Decision No. 248-C-A-2002

May 13, 2002

File No. M4370/A74/01-1498

---

COMPLAINT

On October 19, 2001, Norman Hall filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

On December 4, 2001, the portion of the complaint concerning representation of the fuel surcharge was referred to the Competition Bureau. At the same time, Agency staff requested that Air Canada address the portion of the complaint concerning the amount of the fuel surcharge within the context of sections 111 and 113 of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR).

By letter dated December 18, 2001, Air Canada requested an extension until January 25, 2002 to file its answer to the complaint and, by Decision No. LET-C-A-494-2001 dated December 27, 2001, the Agency granted Air Canada the requested extension. On January 25, 2002, Air Canada filed its answer, and on January 29, 2002, Mr. Hall filed his reply.

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, the parties have agreed to an indefinite extension of the deadline.

ISSUE

The issue to be addressed is whether the Agency, pursuant to sections 111 and 113 of the ATR, should intervene, by virtue of Article 5 of the Air Transport Agreement between the Government of Canada and the Government of the United States of America (hereinafter the Agreement), in the matter of the fuel surcharge collected by Air Canada for travel between Canada and the United States of America.

POSITIONS OF THE PARTIES

Mr. Hall purchased an airline ticket for travel from Calgary, Alberta, Canada, to Denver, Colorado, United States of America, on November 3, 2001 and return to Calgary on November 11, 2001. He states that his ticket included a fuel surcharge of $69.32 ($34.66 each way). Mr Hall alleges that oil prices have fallen dramatically since Air Canada introduced a temporary fuel surcharge. He suggests that Air Canada should either announce a definitive date that it will eliminate the charge or that it should stop calling it a fuel surcharge and include it in the airline's base ticket price. He adds that to continue to charge it as a temporary fuel surcharge, under today's oil and gas prices, is misleading.

In its answer, Air Canada submits that the remedies requested by Mr. Hall are outside the Agency's jurisdiction. Air Canada suggests that the Agency has no jurisdiction to require Air Canada to announce a definitive date for the withdrawal of the fuel surcharge, nor can the Agency require Air Canada to increase its fares by including the surcharge within the base ticket price. With regard to Mr. Hall's concern that the amount charged for a transborder fuel surcharge is unreasonably high, Air Canada submits that, based on Article 5 of the Agreement, the Agency can only intervene in the matter if it determines that the fuel surcharge applied by Air Canada is unreasonably discriminatory, or unreasonably high or restrictive. Air Canada contends that the fuel surcharge is not unreasonably discriminatory, as it applies equally to all regular published passenger fares.

The air carrier also submits that the fuel surcharge is not unreasonably high or restrictive. Air Canada states that Mr. Hall was not charged $34.66 each way for the fuel surcharge. It confirms that $27.16 was the actual fuel surcharge and the remainder of $7.50 was a NAVCAN surcharge. Air Canada submits that it did not initiate the fuel surcharge in the transborder market, but it matched the charge that was introduced by American Airlines, Inc., as did all major air carriers, in order to ensure that base fares remained competitive, and to ensure that consumers were able to accurately compare fares. Air Canada notes that airline fares on transborder routes are highly competitive, that market forces have resulted in setting the fuel surcharge of $27.16, and that market forces will dictate when this fuel surcharge is to be lifted. It argues that, under those circumstances, the amount of the fuel surcharge cannot be unreasonable.

In his reply, Mr. Hall confirms that his complaint is limited to the fuel surcharge being unreasonably high. He submits that Air Canada's evidence in that regard, that the fuel surcharge is the same as is charged by all other major air carriers in a competitive market, does not make the fuel surcharge reasonable. Mr. Hall provides statistics which indicate that the January 2002 crude oil price is only 58% of the price that it was when the current fuel surcharge amount of CAD$27.16 was introduced. Based on that percentage, he contends that the current fuel surcharge is unreasonably high and requests that the Agency disallow the fuel surcharge.

ANALYSIS AND FINDINGS

In making its findings, the Agency has considered all of the evidence submitted by the parties during the pleadings. The Agency has also examined the Agreement and Air Canada's tariff provisions on the fuel surcharge collected in Mr. Hall's case, as set out in category 12, Rule 4275, of the Canadian Passenger Rules (CPR) Tariff, published by the Airline Tariff Publishing Company.

The Agency's jurisdiction over complaints concerning fares, and terms and conditions of carriage applicable to transportation to and from Canada is set out in sections 111 and 113 of the ATR.

Subsections 111(1) and 111(2) of the ATR provide 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.

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:

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

Pursuant to section 78 of the CTA, the powers conferred on the Agency shall be exercised in accordance with any international agreement relating to civil aviation to which Canada is a party - in the case at hand, the Agreement.

Paragraph (1), Article 5, Pricing, of the Agreement provides that:

The Parties acknowledge that market forces shall be the primary consideration in the establishment of prices for air transportation. Intervention by the aeronautical authorities shall be limited to:

1. prevention of unreasonably discriminatory prices or practices;
2. protection of consumers from prices that are unreasonably high or restrictive because of the abuse of a dominant position;
3. protection of airlines from prices to the extent that they are artificially low because of direct or indirect governmental subsidy or support; and
4. protection of airlines from prices that are artificially low, where evidence exists as to an intent of eliminating competition.

Further, Article 23, Definitions, of the Agreement states that:

"Price" means any fare, rate or charge (including discounts, frequent flyer plans or other benefits affecting the cost of air transportation) for the carriage of passengers (and their baggage) and/or cargo (excluding mail), or the charter of aircraft charged by airlines, including their agents, and the conditions governing the availability of such fare, rate or charge but excluding general terms and conditions of carriage which are broadly applicable to all air transportation and are not directly related to the fare, rate or charge.

Air Canada's applicable tariff provisions, as set out in category 12, Rule 4275, of the Canadian Passenger Rules (CPR) Tariff states in part that:

AND - A FUEL SURCHARGE OF CAD 27.16 OR USD 18.60 ONE WAY WILL BE ADDED TO THE APPLICABLE FARE.

NOTE -

THE SURCHARGE APPLIES IN ADDITION TO ALL OTHER CHARGES AND IS NOT SUBJECT TO ANY DISCOUNT.

The Agency notes that Air Canada applied its tariff provisions by imposing the CAD$27.16 fee (each way) in respect of Mr. Hall's ticket.

The Agency finds that the CAD$27.16 fee is a "price" pursuant to Article 23, Definitions, of the Agreement as it is a charge for the carriage of passengers and their baggage.

In light of the foregoing, and pursuant to paragraph (1), Article 5, Pricing, of the Agreement, the Agency can intervene in the matter only if the Agency determines that the fee applied by Air Canada is unreasonably discriminatory, or unreasonably high or restrictive because of the abuse of a dominant position.

With respect to the issue of whether Air Canada's fuel surcharge is unreasonably discriminatory, the Agency finds that the carrier applied the fee equally to all passengers purchasing the fare bought by Mr.Hall, and to all airfares offered by Air Canada between Canada and the United States. Therefore, the Agency is of the view that the fee is not unreasonably discriminatory.

As to the issue of whether Air Canada's fuel surcharge is unreasonably high or restrictive because of the abuse of a dominant position, the Agency's investigation into Mr. Hall's complaint revealed that there are at least four other air carriers that publish airfares between Calgary and Denver. The Agency notes that all four of those carriers applied a CAD$27.16 or a USD$18.60 fuel surcharge to such fares on the date on which Mr. Hall filed his complaint. Accordingly, the Agency is of the opinion that Air Canada did not charge an unreasonably high or restrictive fee because of the abuse of a dominant position.

CONCLUSION

Based on the above findings, the Agency hereby dismisses the complaint.