Decision No. 66-C-A-2020

SUMMARY

[1] The applicants filed an application with the Canadian Transportation Agency (Agency) against Swoop Inc. (Swoop) and WestJet regarding the cancellation of their Swoop flight from Hamilton, Ontario, to Winnipeg, Manitoba, on February 24, 2019.

[2] The applicants also argue that since the respondent’s Tariff does not offer reprotection on WestJet flights in the event of a flight cancellation, it is unreasonable.

[3] The applicants seek compensation in the amount of CAD 715.

[4] The Agency will address the following issues:

1. Did the respondent properly apply the terms and conditions related to flight cancellations set out in its Domestic Tariff CTA(A) No. 1 (Tariff), as required by subsection 67(3) of the Canada Transportation Act, SC 1996, c 10 (CTA)?
2. Is Rule 90(C)(4) of the Tariff reasonable within the meaning of subsection 67.2(1) of the CTA?

[5] For the reasons set out below, the Agency dismisses the application.

BACKGROUND

[6] The applicants purchased round-trip tickets with the respondent to travel between Winnipeg and Hamilton. On the day of Swoop Flight No. WO111 from Hamilton, February 24, 2019, the respondent cancelled the flight due to severe weather. It reprotected the applicants to travel to Winnipeg on its next available flight departing four days later on February 28, 2019. This option was unsatisfactory to the applicants. The respondent offered to cancel and refund the applicants’ unused tickets, which the applicants accepted.

[7] The applicants made alternate arrangements and travelled the following day, February 25, 2019, from Toronto to Winnipeg via Ottawa on WestJet Flight No. WS575.

THE LAW AND RELEVANT TARIFF PROVISIONS

[8] Subsection 67(3) of the CTA states:

The holder of a domestic licence shall not apply any fare, rate, charge or term or condition of carriage applicable to the domestic service it offers unless the fare, rate, charge, term or condition is set out in a tariff that has been published or displayed under subsection (1) and is in effect.

[9] Section 67.1 of the CTA states:

If, on complaint in writing to the Agency by any person, the Agency finds that, contrary to subsection 67(3), the holder of a domestic licence has applied a fare, rate, charge or term or condition of carriage applicable to the domestic service it offers that is not set out in its tariffs, the Agency may order the licensee to

(a) apply a fare, rate, charge or term or condition of carriage that is set out in its tariffs;

(b) compensate any person adversely affected for any expenses they incurred as a result of the licensee’s failure to apply a fare, rate, charge or term or condition of carriage that was set out in its tariffs; and

(c) take any appropriate corrective measures.

[10] Subsection 67.2(1) of the CTA empowers the Agency to, on complaint, address terms and conditions in a tariff that the Agency finds are unreasonable:

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.

[11] The relevant provisions of the Tariff are set out in the Appendix.

PRELIMINARY MATTERS

WestJet as respondent to these proceedings

[12] The applicants name both Swoop and WestJet as respondents as they believe they are one entity. According to the applicants, Swoop is a wholly owned subsidiary of WestJet, as both carriers have the same Chief Executive Officer, the same controlling shareholder, the same mailing address and are traded as one entity on the Toronto Stock Exchange.

[13] The applicants argue that both air carriers are hiding behind the legal concept of the “corporate veil”, which can be breached in certain circumstances.

[14] The applicants hold that Swoop’s Tariff features a photograph of an aircraft in WestJet livery on its cover, proving, in their view, that there is no difference between the entities, stating:

The Swoop website uses a photo of a WestJet aircraft on the runway as the illustration for “Part 1”, page 7 of its “General Tariff Information”. It does not depict the livery of a Swoop aircraft. This is a bungle in the badge engineering of Swoop’s corporate veil.

[15] Swoop submits in response that its tariff document is based on a sample tariff made available to carriers on the Agency’s website and that the photograph formed part of the original document furnished by the Agency.

[16] After examining the photograph relied upon by the applicants and present in Swoop’s Tariff, there appear to be several aircraft in line awaiting takeoff on a runway, which do not appear to have the operators’ names on them.

[17] In light of the above, the presence in Swoop’s Tariff of a photograph of several different aircraft—one of which apparently has WestJet colours on the tail but no WestJet branding—does not signify anything beyond the fact that Swoop used the photograph it states was in the Agency’s sample tariff.

[18] The applicants also rely on statements made by investment brokers prior to the Onex acquisition of WestJet that, as Swoop is a wholly owned subsidiary of WestJet, purchase of WestJet stock would be a means of accessing the returns from Swoop’s operations. The Agency notes that such statements by an investment firm not party to the present application are not grounds for piercing the corporate veil. Moreover, such statements could be made regarding any corporation and its subsidiaries.

[19] Swoop and WestJet are corporate entities which each holding separate and distinct air operator certificates issued by Transport Canada and licences to operate an air service, issued by the Agency. The licensing criteria established by the CTA for air carrier licence applicants, and used by the Agency, set out specific requirements that must be met by the specific air carrier applicant, in this case Swoop, regardless of corporate parentage.

[20] As for the legal ability to pierce the corporate veil, the distinct legal personality of corporations has been long upheld by the courts except in limited circumstances, for example where the corporate veil shields fraud or other objectionable, illegal or improper purpose; and not lifting it would constitute an injustice (Kosmopoulos v Constitution Insurance Co., [1987] 1 SCR 2) [emphasis added]. The Agency finds that there is no evidence of such circumstances in this case.

[21] Given that Swoop marketed and operated the air service between Winnipeg and Hamilton, the Agency finds that Swoop is the proper respondent.

[22] In light of the foregoing, the Agency dismisses the application against WestJet.

Submissions made outside of pleadings

[23] On January 27, 2020, the respondent filed a response to the reply filed by the applicants (response) outside of pleadings. On the same day, the applicants filed comments on the response (comments).

RESPONDENT’S RESPONSE

[24] In the first part of its response, the respondent states that it respected its Tariff when it cancelled its Hamilton to Winnipeg flight. The respondent also states that its Tariff is neither unclear nor unduly discriminatory. In the second part of its response, the respondent indicates that the 100 WestJet dollars referenced by the applicants was provided by WestJet for a delay that occurred on Flight No. WS575 from Ottawa to Winnipeg on February 25, 2019. In support of its position, the respondent filed an e-mail from WestJet.

APPLICANTS’ COMMENTS

[25] In the first part of their comments, the applicants submit that they are only now understanding the different refund and compensation amounts they received and, as such, wish to increase the compensation amount they are seeking to CAD 715. The applicants state that this amount represents the “differential cost” between the refund the respondent provided for Flight No. WO111 and the WestJet tickets they purchased. In the second part of their comments, they provide details regarding a delay they experienced on WestJet Flight No. WS575.

ANALYSIS AND DETERMINATIONS

[26] Given that the first part of the respondent’s response and the applicants’ comments relate to the cancellation of the Swoop flight between Hamilton and Winnipeg, the flight at issue in the application, the Agency finds that it may assist the Agency in making its determination.

[27] Therefore, pursuant to sections 5, 6 and 34 of the Canadian Transportation Agency Rules (Dispute Proceedings and Certain Rules Applicable to All Proceedings), SOR/2014-104, the Agency places the first part of the response and comments on the record of these proceedings.

[28] However, the Agency finds that the second part of the response and comments regarding the delay the applicants experienced with WestJet on Flight No. WS575 relates to a new issue that was not raised in the application. Therefore, the Agency will not consider the second part of the response and comments when rendering its decision.

DID THE RESPONDENT PROPERLY APPLY THE TERMS AND CONDITIONS SET OUT IN ITS TARIFF RELATED TO FLIGHT CANCELLATIONS, AS REQUIRED BY SUBSECTION 67(3) OF THE CTA?

Positions of the parties

THE APPLICANTS

[29] The applicants state that they were scheduled to travel from Hamilton to Winnipeg with Swoop on February 24, 2019. They submit that on February 23, 2019, they received an e-mail notification from the respondent advising them that the flight was cancelled due to dangerous winds and that they were rebooked to travel on February 28, 2019. The applicants submit that they contacted the respondent to seek an earlier flight as they had family obligations and because Valerie J. Arklie had contracted pneumonia and needed to get home. However, they submit that the respondent advised them that an earlier flight was not possible and offered to cancel their tickets and provide them with a refund, which the applicants accepted. The applicants then booked a flight with WestJet departing on February 25, 2019.

[30] The applicants maintain that a one-day delay would have been acceptable to them, but it is unrealistic for the respondent to expect them to accept a four-day delay.

[31] The applicants are seeking compensation in the amount of CAD 715, which represents the difference between the cost of their cancelled flight, Flight No. WO111, and the costs of the flight they purchased with WestJet, Flight No. WS575.

THE RESPONDENT

[32] The respondent submits that on February 23, 2019, it cancelled Flight No. WO111 due to severe weather in the Hamilton area. As a result, all travellers were moved to its next available flight on February 28, 2019, and notifications were sent out to the passengers.

[33] The respondent also submits that, as the applicants decided to cancel the rebooked flight, it refunded the cost of the one-way flight from Hamilton to Winnipeg and the baggage fee. It also submits that, as a courtesy, it refunded a cancellation fee that was previously applied to a change Valerie J. Arklie made to her original outbound flight.

[34] The respondent argues that it respected Rules 90 and 125 of its Tariff when it refunded the unused portion of the applicants’ tickets and baggage fee and, as such, they are not entitled to any further compensation.

[35] In support of its statements, the respondent provided copies of records of payments and refunds to the applicants.

Analysis and determinations

[36] The onus is on the applicant to establish, on a balance of probabilities, that the carrier has failed to properly apply the terms and conditions of carriage set out in its tariff.

[37] In this case, the cancellation of Flight No. WO111 was the result of severe weather, an event beyond the carrier’s control.

[38] Rule 90(C)(4) of the Tariff at the time of ticketing provides that in the event of cancellations outside of the carrier’s control, for example, force majeure, the respondent will either transport the passenger on another of its flights via the same or a different routing to their destination, or refund the passenger in accordance with Rule 125 of its Tariff.

[39] Rule 125(B) of the Tariff at the time of ticketing addresses involuntary refunds and states that if a portion of the ticket has been used, the amount refunded to the purchaser will be the difference between the fare paid and the fare for transportation actually used.

[40] The respondent reprotected the applicants on its next available flight and when this was unsatisfactory to the applicants, the respondent cancelled the applicants’ reservation in accordance with Rule 90(C)(4) of the Tariff. Furthermore, the respondent refunded the applicants for an amount equal to the one-way fare paid for Flight No. WO111 in accordance with Rule 125 of the Tariff.

[41] Accordingly, the Agency finds that the respondent properly applied its Tariff.

IS RULE 90(C)(4) OF SWOOP’S TARIFF UNREASONABLE WITHIN THE MEANING OF SUBSECTION 67.2(1) OF THE CTA?

Positions of the Parties

THE APPLICANTS

[42] The applicants argue that Swoop is a wholly owned subsidiary of WestJet and, as such, it should have reprotected them on WestJet Flight No. WS575 at no additional cost. The applicants claim that since the respondent’s Tariff does not offer reprotection on WestJet in the event of a flight cancellation outside of its control the Tariff is unreasonable.

THE RESPONDENT

[43] The respondent states that WestJet is an affiliate with a separate operating certificate and reservation system.

Analysis and determinations

[44] The onus is on the applicant to establish, on a balance of probabilities, that the carrier’s terms and conditions of carriage set out in its tariff are unreasonable within the meaning of subsection 67.2(1) of the CTA.

[45] In Decision No. 666-C-A-2001 (Del Anderson v Air Canada), the Agency found that, in determining whether a term or condition of carriage applied by a domestic carrier is “unreasonable” within the meaning of subsection 67.2(1) of the CTA, a balance must be struck between the rights of the passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.

[46] In this case, the applicants claim that the respondent’s Tariff is unreasonable because it does not offer reprotection with WestJet in the event of a cancellation.

[47] At the time of ticketing, Rule 90(C)(4) of the Tariff provided reprotection to passengers on the respondent’s own services if a schedule irregularity, which includes cancellation, was outside the carrier’s control.

[48] The cancellation was caused by severe weather, a circumstance that is beyond the respondent’s control. The applicants’ position is that the respondent’s Tariff is unreasonable given that the respondent is a wholly owned subsidiary of WestJet and, as such, it should have reprotected them on WestJet at no additional cost.

[49] The Agency notes that a Tariff provision is not considered unreasonable simply because it does not provide a passenger with reprotection with their preferred carrier. Therefore, the Agency fails to see the relevance of the applicants’ argument.

[50] As noted previously, Swoop and WestJet are distinct air carriers which hold distinct licences to operate an air service and each maintains a separate tariff, operates different schedules and, on the basis of the evidence filed by the applicants, WestJet and Swoop have a significantly different flight frequency on the route the applicants wished to travel with a notable difference in price between the two carriers.

[51] That being said, a carrier’s tariff must strike a balance between the needs of the carrier and the rights of the passengers. At the time the applicants’ tickets were issued, there was no statutory requirement that a carrier provide reprotection with another carrier in the event that a flight is cancelled due to circumstances outside its control. While the Agency recognizes that flight cancellations in such circumstances may cause inconveniences for passengers, these inconveniences are mitigated by the fact that Rule 90(C)(4) of the Tariff provides for reprotection of passengers on the respondent’s next available flight and when this is not satisfactory to the passenger it will provide a refund of their unused ticket.

[52] The Agency finds that the obligations set out under Rule 90(C)(4) represent acceptable means to address passengers’ needs when schedule irregularities, including cancellation, occur outside the respondent’s control, thus striking a balance between the commercial and operational needs of the carrier and the rights of the passenger.

[53] Accordingly, the Agency finds that the applicants have not demonstrated that Rule 90(C)(4) of the Tariff is unreasonable within the meaning of subsection 67.2(1) of the CTA.

CONCLUSION

[54] The Agency finds that the respondent properly applied its Tariff, as required by subsection 67(3) of the CTA. The Agency also finds that Rule 90(C)(4) of the Tariff at the time of ticketing was reasonable within the meaning of subsection 67.2(1) of the CTA.

[55] The Agency therefore dismisses the application.

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APPENDIX TO DECISION NO. 66-C-A-2020

Domestic Tariff, CTA(A) No. 1

Rule 1: Definitions

….

“Force Majeure” means any unforeseeable circumstances beyond the carrier’s control, the consequences of which could not have been avoided even if all due care had been exercised including, but without limitation, meteorological and geological conditions, acts of God, strikes, riots, civil commotions, embargoes, wars, hostilities, disturbances, unsettled international conditions, shortage of fuel or facilities, or labour disputes, either actual, threatened or reported.

“Schedule Irregularities” means the following:

a) Delays in the scheduled departure or arrival of the carrier’s flights;

b) Cancellation of flight, or omission of a scheduled stop, or;

c) Substitution of aircraft or of a different class of service, or;

d) Schedule changes which require rerouting of a passenger at departure time of his or her original flight.

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RULE 90: Schedule Irregularities

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(C) Passenger Options – Re-Rerouting or Refund

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4. In the event of a schedule irregularity, not within the carrier’s control (e.g. Force Majeure), the carrier will provide the following:

(a) The Carrier will offer the Passenger the choice to travel on another of its scheduled flights on the same route as the Passenger was originally ticketed or to travel on a different routing operated by the Carrier to the same ticketed destination;

(b) Should the alternate transportation proposed by the Carrier not meet the Passenger’s satisfaction, the unused portion of the Passenger’s ticket(s) will be refunded. The refund will be made to the purchaser of the ticket(s). The form of refund will be the same form used as payment of the ticket(s). The refund will be based on the total value of ticket(s). For complete conditions on refunds see rule 125.

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Rule 125: Refunds

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(B) Involuntary Refunds

1. Involuntary refunds are not subject to any restrictions contained in the applicable fare rule.
2. The amount of the involuntary refund will be as follows:

….

(d) If, due to a schedule irregularity not within the carrier’s control or a refusal to transport in accordance with Schedule Irregularities Rule 90(C)3.(d) and (e) and Refusal to Transport Rule 105(C)1., a portion of the ticket has been used, the amount refunded to the purchaser will be the one that results in the most generous amount using one of the following methods:

(i) The difference between the fare paid and the fare for transportation actually used or to be used; or,
(ii) Provided that the point where travel terminated was on the passenger’s routing as shown on the original ticket and the routing remains unchanged, the passenger will be refunded the difference between the one way fare applicable to the unused transportation from the point where the passenger terminated travel to the destination or next stopover point as named on the ticket or to the point at which transportation is to be resumed less the same rate of discount, (if travel is on a discount fare) that was applied to the original one way fare (including all charges). If the passenger was travelling on a round trip or circle trip ticket, the amount refunded would be based on the rate of discount of one half of the round-trip fare; or,
(iii) If the point where the passenger terminated travel was not on the routing specified on the ticket, the refund will be based on the lowest applicable fare of any air carrier operating between the point where the passenger terminated travel to the destination or next stopover point named on the ticket or to the point at which transportation is to be resumed.

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