DAVID KNIBB SEATTLE
In separate disputes, Air Canada is testing the full extent of powers that Canadian regulators hold over the airline since its takeover of Canadian Airlines.
The first involves the Competition Bureau's new cease and desist powers. Air Canada has lost the first round, but has two more challenges pending.
A key part of Ottawa's response to Air Canada's takeover of Canadian was to arm the Competition Bureau with new weapons against any market abuse by a dominant airline. Among these is the power to order an airline to cease and desist conduct that looks predatory, even before the Bureau completes an investigation. Lawmakers reasoned that the Bureau needs the power to nip such conduct in the bud early.
CanJet Airlines has complained to the Bureau that Air Canada targeted it with low fares limited to the start-up's five routes. Air Canada responds that it is simply matching CanJet's fares to meet competition.
The Competition Bureau has not yet ruled on the merits, but it has ordered Air Canada to cease and desist offering its low fares. It reasons that Air Canada's discounts could be anti-competitive and threaten CanJet's existence.
Air Canada has challenged the Bureau's power to give that order without a hearing and without first finding if Air Canada intended to drive CanJet out of the market. In a lawsuit filed in Quebec court, Air Canada insisted that the Bureau should be required to ask an independent tribunal for such an order rather than issue one itself.
But the Quebec court refused to stay the Bureau's order until a full hearing. The case is now slated for trial early next year. Separately, the airline has asked the Competition Tribunal to set aside the same order. That request is also pending.
The second dispute involves selective disclosure of financial information. Shortly before release of its results, Air Canada is believed to have told analysts who regularly cover the company that higher fuel, labour, and merger expenses, coupled with lower revenue, would generate lower than expected earnings.
Air Canada did not issue a follow-up media release. Its shares fell in heavy trading upon the next day the stock exchange was open. The Toronto Stock Exchange and Ontario Securities Commission are investigating exactly what Air Canada said and who traded on the basis of it. Robert Milton, the airline's chief executive, however maintains that the calls were not a profit warning.
Regulators have taken no action against Air Canada, but the incident has provoked Canadian financial circles to debate what may be disclosed on a selective basis.
Source: Airline Business
