Decision No. 200-C-A-2016

INTRODUCTION

[1] On September 2, 2013, Tom Brown filed an application with the Canadian Transportation Agency (Agency) alleging, in part, that the fuel surcharges applicable to international transportation that Air Canada also carrying on business as Air Canada rouge and as Air Canada Cargo (Air Canada) applied, were unreasonable.

[2] In 38-C-A-2014">Decision No. 38-C-A-2014 (Decision) dated February 7, 2014, the Agency determined that:

• Fuel surcharges are very much influenced by competitive forces;
• Mr. Brown’s calculations to support his submission that the quantum of Air Canada’s fuel surcharges for international carriage are unreasonably high are not persuasive because the basis for those calculations, i.e., a comparison between domestic and international fuel surcharges, is ill‑founded given that Air Canada’s domestic fuel surcharges are not identifiable; and,
• Even if there were clearly identifiable domestic fuel surcharges, different variables would render such comparison, in the absence of considerably more detailed historical data, meaningless.

[3] In view of the foregoing, the Agency found that Air Canada’s international fuel surcharges were not unreasonable.

[4] On November 9, 2015, Mr. Brown initiated an application with the Agency requesting a review of the Decision. On December 9, 2015, the Agency opened pleadings on the issue as to whether the Agency should grant the application. On December 23, 2015, Air Canada filed its answer, which included a request that proceedings relating to the present matter be stayed pending a decision by the Governor in Council (GIC) respecting a petition filed by Mr. Brown regarding the Decision. Air Canada also included submissions in the answer relating to the issue as to whether Mr. Brown’s application should be granted.

[5] On December 29, 2015, the Agency opened pleadings regarding Air Canada’s request for a stay of proceedings. On January 3, 2016, Mr. Brown responded to Air Canada’s submission, and on January 6, 2016, Air Canada filed its reply. In Decision No. LET-C-A-8-2016 dated March 7, 2016 (Letter Decision), the Agency denied Air Canada’s application for a stay of proceedings, and provided the parties with an opportunity to file further submissions as to whether there has been a change in the facts or circumstances since the issuance of the Decision that would warrant a review.

[6] On March 14, 2016, Air Canada filed its response, and on March 16, 2016, Mr. Brown submitted his comments. Both Air Canada and Mr. Brown requested permission to file further submissions should the Agency determine that a review of the Decision was justified. On April 15, 2016, the GIC dismissed Mr. Brown’s petition.

ISSUE

[7] Has there been a change in the facts or circumstances since the issuance of the Decision, and if so, is it sufficient to warrant a review, rescission, or variance?

LEGISLATIVE CONTEXT

[8] Section 32 of the CTA states as follows:

The Agency may review, rescind or vary any decision or order made by it or may re‑hear any application before deciding it if, in the opinion of the Agency, since the decision or order or the hearing of the application, there has been a change in the facts or circumstances pertaining to the decision, order or hearing.

[9] The review process contemplated by section 32 of the CTA is not an appeal process, nor is it an open-ended authority for the Agency to review its decisions. The Agency’s jurisdiction under this section only arises if, in the Agency’s opinion, there has been a change in the facts or circumstances pertaining to a particular decision since its issuance.

[10] The Agency’s practice, which was initially fully set out in 488-C-A-2010">Decision No. 488-C-A-2010, is to first determine whether there has been a change in the facts or circumstances pertaining to the decision. If no such change exists, the decision stands. If, however, the Agency finds that there has been a change in the facts or circumstances since the issuance of the decision, it must then determine whether such a change is sufficient to warrant a review, rescission or variance of the decision.

[11] The burden of proof rests on the applicant requesting the review to provide the Agency with some substance and explanation demonstrating that the alleged change in the facts or circumstances has arisen since the decision. The applicant must also explain how the alleged change affects the outcome of the matter.

[12] An application pursuant to section 32 of the CTA is not the appropriate vehicle to introduce evidence that was known to or knowable by the applicant during the original application. Moreover, it is not meant to provide the losing party an opportunity to complete the record or to re-argue a case. For the application to succeed, there must have been a real change in the facts or circumstances since the original decision to justify a re-hearing. This must be weighed against the basic legal principle in favour of finality of decisions.

POSITIONS OF THE PARTIES

Mr. Brown

[13] In his application for review, Mr. Brown submits that there have been prolonged and significant changes to the cost of fuel since the issuance of the Decision that directly and dramatically affect the reasonableness of Air Canada’s fuel surcharges. In particular, he alleges that world oil prices have fallen more than 55 percent, from over 100 USD/bbl to less than 45 USD/bbl since the issuance of the Decision, with the lower value applying for much of the last year. Accounting for hedging and currency fluctuations, Mr. Brown argues that Air Canada’s average fuel cost has declined over 27 percent, from 0.89 CAD/l to less than 0.65 CAD/l. Mr. Brown submits that during the same period, Air Canada’s fuel surcharge for the Frankfurt – Calgary return route in economy class has declined 4 percent, from 476 CAD/passenger to 456 CAD/passenger. On the basis of a chart that he has filed, which sets out data for certain markets, Mr. Brown argues that the fuel surcharge assessed by Air Canada, on average, now ranges from 152 percent to 262 percent of the total cost of fuel.

[14] Mr. Brown points out that Air Canada has changed its surcharge terminology since his application was filed in 2013. The carrier now refers to a “Carrier Surcharge” rather than a “Fuel Surcharge”; however, according to Mr. Brown, it is clear that the “Carrier Surcharge” is, in fact, a “Fuel Surcharge”.

[15] Mr. Brown submits that , in relation to the “Carrier Surcharge”, Air Canada’s website states as follows:

“Carrier Surcharge” can be used to partially offset certain volatile, unpredictable or fluctuating operating costs and fees and certain Premiums linked to peak travel periods. These carrier surcharges can be used to offset some (among others) of the following costs: fuel, navigational charges or select peak travel dates to/from certain destinations.

[16] Mr. Brown takes the position that in order to determine whether Air Canada’s surcharge is reasonable, it is not justifiable to include “other” costs without identifying the nature of those costs. Further, Mr. Brown states that navigational charges are established by Nav Canada, they are charged separately, and they are not volatile, unpredictable, or fluctuating.

Air Canada

[17] Air Canada argues that changes in fuel costs do not represent a change in the facts or circumstances that would justify a review of the Decision pursuant to section 32 of the CTA for several reasons.

[18] Air Canada argues that its “Carrier Surcharge” is generic in nature, covers the volatility of a number of costs, and is not only intended to offset fuel costs. Furthermore, Air Canada argues that there is no direct correlation between crude oil prices and Air Canada’s fuel costs. Air Canada submits that the surcharge that is paid at the time of purchase is meant to cover costs that are incurred at or around the time of travel, and it sells tickets up to 360 days prior to such travel.

[19] Furthermore, Air Canada argues that the Decision determined that competitive forces justified the fuel surcharge, and those forces remain in effect. Moreover, the disallowance of the carrier surcharge would place Air Canada in an uncompetitive position, or would seem to place the carrier in that position, even if Air Canada’s total price was competitive, because the carrier’s fares would appear at the bottom of Global Distribution Systems (GDS) displays, given the logic used by GDS to distribute fares.

[20] Air Canada further argues that the issue of the reasonableness of the surcharge, in light of the volatility of fuel prices and the transparency of pricing display, has already been analyzed by the Agency in previous decisions, including 103-A-2013">Decision No. 103-A-2013.

[21] In addition, Air Canada submits that the Decision found that Mr. Brown had not provided sufficiently convincing calculations to support his allegation, and that the analytical approach taken by Mr. Brown in the present application could have been taken in the proceedings relating to the Decision. Air Canada submits that the Agency should not now provide Mr. Brown with an opportunity to reargue his case using that approach.

[22] Air Canada maintains that if the Agency determines that there has been a change in the facts or circumstances relating to the present matter, such facts or circumstances are not of a sufficient magnitude to warrant a review of the Decision because changes in fuel costs would not affect the outcome of the Agency’s decision in the present matter, given that the carrier surcharge continues to be set based on competitive forces.

Mr. Brown

[23] Mr. Brown argues that the dramatic drop in fuel prices since 2013 is material to the issue as to whether Air Canada’s fuel surcharges are still reasonable, and that such a drop constitutes a new fact or circumstance. Although fuel surcharges may have been considered reasonable in 2013, Mr. Brown states that Air Canada’s failure to adjust those surcharges to more accurately reflect the decline in the price of fuel warrants a reconsideration of the Decision.

[24] With respect to Air Canada’s contention that he is attempting to provide new evidence based on a different approach to the facts, Mr. Brown submits that the approach taken in the present matter is identical to that taken in his original application.

[25] In response to Air Canada’s submission that the carrier’s surcharge is justifiable because fuel prices remain volatile and may rise in the future, Mr. Brown contends that Air Canada’s fuel costs have been relatively stable for at least the past year, and that there is a consensus that prices will remain low for a considerable time.

[26] With respect to Air Canada’s argument that competitive forces require retention of the surcharge, Mr. Brown submits that such argument erroneously suggests that customers are incapable of making informed purchasing decisions based on total flight costs, including all taxes, fees, and surcharges.

[27] Mr. Brown also requested that Air Canada provide him with further information respecting the carrier surcharges that relate to fuel, a request that Air Canada did not address in its subsequent submission.

Air Canada

[28] Air Canada notes that it does not have a fuel surcharge, but a carrier surcharge, which is designed to offset the volatility of several costs, including fuel and the rate of exchange between the Canadian and U.S. dollars.

[29] Air Canada states that the carrier surcharge is intended to cover variations in costs, and that the recent changes in fuel costs demonstrate that those costs continue to vary widely, and such volatility does not constitute a change in the facts or circumstances.

[30] Air Canada submits that Mr. Brown’s argument that customers are able to make informed decisions based on total flight costs is inaccurate, and all-inclusive pricing regulations were promulgated because such decisions were not being made.

Mr. Brown

[31] Mr. Brown argues that the interests of the travelling public are meant to be protected by the legislation and the CTA, that the overriding concept of reasonableness must be maintained, and that competitive forces alone cannot be the only consideration.

ANALYSIS AND FINDINGS

[32] In assessing whether there has been a change in the facts or circumstances in this case since the Decision, the Agency has considered the evidence and arguments presented by Mr. Brown in his application for review in light of the evidence and arguments he provided in his original application.

[33] When Mr. Brown filed his application in 2013, he alleged that Air Canada’s fuel surcharges for international carriage were unreasonably high as the revenue accruing from such surcharges more than covered the entire cost of fuel. The Decision addressed this allegation by finding that Mr. Brown’s evidence was not sufficiently persuasive. The Agency also noted the influence of competitive forces in determining fuel surcharge amounts.

[34] In his application for review pursuant to section 32 of the CTA, Mr. Brown makes the same allegation in relation to more recent fuel prices and Air Canada’s current “Carrier Surcharge”. The basis for his application for review is that prolonged and significant changes to the cost of fuel have occurred since the Decision which would affect the Agency’s determination of reasonableness.

[35] In the Letter Decision concerning Air Canada’s request to stay proceedings, the Agency referred the parties to the “Interpretation Note on Section 32 of the Canada Transportation Act” (Interpretation Note). In relation to the first step of the test concerning the existence of a change in the facts or circumstances, the Interpretation Note states as follows:

A distinction must be drawn between, on the one hand, new evidence that is simply “more evidence on the same issues” which would be rejected as new facts or circumstances and, on the other hand, unexpected evidence that is of basic importance to the case which may be accepted as new facts or circumstances.

[36] In the Decision, the Agency considered the data and calculations as presented by Mr. Brown dating from 2013. Mr. Brown has returned to the Agency with calculations using data from 2015. The Agency is of the opinion that Mr. Brown’s application for review provides further updated evidence to support his original allegation that fuel surcharges are unreasonably high compared to fuel costs. In the circumstances of this case, the Agency finds that Mr. Brown’s updated evidence constitutes “more evidence on the same issues”.

[37] Mr. Brown’s filing of more evidence on the same issues is particularly significant given that in the Decision, the Agency found that his original evidence was insufficiently persuasive. In light of this, to allow Mr. Brown to present updated evidence in the context of an application pursuant to section 32 of the CTA would run the risk of allowing him to reargue his case, which is contrary to the intention of the Agency’s review power.

[38] On this basis, the Agency finds that the evidence presented by Mr. Brown does not meet the definition of a change in the facts or circumstances within the meaning of section 32 of the CTA.

[39] The Agency considers that this finding is sufficient to dispose of the application. Nevertheless, the Agency notes that even if recent fuel cost and “Carrier Surcharge” amounts were accepted as a change in the facts or circumstances, Mr. Brown has not demonstrated that this change would be expected to result in a variance of the Decision.

[40] Specifically, the Decision found that fuel surcharges are “very much influenced by competitive forces”. Air Canada has argued that competitive forces remain in effect, such that a change in fuel costs could not be expected to impact the Agency’s findings. In addition, Air Canada argues that fuel surcharge amounts are designed to address the volatility of fuel prices and that fuel prices remain volatile. Mr. Brown makes a general statement that competitive forces should not be the only determinant in assessing the reasonableness of a fuel surcharge, and argues that fuel prices have been relatively stable and are expected to remain so for some time.

[41] In this case, the Agency finds that the influence of competitive forces remains an important factor in relation to fuel surcharge amounts. Moreover, the Agency agrees with Air Canada’s argument that fuel price volatility persists. Given these factors and for the purposes of determining whether a review of the Decision is warranted, the Agency concludes that Mr. Brown’s submissions have not shown that changes in fuel price and current “Carrier Surcharge” amounts would be expected to result in a variance of the Decision. Accordingly, the Agency finds that even if there was a change in the facts or circumstances in this case, Mr. Brown has not shown that the change is sufficient to justify a review.

CONCLUSION

[42] Based on the above findings, the Agency dismisses Mr. Brown’s application for a review of the Decision.