Decision No. 562-P-A-2004

October 22, 2004

October 22, 2004

IN THE MATTER OF a complaint by Ralph Reichert concerning the $399.11 fare and the range of fares offered by Air Canada on or about July 10, 2000 for travel between Toronto and Thunder Bay, Ontario, departing from Toronto on August 7, 2000 and returning from Thunder Bay on August 14, 2000.

File No. M4370/A74/00-92

COMPLAINT

On July 19, 2000, Ralph Reichert, on behalf of Brent Rousseau, filed with the Canadian Transportation Agency (hereinafter the Agency) a complaint concerning the $499.11 fare and the range of fares offered by Air Canada on or about July 10, 2000 for travel between Toronto and Thunder Bay, departing from Toronto on August 7, 2000 and returning from Thunder Bay on August 14, 2000.

By letter dated September 28, 2000, both Mr. Reichert 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 subsections 66(1) and 66(2) 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. Reichert with its answer to the complaint. On October 31, 2000, Air Canada filed its answer to the complaint and on November 14, 2000, Mr. Reichert filed his reply to the carrier's answer.

In its Decision No. LET-P-A-33-2001 dated January 24, 2001, the Agency, pursuant to paragraph 66(3)(b) of the CTA, requested Air Canada to file with the Agency, and serve on Mr. Reichert, specific information with respect to the number of seats made available or sold at the various fares it offered on July 10, 2000 on its Toronto-Thunder Bay route. In a letter dated February 1, 2001, Air Canada challenged the Agency's jurisdiction to seek the information requested in its January 24, 2001 Decision pursuant to section 66 of the CTA, and on February 16, 2001, the Agency, by Decision No. LET-P-A-73-2001, required Air Canada to file the information pursuant to sections 25 and 83 of the CTA. On March 9, 2001, Air Canada filed its answer, but made a claim for confidentiality with respect to the information submitted, which the Agency accepted by Decision No. LET-P-A-193-2001 dated April 9, 2001.

In its Decision No. LET-P-A-164-2001 dated March 29, 2001, the Agency advised Air Canada that, on March 19, 2001, Mr. Reichert had apprised the Agency that the "total cost of the ticket" amount indicated on the Specific Incident Complaint Form that he had filed with the Agency was incorrect and that it should have read $399.11 instead of $499.11.

Subsequent to being advised by Agency staff that the corrected fare did not form the basis of a new complaint, Air Canada filed its supplemental answer to the complaint on May 11, 2001 and made a claim for confidentiality with respect to some of the information submitted. In its Decision No. LET-P-A-323-2001 dated July 10, 2001, the Agency accepted Air Canada's claim for confidentiality.

Deadlines for the filing of some of the pleadings in the application were extended at the request of Air Canada.

Pursuant to subsection 29(1) of 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.

Between April 1, 2003 and September 30, 2004, Air Canada was under court-sanctioned protection from its creditors under the Companies' Creditors Arrangement Act. As part of that process, the Ontario Superior Court of Justice issued an order suspending all proceedings against Air Canada and certain of its subsidiaries. The Agency was, therefore, prohibited from dealing with any complaints or investigations involving Air Canada during that 18-month period.

PRELIMINARY MATTER

Although Air Canada filed its October 31, 2000 answer to the complaint as well as its May 11, 2001 supplemental answer after the prescribed deadlines, the Agency, pursuant to section 6 of the National Transportation Agency General Rules, SOR/88-23, accepts these submissions as being relevant and necessary to its consideration of this matter.

ISSUES

The issues to be addressed are:

  1. whether Air Canada, including its affiliated licensees (hereinafter Air Canada), was, on or about July 10, 2000, the only person providing a domestic service between Toronto and Thunder Bay 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 Toronto and Thunder Bay on or about July 10, 2000, which is the subject of the complaint, was unreasonable, and
  3. whether the range of fares offered by Air Canada in respect of its service between Toronto and Thunder Bay on or about July 10, 2000 was inadequate.

POSITIONS OF THE PARTIES

Mr. Reichert submits that he saw an announcement in a Toronto newspaper during the weekend of July 8-9, 2000, stating that Air Canada would be offering lower fares to northern Ontario destinations. He states that on or about July 10, 2000, when he attempted to book a ticket at the advertised price of $199, he was told that the discounted seats were available only on two of Air Canada's five to six flights per day between Toronto and Thunder Bay, and that no seats were available at the $199 fare on those two flights for the days for which he wished to purchase a ticket. He further maintains that Air Canada would not identify for him how many seats it "allotted at the special fare of $199". Mr. Reichert initially advised that the total cost of the ticket he ultimately purchased was $499.11. He later filed a correction with the Agency stating that the total cost of the ticket should have read $399.11 (including applicable fees, charges and taxes).

Air Canada submits that at the time of the complaint, while it was the only carrier providing a non-stop service between Toronto and Thunder Bay, WestJet Airlines Ltd. (hereinafter WestJet) provided a service between Hamilton and Thunder Bay. The carrier maintains that the service provided by WestJet between Hamilton and Thunder Bay was not an unreasonable alternative to that provided by Air Canada between Toronto and Thunder Bay. In addition, in its supplemental answer dated May 11, 2001, Air Canada submits that Canada 3000 Airlines Limited (hereinafter Canada 3000) had "recently" introduced a non-stop service between Toronto and Thunder Bay.

Air Canada also submits that the fare it offered between Toronto and Thunder Bay was not unreasonable pursuant to subsection 66(1) of the CTA. It states that there are a number of valid reasons why fares differ from route to route, and that the fare which is the subject of the complaint--that is, the round-trip $358 V14SNR fare (excluding applicable fees, charges and taxes)--offered on its service between Toronto and Thunder Bay was not unreasonable.

In its supplemental answer, Air Canada maintained that, generally, economic theory justifies fare differentials from route to route, and submitted 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., a non-competitive route).

Air Canada provided historical data which shows that, on July 18, 1999, when it competed on the route with Canadian Airlines International Ltd. carrying on business under the firm name and style of Canadian Airlines International or Canadi*n Airlines or Canadi*n (hereinafter Canadi*n) and its affiliate, Canadian Regional Airlines (1998) Ltd., Air Canada offered its V14SNR fare at $478, excluding taxes or applicable charges, for round-trip travel between Toronto and Thunder Bay. Accordingly, Air Canada points out that the $358 V14SNR fare it offered one year later represents a 25-percent decrease of that fare.

Air Canada further submits that it was not offering an inadequate range of fares in respect of its service between Toronto and Thunder Bay. It states that the same fare classes--i.e., J, Y, B, H, V, Q, L and Z classes--were offered on July 18, 2000 as on July 18, 1999. The carrier indicates that the special discounted L-class fare of $198 was first introduced on February 24, 2000 and then extended on April 4 until August 14; it added that, given the summer peak period, many of the seats offered at this fare for travel in August would likely have been sold prior to Mr. Reichert's enquiry on or about July 10. (The Agency notes the difference between the $198 fare cited by Air Canada and the $199 fare initially cited by Mr. Reichert, but is of the opinion that the discrepancy does not have any bearing on its investigation into the complaint.) Air Canada also submits that the Agency "does not have the jurisdiction to review inventory levels of fares under section 66 of the Act".

In his reply, Mr. Reichert submits that, contrary to Air Canada's argument, Hamilton is not a viable alternative to Toronto because the trip by car from Toronto to Hamilton can add as much as two hours to a passenger's travel time. He further submits that the fare he paid was unreasonable when one had been offered at $199, and he challenges Air Canada's claim that it offered an adequate range of fares. He reiterates his request that Air Canada advise him of how many seats were sold on each flight between Toronto and Thunder Bay at the discounted price of $199.

ANALYSIS AND FINDINGS

In making its findings in respect of the preliminary issue and the 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 Toronto and Thunder Bay 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.

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 subsections 66(1) and 66(2) 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 its 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; and/or
  3. the licensee is offering an inadequate range of fares in respect of that service.

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.

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

Whether Air Canada was, on or about July 10, 2000, the only person providing a domestic service between Toronto and Thunder Bay within the meaning of section 66 of the CTA

The Agency has reviewed the information available to it with respect to the domestic service offered between Toronto and Thunder Bay. The Agency has also considered Air Canada's position that WestJet's service between Hamilton and Thunder Bay constitutes a reasonable alternative domestic service to that provided by Air Canada between Toronto and Thunder Bay on the grounds that the John C. Munro Hamilton International Airport is easily accessible to the Greater Toronto area; that the John C. Munro Hamilton International Airport has a catchment population of at least 3.5 million people; and that the time to travel by car from the John C. Munro Hamilton International Airport to downtown Toronto is less than one hour.

Pursuant to section 66 of the CTA, the Agency may inquire into complaints concerning passenger fares and cargo rates published or offered in respect of certain domestic services provided "between two points". The word "point" is not defined in the CTA. However, The Canadian Oxford Dictionary defines "point" as "a specific place or position" and, in its mathematical sense, as "that which is conceived as having a position, but no extent, magnitude or dimension". The denotation of the word "point", therefore, is very specific and is much more narrow than "catchment" area. The Agency has considered whether interpreting the word "point" in section 66 of the CTA as "catchment" area would be consistent with the spirit and intent of the CTA as a whole and notes that the word "point" is used frequently in the CTA. The Agency also notes that The Canadian Oxford Dictionary defines "catchment" area as "the area served by a school, hospital, etc." Accordingly, the parameters of a "catchment" area are not very well defined and may be quite subjective. The Agency is therefore of the opinion that interpreting the word "point" in section 66 of the CTA as "catchment" area could lead to inconsistency and ambiguity.

Accordingly, the Agency is of the opinion that the word "point", as it is used in section 66 of the CTA, refers to an individual origin or destination city rather than a "catchment" area.

The Agency has also considered Air Canada's position that Canada 3000 offered a non-stop service between Toronto and Thunder Bay. Information available to the Agency indicates that Air Canada was the only carrier offering a service between Toronto and Thunder Bay on July 10, 2000, the date on which Mr. Reichert undertook his fare research. The Agency's research shows that the service provided by Canada 3000 (or its predecessor on the Toronto-Thunder Bay route, I.M.P. Group Limited carrying on business as Canjet Airlines) commenced only in April 2001. As such, the Agency finds that Canada 3000 did not offer a service between Toronto and Thunder Bay on July 10, 2000.

In light of the foregoing, the Agency has determined that, on or about July 10, 2000, Air Canada was the only person providing a domestic service between Toronto and Thunder Bay 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

Whether the $399.11 fare published or offered by Air Canada was unreasonable and whether the range of fares offered by Air Canada was inadequate in respect of its service between Toronto and Thunder Bay on or about July 10, 2000

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 Toronto and Thunder Bay and the fares applicable to similar domestic services offered by Air Canada and one or more other licensees using similar aircraft, including terms and conditions of carriage. In respect of the complaint, the Agency requested Air Canada to provide information concerning the number of seats sold at each fare for specific dates. In response, Air Canada submitted the number of seats sold in each fare class for the dates specified.

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

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 which 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.

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

  1. on July 10, 2000, Air Canada operated its domestic service between Toronto and Thunder Bay using large aircraft, as defined in the ATR;
  2. according to the OAG, the distance between Toronto and Thunder Bay is approximately 574 air miles; and
  3. the origin-destination passenger volume between Toronto and Thunder Bay was approximately 164,470 passengers in 1999 (the last complete year for which information is available).

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 Toronto and Thunder Bay. Based on its consideration of the factors outlined above, the Agency has determined that, on July 10, 2000, the Air Canada service which was most similar to the one it offered between Toronto and Thunder Bay within the meaning of paragraph 66(3)(b) of the CTA was Air Canada's service between Calgary and Winnipeg for the following reasons:

  1. WestJet operated a domestic service between Calgary and Winnipeg in addition to the service operated by Air Canada;
  2. for approximately 80 percent of its flights, Air Canada operated its service between Calgary and Winnipeg using large aircraft, as defined in the ATR, and for the remaining 20 percent of its flights, it operated this service using medium aircraft, as defined in the ATR;
  3. according to the OAG, the distance between Calgary and Winnipeg is approximately 740 air miles; and
  4. the origin-destination passenger volume between Calgary and Winnipeg was approximately 182,510 passengers in 1999.

Data respecting fares applicable to domestic services between Toronto and Thunder Bay and between Calgary and Winnipeg

The Agency's research has identified that the $399.11 fare which is the subject of the complaint is the sum of Air Canada's V14SNR round-trip base fare of $358, the $15 round-trip surcharge Air Canada applied to the base fare to cover the fees that it pays for the operation of Canada's air navigation system, and the Goods and Services Tax of $26.11. Of these components, the Agency will conduct its analysis and make its determination with respect to the $358 V14SNR base fare, which will be analyzed below. The Agency also analyzed the range of fares offered by Air Canada in respect of its service between Toronto and Thunder Bay.

In conducting its analysis, the Agency considered the V14SNR fare Air Canada offered for round-trip travel on its Toronto-Thunder Bay route in relation to the other fares it offered on the route and to the VHCANADA fare (the fare with the most comparable terms and conditions of carriage) it offered for round-trip travel on the Calgary-Winnipeg route, as well as the discounts off the full economy Y1 fare sold on a round-trip basis (hereinafter the Y1 round-trip fare) which the fares represented, the year-over-year increases in the fares, and the terms and conditions of carriage applicable to the fares on each of the routes. The range of fares Air Canada offered on its Toronto-Thunder Bay route was compared to the range it offered on the Calgary-Winnipeg route with respect to the span of fares, the number of fares, the distribution of discounts off the Y1 round-trip fare, the similarity of fare classes offered on the two routes, the terms and conditions of carriage associated with each fare, and historical ranges, including the levels of the fares themselves and the year-over-year changes.

The Agency has reviewed the fares offered by air carriers in respect of the domestic services operated between Toronto and Thunder Bay on July 10 in 1998, 1999 and 2000, that is, from a point in time when this route was served by both Air Canada and Canadi*n, including their affiliates, to the date of the complaint. The Agency has also reviewed the fares offered by Air Canada on the Calgary-Winnipeg route for those dates.

1. General overview

An overview of the fares published by Air Canada in respect of its domestic services between Toronto and Thunder Bay and between Calgary and Winnipeg on July 10 in 1998, 1999 and 2000 shows that Air Canada offered a selection of fares on each route. The carrier's fare structure on each route included the Y1 fare on which the price levels of the other fares offered on the route are based. The Y1 fare is the economy-type 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. With the exception of a premium, business-type (J-class) fare, most of the other fares offered by Air Canada on the Toronto-Thunder Bay and Calgary-Winnipeg routes were discounted off the Y1 round-trip fare and were non-refundable, round-trip fares which required an advance purchase.

The Agency's analysis shows that, on July 10 in 1998, 1999 and 2000, Air Canada offered a greater number of discounted fares on the Calgary-Winnipeg route than on the Toronto-Thunder Bay route. However, the discounted fares which were available on both routes were lower and were more deeply discounted off the Y1 round-trip fare on the Toronto-Thunder Bay route than on the Calgary-Winnipeg route.

Canadi*n and Royal Aviation Inc. carrying on business as Royal and/or Conifair (hereinafter Royal) both offered fares on the Toronto-Thunder Bay route on July 10 in 1998 and 1999.

2. The V14SNR fare

The Agency's research shows that the V14SNR fare was a year-round fare and was available on the Toronto-Thunder Bay route on each of the dates under review. The V14SNR fare was not offered on the Calgary-Winnipeg route; however, the VHCANADA fare was offered on that route on each of the dates under review. The terms and conditions of carriage applicable to the two fares were very similar with the exceptions that: a) the maximum stay allowed at destination was 365 days for the V14SNR fare and 60 days for the VHCANADA fare; and, b) the V14SNR fare was available year-round whereas the VHCANADA fare was a high-season fare. However, the VHCANADA fare, when combined with its low-season counterpart, the VLCANADA fare, provided travellers with a year-round V-CANADA fare--that is, they were not limited-duration seat sale fares.

Historically, on July 10, 1998 and July 10, 1999, the V14SNR fare offered by Air Canada on the Toronto-Thunder Bay route was 26 percent, or $149 and $166, respectively, lower than the VHCANADA fare it offered on the Calgary-Winnipeg route, reflecting the fact that the Toronto-Thunder Bay route is 22 percent shorter than the Calgary-Winnipeg route. It was also more deeply discounted off the Y1 round-trip fare: the discount was 56 and 57 percent, respectively, on the Toronto-Thunder Bay route, but 47 percent in both years on the Calgary-Winnipeg route. From July 10, 1998 to July 10, 1999, Air Canada increased both fares by 11 percent on each route. Thus, on a historical basis, the V14SNR fare was more advantageous to travellers on the Toronto-Thunder Bay route than was the VHCANADA fare on the Calgary-Winnipeg route.

By July 10, 2000, Air Canada had not changed its practice of offering a more favourable fare on the Toronto-Thunder Bay route. From July 10, 1999 to July 10, 2000, Air Canada reduced the V14SNR fare by $120, or 25 percent, on the Toronto-Thunder Bay route, but reduced the VHCANADA fare by $27, or 4 percent, on the Calgary-Winnipeg route. As a result, on July 10, 2000, Air Canada offered the V14SNR fare at $358 for travel between Toronto and Thunder Bay, and the VHCANADA fare at $617 for travel between Calgary and Winnipeg, a difference of $259, or 42 percent. Even taking into consideration the fact that the Toronto-Thunder Bay route is 22 percent shorter than the Calgary-Winnipeg route, the V14SNR fare remains considerably cheaper than the VHCANADA fare. In addition, the discount off the Y1 round-trip fare applicable to the V14SNR fare offered on the Toronto-Thunder Bay route had increased to 69 percent on July 10, 2000 compared to the 1998 discount of 56 percent. On the Calgary-Winnipeg route, the discount applicable to the VHCANADA fare was 47 percent in 1998 and 51 percent on July 10, 2000.

The Agency has carefully examined and analyzed the V14SNR fare offered by Air Canada in respect of its domestic service between Toronto and Thunder Bay and the VHCANADA fare it offered in respect of its domestic service between Calgary and Winnipeg on July 10 in 1998, 1999 and 2000. On the basis of the foregoing analysis, and based on the factors set out in subsection 66(3) of the CTA, the Agency is of the opinion that the V14SNR fare was lower on the Toronto-Thunder Bay route, reflecting, among other things, the difference in the length of the route. The Agency also notes that, on each of the dates under review, the V14SNR fare offered on the Toronto-Thunder Bay route was more deeply discounted off the Y1 round-trip fare than the VHCANADA fare offered on the Calgary-Winnipeg route. Further, while both the V14SNR and VHCANADA fares were increased by the same amount between July 10, 1998 and July 10, 1999, Air Canada lowered the V14SNR fare offered on the Toronto-Thunder Bay route by a considerably greater amount from July 10, 1999 to July 10, 2000 than the VHCANADA fare offered on the Winnipeg-Calgary route.

3. The range of fares

The Agency also analyzed the range of fares offered by Air Canada in respect of its service between Toronto and Thunder Bay in comparison to the range of fares Air Canada offered on the Calgary-Winnipeg route. An analysis of the ranges of fares follows.

3.(a) Span of fares

On the dates under review, Air Canada's Y1 fare was 7-10 percent lower on the Toronto-Thunder Bay route than the Y1 fare it offered on the similar Calgary-Winnipeg route: it was $108 lower on July 10, 1998, $120 lower on July 10, 1999 and $88 lower on July 10, 2000. However, after taking into consideration the fact that the Toronto-Thunder Bay route is 22 percent shorter in distance than the Calgary-Winnipeg route, if the Agency were to assume a one-to-one relationship between the differences in fares and mileages, the Y1 fare could be as much as 12-15 percent higher on the Toronto-Thunder Bay route than the Y1 fare offered on the Calgary-Winnipeg route. At the opposite end of the range, the lowest fare Air Canada offered on the dates under review on the Toronto-Thunder Bay route ranged from 77 percent higher to 20 percent lower than the lowest fare it offered on the Calgary-Winnipeg route: it was $168 (77 percent) and $182 (73 percent) higher on July 10, 1998 and July 10, 1999, respectively, then $50 (20 percent) lower on July 10, 2000. Thus, after taking into consideration the difference in distance, Air Canada's Y1 fare was somewhat higher and the discounted fares generally lower on the Toronto-Thunder Bay route than those offered on the Calgary-Winnipeg route.

On the Toronto-Thunder Bay route, the difference between the Y1 round-trip fare and the lowest fare increased from $557 on July 10, 1998 to $970 on July 10, 2000, an increase of 74 percent. This change resulted from an increase in the Y1 fare at the high end of the range of 19 percent over the period, and a decline of 49 percent in the level of the lowest year-round fare offered. The fare class of the most deeply discounted fare was not the same in each of the three years.

On the Calgary-Winnipeg route, the difference between the Y1 round-trip fare and the lowest fare increased from $876 on July 10, 1998 to $1,008 on July 10, 2000, an increase of 15 percent. This change resulted from an increase in the Y1 fare of 15 percent over the period, and a decrease of 14 percent in the level of the lowest year-round excursion fare offered. On this route, the fare class of the most deeply discounted fare was identical in each of the three years.

Thus, travellers on the Toronto-Thunder Bay route were offered a slightly narrower span of fares from which to choose on July 10, 2000 than travellers on the Calgary-Winnipeg route; however, the difference in the spans of fares was only $38, or less than 4 percent.

3.(b) Number of fares

On July 10 in 1998 and 1999, Air Canada offered four round-trip fares discounted off the Y1 round-trip fare and on July 10, 2000 it offered six such fares on the Toronto-Thunder Bay route. On July 10 in 1998, 1999 and 2000, it offered seven round-trip fares discounted off the Y1 round-trip fare on the Calgary-Winnipeg route. Thus, on each of the dates under review, Air Canada offered a smaller selection of round-trip fares discounted off the Y1 round-trip fare on the Toronto-Thunder Bay route than it offered on the Calgary-Winnipeg route. However, from July 10, 1999 to July 10, 2000, Air Canada did increase the number of discounted fares offered on the Toronto-Thunder Bay route for those travellers whose plans were flexible.

3.(c) Distribution of discounts off the Y1 round-trip fare

On July 10 in 1998 and 1999, Air Canada offered four round-trip fares on the Toronto-Thunder Bay route which were discounted off the Y1 round-trip fare. The discount applicable to each of the fares on this route was almost identical in both years--that is, at 17, 47, 56-57, and 61 percent. On July 10, 2000, the six fares then offered by Air Canada on the route were generally discounted at 17, 61 (2 fares), 69, 79 and 83 percent. Thus, by July 10, 2000, not only had Air Canada introduced two new fares, it had increased the levels of some of the discounts on fares already offered on the route.

On the Calgary-Winnipeg route on July 10, 1998, Air Canada offered seven year-round, round-trip fares discounted at 23, 41, 47, 55, 59, 71, and 79 percent. On July 10 in 1999 and 2000, the discounts on the seven fares then offered were very similar. In general, discount levels were 23, 41, 47-51, 55, 60, 72, and 79 percent.

The foregoing illustrates that, on July 10, 2000, with respect to the distribution of discounts off the Y1 round-trip fare, the routes were treated in a similar manner, with the concentration of the discounts clustered at the least expensive end of the range of fares on both routes.

A review of the fares available on a year-round basis in 1998 and 1999 shows that, for fare types which were offered in both markets on July 10, the levels of discount were higher on the Toronto-Thunder Bay route than on the Calgary-Winnipeg route. This practice continued into 2000, when, on July 10, the fares which were common to both markets were discounted by higher percentages on the Toronto-Thunder Bay route than on the Calgary-Winnipeg route.

On July 10, 1998 and 1999, the lowest fare on the Toronto-Thunder Bay route was discounted off the Y1 round-trip fare at 56 and 57 percent respectively, while the lowest fare on the Calgary-Winnipeg route was discounted by 80 percent in both years. However, on July 10, 2000, despite the fact that Air Canada offered a greater number of fares on the Calgary-Winnipeg route, the lowest fare on the Toronto-Thunder Bay route was discounted by 83 percent while on the Calgary-Winnipeg route, the discount attributable to the lowest fare remained unchanged at 80 percent.

3.(d) Fare classes

On July 10 in each of the three years under review, Air Canada offered the Y1 (full economy-type) fare and the J1 (premium business-type) fare on both routes. In addition, on July 10, 1998, Air Canada offered one discounted fare in each of the B-, H-, V- and Q-classes of fare on the Toronto-Thunder Bay route; on the Calgary-Winnipeg route, it offered one B- and one H- class fare, two Q-class fares, two V-class fares and one L-class fare. By July 10, 2000, on the Toronto-Thunder Bay route, Air Canada offered one discounted fare in each of the B-, H-, V- and L-classes of fares, and two Q-class fares. On the Calgary-Winnipeg route, it offered one discounted fare in the M-class, one in each of the B- and the H-classes, two in the V-class, two in the Q-class and one in the L-class. The L-class fare was the least expensive fare offered on each route, and on July 10, 2000, the L-class fare was discounted at 83 percent on the Toronto-Thunder Bay route and at 79-80 percent on the Calgary-Winnipeg route. As such, by the date on which Mr. Reichert undertook his fare research, Air Canada offered one fare class on the Calgary-Winnipeg route which it did not offer on the Toronto-Thunder Bay route--a fare in the M-class which was discounted at 19 percent off the Y1 full economy fare. It also offered an additional V-class fare on the Calgary-Winnipeg route; the two V-fares offered on the Calgary-Winnipeg route were discounted at 51 and 60 percent. However, the fare offered in the V-class on the Toronto-Thunder Bay route was discounted at 69 percent.

For those fares common to both routes, the terms and conditions of carriage associated with each fare were the same and, thus, were equally restrictive on both routes.

The foregoing shows that, while Air Canada offered one additional fare class on the Calgary-Winnipeg route, the fare was not deeply discounted. Further, in the one fare class where Air Canada offered two fares on the Calgary-Winnipeg route but only one on the Toronto-Thunder Bay route, the associated discounts were much lower on the Calgary-Winnipeg route than on the Toronto-Thunder Bay route.

3.(e) Historical ranges

(i) Levels of fares

The Agency's examination of the range of fares offered for travel by Air Canada on the Toronto-Thunder Bay route compared to that it offered on the Calgary-Winnipeg route on July 10 in 1998, 1999 and 2000 shows that where year-round fares with the same fare basis codes were offered on both routes in a given year, they were lower on the Toronto-Thunder Bay route than on the Calgary-Winnipeg route; the fares were 10-38 percent, or $108-$126, lower in 1998; 10-38 percent, or $120-$140, lower in 1999; and 7-53 percent, or $88-$281, lower in 2000.

Thus, after taking into consideration the difference in the distance between the two routes, while the Y1 fare offered by Air Canada on the Toronto-Thunder Bay route was somewhat higher than that offered on the Calgary-Winnipeg route, the discounted fares common to both routes were more advantageous to the travellers on the Toronto-Thunder Bay route than they were to the travellers on the Calgary-Winnipeg route on the dates under review.

(ii) Year-over-year changes

Between July 10, 1998 and July 10, 1999, Air Canada raised the fares on the Toronto-Thunder Bay route by 11-12 percent. The increases on the Calgary-Winnipeg route ranged from 5-14 percent during that time. From July 10, 1999 to July 10, 2000, Air Canada increased some of the fares on the Toronto-Thunder Bay route by 6 percent and decreased two others by 22 and 25 percent from the previous year's levels. On the Calgary-Winnipeg route, it increased several fares by 3 percent, left one fare unchanged, and lowered one fare by 4 percent.

As such, with respect to the year-over-year changes to the fares Air Canada offered which were common to both routes, the fares were increased by the same amount on both routes from July 10, 1998 to July 10, 1999. From July 10, 1999 and July 10, 2000, of the five fares common on both routes, three were increased by slightly greater percentages on the Toronto-Thunder Bay route, and two were reduced by significantly greater amounts than on the Calgary-Winnipeg route.

3.(f) Summary

The Agency is of the opinion that, with respect to the range of fares, Air Canada offered a greater number of fares on the Toronto-Thunder Bay route on July 10, 2000 than it had on that date in either of the previous years. The fares were lower on the Toronto-Thunder Bay route than on the Calgary-Winnipeg route, reflecting at least in part the shorter distance of the Toronto-Thunder Bay route. With respect to the year-over-year changes in the levels of fares, the routes were generally treated in a similar manner.

4. Availability of seats at the $198 fare

In his complaint, Mr. Reichert stated that he had been unable to purchase a ticket at the $198 fare (L14EAST fare) due to the unavailability of seats at that fare. The Agency has researched the offering of the L14EAST fare published by Air Canada for travel between Toronto and Thunder Bay and finds that it was offered at $198 from February 24, 2000 through the remainder of 2000 and into January of 2001. Thus, the fare had been published and was available for several months by the time Mr. Reichert saw the announcement in his local newspaper. The Agency also recognizes that July and August are periods of peak travel in the airline industry and that, when a discounted fare is announced, the earlier that a passenger confirms his travel arrangements, the more likely it is that the discounted fare would be available.

In addition, and as previously mentioned, the Agency requested from Air Canada information with respect to the number of seats sold at each fare on the travel dates identified by Mr. Reichert. Air Canada provided the number of seats sold within each fare class but made a claim for confidentiality with respect to the data submitted. The Agency has reviewed the information provided by Air Canada and is of the opinion that Air Canada had made a number of seats available in the L-class of fares.

5. Review of the fares offered by other carriers on the Toronto-Thunder Bay route

Agency investigations into fare-related complaints include the examination of fares offered by other carriers who may, from time to time, have provided service on the route which is the subject of the complaint. As the Agency analyzed the fares offered by Air Canada in respect of the domestic services between Toronto and Thunder Bay on July 10 in 1998, 1999 and 2000, the same review dates were used to identify all other air carriers that provided a service on the route.

The Agency's research shows that on July 10 in 1998 and 1999, in addition to Air Canada, Canadi*n and Royal published fares for travel between Toronto and Thunder Bay.

The Agency's research also shows that on July 10 in 1998 and 1999, Canadi*n offered the same fares, the same range of fares, and fares with the same levels of discounts on the Toronto-Thunder Bay route as did Air Canada; on July 10 in 1998 and 1999, Royal offered a narrower range of fares than did Air Canada. While Royal's fares were lower than those offered by Air Canada, Air Canada's fares were discounted at a much higher percentage off the Y1 round-trip fare than were Royal's.

6. Agency findings

In light of the foregoing, the Agency finds that the $358 V14SNR base fare published or offered by Air Canada in respect of its service between Toronto and Thunder Bay on or about July 10, 2000, which is the subject of the complaint, was not unreasonable.

The Agency also finds that the range of fares offered by Air Canada in respect of its service between Toronto and Thunder Bay on or about July 10, 2000 was not inadequate.

CONCLUSION

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

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