Decision No. 39-P-A-2006

January 26, 2006

File No. M4370/A74/01-420

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COMPLAINT

[1] On March 9, 2001, Jeff LeClair filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title. Various correspondence was exchanged between Agency staff and Mr. LeClair to clarify his complaint and to advise him that less costly fares were available on Air Canada's site than the fare which he had originally been offered. Mr. LeClair advised that, while he noticed that the price was lower on the day after he filed his complaint, he considered even that lower price to be unfair.

[2] By letter dated March 28, 2001, both Mr. LeClair and Air Canada were advised that section 66 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA) sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. More particularly, both parties were advised that, pursuant to subsection 66(1) of the CTA, the Agency may, under certain circumstances, take certain remedial action following receipt of a complaint. In that same letter, Air Canada was requested to provide the Agency and Mr. LeClair with its answer to the complaint, including the information outlined in subsection 66(3) of the CTA.

[3] On April 27, 2001, Air Canada filed its answer to the complaint and, with respect to a portion of the information included in its filing, made a claim for confidentiality which the Agency accepted by Decision No. LET-P-A-317-2001 dated July 9, 2001. On May 7, 2001, Mr. LeClair filed his reply to Air Canada's answer.

[4] Pursuant to subsection 29(1) of the CTA, the Agency is required to make its decision no later than 120 days after the complaint is received unless the parties agree to an extension. In this case, the parties have agreed to an indefinite extension of the deadline.

[5] On April 1, 2003, the Ontario Superior Court of Justice issued a stay order in respect of Air Canada and certain of its subsidiaries (collectively referred to as "Air Canada") under subsection 11(3) of the Companies' Creditors Arrangement Act, R.S.C., 1985, c. C-36 (hereinafter the CCAA). The order had the effect of staying all proceedings against or in respect of Air Canada before the Agency, including proceedings concerning the unreasonableness of the fares which are the subject of the present complaint. Mr. LeClair was advised of the status of his complaint in this respect.

[6] On August 23, 2004, Mr. Justice Farley of the Ontario Superior Court of Justice issued an Order pursuant to the CCAA (hereinafter the Sanction Order) which governed Air Canada's emergence from bankruptcy protection and lifted the stay order as of October 1, 2004.

[7] In January 2005, Air Canada took the position that all applications before the Agency against Air Canada and its subsidiaries in relation to incidents which occurred on or before April 1, 2003 (hereinafter the affected applications), including this application, were extinguished by the Sanction Order.

[8] The Agency was of the opinion that Air Canada's position was incorrect and took action to have the issue resolved by Mr. Justice Farley as expeditiously as possible by seeking an interpretation of the Sanction Order as to whether the affected applications were extinguished, as argued by Air Canada. As a result, the affected applications, including this application, were subsequently stayed for a second period of time pending Mr. Justice Farley's decision on the matter.

[9] The Agency subsequently decided that the best way to deal with the affected applications was for the Agency to proceed with its consideration of the applications and, as such, on June 30, 2005, the Agency determined that it would not continue with its motion before Mr. Justice Farley for an interpretation of the Sanction Order. While a resolution on the dispute surrounding the scope of the Sanction Order has yet to be reached, the Agency has determined that it will proceed with its processing of the affected applications, including the present one.

ISSUES

[10] The issues to be addressed are:

1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was, on or about March 9, 2001, the only person providing a domestic service between Ottawa and Windsor within the meaning of section 66 of the CTA; and, if so,
2. whether the fare published or offered by Air Canada in respect of its service between Ottawa and Windsor on March 9, 2001, which is the subject of the complaint, was unreasonable.

POSITIONS OF THE PARTIES

[11] Mr. LeClair notes that the amount of $462.24 that he was quoted by Air Canada's online reservation system on March 9, 2001 for round-trip travel between Ottawa and Windsor, departing Ottawa on May 17, 2001, and returning from Windsor on May 22, 2001, was an improvement over the $500-$550 tax-inclusive fare he was quoted the previous day, yet was still unfair. He adds that over the previous seven years, he had routinely been able to purchase a round-trip fare for travel between the two points over the Victoria Day holiday weekend for approximately $200-$250.

[12] In its answer to the complaint, Air Canada submits that the Agency has no jurisdiction with respect to this complaint for two reasons. First, Air Canada's reservation system constructed the lowest priced alternative fare for travel between Ottawa and Windsor by combining two separate fares – one for the Ottawa-Toronto leg of the trip and the other for the Toronto-Windsor leg. Air Canada contends that by virtue of this fact alone Air Canada was not acting unreasonably and that, based on the wording of subsection 66(1) of the CTA, the Agency has no jurisdiction to put two fares together from two different routes and treat them as one fare. Air Canada's second argument is that no leg or combination of legs of the trip – that is between Ottawa and Toronto, between Ottawa and Windsor or between Toronto and Windsor – is a monopoly route.

[13] With respect to the preliminary issue raised by the complaint, Air Canada submits that it is quite evident that there is more than one carrier providing service on the Ottawa-Toronto route. With respect to the Toronto-Windsor and Ottawa-Windsor possibilities, Air Canada notes that passengers residing in, or destined for, Windsor also have the option of travelling to Detroit, Michigan, United States of America, using the services of carriers such as US Airlines and Northwest Airlines, Inc. (hereinafter Northwest), given the proximity of Windsor to the US border. With respect to travel between Ottawa and Windsor (or Toronto and Windsor), Air Canada adds that passengers could use the services of another air carrier, such as, among others, Canada 3000 Airlines Limited, between Ottawa and Toronto, and then continue on to Windsor by either train or by bus. As such, Air Canada maintains, these alternative services are not unreasonable, taking into account the factors listed in subsection 66(4) of the CTA.

[14] With respect to the fare-related issue raised by the complaint, Air Canada submits that there are a number of valid reasons why fares differ from route to route. The carrier maintains that economic theory justifies fare differentials from route to route, and submits a statement prepared by Professor William J. Baumol, "a pre-eminent economist from New York University with extensive experience relating to the economics of the airline industry" in support of its position. Professor Baumol maintains that differential pricing is widespread and is not to be interpreted as a manifestation of monopoly power exercised as a means to obtain excessive profits, and that it is not unreasonable for an air carrier to publish and apply a fare on one route (e.g., a competitive route), but not to apply the same fare on another route (e.g., non-competitive route).

[15] Air Canada maintains that no single fare offering of $462.24 could be found in its records, but notes that the $462.24 amount that Mr. LeClair was quoted would have been a fare of $392, before the application of charges and taxes. However, the carrier submits that it did not offer a fare of $392 on its domestic service between Ottawa and Windsor, highlighting the view that the division of the fare into its Ottawa-Toronto and Toronto-Windsor components "makes the analysis necessarily one of the two specific fares". Air Canada argues that the composite fare cannot be unreasonable in and of itself as there are two fare components. According to Air Canada, this matter is therefore outside the Agency's jurisdiction under section 66 of the CTA.

[16] Air Canada submits that, based on Mr. LeClair's booking and travelling pattern, it is quite possible that in the past Mr. LeClair purchased one of the Spring Seat Sale fares which are generally launched between February and April each year. Air Canada notes that on March 9, 2001, when Mr. LeClair undertook his fare research, the Spring Seat Sale fares had not yet been released and that in 2001, they were available for sale between March 21 and April 3. Air Canada adds that the Spring Seat Sale fares it offered in 2001 were in line with the seat sale fares the carrier offered at the same time in previous years when Canadian Airlines International Ltd. and its affiliates (hereinafter Canadi*n) provided competition on the Ottawa-Windsor route.

[17] The carrier argues that because there are many carriers providing air service in the Greater Toronto Area to and from Ottawa, only the QE7SNR fare of $224 applicable to the Toronto-Windsor portion of the trip can be the subject of the complaint. According to Air Canada, a year before Mr. LeClair filed his complaint and at a time when Canadi*n provided service on the Toronto-Windsor route in competition with the service offered by Air Canada, Air Canada offered a fare which was similar with respect to the terms and conditions associated with the QE7SNR fare: it was the Q7SNR fare which was offered at $191, exclusive of applicable charges and taxes. Air Canada submits that all but 6 percent of the 17 percent difference between the $191 Q7SNR fare and the $224 QE7SNR fare offered to Mr. LeClair was in place prior to January 2000 – that is "when there was competition", and that the remaining increase of 6 percent was introduced by Air Canada to offset higher fuel costs.

[18] In his reply to Air Canada's answer to the complaint, Mr. LeClair submits that Air Canada has ceased to operate a direct Ottawa-Windsor service since it became the sole air carrier operating at the Windsor airport. With respect to Air Canada's suggestion that the services provided by US Airlines and Northwest to Detroit are alternatives to the service it provides to Windsor, Mr. LeClair states that "a flight with a start or end point outside the borders of our Country of Canada, is not a domestic flight". Further, in response to Air Canada's argument that a combination of air travel from Ottawa to Toronto and travel by rail or bus from Toronto to Windsor provides the traveller with an alternative, Mr. LeClair agrees that it is possible and less costly, but it is not time-efficient.

[19] Mr. LeClair submits that the $224 QE7SNR fare Air Canada offered for round-trip travel between Toronto and Windsor is unreasonable when compared to the $168 NECONO2 fare it offered for round-trip travel between Ottawa and Toronto, the distance between which, according to Mr. LeClair, is roughly equal to that between Toronto and Windsor. He adds that the $224 QE7SNR fare for round-trip travel between Toronto and Windsor is unreasonable when compared to the $225 fare (including applicable charges and taxes) for round-trip travel on the Halifax and Ottawa route, the distance of which is roughly three times that of the Ottawa-Windsor route.

PRELIMINARY MATTER

[20] In its answer filed on April 26, 2001, Air Canada argued that the Agency had no jurisdiction to hear the complaint as it involved two fares: one return fare between Ottawa and Toronto, and one return fare between Toronto and Windsor.

[21] Subsection 66(1) of the CTA provides that, in part, if the Agency finds that a licensee is the only person providing a domestic service between two points and that a fare offered in respect of the service is unreasonable, the Agency may take any action provided from paragraph (a) to (c).

[22] Applied to the case at hand, this subsection means that should Air Canada be found to be the only licensee providing a domestic service between Ottawa and Windsor, a fare offered by Air Canada in respect of that service is subject to the jurisdiction of the Agency. In this case, Air Canada offered a through fare on a through ticket between Ottawa and Windsor. It is this through fare that is subject to the jurisdiction of the Agency. The fact that such a through fare flows from a combination of two distinctive fares, one being between Ottawa and Toronto and one being between Toronto and Windsor, does not in any way deprive the Agency of its jurisdiction to examine the fare or the combination of fares offered by a carrier between two points where it is the only licensee providing a domestic service.

[23] Accordingly, the Agency is of the opinion that it has the jurisdiction to investigate the complaint under subsection 66(1) of the CTA.

ANALYSIS AND FINDINGS

[24] In making its findings with respect to the preliminary and fare-related issues raised by the complaint, the Agency has considered all of the evidence submitted by the parties during the pleadings, as well as information available both publicly and within the Agency concerning air services provided between Ottawa and Windsor and the fares published or offered by Air Canada in respect of its service between these two points, including the Internet, the Official Airline Guide (hereinafter the OAG), published flight schedules and airline tariffs published by the Airline Tariff Publishing Company.

[25] Section 66 of the CTA sets out the Agency's jurisdiction over complaints concerning fares applied by air carriers in respect of domestic services. Pursuant to subsection 66(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that

1. the air carrier who published or offered the fare which is the subject of the complaint is a licensee who, including affiliated licensees, is the only person providing a domestic service between two points, and
2. the fare published or offered by the licensee in respect of the service is unreasonable.

[26] Pursuant to subsection 66(4) of the CTA, the Agency's jurisdiction over complaints concerning fares may be extended to domestic routes served by more than one licensee where the Agency is of the opinion that none of the other services between those two points provides a reasonable alternative taking into consideration the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.

[27] Further, pursuant to subsection 66(3) of the CTA, when determining whether a fare published or offered in respect of a domestic service between two points is unreasonable or that a licensee is offering an inadequate range of fares in respect of a domestic service between two points, the Agency shall consider the following factors:

1. historical data respecting fares applicable to domestic services between the two points;
2. fares applicable to similar domestic services offered by the licensee and one or more other licensees using similar aircraft, including terms and conditions of carriage and the number of seats available at those fares; and
3. any other information that may be provided by the licensee, including information that the licensee provides under section 83 of the CTA.

Preliminary issue

[28] Whether Air Canada was, on or about March 9, 2001, the only person providing a domestic service between Ottawa and Windsor within the meaning of section 66 of the CTA

[29] The Agency has reviewed the information available to it with respect to the domestic service offered between Ottawa and Windsor. The Agency has also considered Air Canada's position that a combination of the services provided by a competing air carrier between Ottawa and Toronto with those of an alternative mode of transportation, such as a train or a bus, between Toronto and Windsor constitutes a reasonable alternative domestic service to that provided by Air Canada between Ottawa and Windsor. Additionally, the Agency has considered Air Canada's position that the services provided by US Airlines and Northwest between Ottawa and Detroit or between Toronto and Detroit provide a reasonable alternative to the service provided by Air Canada between Ottawa or Toronto and Windsor.

[30] Pursuant to section 66 of the CTA, the Agency may inquire into a complaint concerning the fares published or offered in respect of a "domestic service" provided between two points.

[31] Subsection 55(1) of the CTA defines "domestic service" as:

an air service between two points in Canada, from and to the same point in Canada or between Canada and a point outside Canada that is not in the territory of another country;

[32] An "air service" is defined in subsection 55(1) of the CTA as:

a service, provided by means of an aircraft, that is publicly available for transportation of passengers or goods, or both;

[33] Accordingly, in order for a transportation service to be considered as an alternative domestic service between two points within the meaning of subsection 66(4) of the CTA, the service must be provided by means of an aircraft and the service must be between two points within Canada. The Agency is therefore of the opinion that the types of services which Air Canada suggests as alternatives to its domestic service between Ottawa and Windsor which involve the use of some mode of transportation other than air between Ottawa and Windsor are not alternative domestic services within the meaning of subsection 66(4) of the CTA. Furthermore, the Agency is also of the opinion that the services provided by US Airlines and Northwest between Ottawa or Toronto and Detroit are not between two points which lie within Canada. Accordingly, the services provided by US Airlines and Northwest between Ottawa or Toronto and Detroit are not alternative domestic services within the meaning of subsection 66(4) of the CTA.

[34] In light of the foregoing, the Agency has determined that, on or about March 9, 2001, Air Canada was the only person providing a domestic service between Ottawa and Windsor within the meaning of section 66 of the CTA. Accordingly, the complaint falls within the purview of section 66 of the CTA.

Fare-related issues

[35] Whether the fare published or offered by Air Canada in respect of its service between Ottawa and Windsor on or about March 9, 2001, which is the subject of the complaint, was unreasonable

[36] In addition to the material and information described above, the Agency, as required by subsection 66(3) of the CTA, has considered historical data respecting fares applicable to domestic services offered between Ottawa and Windsor and the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft, including the terms and conditions of carriage. The Agency notes that although Air Canada was given the opportunity to identify passenger fares applicable to similar domestic services offered by Air Canada and one or more other licensees as well as the number of seats available at those fares, the carrier did not provide the Agency with such information.

Similar domestic services offered by Air Canada and one or more other licensees

[37] The Agency is of the opinion that the intent of section 66 of the CTA is to ensure that travellers on routes on which there is no, or very limited, competition, are offered fares that are broadly comparable in level and range to those offered to travellers on competitive routes. In determining whether a particular service between two points is similar to the service which is the subject of a section 66 complaint within the meaning of paragraph 66(3)(b) of the CTA, the Agency will consider the following factors:

1. whether there are other licensees offering a domestic service between the two points;
2. the type of aircraft used by the licensee which is the subject of the section 66 complaint to operate its service between the two points;
3. the air mileage between the two points; and
4. the origin-destination passenger volume between the two points.

[38] With respect to the service which is the subject of the section 66 complaint, the Agency has determined that:

1. on March 9, 2001, Air Canada operated its domestic service between Ottawa and Windsor using medium aircraft, as defined in the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR);
2. according to the OAG, the distance between Ottawa and Windsor is approximately 420 air miles; and
3. the origin-destination passenger volume between Ottawa and Windsor was approximately 17,480 passengers in 1999 (the last complete year for which information is available).

[39] The Agency conducted the same analysis in respect of nearly 170 services offered within Canada to identify the services provided by Air Canada and one or more other licensees and which have characteristics similar to those of the service Air Canada provided between Ottawa and Windsor. Based on its consideration of the factors outlined above, the Agency has determined that, on or about March 9, 2001, four such services were similar to that offered by Air Canada between Ottawa and Windsor within the meaning of paragraph 66(3)(b) of the CTA. These are Air Canada's services between Vancouver and Grande Prairie, Regina and Edmonton, Fort McMurray and Calgary, and Thunder Bay and Winnipeg. The determination of similarity is based on the following reasons:

1. in addition to the service operated by Air Canada, WestJet operated a domestic service on each of the four routes. As well, Transwest Air Limited Partnership operated a domestic service between Regina and Edmonton on or about March 9, 2001;
2. Air Canada operated its service on all four routes using medium aircraft, as defined in the ATR;
3. according to the OAG, the distance between Vancouver and Grande Prairie is approximately 452 air miles, the distance between Regina and Edmonton is approximately 431 air miles, the distance between Fort McMurray and Calgary is approximately 399 air miles and the distance between Thunder Bay and Winnipeg is approximately 375 air miles; and
4. the origin-destination passenger volume between Vancouver and Grande Prairie was approximately 13,390 passengers in 1999, the origin-destination passenger volume between Regina and Edmonton was approximately 26,250 passengers in 1999, the origin-destination passenger volume between Fort McMurray and Calgary was approximately 19,930 passengers in 1999, and the origin-destination passenger volume between Thunder Bay and Winnipeg was approximately 22,160 passengers in 1999. It should be noted here that the Ottawa-Windsor route is approximately 7 percent longer in distance than the Vancouver-Grande Prairie route, 3 percent shorter than the Regina-Edmonton route, 5 percent longer than the Fort McMurray-Calgary route and 12 percent longer than the Thunder Bay-Winnipeg route.

Data respecting fares applicable to domestic services between Ottawa and Windsor and to the selected similar domestic services

[40] The Agency's research has identified that the fare which is the subject of the complaint is the sum of Air Canada's $168 NECONO2 base fare offered for round-trip travel between Ottawa and Toronto, its $224 QE7SNR base fare offered for round-trip travel between Toronto and Windsor, the $10 airport improvement fee collected by Air Canada at the time of ticketing on behalf of the Ottawa International Airport for domestic departures, the $30 round-trip surcharge Air Canada applied to the cost of the ticket to cover the fees that it pays for the operation of Canada's air navigation system, and GST of $30.24. Of these components, the Agency will conduct its analysis and make its determination with respect to the combined $392 base fare – that is the sum of the $168 NECONO2 and the $224 QE7SNR fares – which Air Canada offered to Mr. LeClair on March 9, 2001.

[41] In conducting its analysis, the Agency considered the combined base fare which is the subject of the complaint in relation to the other fares offered by Air Canada on the Ottawa-Windsor route and in relation to the fare with the most similar terms and conditions which it offered on the similar, competitive Vancouver-Grande Prairie, Regina-Edmonton, Fort McMurray-Calgary, and Thunder Bay-Winnipeg routes, as well as the discounts off the full economy Y1 base fare calculated on a round-trip basis (hereinafter the Y1 round-trip fare) which the fare represented, the year-over-year increases in the fare, the terms and conditions of carriage applicable to the fare, and historical fare information with respect to each of the routes involved in considering the complaint. The analysis was undertaken using fares offered by Air Canada on these routes on March 9 in 1999, 2000 and 2001.

1. General overview

[42] An overview of the fares published by Air Canada in respect of its domestic services between Ottawa and Windsor, Vancouver and Grande Prairie, Regina and Edmonton, Fort McMurray and Calgary, and Thunder Bay and Winnipeg on March 9 in 1999, 2000, and 2001, shows that Air Canada offered a selection of fares for sale on each route.

[43] The carrier's fare structure on each route included the Y1 fare on which the price levels of the other fares offered on each route are based. The Y1 fare is the full economy fare for one-way travel which allows passengers the most flexibility with respect to booking or cancelling reservations or making changes in their itinerary; however, it is the most expensive economy-type fare. Most other fares offered by Air Canada on these routes were discounted off the Y1 round-trip fare and the tickets related to the round-trip fares were non-refundable and required an advance purchase.

2. The $392 fare

[44] As mentioned above, the Agency's research shows that the $392 fare offered by Air Canada on March 9, 2001 was a combined fare – that is it was calculated by combining the $168 discounted NECONO2 base fare offered for round-trip travel between Ottawa and Toronto and the $224 discounted QE7SNR base fare offered for round-trip travel between Toronto and Windsor. As the terms and conditions applied to each component of the combined fare were not identical, those applicable to the more restrictive of the two components – that is the QE7SNR fare – are deemed to have applied to the combined fare. Thus, the fare quoted to Mr. LeClair would have required a seven-day advanced purchase and a minimum Saturday-night stay at his destination. Further, the related ticket would have been non-refundable and would have allowed for a maximum stay of one year. In addition, a fee of $145 would have applied to any changes being made to his itinerary.

[45] On March 9, 2001 on each of the similar competitive routes, i.e., Vancouver-Grande Prairie, Regina-Edmonton, Fort McMurray-Calgary and Thunder Bay-Winnipeg, Air Canada offered a QECONO2 fare which was the most similar, with respect to terms and conditions of carriage, to the fare offered to Mr. LeClair. In fact, the only difference in the terms and conditions of carriage related to the minimum and maximum stay requirements: the QECONO2 fare required a minimum stay of either a Saturday night or three days, and allowed for a maximum stay of 60 days. Further, the QECONO2 fare was in the same fare class as the QE7SNR fare whose terms and conditions governed the fare offered to Mr. LeClair.

[46] The Agency's analysis shows that, on March 9, 2001, Air Canada offered eight fares on the Ottawa-Windsor route which were discounted off the Y1 full economy fare from 5 to 65 percent. The combined fare offered to Mr. LeClair was discounted at 63 percent and was $17 more expensive than the cheapest fare offered on that route, which was discounted at 65 percent. On that same date, Air Canada's QECONO2 fare was the cheapest fare available year-round on each of the similar competitive routes where the discount off the Y1 round-trip fares ranged from 77 to 82 percent. The QECONO2 fare was $50 to $115 cheaper than the next highest fare offered on these routes on March 9, 2001.

[47] The Agency conducted its analysis on two bases – that is on the actual fares as they were published or offered by Air Canada as well as those same fares calculated on a revenue-per-mile (RPM) basis. Converting the fares to a revenue-per-mile value has the advantage of removing the component of distance in establishing differences between fares. The analysis of the fares as they were offered or published shows that, on March 9, 2001, the combined fare offered to Mr. LeClair for travel between Ottawa and Windsor was $104 to $214 – that is 36 to 120 percent – higher than the QECONO2 fares offered for round-trip travel on the four similar routes. The RPM analysis shows that the fare offered to Mr. LeClair was 47 to 114 percent – that is $0.15 to $0.25 per mile – higher than the QECONO2 fares offered on the similar competitive routes.

[48] To the Agency's knowledge, Air Canada did not publish or offer for travel on the Ottawa-Windsor route the same combined fare on March 9 in 2000 or 1999, nor did it publish or offer the QECONO2 fare on those dates. The Agency's research shows that the QECONO2 fare was never offered on the Ottawa-Windsor route, but was introduced for sale on the similar Vancouver-Grande Prairie, Regina-Edmonton, Fort McMurray-Calgary and Thunder Bay-Winnipeg routes on February 15, 2001. As such, in conducting its comparison of the fares offered historically on the route which is the subject of the complaint with those offered on the similar competitive routes, the Agency can comment only in general upon the manner in which those fares available from year to year were managed by Air Canada on a historical basis.

[49] From March 9, 1999 to March 9, 2000, the fares on the Ottawa-Windsor route were, for the most part, increased by 9 percent at both the upper and lower ends of the range of fares offered. During that period, fares at the upper end of the range offered on each of the similar domestic services were generally increased by 3 to 36 percent, while the changes to the fares at the lower end of the ranges varied from a decrease of 9 percent to increases ranging from 3 to 48 percent.

[50] In the year from March 9, 2000 to March 9, 2001, the fares at the high end of the range were increased by approximately 6 percent while the fares at the low end of the range were reduced by 15 to 16 percent on the Ottawa-Windsor route. During that period, the fares offered on the similar competitive routes were increased by approximately 6 percent at the upper end of the range, but at the lower end the changes ranged from a reduction of 25 percent to an increase of 25 percent.

[51] An analysis of the discounted fares common to both the Ottawa-Windsor route and any or all of the similar competitive routes – that is the fares with the same fare codes and the same terms and conditions of carriage and sale – on March 9, 1999 shows that, on an RPM basis, the discounted fares offered on the Ottawa-Windsor route were from 19 percent lower to 58 percent higher than the discounted fares offered on the similar competitive routes. On that date in 2000, the discounted fares offered on the Ottawa-Windsor route were from 24 percent lower to 16 percent higher on an RPM basis than the discounted fares offered on the similar competitive routes. A similar comparison as at March 9, 2001 shows that the discounted fares were generally from 9 percent less expensive to 17 percent more expensive on the Ottawa-Windsor route than on the similar competitive routes.

[52] Thus, on a historical basis, the Agency's analysis shows that the fares offered on the Ottawa-Windsor route were neither exclusively higher nor exclusively lower than those offered on the similar competitive routes: much depended upon the route-to-route comparison, and even within one comparison, the difference was not necessarily consistently either higher or lower. Over the period from March 9, 1999 to March 9, 2001, on an RPM basis, the discounted fares offered on the Ottawa-Windsor route generally ranged from 24 percent lower to 58 percent higher than the discounted fares offered on the similar competitive routes. However, on March 9, 2001, the combined fare offered to Mr. LeClair was consistently higher: on an RPM basis, it was 47, 71, 97 and 114 percent higher than on the four similar competitive routes. As such, the differences on three of the routes also far exceeded the historical maximum difference of 58 percent.

3. Summary

[53] The Agency has carefully examined and analyzed the combined $392 fare offered by Air Canada in respect of its domestic service between Ottawa and Windsor on March 9, 2001 as well as the QECONO2 fare offered in respect of its similar competitive services between Vancouver and Grande Prairie, Regina and Edmonton, Fort McMurray and Calgary, and Thunder Bay and Winnipeg on March 9, 2001. The Agency's analysis identified that, as mentioned above, the combined $392 fare, although only slightly higher than the cheapest fare offered on the Ottawa-Windsor route, was considerably higher on the Ottawa-Windsor route than the comparable fare on the similar competitive routes, both as it was offered to Mr. LeClair and on an RPM basis. In fact, the RPM calculation would suggest that the fare offered to Mr. LeClair was effectively $125 to $210 too high if distance were the only feature to distinguish the Ottawa-Windsor route from the similar competitive routes.

[54] Further, the Agency notes that on March 9, 2001, the combined $392 fare offered for round-trip travel between Ottawa and Windsor was discounted by a lower amount and had slightly less advantageous terms and conditions of carriage than the QECONO2 fares offered on the similar routes. The less advantageous terms and conditions of carriage would lead to the expectation of a lower, rather than higher, fare as passengers purchasing the fare would have less flexibility with respect to the minimum stay requirement. The Agency notes that the historical comparison of the fares common to the Ottawa-Windsor route and the similar competitive routes indicated that, on an RPM basis, some fares were higher and some were lower on the Ottawa-Windsor route, depending upon the route-to-route comparison being considered. It further notes that on March 9, 2001, the combined fare offered to Mr. LeClair did not reflect this mix of higher and lower differences: in each of the four comparisons, the combined fare was considerably higher than the similar fare offered on the similar competitive route.

4. Services provided by other carriers on the Ottawa-Windsor route

[55] Agency investigations into fare-related complaints include the examination of fares offered by other carriers who provided a service on the route which is the subject of the complaint. On the date under review in 1999 and 2000, Canadi*n also published fares for travel between Ottawa and Windsor.

[56] On March 9, 1999 and 2000, Canadi*n offered the same selection of fares at the same level and level of discount on the Ottawa-Windsor route as did Air Canada. By March 9, 2001, the merger between Air Canada and Canadi*n had taken place, so there were no longer any Canadi*n' fares offered on the route.

[57] The Agency also notes that from mid-September, 2000 until November 27, 2000, CanJet Airlines, A Division of I.M.P. Group Limited (hereinafter CanJet) provided a service between Ottawa and Windsor. The Agency's research shows that during the period when CanJet provided service on the route, Air Canada did not increase the levels of any of the fares generally available to the travelling public on a year-round basis on that route. When CanJet announced its entry into the domestic market, Air Canada introduced on September 1, 2000 one deeply-discounted fare for travel between Ottawa and Windsor until, on October 12, 2000 the Commissioner of Competition issued a temporary Cease and Desist Order prohibiting Air Canada from offering or selling that fare on selected routes, one of which was the Ottawa-Windsor route. As a result, Air Canada withdrew that particular deeply discounted fare from its fare structure. At that point, CanJet was offering one-way fares "from $119" for travel between these cities and the lowest fare then offered by Air Canada for travel between Ottawa and Windsor was a fall seat sale fare (available only until November 8, 2000) of $209 for round-trip travel; Air Canada's lowest fare available year-round was the round-trip fare of $415.

5. Agency findings

[58] In light of the foregoing, the Agency finds that the $392 combined fare which is the subject of the complaint was unreasonable.

[59] Based on the above finding, it would have been the Agency's intention, pursuant to subsection 66(5) and paragraph 66(1)(b) of the CTA, to seek Air Canada's comments and consider directing the carrier to amend its tariff applicable to the $392 round-trip fare offered in respect of its service between Ottawa and Windsor.

[60] However, since the date on which the complaint was filed, Air Canada has significantly changed its revenue model for passenger services from the traditional, full service network airline model with its multiplicity of fare structures and imposing restrictions, such as Saturday night stays, to a new revenue model based on five simple fare types, each based on different combinations of product attributes, including the ability to make changes to reservations, seat selection and Aeroplan mileage. As such, it would be difficult to identify a fare currently offered by Air Canada which would be comparable to the one offered to Mr. LeClair on March 9, 2001. As a consequence, the Agency is of the opinion that there is no advantage to proceeding with directing Air Canada to amend its tariff as identified above.

CONCLUSION AND RECOMMENDATION

[61] In light of the foregoing, the Agency finds that the $392 combined fare which is the subject of the complaint was unreasonable. However, and given that the change in revenue model for passenger services now offered by Air Canada would render any order issued under subsection 66(5) and paragraph 66(1)(b) of the CTA moot, the Agency contemplates no further action in this regard.

Members

• Marian L. Robson
• Guy Delisle
• Gilles Dufault