by Air Canada with subsection 115(1) of the ATR is impractical in this case. Accordingly, the Agency, pursuant to paragraph 80(1)(c) of the Canada Transportation Act, S.C., 1996, c. 10, hereby exempts Air Canada from the application of subsection 115(1) of the ATR to permit Air Canada to advance the effective date of its proposed tariff revision to extend the carrier's insurance surcharge to November 1, 2002. Special Permission No. 75065 is therefore assigned to this application, subject to the surcharge bearing an expiry date of March 31, 2003, or until such time as Air Canada has transferred the amount of the surcharge into its base fares, whichever is sooner.

Be advised that the Agency may not favourably consider another request for extension leaving Air Canada, the option of, inter alia, incorporating the surcharge into the base fare, taking some other action or cancelling it. In Decision No. 242-A-2001 dated May 14, 2001 and Order No. 2002-A-216 dated June 7, 2002, the Agency previously indicated to Air Canada that it is concerned that the ever-increasing use of surcharges limits the consumers' ability to compare airfares, as the advertised price does not usually disclose the true price that the consumer will have to pay at the time of purchase. Accordingly, the Agency is of the opinion that air carriers should make every effort to incorporate surcharges into air fares and avoid such surcharges. If surcharges are used, however, they should be a temporary measure only, in response to identifiable and unforeseen events leading to increased carrier costs. The continuation of the insurance surcharge runs contrary to the stated opinion of the Agency, however, the Agency is prepared to allow Air Canada time to adjust by incorporating this surcharge into the base fare, taking some other action or cancelling it.

The Agency may review this matter sooner than the expiry date upon complaint or if there is a significant change in the circumstances which prompted the surcharge.