WestJet admits to spying on Air Canada
Discount airline apologizes for 'unethical' conduct, to pay C$15.5 million
Updated: 12:06 a.m. PT May 29, 2006
MONTREAL - WestJet Airlines Ltd. admitted on Monday that it had improperly gained access to Air Canada’s key flight operations data and apologized as the two rivals settled a two-year-old legal dispute over the issue.
WestJet said its conduct in the matter, which took place in 2003-04 as Air Canada was restructuring under bankruptcy protection, was “unethical and unacceptable.”
“This practice was undertaken with the knowledge and direction of the highest management levels of WestJet and was not halted until discovered by Air Canada,” the companies said in a joint statement on Monday.
Calgary-based WestJet apologized to Air Canada and to Robert Milton, chief executive of Air Canada’s parent company, Aviation Holdings Inc.
WestJet agreed to pay Air Canada’s legal costs of C$5.5 million ($5 million) and accepted the latter’s request to donate C$10 million to children’s charities.
Cameron Doerksen, an analyst at Versant Partners said in a research note that the settlement was a fraction of what Air Canada had originally demanded and would lower WestJet’s legal expenses. The airline had C$288 million in cash at the end of its first quarter, he added.
“We view this as a significant positive for WestJet,” Doerksen said.
WestJet shares jumped 55 Canadian cents, or 5 percent to C$11.63, while ACE class A shares were up 22 Canadian cents at C$32.67 at midday on the Toronto Stock Exchange.
Montreal-based Air Canada had sued WestJet for C$220 million in April 2004, claiming its no-frills rival had repeatedly and covertly gained access to a password-protected Air Canada Web site for employees.
In its lawsuit, Air Canada alleged that WestJet had used the Web site access to download details about Air Canada’s flight operations, such as how many seats were filled on certain routes.
Although WestJet had previously denied wrongdoing, the scandal reverberated through the firm’s top management ranks.
Mark Hill, a co-founder of WestJet and former vice-president of strategic planning, resigned in July 2004.
In November 2004, Clive Beddoe, president and chief executive, and also a co-founder, told reporters he had offered to resign over the case, but Westjet’s board refused to consider it.