Air Canada links WestJet success to 'tap'
Lawsuit documents filed: Accusation that Web site data gave carrier unfair edge
Paul Vieira
Financial Post
Thursday, April 08, 2004
Senior Air Canada executives claim the remarkable success of WestJet Airlines Ltd., compared with the struggles and failures of other domestic low-cost carriers like CanJet and Roots Air, and its recent shift in corporate strategy are tied to its ability to tap unlawfully into the insolvent company's secrets.
The allegation comes in a series of affidavits filed by airline executives, technology staff and security managers in a support of an Air Canada lawsuit against its rival and two of its employees. The documents, which contain allegations yet to be proven in court, spin a tale that suggest many of the recent moves by the Calgary discounter -- from shifting its eastern hub from Hamilton to Toronto, to changing flight times on certain routes -- were done based on illegal access to Air Canada data.
The Montreal airline alleges WestJet was able, between May of last year and last March 19, to gain access to an Air Canada Web site on at least 240,000 occasions to acquire secret data -- namely passenger traffic and load factors on flights -- by using the personal I.D. of Jeffrey Laffond, a WestJet financial analyst, a former Canadian Airlines employee who was given a log-in password in order to book two free Air Canada flights a year until 2005 as part of his severance package.
Air Canada hinted WestJet may have tapped into the computer before May, 2003, but a change in software prevents Air Canada from tracking back that far.
Air Canada was first tipped off last December by a WestJet employee that the low-cost carrier's executives had access to its rival's secrets.
The whistle-blower decided to spill the beans to Stephen Smith, head of Air Canada's Zip discount subsidiary, because he "was upset, disgusted and concerned about unfair business practices ... in a vicious business."
Air Canada executives argued in the affidavits that WestJet's having access to this confidential information helps explain many of the company's recent moves and a change in corporate direction.
Montie Brewer, Air Canada's vice-president of commercial operations, cited as an example a change in scheduling on WestJet's Vancouver-Montreal route.
Six months after it started, WestJet "made a dramatic scheduling change, moving its only flight on that route from the evening to the early morning -- which coincides with Air Canada's most profitable time for this route," Mr. Brewer said in his affidavit, adding that was likely done with secret data in hand.
He also cites the recent announcement that WestJet is abandoning Hamilton as its eastern Canadian hub in favour of Toronto.
"By observing that Air Canada's loads out of Toronto to Montreal and Ottawa remained steady despite WestJet's presence in Hamilton, WestJet was able to determine that its Hamilton-based flights were not attracting Air Canada's Toronto customers," Mr. Brewer said, "and therefore, moved to Toronto."
The filings also note that as of January 2000, WestJet has skyrocketed from a 10% market share to 30%.
"It has done this at a time when other low-fare airlines who do not have access to Air Canada's confidential information have tried through trial and error to establish viable combinations of routes and fares," Mr. Brewer said, noting Canada 3000 and Roots Air collapsed, while CanJet and Jetsgo struggle.
Ben Smith, Air Canada's senior director of planning, said part of his job is to monitor WestJet's routes. "It has become apparent to me that there has been a marked change in WestJet's recent strategy," he said. "Formerly, it was very conservative about adding new routes -- generally one at a time, and staying within Canada.
"By contrast," Mr. Smith said, "its record on new routes over the past 18 months has been very good. It has added routes for which there is strong demand, and it has become apparently risk aggressive in its expansion."
WestJet has said it will respond to the allegations once it has reviewed all the court materials filed by Air Canada.
© National Post 2004