WestJet says Air Canada hurting its business

WestJet Airlines Ltd. says it has curtailed plans to expand service to new destinations in the East because of alleged anti-competitive behaviour by Air Canada.

In an affidavit filed yesterday with the federal Competition Tribunal, WestJet revealed that it has lost $182,585 on its Hamilton-Moncton route since launching it last April.

"If Air Canada's anti-competitive actions are permitted to continue, WestJet may be forced to withdraw from the Hamilton-Moncton route and will need to re-think its expansion strategy," Mark Hill, WestJet's vice-president of strategic planning, wrote in the affidavit.

As a result, WestJet would be "unlikely to grow to become a substantial competitor to Air Canada in Eastern Canada," Mr. Hill wrote.

Canada's Competition Bureau Commissioner is taking Air Canada to the Competition Tribunal over allegations of predatory behaviour against Calgary-based WestJet and CanJet Airlines, which is being acquired by Toronto-based Canada 3000 Inc.

The bureau alleges that Air Canada lowered prices below its avoidable costs on flights between Halifax and Montreal, Halifax and Ottawa, Halifax and St. John's, Toronto and Moncton, Toronto and Saint John, Toronto and Fredericton, and Toronto and Charlottetown.

Air Canada filed its response to the allegations yesterday, arguing that the commissioner's approach prevents the airline from responding to competition -- "a result wholly at odds with competition law and policy."

The airline said it has not engaged in predatory behaviour and has not priced below avoidable costs on the routes in question. It said it should not take the blame for CanJet's troubles.

"If CanJet could not operate profitably in the face of competition from Air Canada, as alleged by the commissioner, this highlights the inadequacies in CanJet's business plan.

"It is not for Air Canada to concern itself with CanJet's profitability, nor should it be the commissioner's role to protect one competitor at the expense of proper and vibrant competition," Air Canada said in its response.

Air Canada, which controls about 80 per cent of Canada's domestic traffic, also disputed the commissioner's characterization of the Montreal-based carrier as the country's "dominant airline."

WestJet's affidavit appears to explain why the carrier has slowed its expansion into Eastern Canada.

After building a successful short-haul network in Western Canada, WestJet launched service last year into Hamilton, Ottawa and Moncton. But it has delayed previously announced plans to expand service into Montreal and Halifax. (It also put off plans to expand into Toronto, citing problems with airport landing slots.)

Clive Beddoe, WestJet's chairman, said this week that Air Canada should look after its own business instead of focusing so much on the competition.

Air Canada president and chief executive officer Robert Milton has acknowledged that WestJet is giving him troubles.

In a letter sent to pilots in February, Mr. Milton said it is "strategically important" that Air Canada launch its own no-frills airline to minimize WestJet's impact.

The Competition Bureau is also investigating allegations of predatory behaviour by Air Canada against Roots Air, a division of Toronto-based Skyservice Airlines Inc., which launched service last month.