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Westjet's whine about AC getting old fast.

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WestJet's whine about Air Canada is getting old fast


Friday, December 17, 2004 -The Globe and Mail Page B2

What's with WestJet's whining? Is its most recent lawsuit against Air Canada a smokescreen to deflect the scrutiny to which the discount carrier is increasingly subjected, or is there truly some merit in its claim that its larger rival is engaged in abuse of the judicial system? And before going any further, let's clarify what "abuse of the judicial system" implies.

It's an old cause of action that says a company or person can't use the processes of the court to sue someone for one thing in order to gain an advantage in another way.

Many in the legal community view this as what football players call a "hail Mary" play.Now on to the business of sifting through the statement of claim filed on Wednesday to see whether the allegations are new or whether they're more of the classic attacks on Air Canada, which WestJet has never shied away from. And it doesn't take long to figure out which direction the document leans.

The first header, after the formalities regarding the parties named, is about Air Canada's business plan being crafted with the sole purpose of destroying WestJet.

WestJet was eating Air Canada's lunch in certain markets, but to assume CEO Robert Milton would focus the airline's resources on putting a competitor out of business -- especially when it wasn't on the soundest financial footing in the first place -- is ludicrous.

Truth is, WestJet had quite a nice little monopoly once that pesky Canadian Airlines was out of the way, but now it faces competition not only from a healthy Air Canada, but also from the increasingly aggressive Jetsgo.

So, while the courts will ultimately rule on its validity, this lawsuit comes across early in the claim as nothing more than sour grapes.

WestJet attempts to substantiate its claim that Air Canada was indeed intent on driving it out of business by alleging that is what it had done to a number of other low-cost carriers, including Nationair, Astonia and VistaJet.But each of those carriers had its own serious problems, and they all suffered from underfunding in a capital-intensive business.

On the other hand, one of WestJet's successes has been its ability to raise money at a time when many rivals are shut out of the capital markets.But there's more.

The lawsuit alleges that Air Canada engaged in predatory behaviour, where it would sell seats below its costs or flood the market with more capacity in order to win market share. WestJet supports this statement by saying the Competition Tribunal rendered a decision in July, 2003, declaring Air Canada's conduct was anti-competitive.

But paragraph 340 of the tribunal's judgment suggests otherwise: ". . . even if the Tribunal concluded that Air Canada failed the avoidable cost test, it does not lead to a conclusion that Air Canada has engaged in an abuse of dominant position under section 70 of the Act.

Indeed, a practice of anti-competitive acts, among other elements, must be demonstrated under that provision."

The WestJet suit goes on to claim that Air Canada's business plan called for an equity investor in the airline to be prepared to sustain losses of up to $200-million while Air Canada concentrated on driving WestJet out of business.

Was Air Canada management so delusional that they thought attracting an equity investor prepared to lose money for a period of time was even in the realm of possibility? Last anyone checked, people invest for the purpose of making money, not losing it.

Then there is the allegation that Air Canada aimed to "eliminate WestJet as a competitor through the abuse of the justice system." And how was this supposed to have been done?

By not acting quickly enough to shut down the WestJet employees that were obtaining load factor information by using an access code granted to a former Canadian Airlines employee who went on to work for WestJet, the statement of claim alleges.

But the best bit comes at the end, where the claim is clearly stated that "Air Canada, Zip [the discount subsidiary], Milton, Smith and Rovinescu conspired together to destroy WestJet." (At the time Steve Smith was the president of Zip and Calin Rovinescu an Air Canada executive vice-president.)

This allegation presumes there was no executive team, no board input, no sense of fiduciary duty -- just a rogue management group hijacking an airline's business plan for the purpose of putting a competitor out of business.

That's a tough one to believe. While it's true that Air Canada's management perhaps hasn't always made the best decisions, to suggest they abandoned sound business practices goes a bit far.

With this lawsuit, WestJet reveals itself as a tempestuous adolescent that doesn't want to take responsibility for itself nor deal with the realities of operating in a tough business. It really should stop whining.

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Guest rattler

With this lawsuit, WestJet reveals itself as a tempestuous adolescent that doesn't want to take responsibility for itself nor deal with the realities of operating in a tough business. It really should stop whining.dyedlin@

Strong words indeed. Next headline may be "Westjet sues columnist" biggrin.gif

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laugh.gif Good grief man! These stories will be told for years to come! This is truly precious to be here watching this all go down!... History in the making, and incredibly entertaining stuff it is!

What a hoot! Y'all wanted to see what it meant to be Canadian... This is it.... How silly can it get? laugh.giflaugh.giflaugh.gif

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Damn.... Now I have to get serious...

Financial Guy... I agree.

Niether AC nor any other competitor was responsible for Naitionair's demise.

And I agree with the intent of maintaining that site. It's a lesson that really shouldn't be forgotten.

Having witnessed, first hand, some of the real life results of the urge to be cheap, I have all the evidence I need to make a conclusion as to what killed that airline. ....and several of it's employees! sad.gif

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