It had to happen sooner or later, and when it came on May 29 the words
were demeaning: “In 2003-2004, certain members of WestJet management
engaged in an extensive practice of covertly accessing a
password-protected proprietary employee web site maintained by Air
Canada to download detailed and commercially sensitive information
without authorization or consent from Air Canada. 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.
This conduct was both unethical and unacceptable and WestJet accepts
full responsibility for such misconduct. WestJet sincerely regrets
having engaged in this practice and unreservedly apologizes to Air
Canada and Mr. Robert Milton.”
This
joint statement by Air Canada and WestJet ended a two-year legal battle
that began on April 6, 2004 when Air Canada filed suit in Ontario
Superior Court, alleging that an ex-employee, financial analyst Jeffrey
Lafond, then working for WestJet, had allowed his Air Canada employee
number and PIN number to be used by WestJet to gain access to the web
site 243,630 times between May 15, 2003 and March 19, 2004.
The
web site contained passenger booking numbers for Air Canada flights for
nearly a year into the future and was thus of value to WestJet for its
strategic planning. The lawsuit alleged that Mark Hill, WestJet’s VP
for strategic planning, encouraged Lafond – who earlier was with
Canadian Airlines International, which was acquired by Air Canada in
2000 – to use his Air Canada ID to gain information that enabled
WestJet to:
• Identify Air Canada’s most profitable routes and so adjust its own prices and schedules;
• Plan route expansion;
• Price its services so as to force Air Canada out of new markets.
There
was much legal to-and-froing over the next two years, but Hill’s
resignation on July 14, 2004 suggested that Air Canada’s claim was
serious. Indeed, WestJet co-founder and CEO Clive Beddoe, in a
conference call with financial analysts about that year’s
second-quarter results, apologized for the deposed VP’s “inappropriate”
behaviour. “I should have known what Mark Hill was doing,” he said.
Well,
did he or didn’t he? The recent mea culpa that settled the case stated
that Hill’s activity was undertaken “with the knowledge and direction
(my italics) of the highest management levels of WestJet.” Beddoe, of
course, is the highest management level at WestJet. He himself revealed
on November 10, 2004 that he had offered to resign but the board of
directors had turned him down.
Whatever the details, the fact
remains that WestJet was caught out. The May 29 statement could not
have been more embarrassing. And WestJet paid a price in money as well
as in corporate reputation. As a full settlement, it agreed to pay Air
Canada’s litigation costs of $5.5 million and to donate $10 million to
children’s charities across Canada.
Under these terms, Air
Canada accepted WestJet’s apology and withdrew its claims. All legal
proceedings between the companies were terminated. “Both parties have
expressed a desire to turn the page on this unfortunate chapter with
finality,” the joint statement said.
Has this “unfortunate
chapter” had any effect on WestJet other than humiliation at the
corporate level? Apparently not. There appears to be no customer
revolt. People who liked WestJet’s service (as I do) still like it.
So
the world did not end for WestJet. In fact, no sooner was the new
accord made public than Milton, chairman of Air Canada parent ACE
Aviation Holdings Inc., was talking about the two airlines working
together in areas of common interest such as airport fees and air
traffic control.
Only 12 days after the out-of-court settlement,
Jeffrey Simpson, a major columnist for the Globe and Mail – widely read
by the business elite that is the backbone of Air Canada’s crucial
premium-fare services – unleashed a virulent attack on Air Canada’s
customer service. The airline, he wrote, “doesn’t give a damn, except
for the bottom line.” As for the competition, he declared: “WestJet,
you’ve got a new customer.” He made no mention whatsoever of WestJet’s
corporate espionage caper.
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