Decision No. 594-C-A-2004

November 1, 2004

File No. M4370/A74/02-1154

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COMPLAINT

On November 25, 2002, Lawrence Strutynski filed with the Air Travel Complaints Commissioner the complaint set out in the title. Due to the regulatory nature of Mr. Strutynski's complaint, it was referred to the Canadian Transportation Agency (hereinafter the Agency) on January 21, 2003.

On January 31, 2003, Agency staff requested that Air Canada address the complaint within the context of subsection 67.2(1) of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA).

On February 28, 2003, Air Canada filed its answer to the complaint, and on April 3, 2003, Mr. Strutynski filed his reply to Air Canada's answer.

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 Mr. Strutynski filed his reply after the prescribed deadline, the Agency, pursuant to section 6 of the National Transportation Agency General Rules, SOR/88-23, hereby accepts this submission as being relevant and necessary to its consideration of this matter.

ISSUE

The issue to be addressed is whether Air Canada's period of validity provision on non-refundable tickets applicable to domestic transportation is unjust and unreasonable within the meaning of subsection 67.2(1) of the CTA.

POSITIONS OF THE PARTIES

On November 13, 2002, Mr. Strutynski purchased a non-refundable ticket to travel from Kelowna, British Columbia to Yellowknife, Northwest Territories, departing on November 24, 2002. However, due to circumstances beyond his control, Mr. Strutynski had to cancel his ticket prior to his departure. Upon payment of a change fee, Air Canada allows a person to retain the unused portion of a ticket for travel up to one year from the date of issuance of the original ticket. Mr. Strutynski contests Air Canada's refusal to reissue his ticket for travel on dates subsequent to November 13, 2003.

In response, Air Canada explains that air carriers are required to adhere to the terms and conditions of their tariffs to ensure consistency and fairness, and as a result, it is unable to refund, allow a name change, issue a travel voucher or extend the validity of a non-refundable ticket.

Mr. Strutynski submits that it is unjust that Air Canada imposes a deadline for the use of a ticket, in addition to applying a change fee, and that, given that Air Canada has retained the fare that he paid, it would be reasonable to reissue the ticket for travel after November 13, 2003, and to adopt this approach as a consistent practice.

By letter dated January 31, 2003, Agency staff requested the parties to the complaint to address the matter within the context of subsection 67.2(1) of the CTA.

In its answer, Air Canada states that the restrictions imposed on a new ticket issued in exchange for an unused non-refundable ticket are not unreasonable within the meaning of subsection 67.2(1) of the CTA.

Air Canada submits that, like many carriers, it offers various fares bearing different terms and conditions, including full-priced economy (Y) and business (J) class fares that, among other things, are fully refundable, and lower-priced fares, such as that purchased by Mr. Strutynski, which are non-refundable. Air Canada advises that effective September 6, 2002, for travel on or after October 1, 2002, and following the practice of other North American carriers, it reinforced the non-refundability policy, and that carriers have decided to strictly enforce the one-year deadline associated with the use of tickets. Air Canada submits that without such restrictions, persons who purchase discounted fares would be given the same flexibility as those who pay for higher-class fares. Air Canada argues that the restrictions applied to the issuance of non-refundable tickets represent a key element in differentiating fare types, and that in the absence of such differential pricing, air carriers could not recover their fixed, sunk and common costs.

In his reply, Mr. Strutynski states that he remains of the opinion that Air Canada is being unreasonable in respect of this matter.

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 Air Canada's tariff provision with respect to the period of validity for a ticket, set out in Rule 105, Ticket Validity, of the Canadian Domestic General Rules Tariff (hereinafter CDGR), published by the Airline Tariff Publishing Company, which states, in part, that:

(A) period of validity

"..... a ticket will be valid for transportation for one year from the date on which transportation commences at the point of origin that is designated on the original ticket or, if no portion of the ticket is used, from the date of issuance of the original ticket."

The Agency's jurisdiction over complaints concerning domestic tariffs is set out in sections 67, 67.1 and 67.2 of the CTA. Pursuant to subsection 67.2(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory. More particularly, subsection 67.2(1) of the CTA states that:

If, on complaint in writing to the Agency by any person, the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

As a preliminary matter, the Agency finds that Air Canada applied Rule 105 of the CDGR in imposing a deadline of one year from the date of issuance of Mr. Strutynski's ticket to use such ticket.

Is Air Canada's one-year deadline for the use of tickets applicable to transportation between points in Canada "unreasonable" within the meaning of subsection 67.2(1) of the CTA?

According to the principles of statutory interpretation, words of a statute are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme and object of the statute as well as the intention of Parliament. As stated by Justice Rouleau of the Federal Court Trial Division in ECG Canada Inc. v. M.N.R., [1987] 2 F.C. 415:

There is no question that the literal approach is a well established one in statutory interpretation. Nevertheless, it is always open to the Court to look to the object or purpose of a statute, not for the purpose of changing what was said by Parliament, but in order to understand and determine what was said. The object of a statute and its factual setting are always relevant considerations and are not to be taken into account only in cases of doubt.

The term "unreasonable" is not defined in either the CTA or the Air Transportation Regulations, SOR-88/58, as amended. The Canadian Oxford Dictionary defines the word "unreasonable" as "going beyond the limits of what is reasonable or equitable; not guided by or listening to reason". Black's Law Dictionary defines "unreasonable" as meaning "irrational; foolish; unwise; absurd; silly; preposterous; senseless; stupid".

Although the scope of the word "unreasonable" as it relates to terms and conditions of carriage has not been judicially considered in Canada, the meaning of the word has repeatedly been examined by the courts in contexts such as judicial review (C.U.P.E. v. New Brunswick Liquor Corporation, [1979] 2 R.C.S. 227) or the review of a discretionary decision based on irrelevant consideration, improper purpose or bad faith (Associated Provincial Picture Houses v. Wednesbury Corporation, [1948] 1 K.B. 233; City of Montréalv. Beauvais, (1909) 42 S.C.R. 211; Canadian Transportation Agency Decision No. 445-R-2000 dated June 30, 2000). While it is difficult to extrapolate distinct principles on the meaning of the word "unreasonable" from these cases, the courts have consistently held that:

• The meaning of the word cannot be determined by recourse to a dictionary;
• A contextual meaning must be given to the word; and
• In general terms, the word means "without a rational basis".

The Agency recognizes that the deadline imposed by Air Canada for the use of tickets, as it applies to non-refundable fares, is an important element of the carrier's current seat inventory management system, a feature of which is the application of differential pricing to the carrier's fare structure. Differential pricing is designed to segregate specific consumer segments. Within this segregation, unrestricted fares, which are priced at higher levels, are intended for passengers requiring more flexibility in meeting their travel requirements, while restricted fares, which often include a round-trip requirement, are designed for travellers prepared, in exchange for a lower fare, to accept less flexibility in making or changing their air travel arrangements. In addition, the Agency notes that it is a common practice among carriers to impose a deadline for the use of non-refundable tickets.

In weighing the submissions of the parties and after examining Rule 105 of the Air Canada's domestic tariff, the Agency finds that Air Canada's policy with respect to the period of validity on a non-refundable ticket is not, in this case, "unreasonable" within the meaning of subsection 67.2(1) of the CTA.

CONCLUSION

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