Determination No. A-2019-14

APPLICATION

[1] Swoop has applied to the Canadian Transportation Agency (Agency) for an exemption, pursuant to paragraph 80(1)(c) of the CTA, from the requirements of paragraph 67(1)(b), subsection 67(3) and section 67.1 of the CTA, and paragraph 107(1)(o) of the ATR.

THE LAW

[2] The CTA requires that all Canadian air carriers holding a domestic licence have a tariff, which is a schedule of their fares, rates, charges and terms and conditions of carriage applicable to the provision of their services and other incidental services.

[3] As part of its tariff obligations, under paragraph 67(1)(b) of the CTA, the holder of a domestic licence must identify a basic fare for all the routes that it offers. The “basic fare” is defined in section 55 of the CTA as follows:

(a) the fare in the tariff of the holder of a domestic licence that has no restrictions and represents the lowest amount to be paid for one-way air transportation of an adult with reasonable baggage between two points in Canada, or

(b) where the licensee has more than one such fare between two points in Canada and the amount of any of those fares is dependent on the time of day or day of the week of travel, or both, the highest of those fares;

[4] Subsection 67(3) of the CTA provides that the holder of a domestic licence shall not apply any fare, rate, charge or term or condition of carriage unless the fare, rate, charge, term or condition is set out in a tariff that has been published or displayed and is in effect.

[5] Section 67.1 of the CTA provides the Agency with authority, on complaint, to take certain actions where the holder of a domestic licence has contravened subsection 67(3) of the CTA and applied a fare, rate, charge or term or condition of carriage that is not set out in its tariff.

[6] Paragraph 107(1)(o) of the ATR provides that the carrier must have the tolls listed in their tariff.

[7] Paragraph 80(1)(c) of the CTA allows the Agency to exempt a regulated entity from compliance with a statutory provision if the Agency is of the opinion that compliance “is unnecessary, undesirable or impractical”.

[8] Section 5 of the CTA sets out the National Transportation Policy, and states, among other things, that “competition and market forces, both within and among the various modes of transportation, are the prime agents in providing viable and effective transportation services”.

POSITION OF THE APPLICANT

[9] Swoop states that, for modern air travel, the setting of fares is dynamic, individualized and flexible, particularly for ultra-low-cost carriers (ULCCs). It contends that the provisions of the CTA and ATR, from which it is seeking an exemption, did not contemplate the modern air travel marketplace and business models such as those used by ULCCs, and that compliance with them would be disruptive and counter to its business model.

ANALYSIS AND FINDINGS

[10] There is a distinction to be made between the different provisions from which Swoop has requested an exemption. Paragraph 67(1)(b) of the CTA specifically establishes the requirement to identify the basic fare in the carrier’s domestic tariff. Section 67.1 and subsection 67(3) of the CTA, and paragraph 107(1)(o) of the ATR are more broadly related to a carrier’s tariff obligations.

[11] With respect to paragraph 67(1)(b) of the CTA, the Agency finds that the applicant has provided sufficient arguments and evidence to establish, on a preliminary basis, that compliance with paragraph 67(1)(b) is “unnecessary, undesirable or impractical”. The legal requirement that a basic fare has no restrictions and allows for the transportation of baggage at no additional cost means that, in practice, for most carriers, the basic fare listed in the tariff is higher than many of the fares on offer in the marketplace. In the specific context of the ULCC’s business model—which is particularly characterized by dynamic price setting, non-refundable fares with restrictions on changes, and the unbundling of fares so that travellers select the services for which they want to pay—the obligation to include such a basic fare in the tariff would appear to have no material benefit to passengers and to impose an unnecessary administrative burden. Given the interests of travellers in having choices in the market and the National Transportation Policy’s emphasis on competition, this burden should only be imposed if it achieves some purpose.

[12] That said, to ensure a comprehensive understanding of the implications of a longer-term exemption from compliance with paragraph 67(1)(b) for Swoop and, potentially, other carriers with comparable business models, the Agency will undertake a 60-day consultation to allow stakeholders and other interested parties to provide information and their views.

[13] With respect to subsection 67(3) and section 67.1 of the CTA, and paragraph 107(1)(o) of the ATR, the Agency finds that Swoop has not provided persuasive arguments and evidence in support of an exemption. Such an exemption would give Swoop unreasonable competitive advantages in the marketplace and unduly limit the rights of, and availability of recourse to, passengers.

CONCLUSION

[14] The Agency, in accordance with paragraph 80(1)(c) of the CTA, exempts Swoop from compliance with paragraph 67(1)(b) of the CTA for a period of 180 days from the issuance of this Determination. During that time, the Agency will undertake consultations, which will help to inform a subsequent decision on whether the exemption should be extended or made indefinite.

[15] The Agency denies Swoop’s application for an exemption from the requirements of subsection 67(3) and section 67.1 of the CTA, and paragraph 107(1)(o) of the ATR.