Canada: CTA decides on overbooking - and finds European compensation system unreasonable

Michael Wukoschitz's picture

On December 12, 2011, Gábor Lukács filed a complaint with the Canadian Transportation Agency (CTA) alleging that Air Canada’s practice of overselling domestic flights and certain domestic tariff provisions governing denied boarding compensation appearing in Air Canada’s Tariff are unreasonable. He requested the CTA to:

  • direct Air Canada to cease and desist from overselling domestic flights;
  • disallow Rule 245(E)(1)(b)(iv) of the Tariff which provision relieves Air Canada from compensating a passenger if, for operational and safety reasons, the aircraft on which the passenger had a confirmed reservation has been substituted with an aircraft of lesser capacity, thereby preventing Air Canada from accommodating the passenger on that aircraft; and
  • disallow Rule 245(E)(2) of the Tariff, which governs the amount of denied boarding compensation tendered to affected passengers and provides that, subject to certain conditions, and at the passenger’s option, Air Canada will tender liquidated damages in the amount of $100, or will offer a travel voucher in the amount of $200 for travel within Canada, the United States of America or Mexico.

In its decision of May 27, 2013, the CTA held that the test for reasonableness requires that a balance 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.

With regard to overbooking, the CTA held that overbooking wascommonplace among air carriers. In general, the practice served the interests of both the carriers and the travelling public because carriers are able to operate at maximum capacity, which should result in reduced fares. The CTA therefore found that the practice of overselling domestic flights strikes a reasonable balance between Air Canada’s statutory, commercial and operational obligations and the passengers’ rights to be subject to reasonable terms and conditions of carriage.

With regard to substitution of aircrafts, the CTA was of the opinion that Air Canada should have the flexibility to control its fleet and determine when an aircraft should be substituted for operational and safety reasons, provided that Air Canada is able to demonstrate that the events prompting the substitution were beyond Air Canada’s control. However, the burden must rest with Air Canada to establish that the events prompting the substitution were beyond Air Canada’s control and that it took all reasonable measures to avoid the substitution or that it was impossible for Air Canada to take such measures. If Air Canada failed to so demonstrate, compensation should be due to the affected passengers. In the absence of specific language that established context or qualified Air Canada’s exemption from paying compensation, Rule 245(E)(1)(b)(iv) of Air Canada's Tariff was therefore held to be unreasonable.

Regarding the amount of compensation, the CTA referred to an earlier decision according to which the particular rule was reasonable. However, the CTA pointed out that that decision was rendered nearly 12 years ago and circumstances in the market have changed since then. According to the CTA's opinion, Air Canada had failed to demonstrate how a higher level of compensation would place it in a disadvantageous position relative to other domestic air carriers and Air Canada had not demonstrated to the Agency’s satisfaction that Air Canada’s denied boarding compensation was still reasonable.

With regard to what may constitute a reasonable compensation regime, the CTA is not convinced that an approach that includes a distance component correlates with the inconvenience that may be experienced by a passenger who is denied boarding. Rather, compensation based on the length of time by which a passenger is delayed more accurately reflects the damage which may be experienced. As such, CTA is of the opinion that the regime applied by the United States of America represents reasonable options, while that applied by the European Union does not.

Full text of Decision No. 204-C-A-2013 of May 27, 2013 in Case Gábor Lukács v. Air Canada available here>>.

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