Decision No. 680-C-A-2005

November 14, 2005

File No. M4370/A74/05-01427

COMPLAINT

[1] On March 4, 2005, Gloria Smythe filed with the Air Travel Complaints Commissioner (hereinafter the ATCC) the complaint set out in the title. Given that the parties were unable to reach a satisfactory agreement despite the ATCC's intervention, on June 2, 2005, Ms. Smythe requested that her complaint be referred to the Canadian Transportation Agency (hereinafter the Agency) for its consideration. As the complaint raised a tariff issue that falls within the jurisdiction of the Agency, it was referred to the Agency on that date.

[2] On August 8, 2005, Agency staff advised Air Canada that Ms. Smythe had filed a complaint with the Agency. As comments regarding Ms. Smythe's complaint were filed by both parties with the ATCC, Agency staff also sought the parties' agreement to have the comments they filed with the ATCC considered as pleadings before the Agency.

[3] On August 15, 2005, Ms. Smythe agreed to have the comments she filed with the ATCC considered as pleadings before the Agency.

[4] On September 12, 2005, Air Canada filed a further submission concerning this matter, and on September 20, 2005, Ms. Smythe responded to Air Canada's further submission.

[5] On September 30, 2005, Air Canada advised the Agency that it agreed to have the comments it filed with the ATCC considered as pleadings before the Agency.

[6] Pursuant to subsection 29(1) of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter 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 extension of the deadline until November 14, 2005.

ISSUE

[7] The issue to be addressed is whether Air Canada's restrictions on the transferability of a ticket as set out in Air Canada's Domestic Passenger General Rules Tariff No. CDGR-1 (hereinafter the tariff) are unreasonable or unduly discriminatory within the meaning of subsection 67.2(1) of the CTA.

POSITIONS OF THE PARTIES

[8] On November 18, 2004, Ms. Smythe booked a non-refundable ticket on Air Canada's Internet Web site for a friend to travel from Winnipeg to Calgary. Ms. Smythe paid for the ticket with her MasterCard credit card. Her friend was subsequently unable to travel due to illness. Ms. Smythe cancelled her friend's reservation and was informed by Air Canada that while a credit would be issued in respect of the cancelled ticket, it would be issued in her friend's name rather than her own. Ms. Smythe states that she was aware that she would be required to pay a change fee for the cancellation of the ticket, but adds that Air Canada's Internet Web site did not contain any information indicating that a travel credit for a ticket would only be issued to the person whose name appears on the ticket, rather than to the purchaser of this ticket. Ms. Smythe argues that Air Canada's applicable tariff provision is unreasonable and "discriminatory", and that Air Canada's failure to provide full information is "devious".

[9] Air Canada submits that the itinerary/receipt that is provided to all persons purchasing tickets contains the conditions of contract and clearly states that tickets are non-transferable and that name changes are not allowed. Air Canada further submits that Rule 100, category 70, Part D, of the its tariff states that "Tickets are not transferable but carrier is not liable to the owner of a ticket for honouring or refunding such ticket when presented by another person". Air Canada adds that "a refund is always provided to the original form of payment for the ticket" and that, in this case, the ticket was "non-refundable" and the credit remains in the name of the person for whom the ticket was purchased. Air Canada also advises that, for a fee, it offers travel insurance in order that passengers will be protected in the event that they are unable to travel due to illness, and points out that Ms. Smythe chose not to purchase this insurance.

[10] Air Canada submits that it allows a passenger, upon payment of the applicable change fee, to use an unused ticket for future travel with Air Canada, for up to one year from the date of issuance of the original ticket.

[11] Air Canada notes that it provides a range of fares for sale, including full-priced economy class fares that are completely refundable, but that there are discounted fares, such as the fare purchased by Ms. Smythe that are non-refundable. Air Canada argues that allowing persons to transfer tickets would affect the integrity of the carrier's pricing system as well as its inventory management system. Air Canada submits that it does not allow the person who has paid for a ticket, which has been issued in another person's name, to use the ticket for travel on the dates appearing on such ticket, and therefore it should not allow the purchaser of a ticket issued in another person's name to use the ticket during its extended period of validity.

[12] Air Canada notes that other carriers in the market have adopted similar tariff provisions concerning the non-transferability of tickets and that Air Canada's tariff provision relating to this matter is not unduly discriminatory as such a provision applies to all passengers, notwithstanding the type of fare purchased.

[13] Ms. Smythe objects to Air Canada's suggestion that she should have purchased insurance, arguing that the $30 cancellation fee assessed by Air Canada is more than sufficient and, in her opinion, is a form of insurance. Ms. Smythe submits that Air Canada is remiss in not advising passengers at the time of booking a ticket in another person's name that any credit will be issued to the person whose name appears on the ticket rather than to the purchaser of the ticket. Ms. Smythe notes that, under similar circumstances, WestJet had issued a credit to her.

[14] Ms. Smythe questions if, had she been the person whose name appeared on a ticket, cancelled her reservation, and paid the appropriate fee, and then, several months later, advised Air Canada that she wished to use the ticket to travel to the same destination, Air Canada would have issued her a new ticket at the same price or told her that she had a credit that she could apply to a new fare.

[15] Air Canada responds that if Ms. Smythe had been the travelling passenger, cancelled her ticket and paid the applicable fee, the value of her unused ticket could have been used to purchase a new one.

ANALYSIS AND FINDINGS

[16] In making its findings, the Agency has considered all of the evidence submitted by the parties during the pleadings.

[17] The facts leading to the present case are uncontested. The complainant purchased a non-refundable ticket for a friend who, because of illness, was unable to travel. The complainant subsequently cancelled her friend's reservation and was informed by Air Canada that the resulting travel credit would be issued to her friend rather then to her. The complainant argued that Air Canada's applicable tariff provision, which prevents the transfer of a travel credit to the purchaser of the ticket, is unreasonable and discriminatory.

[18] 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) 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.

Is Air Canada's tariff provision concerning the non-transferability of tickets set out in Rule 100 of Air Canada's tariff "unreasonable" within the meaning of subsection 67.2(1) of the CTA?

[19] In Decision No. 666-C-A-2001 dated December 24, 2001 concerning a complaint filed by Del Anderson against Air Canada with respect to its denied boarding policy applicable to transportation between points in Canada, the Agency had an opportunity to examine the scope of the word "unreasonable" found in subsection 67.2(1) of the CTA. In that Decision, the Agency found, in part, that:

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 M. 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.
(...)

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 Montréal v. 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:

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

(...) In the Agency's opinion, the specific wording of subsection 67.2(1) of the CTA reflects a recognition by Parliament that regulation was needed in order to attain the stated objective of the national transportation policy found in section 5 of the CTA which provides, in part, that:

... each carrier or mode of transportation, as far as is practical, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute

(i) an unfair disadvantage in respect of any such traffic beyond the disadvantage inherent in the location or volume of the traffic, the scale of operation connected with the traffic or the type of traffic or service involved.

This position is also in harmony with section 12 of the Interpretation Act, R.S.C., 1985, c. I-21 which provides that:

Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.

In determining whether a term or condition of carriage applied by a carrier is "unreasonable" within the meaning of subsection 67.2(1) of the CTA, the Agency must, therefore, ensure that it does not interpret the provision in such a way that impairs or jeopardizes the ability of the travelling public to efficiently use the recourse put in place by Parliament to protect it against the unilateral setting of terms and conditions of carriage by air carriers.

[20] Conversely, the Agency must also take into account:

1. the operational and commercial obligations of the particular air carrier which is the subject of the complaint;
2. the other consumer protection provisions found under Part II of the CTA which compel air carriers to publish, display or make available for public inspection tariffs that contain the information required by the ATR and only apply the terms and conditions of carriage set out in those tariffs; and
3. the fact that air carriers are required to establish and apply terms and conditions of carriage designed to apply collectively to all passengers as opposed to one particular passenger.

[21] The Agency is, therefore, of the opinion that, in order to determine 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.

[22] In the case at hand, the Agency notes that the complainant purchased a non-refundable ticket. While these tickets are non-refundable when reservations are cancelled, carriers often provide a travel credit as a means of extending the validity period of such tickets. The complainant in this case challenges neither the non-refundable nature of the ticket purchased nor the fact that a travel credit was issued by Air Canada following the cancellation of the reservation. What the complainant objects to is the fact that the travel credit can only be issued to the holder of the ticket and not to the purchaser of the ticket.

[23] Air Canada refused to issue the travel credit to the complainant as the carrier argued that tickets are non-transferable. Air Canada's tariff provision concerning the non-transferability of tickets is set out in Rule 100 of the carrier's tariff, which states in part that:

(D) Tickets are not transferable but carrier is not liable to owner of a ticket for honouring or refunding such ticket when presented by another person.

[24] While it is acknowledged that the complainant in this case did not expressly request the transfer of the ticket per se, but rather the transfer of the travel credit, the Agency is of the opinion that the principle of the non-transferability of tickets applies not only to the ticket itself, but also to any credit issued for future use of that ticket.

[25] The non-transferability of tickets is a common practice in the airline industry. The root of such practice is economical in nature. Carriers offer a number of fare classes with associated terms and conditions, including restrictions such as an advance payment requirement and non-refundability of the ticket. Ordinarily, lower-priced fares will have more restrictive terms and conditions than higher-priced fares. The various fare classes and their associated terms and conditions form vital elements in a carrier's pricing strategy. Should the transferability of tickets be allowed, it would, as pointed out by Air Canada, create a parallel market for pre-purchased tickets. While this parallel market would undoubtedly benefit the purchaser of a ticket, it would seriously affect the financial health of air carriers.

[26] In light of the foregoing, the Agency finds that Air Canada's tariff provision regarding the non-transferability of tickets is not "unreasonable" within the meaning of subsection 67.2(1) of the CTA.

[27] Ms. Smythe expressed concerns regarding Air Canada's alleged failure to advise her of the conditions relating to transferability. There are no legislative or regulatory provisions administered by the Agency that compel a carrier to provide full information to persons concerning terms and conditions of travel other than the requirement to publish, display and make available for inspection at the carrier's business offices a copy of the applicable tariff.

Is Air Canada's tariff provision concerning the non-transferability of tickets set out in Rule 100 of Air Canada's tariff "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA?

[28] In Decision No. 666-C-A-2001 quoted above, the Agency also had an opportunity to examine the scope of the words "unduly discriminatory" found in subsection 67.2(1) of the CTA. In that same Decision, the Agency found, in part, that:

As with the word "unreasonable", the phrase "unduly discriminatory" is not defined in the CTA or the ATR....

With respect to the meaning of the word "discriminatory", the Supreme Court of Canada, in Andrews v. Law Society (British Columbia), [1989] 1 S.C.R. 143, held that "discrimination may be described as a distinction, whether intentional or not but based on grounds relating to personal characteristics of the individual or group, which has the effect of imposing burden, obligation, or disadvantages on such individual or group not imposed on others, or which withholds or limits access to opportunities, benefits, and advantages, available to other members of society".

(...)

The Agency notes, however, that, contrary to the human rights and labour relations contexts in which that Supreme Court decision was rendered, where the overriding principle is that no discrimination is tolerated, the CTA provides that "discriminatory" terms or conditions of carriage may be tolerated provided that they are not "unduly discriminatory".

The determination of whether a term or condition of carriage applied by a carrier on a domestic route is "unduly discriminatory" is, therefore, a two-step process. In the first place, the Agency must determine whether the term or condition of carriage applied is "discriminatory". In the absence of discrimination, the Agency need not pursue its investigation. If, however, the Agency finds that the term or condition of carriage applied by the domestic carrier is "discriminatory", the Agency must then determine whether such discrimination is "undue".

The Agency is, therefore, of the opinion that, in determining whether a term or condition of carriage applied by a domestic carrier is "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA, it must adopt a contextual approach which balances the rights of the travelling public not to be subject to terms and conditions of carriage that are discriminatory, with the statutory, operational and commercial obligations of air carriers operating in Canada. This position is also in harmony with the national transportation policy found in section 5 of the CTA.

[29] The first question for the Agency to consider, in determining whether a term or condition of carriage applied by an air carrier is "unduly discriminatory" within the meaning of subsection 67.2(1) of the CTA, is whether the term or condition of carriage is discriminatory.

[30] In this case, given that Air Canada's tariff provision concerning the non-transferability of tickets applies to all passengers, regardless of the type of fare purchased, the Agency finds that there is no evidence before it to suggest that such provision is discriminatory or that the provision has been applied in a discriminatory manner.

[31] Given that Air Canada's tariff provision concerning the non-transferability of tickets is not "discriminatory" within the meaning of subsection 67.2(1) of the CTA, the Agency need not examine the question of whether the provision is "unduly discriminatory".

CONCLUSION

[32] Based on the above findings, the Agency hereby dismisses the complaint.

Members

• Mary-Jane Bennett
• Guy Delisle
• Gilles Dufault