Estimated Amount of Damages is Believed to be the Largest Single Claim Against the Insolvent Carrier
Attorney for the Counterpart U.S. Class Action Lawsuit Reveals “Smoking Gun” of Alleged Airline Conspiracy
Toronto, 30 October 2003: Travel agency plaintiffs in the ongoing federal class action lawsuit against Air Canada, five U.S. airlines, and the International Air Transport Association (IATA), filed a CAD $1.7 billion dollar claim against Air Canada yesterday in accordance with a court-ordered process whereby creditors are required to file damage claims against Air Canada no later than 17 November 2003. The alleged damages relate to travel agency commissions lowered, capped, or eliminated from 3,700 IATA-accredited travel agencies by Air Canada beginning in 1997 and which the travel agency plaintiffs allege occurred through a conspiracy among Air Canada, IATA, and the other airline defendants.
CSTAR is a co-plaintiff in the class action lawsuit.
The travel agency damages claim against Air Canada is likely to be the largest single claim against the insolvent airline by any prospective unsecured creditor. The amount of the claim was calculated using conservative benchmarks and data, some of which came from industry estimates and IATA`s own published sales statistics. However, the plaintiffs underscore that Air Canada and IATA have access to the actual and true amount of alleged damages via commission settlement mechanisms and transaction data in their sole control and that the amount claimed is thought to be a conservative approximation thereof.
On 25 September 2003, Ontario Superior Court Justice James Farley conditionally lifted the Court`s 01 April 2003 stay on proceedings against Air Canada insofar as CSTAR`s class action lawsuit was concerned, requiring the Canadian flag carrier to continue with the delivery of motion materials to the Federal Court in connection with a prospective hearing to certify or not, the class of 3,700 travel agency plaintiffs in Canada.
In a related matter, travel industry news media has reported that Henry “Andy” Anderson, the lead attorney in the U.S. counterpart class action lawsuit (“Sarah Hall vs.United Airlines et al”) revealed so-called alleged “smoking guns”, pointing at the alleged conspiracy involving Air Canada and some 19 other defendant airlines, and its effect on over 22,000 U.S. travel agencies. In this latter lawsuit, the class has already been certified by the U.S. District Court in North Carolina and is scheduled for a jury trial in Raleigh, North Carolina to commence on 04 February 2004. One defendant airline, Lufthansa German Airlines, has already opted out of the trial through a multi-million dollar settlement with the plaintiffs.
U.S. travel trade publication Travel Weekly (28 October 2003) reports that Anderson, speaking at the World Travel Congress of the American Society of Travel Agent (ASTA), held in Miami last week: “Developed direct evidence—which he calls the “smoking gun”—by piecing together details of how U.S. airlines used overseas partners for “their dirty work” at meetings of IATA`s Passenger Traffic Coordinating Conference (PTCC), which deals with international commission agreements. That “dirty work” was, first, the rescission, as to Canada, of [IATA] Resolution 016a, which had set international commissions at 9% for most of the world, except the U.S. The second step was eliminating the resolution to set 9% anywhere. The purpose was to set the stage so carriers would not be obliged to pay 9% on air tickets issued by foreign [travel] agents for Americans in cross-border arrangements.
In June 1998, Anderson said, Air Canada proposed the group rescind 016a for Canada, and that was OK`d in July. However, he said, IATA knew the fix was in: Five months earlier, IATA published its annual handbook for Canadian agencies, and that document did not include the resolution, though previous editions had included it as Page 1, he said, for upwards of 20 years. Finally, at a July 1999 PTCC meeting, the carriers rescinded 016a. In each case, Anderson said, minutes showed that the U.S. carriers left the room to avoid allegations of antitrust violations.
He said he will cite in court, as further evidence of collusion, the fact that some names appear consistently on attendance records for the three subcommittees that were supposed to provide independent judgments on issues. Anderson said he will connect those dots in court,”
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