Regional carrier Porter Airlines is suing Air Canada and Jazz for violating Canada's competition laws, calling into question a capacity purchase agreement in force between Air Canada and Jazz for more than three years.
Porter alleges that Air Canada and Jazz have conspired to lessen competition by "entering into an agreement through which they effectively co-ordinate their activities to establish airfare prices, increase their market dominance, avoid competition between themselves, and impede new competitors such as Porter Airlines".
Porter is asking a court to break up this arrangement and award it damages. Its charges arise as a counterclaim in a lawsuit brought by Jazz over its restricted access to Toronto's downtown airport, where Porter is based.
The allegations question whether Air Canada and Jazz can continue commercial practices that started when they were both wholly-owned subsidiaries of ACE Aviation Holdings. Under competition law, such subsidiaries are immune from claims of price or capacity fixing because they are regarded as a single entity. ACE spun off Jazz last year as a separate company and recently reduced its stake to 20%, but Porter claims Air Canada and Jazz are continuing to operate as if they are a single entity. "The two airlines should not be allowed to operate in the same way as they have in the past," insists Porter founder and chief executive Robert Deluce.
Under the capacity agreement, Jazz flies passengers for Air Canada at agreed rates, acting much as a charter on Air Canada's behalf. According to Porter, Air Canada controls almost every aspect of Jazz's business, including scheduling flights and setting fares.
Porter claims that Air Canada and Jazz also offer bulk discounts that exclude other airlines from competing. Air Canada says its agreement is similar to those between other mainline and regional carriers in North America.
Source: Airline Business
