Air Canada is suing U.S. Transportation Secretary Ray LaHood over his department's decision to ban the airline's sports team charters from making multiple stops in the United States.
The decision, made last month, has sparked retaliation by Transport Canada and created a nightmare for the National Hockey League, which is about to start its season. If the dispute is not resolved, NHL clubs will not be able to play more than one game in the U.S. or Canada without first returning to their home country. The dispute also affects the National Basketball Association and has disrupted baseball's Toronto Blue Jays.
The U.S. decision "is wreaking havoc on the hockey season, may damage the National Basketball Association season, and exposes Air Canada to claims from its customers," the airline said in its lawsuit filed Thursday in a district court in Washington. The airline included statements from executives at several NHL teams about the hardships they will face if the dispute continues into the hockey season.
Air Canada's subsidiary Jetz has built up a lucrative business ferrying sports teams to games. Jetz serves 10 NHL clubs, including all six Canadian-based teams, as well as the Milwaukee Bucks of the NBA. Air Canada said that if the U.S. decision stands, Jetz will go from being "a profitable division within Air Canada to being not viable."
For years, sports teams had been given special consideration by both countries. Foreign airlines are generally not allowed to move passengers between domestic cities in either country, something known as "cabotage." Sports team charters were given exemptions to those rules because of the nature of their operations.
Transportation officials in the U.S. audited Jetz flights involving the Boston Bruins and Bucks during their 2008-09 seasons and allegedly found incidents of cabotage that went beyond the exemptions. The department sent Air Canada a letter on Aug. 11 instructing the airline to stop "accepting any future such business" and "take steps to cancel any such current contracts."
In its lawsuit, Air Canada alleges there were only a handful of incidents and none involved violations of the rules pertaining to cabotage. The airline alleges U.S. Transportation officials have repeatedly approved Jetz services and the recent action was taken at the behest of labour unions and U.S. competitors who were upset the Canadian carrier was winning business from U.S.-based teams.
"The action by the department is arbitrary, capricious, and contrary to law," Air Canada alleges in its filing.
Air Canada adds that the Anaheim Ducks have already dropped Jetz, and several other hockey teams, including the St. Louis Blues and the Bruins, have indicated they may drop the charter service because of the U.S. decision.
Some U.S. charter companies, including Dallas-based Paradigm Air Carriers and Florida-based Miami Air International Inc., which provide services to several NHL teams and the Blue Jays, have been banned from making multiple stops in Canada. Canadian regulators recently cancelled close to 60 flights scheduled by those airlines this month for teams heading to NHL exhibition games.
Air Canada has asked the U.S. court for an injunction lifting the Department of Transportation decision until it can be resolved. The airline alleged that U.S. officials have refused to hold a proper hearing on the issue.
Canadian Transport Minister John Baird has backed up Air Canada's concerns and sent a letter to Mr. LaHood last month calling the U.S. decision "an unprecedented interference in the operations of the marketplace." Canadian officials have also been requesting meetings on the issue to help find a resolution.
U.S. officials declined comment on the lawsuit.