Air Canada sued WestJet Airlines and two of its employees on Tuesday, alleging the discount carrier used information on a private Air Canada website to plan its expansion.
Air Canada alleges WestJet used the personal identification number of Jeffrey Lafond, a former Canadian Airlines employee hired by WestJet as a financial analyst, to access the website and find out detailed information about Air Canada's routes and market conditions.
The private website is used by Air Canada employees to book personal travel.
In its statement of claim filed in Ontario Superior Court, Air Canada alleges WestJet, Lafond, and Mark Hill - the airline's vice-president of strategic planning - used the information to identify Air Canada's most profitable flights and times.
Using that confidential information, WestJet adjusted its own schedule, planned its expansion into new routes and adopted pricing strategies to force its larger competitor out of certain markets, Air Canada alleges.
"Its abuse of the plaintiffs' confidential information has enabled WestJet to expand its service, its revenue and its profitability at a more rapid pace than it would without the plaintiffs' confidential information," Air Canada said.
As part of his separation package when Lafond left Canadian Airlines in October 2000, he received two space-available airline tickets per year for five years. These tickets are booked through the private website.
The airline alleges Lafond's identification number was used 243,630 times between May 15, 2003, and March 19, 2004, to access the website.
"The continuous and massive use of Lafond's employee ID number and PIN to access the employee website could not be done by one individual and far exceeds any possible potential use by Lafond," Air Canada said.
"Such massive access to the employee website through one employee ID number could only be accomplished through automated technology."
Air Canada is seeking $5-million in punitive damages, as well as damages for lost revenues and profits.
The airline also asked that any WestJet profits earned from use of the information be held in trust and that all the data be returned to Air Canada.
Officials at Calgary-based WestJet were not immediately available for comment.
The lawsuit comes as WestJet prepares to move its eastern hub from Hamilton to Toronto and increase flights out of Canada's largest city.
WestJet, which has been eating up domestic market share at Air Canada's expense, is stepping up the pressure, with plans to more than double its flights in and out of Toronto to 365 per week, up from 146, beginning April 18.
Air Canada is searching for a new investor to replace Hong Kong businessman Victor Li and his Trinity Time Investments, which has announced plans to walk away from a $650-million investment in the airline unless significant changes are made.
"The issue for us and for our employees in particular is to find the right investor," chief executive Robert Milton said Tuesday in his first public comments since Trinity announced its plans.
"A person that is just going to write a cheque to potentially rip the company apart is not what the employees need, or what I want."
Some of Canada's largest pension funds as well as Toronto conglomerate Onex Corp. and several U.S. vulture funds have been mentioned as possible replacement investors in the airline.
Michael Carney, a business professor at Concordia University, said the pieces of Air Canada may be worth more than the airline as a whole and an investor like Onex might look to sell off units such as its Aeroplan loyalty program, its Jazz regional subsidiary, and its maintenance division.
"I don't think he necessarily wants that, probably because he likes his little empire that he runs," Carney said of Milton.
An earlier bid by Onex, together with the Texas Pacific Group - a U.S. firm experienced in the turning around airlines - was rejected by the airline's board of directors in favour of Trinity.
Carney, who teaches aviation management, said that had the Texas Pacific bid been selected, Milton would have almost certainly been removed as head of the airline.
"He would be in a very hot seat if those owners came in and it didn't surprise me when they didn't select Texas," Carney said.
Air Canada also filed a motion with the court overseeing its restructuring Tuesday to have its creditor protection, currently set to expire on April 15, extended one month until May 14.
The airline said it needed the time to stabilize the current situation, develop a process to find a new equity sponsor and finalize a timeline to exit from creditor protection.
The bankruptcy monitor overseeing the airline has recommended the extension be approved.