Decision No. 407-A-2011

Application

Air Canada has applied to the Canadian Transportation Agency (Agency) for a licence to operate scheduled international services, large and all-cargo aircraft, between Canada and Saint Kitts and Nevis, in accordance with the Agreement between the Government of Canada and the Government of the Federation of St. Christopher and Nevis on Air Services signed on October 18, 1985 (Agreement).

Legislation

Paragraph 69(1)(a) of the Canada Transportation Act (CTA)

For a licence to be issued, the Agency must be satisfied, as provided for in paragraph 69(1)(a) of the CTA, that Air Canada is a Canadian, holds a Canadian aviation document, has the prescribed liability insurance coverage in respect of the service to be provided under the licence and meets the prescribed financial requirements.

The Agency has reviewed the application and is satisfied that Air Canada meets all the applicable requirements of paragraph 69(1)(a) of the CTA in respect of the services between Canada and Saint Kitts and Nevis. The Agency also finds that the pertinent terms and conditions of the Agreement have been complied with.

Paragraph 69(1)(b) and section 59 of the CTA

In order for a licence to be issued, the Agency must also be satisfied, as provided for in paragraph 69(1)(b) of the CTA, that Air Canada has not contravened section 59 of the CTA within the preceding twelve months.

Section 59 of the CTA states that no person shall sell, cause to be sold or publicly offer for sale in Canada an air service unless, if required under Part II of the CTA, a person holds a licence under that Part in respect of that service and that licence is not suspended.

In its Order No. 2011-A-393 dated September 23, 2011, the Agency exempted Air Canada from the application of section 59 of the CTA, permitting it to sell, cause to be sold or publicly offer for sale in Canada a scheduled international service between Canada and Saint Kitts and Nevis without holding the required licence. The Agency also found, however, that Air Canada had contravened section 59 of the CTA prior to filing its application for an exemption.

With respect to this licence application, Air Canada has filed an affidavit referring to letters dated September 16 and 20, 2011 pointing out that as a result of an internal error, it had already started to offer for sale seats for air services from Toronto, Ontario, Canada to Saint Kitts and Nevis. Air Canada indicates that it had assumed erroneously that the services were authorized to be operated under a licence Air Canada already held. Air Canada submits, however, that it has not actively promoted the sale of these air services.

In addition, Air Canada states that as soon as it became aware that it was selling the air services without the appropriate licence authority, it took immediate remedial action to avoid further contravention of section 59 of the CTA by promptly filing an application for an exemption from section 59 of the CTA.

Air Canada also states that it considered removing the available fares from its reservation system including the ability to book flights for these services. However, due to internal availability, technical and commercial reasons as well as a potential imminent labour disruption, it was not operationally appropriate to do so. Air Canada indicates that its credibility as a carrier would have been at risk, and that the success and viability of the services would have been jeopardized, if it had ceased offering and selling the services.

Analysis and Findings

The Agency, pursuant to subsection 79(2) of the CTA, has discretion to issue a licence notwithstanding the contravention.

The Agency has reviewed the application and finds that the offer for sale of air services between Canada and Saint Kitts and Nevis until the day Air Canada became aware of its contravention and applied for an exemption was not a willful attempt to avoid compliance with legislative and regulatory requirements.

The Agency also considered Air Canada’s explanation as to why it continued to offer the services until the day the exemption from section 59 of the CTA was granted to Air Canada. The Agency notes that Air Canada was forthright in admitting its error to the Agency and took steps to ensure that such a situation will not recur. The Agency also considered the impact on Air Canada’s efforts to make the services viable and the potential for recovery from the public confusion relating to an interruption of its sales. The Agency finds that to refuse to issue a licence to Air Canada would be a detriment to both Air Canada and the public.

Conclusion

In light of the foregoing, the Agency will not refuse to issue a licence to Air Canada even though it contravened section 59 of the CTA. However, Air Canada should be aware that the Agency considers contraventions of provisions of the CTA or the Air Transportation Regulations, SOR/88-58, as amended (ATR) to be serious and may take punitive action should any such contraventions occur in the future.

Accordingly, the Agency approves the application for a licence to operate scheduled international services, large and all-cargo aircraft, between Canada and Saint Kitts and Nevis.

Pursuant to subsection 71(1) of the CTA, the licence is subject to the conditions prescribed by the ATR and the following conditions:

1. The Licensee is authorized to operate scheduled international services on the route(s) set out in the Agreement.
2. The scheduled international services are to be conducted in accordance with the Agreement and any applicable arrangements agreed to between Canada and Saint Kitts and Nevis.