Letter Decision No. LET-C-A-78-2011

BACKGROUND

[1] On April 28, 2009, Air Transat filed with the Canadian Transportation Agency (Agency) certain amendments to its Scheduled International Passenger Rules Tariff No. CTA(A) No. 4 (Tariff).

[2] Chief among these amendments was the addition of Rule 21, which provided for additional service standard commitments for passengers.

[3] At that time, the Agency evaluated the Tariff amendments from the perspective of clarity pursuant to section 122 of the Air Transportation Regulations, SOR/88-58, as amended (ATR), and raised certain clarity issues with Air Transat. One of the concerns raised by the Agency was that, although Rule 21(2) set out three options to be exercised in the event of overbooking and cancellation, it did not clearly state who, between Air Transat and the passenger, had the discretion to determine which option would be exercised. Air Transat proposed amendments to make the choice of option clear.

[4] In Decision No. 478-A-2009, the Agency made a determination on the clarity of certain provisions of the Tariff and accepted amendments proposed by Air Transat. The Agency explicitly stated that it had not assessed the reasonableness of the provisions proposed by Air Transat, but had limited itself to the issue of clarity.

[5] On June 8, 2009, Mr. Lukács filed a complaint with the Agency in which he challenged Rule 21(2) and Rule 5.2(e) of Air Transat’s Tariff.

[6] Mr. Lukács’ complaint primarily concerns whether these provisions are consistent with Article 19 of the Convention for the Unification of Certain Rules for International Carriage by Air, commonly known as the Montreal Convention (Convention).

[7] Pursuant to Mr. Lukács’ complaint, the Agency must now assess these Tariff provisions from a substantive, rather than a clarity, perspective.

[8] It should be noted that Mr. Lukács filed the same complaint against three carriers, namely Air Canada, WestJet and Air Transat. WestJet and Air Transat filed a single submission setting out the common position of both carriers. Although the submissions respecting Air Transat and WestJet are identical, as, for the most part, are the Agency’s analysis and conclusions, it has been determined that a separate decision will be issued respecting each carrier.

[9] It should also be noted that Mr. Lukács states that his complaint does not extend to situations outside the control of a carrier. Accordingly, this Decision is related to an assessment of situations which are within the control of a carrier.

APPLICABLE TARIFFS

[10] Since Mr. Lukács filed his complaint, the impugned Tariff Rules have been amended by Air Transat.

[11] Rule 21(2) has been changed to indicate where the choice of option lies, following Decision No. 478-A-2009. In all other respects, Rule 21(2) remains the same and the submissions of the parties remain relevant. As such, the following analysis and findings refer to Rule 21(2) as currently in effect.

[12] Rule 5.2(e) relates to Air Transat’s policy in the event of an involuntary rerouting of a flight. At the time Mr. Lukács’ complaint was filed, the Rule provided that Air Transat would "undertake to ensure" the passenger was routed or transported to his or her destination within a reasonable time and at no extra cost. In the event no reasonable transportation could be arranged, Air Transat would refund the unused ticket or portion thereof.

[13] In its current form, Rule 5.2(e) states that Air Transat "will ensure" that the passenger is routed or transported to his or her destination, but it does not provide that this will be done within a reasonable time and at no extra cost. Furthermore, the Rule provides that a refund will apply on the unused ticket, instead of the "unused ticket or portion thereof".

[14] Mr. Lukács raised Rule 5.2(e) in his complaint, but he has not provided specific comments on this Rule. Rather, his complaint appears to have focused on Rule 21(2). Rule 5.2(e) deals with rerouting, whereas Rule 21(2) deals with cancelled or overbooked flights. The provisions have in common their reference to refunds, an issue which Mr. Lukács addresses at length in his complaint. The Agency also notes that Rule 21(6) provides that Rule 21(2) prevails over Rule 5.2(e) in the event of any conflict. Accordingly, the Agency, in its analysis of and findings for Rules 5.2(e) and 21(2), will focus on the refund policies contained in those Rules.

[15] Although the language in that part of Rule 5.2(e) respecting refunds has changed slightly since Mr. Lukács’ complaint was filed, the Agency is of the opinion that the removal of the phrase "or portion thereof" with respect to ticket refunds does not substantially affect the Tariff provision. As such, the refund analysis and findings below will apply to Rule 5.2(e) as currently in effect.

[16] Rules 5.2(e) and 21(2) also have in common their silence as to the availability of passenger rights and remedies under the Convention, another issue Mr. Lukács raises in his complaint. Accordingly, the Agency will refer equally to Rules 5.2(e) and 21(2) in its discussion of the Tariff’s silence on other remedies available to the passenger.

[17] Appendix A sets out the subject Tariff provisions both at the time of filing of the complaint by Mr. Lukács and as currently in effect.

ISSUES

[18] In addressing Mr. Lukács’ complaint the Agency will consider the following issues:

1. Do overbooking and cancellation constitute delay for the purpose of Article 19 of the Convention?
2. Is it reasonable that Air Transat’s Tariff Rule 21(2) reprotects passengers only on Air Transat’s own aircraft or with other carriers with which it has an interline agreement?
3. Is it reasonable that Air Transat’s Tariff Rule 21(2) which deals with overbooking and cancellation only calls for a refund of the unused portion of a ticket and 5.2(e) which deals with rerouting only calls for a refund of the unused ticket?¹
4. Is it reasonable that Air Transat’s Tariff Rules 21(2) and 5.2(e) do not state that passengers have rights and remedies outside those named in the Tariff?

Issue 1: Do overbooking and cancellation constitute delay for the purpose of Article 19 of the Convention?

Submissions

[19] Mr. Lukács takes the position that overbooking and cancellation are forms of delay and are captured by Article 19 of the Convention. From the point of view of a passenger, he states, the terminology is irrelevant as the effect is the same: the arrival time at destination is delayed. Mr. Lukács cites a number of cases that stand for this proposition.

[20] Air Transat asserts that not all cases of overbooking or cancellation constitute "delay" under the Convention. It claims that characterizing all cases of schedule change, flight cancellation, overbooking and equipment changes as "delay" is a great oversimplification which, if accepted, would lead to unreasonable results. In light of the jurisprudence, doctrine and the working papers of the Convention, Air Transat argues that one can only determine whether a particular set of facts gives rise to compensable delay under the Convention on a case-by-case basis.

[21] In his reply, Mr. Lukács concedes that the definition of "delay" has been left open in the Convention. However, he refers to jurisprudence which, he argues, tends to show that overbooking and cancellation are forms of delay under the Convention, rather than non-performance. He concludes that Air Transat’s Tariff provision falls squarely within Article 19.

Analysis and findings

[22] By virtue of the Carriage by Air Act, R.S.C., 1985, c. C-26, the Convention has the force of law in Canada and governs, among other matters, the liability limitations for delay applicable to international carriage by air for travel to which the Convention applies. The Convention modernizes the liability regime governing international carriage and consolidates the Convention for the Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw on 12 October 1929 (Warsaw Convention) and the various instruments comprising the Warsaw system.

[23] Under Article 26 of the Convention, an air carrier may not relieve itself from liability nor fix a lower limit to its liability than that prescribed in the Convention.

[24] The focus of the complaint is Article 19 of the Convention which reads:

The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.

[25] A fundamental question addressed by the parties to this complaint is whether instances of cancellation and overbooking fall within the scope of "delay" as found in Article 19 of the Convention. As the term "delay" is not defined and its meaning is not clear from the text of Article 19 or the Convention as a whole, consideration must be given to supplementary sources.

[26] The modern principle of statutory interpretation applicable to international conventions takes a purposive reading of legislation. This approach has been adopted by Canadian courts.²

[27] Interpreting Article 19 of the Convention therefore requires an analysis that takes into account the ordinary meaning of the text as well as contextual factors to give effect to the purpose of that Article. To that end, reference may be made to the working papers of both the Warsaw and Montreal Conventions, as well as domestic and international doctrine and jurisprudence.

[28] As is clear from the submissions of the parties on this issue, the principle that emerges from the Minutes of discussions leading up to the adoption of the Convention is that the delegates intended to leave the definition of "delay" open-ended, and subject to a case-by-case assessment by the courts.

[29] Although the Warsaw and Montreal Conventions’ working papers show that the scope of Article 19 was not intended to extend to non-performance, the distinction between non-performance and delay was not made entirely clear.

[30] As reflected in the case law arising from the parties’ submissions, jurisprudence addressing the legal characterization of delay and the distinction between "delay" and "non-performance" reveals that there are contradictions and inconsistencies in reasoning, both domestically and internationally.

[31] The cases of Weiss v. El Al Israel Airlines³ and Minhas v. Biman Bangladesh⁴ provide an example of the contradictory characterization of "delay" by the courts. In Weiss, the District Court for the Southern District of New York considered a case where passengers were "bumped" from a flight from New York to Jerusalem. The plaintiffs, after being placed on stand-by and waiting for two days, eventually purchased a flight on another airline. The plaintiffs received no refund or compensation for bumping from the carrier. The Court asserted that the standard international position on the question of bumping was that it was akin to non-performance.

[32] In Minhas a passenger had been "bumped" from her flight from India to the United States. The plaintiff attempted to secure a flight home with the carrier over a period of 45 days, until she eventually obtained a ticket from another carrier. The same District Court for the Southern District of New York held that her claim constituted "delay" pursuant to Article 19 of the Convention.

[33] Although the facts canvassed in Weiss are substantially similar to those in Minhas, namely that the passengers in each case were bumped from their original flight and eventually resorted to purchasing tickets with another airline, this was determined to be contractual non-performance in Weiss (after two days of waiting) while characterized as delay in Minhas (after 45 days of waiting).

[34] There are further examples of contradictory characterizations of "delay". Basing itself in no small part on the working papers of the Warsaw Convention, the U.S. Court of Appeals, Seventh Circuit, in Wolgel v. Mexicana Airlines⁵ drew a boundary between damages arising from "delay" under Article 19 of the Warsaw Convention, and damages arising from the act of being "bumped" from a flight.

[35] Wolgel was a case of overbooking. The passengers had confirmed reservations on an international flight but, upon arrival at the airport, were informed that they had been bumped. Plaintiffs sued in private law and cited a now-repealed section of the Federal Aviation Act. The Court held as follows:

This case is one of non-performance of a contract. The Wolgels are not attempting to recover for injuries caused by their delay in getting to Acapulco. Rather, their complaint is based on the fact that, as far as the record shows, they never left the airport. Because the Wolgels’ claim is for total non-performance of a contract, the Warsaw Convention is inapplicable.

[36] In the Canadian case of Lukács v. United Airlines Inc.,⁶ the plaintiff had been informed by air carrier personnel before arriving at the airport that his flight was cancelled. He went to the airport on the understanding that his ticket would be endorsed by another airline providing a flight that afternoon, but the process took so long that he ultimately decided not to travel at all. After hearing the positions of the parties as to whether this event constituted "delay", the Manitoba Court of Queen’s Bench ultimately decided that it came within the scope of Article 19 of the Convention.

[37] The facts in Wolgel and Lukács are similar insofar as the passengers, due to overbooking or cancellation, never left the airport. However, this situation was characterized as non-performance in the former case and delay in the latter.

[38] In recent years, U.S. courts have begun to trace the outline of a principled distinction between delay and non-performance, which (1) recognizes the possibility that the alternative categorizations can co-exist, although each is governed by a different legal regime; and (2) makes their characterization dependent on specific factors.

[39] Building on this distinction is the case of In re Nigeria Charter Flights Contract Litigation,⁷ referred to by Mr. Lukács in his reply submissions, in which the Court attempted to synthesize several key distinctions between delay and contractual non-performance. The Court stated that in the case law, courts tended to find "delay" where one of three conditions is met:

1. The defendant airline ultimately provided transportation;
2. The plaintiffs secured alternate transportation without waiting to see whether the airline would transport them or they refused an offer of a later flight; or
3. Plaintiffs never alleged non-performance.

[40] The Court held, in that case, that the claim for non-performance was founded because the air carrier simply refused to transport the plaintiffs. As such, the facts of that case were found to resemble those in Wolgel.

[41] This points to the conclusion that the legal characterization of an event depends on certain conditions relating to the actions of both parties (the air carrier’s willingness to provide transportation on the one hand and the passenger’s willingness to accept it on the other).

[42] Although there is contradiction and inconsistency in the meaning to be given the word "delay" as found in Article 19 of the Convention, what is clear is that the intent of Article 19 is to have the meaning of "delay" determined on a case-by-case basis. As is set out above and as submitted by the parties, whether a situation of cancellation or overbooking constitutes delay will depend on the particular circumstances of a case as well as the court’s interpretation of the questions of fact and law in issue. Layered on this, however, is that some courts, as illustrated by the Nigeria case, are setting out specific criteria for assessing whether a particular fact situation falls within the meaning of "delay" as found in Article 19 of the Convention.

[43] In all situations, however, one element is clear. At the core of overbooking or cancellation, the affected passenger is not in a position to proceed with their journey in the timeframe originally established. Accordingly, the Agency is of the preliminary opinion that overbooking and cancellation that are within Air Transat’s control constitute delay for the purpose of Article 19 of the Convention.

[44] The Agency recognizes, however, in keeping with the Nigeria case as set out above, that in limited situations there may be clear facts and circumstances that would evidence the alternative of non-performance of the contract of carriage. As further complaints, with different fact situations, are brought before the Agency, the Agency will be able to clarify the conditions that constitute non-performance.

[45] The Agency appreciates that the parties have made well-reasoned submissions on the legal characterization of delay. However, considering that this issue is a key element of the matter before the Agency, this will nevertheless be the subject of a show cause order as set out at paragraph 106 of this Decision. This will provide the parties with a further opportunity to comment on this issue before a final determination is made.

Issue 2: Is it reasonable that Air Transat’s Tariff Rule 21(2) reprotects passengers only on its own aircraft or with other carriers with which it has an interline agreement?

Submissions

The obligations of Air Transat in the case of delay

[46] Mr. Lukács is seeking a determination from the Agency concerning the basic obligations of carriers in the case of overbooking or cancellation. Because Mr. Lukács argues that Article 19 of the Convention applies to cases of overbooking and cancellation, he takes the position that, pursuant to that provision, a carrier must prove that it took "all measures that could reasonably be required" to avoid delay.

[47] Mr. Lukács refers to Canadian jurisprudence to determine what constitutes "all reasonable measures". He cites case law stating that a carrier must be aware of the possibility of mechanical failure and offer efficient solutions in such an event.⁸ He also cites case law that, he argues, found a carrier had not discharged its burden of proof under Article 19 where, after a flight delay, it refused to provide passengers with seats on another carrier’s flight, an act which would have allowed them to catch a departing cruise ship at their destination.⁹

[48] Air Transat acknowledges that in cases where the Montreal or Warsaw Convention applies, an air carrier cannot relieve itself from liability or fix a lower limit than that set out in the applicable convention. Air Transat further acknowledges the requirement for an air carrier to provide tariffs that clearly set out the matters identified in the ATR. However, Air Transat argues that circumstances affecting carrier liability are many and it is not possible to prescribe the consequences of every variation in a tariff. The best solution, Air Transat submits, is to have a basic obligation in the tariff and leave it to common sense, the Agency or courts to determine what compensation is appropriate.

[49] In Air Transat’s view, Mr. Lukács has an overly mechanistic approach to delay and reasonable measures that fails to take into account contextual considerations from the perspective of the passenger and carrier, including length of delay, cost of accommodation, nature of the damage and safety concerns. Air Transat concludes that one cannot determine in advance what measures are reasonably required of a carrier. Air Transat therefore argues that its obligation cannot be defined in the abstract, without due consideration of the circumstances of the case.

[50] Air Transat submits that its impugned Tariff provisions are fair and reasonable, defining an uncontentious level of obligation while recognizing that more may be required of it depending on the circumstances.

[51] Mr. Lukács disagrees that it is impossible to define Air Transat’s obligations in the abstract. He asserts that the Agency has jurisdiction to make a determination on principle, and that it does this routinely when it considers the reasonableness of a tariff. Mr. Lukács goes on to point out that paragraph 122(c) of the ATR in fact requires Air Transat to clearly state in its tariff its policy concerning overbooking, failure to operate, and failure to operate on schedule. He concludes that the legislators were of the opinion that it is not only possible but necessary for carriers to state their policies on these matters in the abstract, despite the complexity of the task.

[52] Mr. Lukács submits that Article 19 of the Convention sets out a standard of care owed by Air Transat to the passenger during and before delay. He claims that the purpose of his complaint is to determine the basic obligations of carriers in cases of overbooking and cancellation.

Reprotection of a passenger on the fastest available route

[53] Mr. Lukács considers that carriage to destination by the fastest available route is a measure that could reasonably be required under Article 19. He therefore argues that Air Transat’s Tariff provision limiting itself to finding a seat on one of its own flights or that of a carrier with which it has an interline agreement is contrary to the Convention. According to Mr. Lukács, in the event of overbooking or cancellation, Air Transat must search all possible routes and arrange or pay for the route that would get a passenger to his or her destination the soonest, regardless of the identity of the carrier used for rerouting.

[54] According to Air Transat, providing carriage by the fastest available route or providing additional remedies at the sole discretion of the passenger is not always required to meet the standard of all reasonable measures set out in Article 19.

[55] In Mr. Lukács’ reply, he claims that limiting possible reroutes to carriers with whom an interline agreement exists may result in further delay to passengers and falls short of what he sees as the reasonable measures obligation.

[56] Mr. Lukács applies a balancing test and argues that the cost of rerouting on the fastest available route should be weighed against the additional revenue that overbooking produces for Air Transat. He reiterates that the only consideration for Air Transat should be mitigating the passenger’s delay, which requires finding the fastest available route to destination for the passenger.

[57] As for cancellation which is within Air Transat’s control, Mr. Lukács similarly submits that Air Transat’s basic obligation is to provide transport on the fastest available route. Again, the cost to Air Transat must be weighed against the financial benefit that a "schedule change" or failure to provide back-up equipment generates.

Analysis and findings

Tariffs in general

[58] Section 55 of the Canada Transportation Act, S.C. 1996, c. 10, as amended (CTA) defines an air carrier’s tariff as a "schedule of fares, rates, charges and terms and conditions of carriage". Essentially, a tariff is the contract of carriage between the passenger and the air carrier and is a central feature of carriage by air because it sets out the terms and conditions that will apply to the applicable carriage. However, the carrier’s tariff is not the type of contract that is negotiated between two parties. Rather, it is a contract that is unilaterally imposed on the passenger by the carrier. In Decision No. 456-C-A-2009, Wyant v. Air Canada the Agency stated:

[10] It should be noted that the terms and conditions of carriage are set by an air carrier unilaterally without any input from future passengers. The air carrier sets its terms and conditions of carriage on the basis of its own interests, which may have their basis in statutory or purely commercial requirements. There is no presumption that a tariff is reasonable.

[59] The Agency’s authority with respect to tariffs is set out in the CTA and in the ATR. In the international context, carriers are required to file their terms and conditions of carriage with the Agency pursuant to section 110 of the ATR. The Agency’s oversight power over a carrier’s tariffs allows it, on its own motion or on complaint, to inquire into whether the tariff is clear, just and reasonable and to take such remedial actions as suspending or disallowing tariffs that do not meet regulatory requirements.

ATR requirements respecting international flights

[60] There is a clear and definitive requirement for a carrier, pursuant to paragraph 122(c) of the ATR to set out in its tariff its terms and conditions of carriage and, in particular, to clearly state its policy in respect of, among other matters, compensation for denial of boarding as a result of overbooking, passenger rerouting, failure to operate the service and refunds for services purchased but not used.

[61] The requirement for Air Transat, pursuant to paragraph 122(c) of the ATR, to clearly set out its policy on overbooking and cancellation was addressed by the Agency in Decision No. 478-A-2009.

[62] Subsection 110(4) of the ATR requires an air carrier to charge the tolls and apply the terms and conditions of carriage set out in its tariffs while subsection 110(5) requires a carrier to not charge a toll or apply a term and condition of carriage that is not specified in its tariffs.

[63] In addition, a carrier is required to not only clearly set out its policy with respect to overbooking and flight cancellations, but to also ensure that with respect to international flights, its tariff is just and reasonable within the meaning of subsection 111(1) of the ATR and consistent with the applicable conventions.

[64] The Agency has stated in previous decisions that in order to determine whether a term or condition of carriage applied by a carrier is "reasonable" within the meaning of subsection 111(1) of the ATR, a balance must be struck between the rights of passengers to be subject to reasonable terms and conditions of carriage, and the particular air carrier’s statutory, commercial and operational obligations.¹⁰

Application of the Montreal Convention

[65] The Agency, in assessing a carrier’s tariff, must have regard to the articles of the Convention and, in this respect, the Agency notes that Article 27 of the Convention sets out a principle that a carrier’s tariff must not conflict with the provisions of the Convention.

[66] As set out in Issue 1 above, the Agency is of the preliminary opinion that overbooking and cancellation that are within Air Transat’s control constitute delay which falls within the purview of Article 19 of the Convention. Accordingly, when reviewing a carrier’s international tariff in the context of overbooking and cancellation consideration must be given to not only subsection 111(1) of the ATR but also Article 19 which addresses the issue of delay.

[67] A carrier, pursuant to Article 19 of the Convention, is liable for damage occasioned by delay in the carriage of, amongst other matters, passengers, but will not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or it was impossible for them to take such measures.

[68] This provision imposes on a carrier an obligation, namely to transport a passenger, as contracted, without delay, failing which there will be a presumption of liability for damage arising from any such delay. With a presumption of liability for delay against a carrier, the Agency is of the preliminary opinion that there is a concomitant obligation for a carrier to mitigate such liability and address the damage which has or may be suffered by a passenger as a result of the delay. Article 19 anticipates this by providing a carrier with a defence to the liability if it can show that it took, or it was impossible to take, all reasonable measures to avoid the damage caused by the delay. This is consistent with an assumption that a carrier, when faced with a presumption of liability, will take whatever action is necessary or possible, within reason, to address an issue which arose as a result of a situation which was within its control.

[69] A central component of Mr. Lukács’ argument is that Article 19 of the Convention means, in the event of delay, that a carrier must rebook a passenger on the fastest available alternative route in order to satisfy the requirement to take all reasonable measures. However, the Agency notes that Article 19 does not prescribe specific measures for a carrier to take, nor does it state which "reasonable measures" would exonerate it from liability.

[70] As with the issue of the meaning of "delay" as discussed above, there is controversy and inconsistency in the jurisprudence as to what constitutes a carrier taking all measures that could reasonably be required to avoid damage.

[71] For example, the cases are not consistent as to whether Article 19 extends to booking a passenger on a flight with a carrier for which there is no interline agreement if that is the fastest means for the passenger to arrive at their destination.

[72] In some instances, the courts have been satisfied with reprotection on the carrier’s next flight. In others, courts have required that passengers be put on whatever flight will get them to their destination. The term "reprotect" is used here to refer to the act by a carrier of securing a passenger's travel on another flight if, due to overbooking or cancellation, the passenger is prevented from travelling on their original flight as planned. To a large extent, the approach taken depends on the particular facts of the case.

[73] In Mohammad v. Air Canada,¹¹ a case brought against Air Canada and Kuwait Airlines for joint carriage between Canada and Kuwait, the Court of Quebec Small Claims Division held that Air Canada, when faced with a flight cancellation, took all reasonable measures when it put passengers on its next available flight, described as a new flight created by the carrier. However, on the final segment of the same flight itinerary, Kuwait Airlines was found liable under the Convention on the grounds that it should have transferred passengers to another carrier given that its own flights were booked for the next several weeks. The New York City Civil Court has similarly held that reprotection on any other carrier may be reasonable where a carrier’s own flights are fully booked.¹² However, the District Court for the Southern District of New York has held that where there are extensive administrative requirements and limited timeframes, reprotection on any other carrier may not be reasonable.¹³

Air Transat’s Tariff and the question of reprotection on the fastest available flight

[74] Mr. Lukács’ complaint concerns the obligations of carriers in the case of overbooking and cancellation. In the Agency’s opinion, this complaint involves a consideration of the reasonableness of Air Transat’s Tariff provisions on overbooking and cancellation which, in turn, involves the Agency considering these provisions pursuant to subsection 111(1) of the ATR, while also taking into account Article 19 and ensuring that the Tariff is consistent with the articles of the Convention.

[75] Air Transat’s Tariff Rule 21(2) does not provide for the possibility that a passenger might, in certain circumstances, be reprotected on any carrier regardless of whether Air Transat has an interline agreement with that carrier.

[76] Instead, Tariff Rule 21(2) provides a closed list of actions to be taken by Air Transat following overbooking or cancellation. The purpose of this list is to set out the measures Air Transat will take in an effort to avoid damage to a passenger that is occasioned by overbooking or cancellation.

[77] When considering the issue as to whether Tariff Rule 21(2) is reasonable, several factors must be considered and, as noted above at paragraph 64, the Agency must strike a balance between the rights of passengers to be subject to reasonable terms and conditions of carriage and the particular carrier’s statutory, commercial and operational obligations.

[78] On the one hand, in reviewing Air Transat’s Tariff from the passenger’s perspective, the provision does not leave open the possibility of reprotection on another air carrier for which there is no interline agreement in situations of overbooking and cancellation.

[79] This is despite the fact that case law suggests, as set out in paragraph 73, that in the appropriate circumstances, reprotection on a carrier with which no interline agreement exists might be necessary to establish that a carrier has taken all measures that could reasonably be required to avoid the damages caused by delay.

[80] Mr. Lukács provides insight into the passenger’s perspective on this question by arguing that the cost of rerouting on the fastest available route should be weighed against the additional revenue that overbooking and cancellation produces for Air Transat. He emphasizes that the only consideration for Air Transat should be mitigating the passenger’s delay, which requires finding the fastest available route to destination for the passenger.

[81] The Agency is of the opinion that Mr. Lukács’ position is too restrictive and onerous in that it requires Air Transat to always provide the passenger with the fastest possible means of getting to their destination. Mr. Lukács has not shown that in every situation of overbooking or cancellation the fastest possible means for a passenger to get to their destination is reasonable.

[82] While the particular circumstances may call for putting a passenger on a carrier for which no interline agreement exists, it cannot be said that this remedy must always be required.

[83] On the other hand, the balancing test also requires that Air Transat’s perspective, namely with regard to its statutory, commercial and operational obligations, be considered. Air Transat, in its submissions, admits that its Tariff aims to set out a basic obligation—one that is, in Air Transat’s words, "uncontentious"—but it does not provide any justification as to why its basic or most uncontentious obligation must be reprotection on a carrier with whom it has an interline agreement, as opposed to the possibility of reprotection on any other carrier.

[84] Air Transat appears to agree that it is difficult to prescribe in a tariff the measures that might be reasonably required of a carrier in the case of overbooking or cancellation. Nevertheless, the air carrier is required pursuant to paragraph 122(c) of the ATR to clearly state, as part of its terms and conditions of carriage, its policy concerning overbooking and cancellation. The Agency is of the opinion that this requirement must be met, even if this might be a difficult drafting exercise.

[85] To that end, the Agency is of the opinion that a provision, in this case Tariff Rule 21(2), which outright precludes the possibility of reprotection on a flight with any carrier, except those for which an interline agreement has been established, is overly restrictive and the Agency is of the preliminary opinion that this provision is unreasonable.

[86] Air Transat maintains that its Tariff sets out the basic obligation of Air Transat which is the most appropriate approach given that it is impossible to set out in a tariff the many circumstances affecting air carrier liability. However, as the Agency is of the preliminary opinion that Air Transat’s list of measures for addressing overbooking and cancellation is too restrictive and therefore unreasonable, Air Transat is in fact setting out something less than the basic obligation of Air Transat, particularly as reprotection of a passenger on a carrier for which no interline agreement exists might be the required reasonable solution in a case of overbooking or cancellation.

[87] Further, Air Transat has provided no evidence to counter Mr. Lukács’ position which shows the hardship that Air Transat’s current policy, as reflected in its Tariff, may have on a passenger affected by a flight overbooking or cancellation. Specifically, Air Transat has provided no proof of the commercial or operational obligations to justify that reprotection on its own flights or those of a carrier for which an interline agreement exists is the only reasonable solution to get a passenger to his or her destination in the event of overbooking or cancellation.

[88] Air Transat’s approach of putting a passenger only on its own flights or on another carrier where an interline agreement exists is a carrier-focussed approach to remedying the situation of overbooking or flight cancellation. In contrast, the jurisprudence that deals with situations of overbooking and cancellation takes a more circumstance-focussed approach by generally looking to the particular circumstances of a situation in order to determine whether the carrier took all measures that could reasonably be required to avoid the damage. For example, the reasonableness of measures taken has been assessed in light of a passenger’s need to get to a work-related conference at a particular time, as in the case of Lukács v. United Airlines Inc.¹⁴ Similarly, where a flight delay has prevented a passenger from boarding a cruise ship at a scheduled time and place, the carrier’s actions have been evaluated in that particular context.¹⁵ The time-sensitive nature of a passenger’s purpose of travel is a factor that has been considered by the courts in these cases.

[89] Based on the above, the Agency is of the preliminary opinion that a circumstance-focussed approach is a reasonable approach to addressing the issue of overbooking and cancellation when the circumstances are made known to Air Transat.

Issue 3: Is it reasonable that Air Transat’s Tariff Rule 21(2) which deals with overbooking and cancellation only calls for a refund of the unused portion of a ticket and 5.2(e) which deals with rerouting calls for a refund of the unused ticket?¹⁶

Submissions

[90] Mr. Lukács submits that Article 19 of the Convention requires carriers to take measures to avoid damage to passengers and bear the cost of these measures. He argues that by refunding the unused portion of a ticket, a carrier may unilaterally cancel the contract of carriage. In his view, providing a partial, or even a full, refund falls short of the obligation to take all measures that could reasonably be required under Article 19 of the Convention. Refunding only the unused portion of a ticket, he claims, would allow a carrier to exonerate itself from the liability to which it would otherwise be exposed under the Convention.

[91] Mr. Lukács states that providing a refund of the unused portion of a ticket might result in financial loss to the passenger and that a passenger might not always prefer a refund. Therefore, he requests that the provision of a refund be at the sole discretion of the passenger.

[92] Air Transat does not address this issue in its submissions, except to comment that giving passengers the sole discretion to choose remedies may not be required under Article 19 of the Convention.

[93] In his reply, Mr. Lukács requests that the refund should be the greater between the portion of the ticket that no longer serves a purpose, and the cost of purchasing a similar itinerary for departure on another carrier that day.

Analysis and findings

Refund of the unused ticket

[94] Article 19 of the Convention does not specify exactly what type of damage would be compensated for in the case of delay, but some examples from the jurisprudence include expenses for accommodation and meals or the additional transportation costs that would be incurred as a result of overbooking or cancellation.¹⁷

[95] There is therefore a possibility that compensation for damages under the Convention would extend beyond a mere refund of the unused ticket. In fact, it is reasonable to assume that in many situations of overbooking or cancellation a passenger would expect more than a refund for the unused ticket.

[96] The subject Tariff provisions in this case, namely Rules 21(2) and 5.2(e), indicate that the Tariff may operate to leave a passenger without a flight to or from their destination and with nothing but a refund for the unused ticket. In cases where a delay or cancellation occurs at a connecting point during a trip, with the result that a passenger’s travel no longer serves the passenger’s purpose, the passenger could be required to pay the cost of returning to their point of origin. As Mr. Lukács submits, payment of a partial refund may force a passenger to absorb some of the costs directly associated with their delayed travel. The Agency accepts Mr. Lukács’ submission that the actual costs, or damages, incurred by a passenger may exceed the mere refund of the unused ticket.

[97] Accordingly, the Agency is of the preliminary opinion that the parts of Tariff Rules 21(2) and 5.2(e) that provide for a refund of only the unused ticket are unreasonable. Air Transat has not demonstrated why, given its commercial and operational obligations, it cannot refund the entire ticket cost. Furthermore, Air Transat has not addressed the question of returning a passenger to their point of origin, within a reasonable time and at no extra cost, in cases where delay or cancellation occurs at a connecting point during travel, with the result that a passenger’s travel no longer serves the passenger’s purpose. As Mr. Lukács argues, many situations can be envisioned in which a passenger could be forced to absorb the cost of a flight that does not meet their needs, nor fulfil their purpose of travel, and does not coincide with the transportation for which the passenger contracted.

The passenger’s choice of option to obtain a refund

[98] In 2009, Air Transat was called upon by the Agency to indicate who had the choice within Tariff Rule 21(2) for (a) a seat on another Air Transat flight, (b) a seat with an interline carrier or (c) a refund of the unused ticket.

[99] In Decision No. 478-A-2009, the Agency accepted Tariff language proposed by Air Transat that would give the choice of option to Air Transat. The Decision explicitly states, however, that the scope of the Agency’s ruling related to clarity only and not to the reasonableness of the proposed Tariff language.

[100] Air Transat’s Tariff gives to Air Transat the choice of option as to whether the passenger will receive a refund of the unused ticket or whether the passenger will continue on their journey on another flight. This means that the passenger is subject to the decision of Air Transat on this issue regardless of what might work best for the passenger. A delay of simply a few hours might result in a passenger preferring a refund rather than continuing on with their journey if, for example, the reason for their journey has been negated by the delay. By retaining sole discretion over the selection of the choice of options from its Tariff provision, Air Transat may be limiting or avoiding its exposure to the actual damage incurred by a passenger as a result of delay. The Agency also notes, with respect to this issue, that Air Transat has not demonstrated why, from an operational and commercial perspective, the choice of option could not lie exclusively with the passenger. Accordingly, the Agency is of the preliminary opinion that the subject Tariff provision is unreasonable.

Issue 4: Is it reasonable that Air Transat’s Tariff Rules 21(2) and 5.2(e) do not state that passengers have rights and remedies outside those named in the Tariff?

Submissions

[101] Mr. Lukács claims that the impugned Tariff provisions should clearly state that rerouting or refunding does not affect a passenger’s right to seek further compensation or other remedies against Air Transat.

[102] Air Transat has proposed to amend its Tariff to state that the passenger rights set out in its Tariff provisions "are without prejudice the [sic] any right a passenger may be found to have, in all circumstances of the case, by reason of the Warsaw Convention or the Montreal Convention".

Analysis and findings

[103] The Agency considers that a passenger should be able to fully understand their rights in law simply by reading a tariff and without reviewing specific articles of treaties to discern the terms and conditions that apply to that tariff.

[104] While Air Transat’s proposed amendment would refer passengers to the Warsaw and Montreal Conventions, this does not sufficiently allow a passenger to understand their rights under the law because it does not accurately and fully represent the rights and remedies extended to passengers by these Conventions.

[105] To be specific with respect to this Issue, Air Transat’s proposed amendment does not give any indication of which rights and remedies a passenger might have under the applicable provisions of the Conventions in the event of overbooking or cancellation. Nor does it indicate that passengers may have rights and remedies at law outside the Conventions. For example, a claim for non-performance of the contract of carriage would not be limited by the liability provisions of the Conventions. In fact, the wording of the proposed amendment may misrepresent to passengers that their rights and remedies are only determined within the context of the Conventions. Accordingly, the Agency is of the preliminary opinion that Air Transat’s Tariff Rules 21(2) and 5.2(e), and the amendment proposed by Air Transat, are unreasonable.

CONCLUSION

[106] Based on the above findings, the Agency provides Air Transat with the opportunity to show cause, within thirty (30) days from the date of this Decision:

With respect to Issue 1:

i) why overbooking and cancellation that are within Air Transat’s control should not fall within the meaning of "delay" as found in Article 19 of the Convention.

With respect to Issue 2:

ii) why Air Transat’s current Tariff Rule 21(2) should not be found unreasonable as per subsection 111(1) of the ATR for being too restrictive in dealing with issues of overbooking and cancellation and be drafted in a manner that allows for reprotection, in certain circumstances, on carriers for which there is no interline agreement.

With respect to Issue 3:

iii) why those parts of Air Transat’s current Tariff Rules 21(2) and 5.2(e) that allow for a refund of only the unused ticket should not be found unreasonable as per subsection 111(1) of the ATR.

iv) why that part of Air Transat’s current Tariff Rule 21(2) that leaves with Air Transat the choice of option for compensation dealing with an overbooking or cancellation situation should not be found unreasonable as per subsection 111(1) of the ATR.

With respect to Issue 4:

v) why Air Transat’s current Tariff Rules 21(2) and 5.2(e) should not be found unreasonable as per subsection 111(1) of the ATR for failing to accurately and fully set out a passenger’s right to seek further compensation and other remedies against carriers under the Warsaw and Montreal Conventions or otherwise at law.

[107] Air Transat’s response will be copied, at the same time, to Mr. Lukács who will have 14 days to file comments with the Agency, copied to Air Transat. Air Transat will then have 7 days to file a response with the Agency, copied to Mr. Lukács.

Appendix

(Air Transat A.T. Inc.)

Tariff provisions in effect when complaint was filed

RULE 5 – CONDITIONS OF CARRIAGE (subject to Rule 21 hereinafter)

…

5.2 Responsibility for schedules and operations

…

e) In the event of an involuntary re-routing of a flight, the Carrier will undertake to ensure that the passenger is routed or transported to his/her ultimate destination, as per the contract of carriage, within a reasonable period of time and at no extra cost. If no reasonable transportation can be arranged, then the Carrier will refund the unused ticket or portion thereof.

RULE 21 – ADDITIONAL PASSENGER SERVICE COMMITMENTS

…

2. Given that passengers have a right to take the flight they paid for, if the plane is over­booked or cancelled, Air Transat will:

1. find the passenger a seat on another flight operated by Air Transat;
2. buy the passenger a seat on another carrier with whom it has a mutual interline traffic agreement; or
3. refund the unused portion of the passenger's ticket.

Tariff provisions currently in effect

RULE 5 – CONDITIONS OF CARRIAGE (subject to Rule 21 hereinafter)

…

5.2 Responsibility for schedules and operations

…

e) In the event of an involuntary re-routing of a flight, the Carrier will ensure that the passenger is routed or transported to his/her ultimate destination, as per the contract of carriage. If no reasonable transportation can be arranged, the Carrier will refund the unused ticket.

RULE 21 – ADDITIONAL PASSENGER SERVICE COMMITMENTS

…

2. Given that passengers have a right to take the flight they paid for, if the plane is over­booked or cancelled, Air Transat will in the following order and as its discretion:

1. find the passenger a seat on another flight operated by Air Transat;
2. buy the passenger a seat on another carrier with whom it has a mutual interline traffic agreement; or
3. refund the unused portion of the passenger's ticket.

---

1. For ease of reference, the Agency will collectively refer to both as a refund of the "unused ticket". ↑
2. Plourde c. Service aérien FBO inc. (Skyservice), 2007 QCCA 739; Connaught Laboratories Ltd. v. British Airways, 61 O.R. (3d) 204 at paras. 44 and 50; Attorney General of Canada v. Flying Tiger Line, Inc., [1987] O.J. No. 914 (H.C.J.) at para. 7. ↑
3. Plourde c. Service aérien FBO inc. (Skyservice), 2007 QCCA 739; Connaught Laboratories Ltd. v. British Airways, 61 O.R. (3d) 204 at paras. 44 and 50; Attorney General of Canada v. Flying Tiger Line, Inc., [1987] O.J. No. 914 (H.C.J.) at para. 7. ↑
4. 1999 U.S. Dist. LEXIS 9849 (U.S.D.N.Y.). ↑
5. 821 F. 2d 442 (U.S.C.A. 7th Cir. 1987). ↑
6. 2009 MBQB 29 (Application for leave to Appeal dismissed: 2009 MBCA 111). ↑
7. 520 F. Supp. 2d 447 – (E.D.N.Y. 2007). ↑
8. Quesnel c. Voyages Bernard Gendron Inc. [1997] J.Q. no 5555 (QL)(QCCQ). ↑
9. Assaf c. Air Transat A.T. Inc. [2002] J.Q. no 8391 (QCCQ). ↑
10. See for example Wyant v. Air Canada and Black v. Air Canada, Decision No. 746-C-A-2005. ↑
11. 2010 QCCQ 6858. ↑
12. McMurry v. Capitol Intern. Airways, 102 Misc. 2d 720 at 722. ↑
13. Cohen v. Delta Air Lines Inc., 09 Civ. 6709 (S.D.N.Y.) (2010 U.S. Dist. Lexis 118164). ↑
14. Supra note 6. ↑
15. Assaf c. Air Transat A.T. Inc., supra note 9. ↑
16. As noted above, the Agency will collectively refer to both as a refund of the "unused ticket". ↑
17. See for example Balogun v. Air Canada, [2010] O.J. No. 663 (S.C.J.); Lukács v. United Airlines Inc., supra note 6. ↑