Order No. 2017-A-27

INTRODUCTION

[1] Air Canada has applied to the Canadian Transportation Agency (Agency) for a reduction of the notice period of the proposed discontinuance of its domestic service between Vancouver, British Columbia and Fort McMurray, Alberta, effective April 24, 2017.

[2] It is important to note that the CTA and the Air Transportation Regulations, SOR/88-58, as amended (ATR) do not empower the Agency to reject a notice of discontinuance of service. The Agency may only determine whether to allow a reduction in the period of notice to be given for such discontinuance.

[3] Air Canada is licensed to operate domestic services, using medium, large and all-cargo aircraft.

SUBMISSIONS

[4] Air Canada states that it currently operates a year-round daily direct service between Vancouver and Fort McMurray. This route is operated by Jazz Air LP under the “Air Canada Express” banner, using DH4 aircraft with 518 seats per week.

[5] Air Canada intends to discontinue the scheduled service between Vancouver and Fort McMurray effective April 24, 2017. It confirms that all passengers with reservations for flights after April 24, 2017 will be accommodated on alternative flights via Calgary and Edmonton, Alberta.

[6] Air Canada submits that the drop in fuel prices negatively impacted the Fort McMurray economy, resulting in a drop in the occupancy rate on this route, to which Air Canada responded with a gradual drop in its offering of seats in this market, equivalent to a total drop of 45% over two years. Air Canada further submits that the occupancy rate decreased by 10% annually and that its profit margin has dropped correspondingly, making the route no longer viable.

[7] Air Canada submits that it foresees demand on this route to be reduced compared to its historical levels as a result of the slow performance of business demand since the weakening of the economy, thus making the continuance of service financially impractical.

[8] Air Canada indicates that WestJet continues to offer a scheduled year-round air service between Vancouver and Fort McMurray and has the capacity to fulfill the travelling needs of the community by offering 5 flights per week, for a total of 390 seats per week.

[9] Air Canada points out that it will continue to operate other services to Fort McMurray, with adequate capacity to fulfill the travelling needs of the community. Vancouver customers will continue to have access to Fort McMurray through connections in Calgary and Edmonton, where significant capacity is available. Currently, Air Canada is offering 4 flights per day between Calgary and Fort McMurray using a 78-seat DH4 aircraft. Flights between Edmonton and Fort McMurray are operated 4 times daily with a 50-seat DH3 aircraft. In addition to these alternatives, Air Canada will continue to serve Fort McMurray from its Toronto hub, 2 times daily with a 120-seat 319 aircraft.

[10] Air Canada submits that in addition to its current non-stop flights between Vancouver and Fort McMurray, WestJet also operates from Calgary, Edmonton and Toronto to Fort McMurray.

LEGISLATIVE FRAMEWORK

[11] Subsection 64(2) of the CTA requires, in part, that a licensee not implement a proposal to discontinue a domestic service referred to in subsection 64(1.1) of the CTA until the expiry of 120 days, or any shorter notice period that the Agency may specify by order.

[12] Subsection 14(1.1) of the ATR provides that, for the purposes of subsection 64(1.1) of the CTA, a licensee proposing to discontinue or to reduce the frequency of a domestic service shall give notice of the proposal to the Agency, to the Minister of Transport of Canada and to the minister responsible for transportation in the province or territory where the area to be affected is located. Additionally, the licensee is required to advise holders of domestic licences operating in the area to be affected by the proposal and the persons resident therein, by publishing a notice in newspapers with the largest circulation in that area in each official language.

[13] Pursuant to subsection 64(3) of the CTA, the Agency, in considering whether to specify a shorter notice period, shall have regard to the adequacy of alternative modes of public transportation available between the points concerned; other means by which air service to the point or between the points is or is likely to be provided; whether the licensee has complied with subsection 64(1.2); and the particular circumstances of the licensee.

ANALYSIS AND FINDINGS

[14] The proposed discontinuance would result in a reduction of at least 50% of the weekly passenger-carrying capacity of all licensees operating year-round non-stop scheduled air services between Vancouver and Fort McMurray. Therefore, subsection 64(1.1) of the CTA applies and Air Canada shall give notice of the proposed discontinuance of its service.

[15] The Agency has reviewed the application and the factors identified in subsection 64(3) of the CTA as they apply to this case, and notes the following:

• Air Canada continues to operate services to Fort McMurray via alternative routes.
• WestJet offers a scheduled year-round air service between Vancouver and Fort McMurray 5 times per week.
• Air Canada has indicated that it is financially impractical to continue the air service to Fort McMurray due to the slow performance of business demand since the weakening of the economy, which is the reason for the proposed discontinuance of the air service effective April 24, 2017.
• Air Canada has also indicated that, on February 27, it intended to notify the following people of the discontinuance of service, providing an opportunity to meet and discuss: the Minister of Transportation, Government of British Columbia; the Mayor of Vancouver; the Minister of Transportation, Government of Alberta; the Mayor of Fort McMurray; and the Minister of Transportation, Government of Canada.

[16] The notice provisions required by the CTA are intended to ensure that communities with limited air service, usually remote communities, are made aware enough in advance of reductions in or discontinuances of air services in their community. Once advised, the elected officials and the general population of the affected communities may choose to seek a replacement carrier. Carriers of the affected area are also made aware of the situation by the notice and can take advantage of an opportunity to enter that market.

[17] After consideration of this case, the Agency is of the opinion that while Air Canada submits that the yields and profits over this route have decreased and that continuance of the service is financially impractical, Air Canada failed to submit sufficient evidence to the Agency that the route is operated at a loss or that the impact of a denial of a reduction of notice period below 120 days would be unreasonably burdensome to Air Canada.

[18] Therefore, the Agency is of the opinion that the proposed request to reduce the notice period from 120 days to 52 days in respect of the proposed discontinuance to take effect on April 24, 2017 is not warranted.

CONCLUSION

[19] Accordingly, the Agency dismisses the application.