Canada: New Regulations For Canadian Air Carriers

This article was originally published in the June 2012 edition of Travel Law Quarterly (www.tlq.travel)

Until recently, for the unsophisticated purchaser, the prospect of a relaxing vacation in an exotic location or a sightseeing tour to a world class destination inevitably required navigating a collection of travel brochures, newspaper ads and internet travel sites to determine exactly how much a flight was going to cost. Similarly, collectors of frequent flyer miles had to account for additional taxes and fees when making the decision to redeem their points. In the wake of recent Canadian consumer protection legislation and complementary initiatives on the part of airlines, these frustrating experiences may soon be a thing of the past. New regulations requiring Canadian air carriers to include all associated fees and taxes in their advertised prices are expected to be implemented this year and have already started to change the consumer experience associated with purchasing an airline ticket.

Background: a history of the Legislation

'An Act to amend the Canada Transportation Act and The Railway Safety Act and to make consequential amendments to other Acts'¹ came into force on 22 June 2007. The Act was intended to strengthen the Canada Transportation Act² by providing for more comprehensive protection of the rights of air travellers. To this effect, clause 27 contained provisions that required the Canadian Transportation Agency to implement regulations that would more strictly govern airfare advertising in Canada.

In an industry where consumers can search and compare hundreds of prices with the click of a mouse, it isn't surprising that airline carriers opposed clause 27 and the apparent threat it imposed on their freedom in the realm of airfare advertising. Ultimately, the Act was implemented without clause 27 and the issue of airfare advertising was left to be addressed at a later date.³

A shift towards transparent airfare costs

Over four years after it was initially proposed, the Government of Canada is set to move forward with its effort to strengthen the regulations governing airfare advertising across the country. On 15 December 2011, clause 27 came into force and, with it, sections 86.1 and 86.2 of the Canada Transportation Act were implemented. These provisions require the Canadian Transportation Agency to create new regulations compelling air carriers to include all fees, taxes and additional charges in their advertised prices in all media, including the Internet. As emphasised in the Canada Gazette's explanatory note, these provisions aim to 'ensure greater transparency of advertised airfares by airlines and allow consumers to readily determine the cost of an air service.'⁴

The race to redefine consumers' purchasing experience

In the wake of these statutory amendments, the Canadian Transportation Authority has begun the lengthy process of consulting key air and travel industry stakeholders and will eventually draft regulations requiring advertised airfare prices be all-inclusive.⁵ Transport Canada anticipates that the process of implementing these regulations will take one year;⁶ however, the transition has been drastically accelerated by the airline industry itself.

Within two months of the Canadian government announcing its plan to introduce new consumer protection legislation, several of Canada's largest airlines declared their intention to transition to 'all-inclusive fares'. These fares quote a single fee encompassing the base price and all taxes, fees and surcharges including Nav Canada fees, airport improvement charges, fuel surcharges, insurance and security charges, and HST. These additional taxes and fees can be as much as, or in many cases, substantially more than the base price of the ticket. WestJet Airlines was the first to make the shift in its print advertisements in January 2012, followed closely by Air Canada and Porter Airlines in February of the same year.

Some suggest that the airline sector's transition to all-inclusive fares is due to its alignment with a growing international industry trend. Notably, the United States recently implemented airfare honesty laws and the European Union has had similar regulations in place since 2008.⁷ Others view the airlines' pre-emptive response as an ingenious marketing strategy that addresses consumer demands for increased transparency in airfares. Regardless of the motive, at least from a consumer's perspective, the expansion of consumer protection legislation into the realm of airfare price advertising will drastically change the way that consumers will research, compare and purchase airline tickets in the future.

On the marketing side, according to marketing experts, "brands that have a process for telling the truth are likely to sell more products, make more money, and keep more customers loyal – through any medium, in every market."⁸ If truth really sells, there will be more time for relaxing vacations for those of us practising advertising law. I hope you enjoy this issue.

I would like to acknowledge the valuable assistance of our summer students, Nicole Zeit and Amanda MacNaughton in the preparation of this article.

Footnotes

1 SC 2007, c 19 (the Act)

2 SC 1996, c 10 (Canada Transportation Act)

3 See Explanatory Note to the Order Bringing into Force Sections 86.1 and 86.2 of the Canadian Transportation Act, as enacted by section 27 of the Act, SI/2011- 119, (2012) C Gaz II, 146:1 for more detail on this point.

4 Ibid.

5 Transport Canada, 'Government of Canada moves forward with changes to airfare advertising' (News Release), H128/11 (Ottawa: Media Relations Transport Canada, 2011)

6 Ibid.

7 Ibid.

8 Sue Unerman & Jonathan Salem Baskin, Tell the Truth (Dallas, Texas: BenBella Books, Inc) at 3.

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