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WestJet Spies on Air Canada

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Stephen Smith is the type of boss who keeps his door open. As president of Zip, a shortlived
Air Canada subsidiary, he was known as easygoing and approachable, regularly
walking around the Calgary office to check in with people. He also happens to be the
former CEO of WestJet Airlines, Air Canada’s archrival. All of which may be why he was
the one to receive a phone call last December from a man identifying himself only as a
WestJet employee. “I’m all for tough competition,” said the voice on the phone, “but I
have to draw the line at dishonest conduct.”
Then the caller dropped the bomb: WestJet was dipping into private Air Canada files
online and passing the information around the executive suite. The tipster reported
that he had seen a multicoloured page filled with Air Canada’s flight load (industry
jargon for the number of passengers flying on a specific flight) on a senior executive’s
computer. Smith suddenly feared West Jet brass might have access to a private site
used by Air Canada employees to book their own travel, from which the snoopers would
gauge which routes make money and which don’t – invaluable information in a business
built on tight margins. If he was right, this could explain why WestJet seemed to be
making all the right decisions of late such as flipping its Montreal-Vancouver flight from
evening to morning.

Smith was not alone in his office when the call came. A colleague, Michael Rodyniuk,
was there as well, according to an affidavit Smith filed later. Unbeknownst to the
WestJet snitch, Smith’s phone displayed his name and number. As Smith was jotting
notes from the conversation, he pulled out an extra sheet of paper and says he
indicated to Rodyniuk to write down the information.
That phone call, which could not have lasted for more than five minutes, eventually
triggered a massive civil lawsuit for corporate espionage, one that provides a rare
glimpse of the dirty tricks rivals resort to in the name of competition. Although none of
the parties would go on the record for this story, affidavits, transcripts and background
interviews reveal just how ruthless the airline industry has become in this country,
where Air Canada is battling a posse of up and comers, most notably the feisty WestJet,
as it emerges from bankruptcy protection. Even in its early stages the case has
uncovered fresh incriminating material, but it will be months, possibly years, before the
various players get their days in court. It may never get that far- many observers expect
an out-of-court settlement. Still, the critical battle is playing out in the court of public
opinion, where the two airlines’ pilot personas so far seemed reversed: Air Canada, long
thought to be a corporate bully, appears to be the victim, while WestJet, for years the
darling of investors and the flying public, has been cast as the bad guy.
In its statement of claim, which accuses WestJet of “high-handed and malicious”
conduct, Air Canada says the company surreptitiously tapped into its employee website
and set up a “screen scrapper,” a program designed to automatically lift data off one
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site and dump it into another. WestJet boosted its own profits using that information,
says Air Canada, claiming a whopping $220 million in damages. In reply, WestJet
dismissed the suit as an attempt to embarrass a rival and in a countersuit accuses the
national carrier of stealing its confidential information. It says Air Canada sent
investigators to pilfer one of its executive’s garbage-and has pictures to prove it.
What pushes this story into the realm of the absurd is that neither airline denies the
accusations – what is disputed is whether doing so was wrong. WestJet admits a senior
executive, Mark Hill, entered Air Canada’s website; Clive Beddoe, the company’s CEO,
even apologized to shareholders for Hill’s actions while discussing WestJet’s tumbling
profits this summer. For its part, Air Canada readily admits it took the garbage – in fact,
it uses the reconstituted pages for its defence for its case. But almost in mirror fashion,
they both scoff at the recriminations. WestJet says its s-called crime coughed up data
that was neither confidential and/or important. Air Canada’s investigators deny they
trespassed on private property. If there were not investors’ money and jobs at stake,
and possibly even the fragile health of the national airline industry, these suits and
countersuits could be likened to a spat between siblings that is getting out of control.
And now Jetsgo Corporation, the young Montreal-based discounter, has entered the
fray. Among the documents Air Canada had pasted back together; it discovered a
summary of Jetsgo load factors. Last week, Jetsgo CEO, Michael LeBlanc asked Air
Canada for a copy of that document. All of which poses an intriguing question: Just
hopw widespread was WestJet’s espionage?
While the audacity of the tactics may be shocking, there is nothing new in companies
spying on each other, says Norman Inkster, who led the RCMP from 1987 to 1994 and
now runs a private investigation firm. But in the old days it usually meant breaking into
rivals’ offices. Today, it is about hacking into websites and electronic files – tactics that
Inkster says can be difficult to detect and hugely damaging. If Smith had not been
tipped off, chances are Air Canada would never have discovered WestJet’s scheme.
As much as five months before the mole’s disturbing call, Rodyniuk, the executive who
Smith says was in his office that day, had mentioned that a WestJet co-founder, Mark
Hill, seemed to have oddly accurate data on Air Canada’s flight loads. Rodyniuk, Zip’s
director of marketing and sales, had known Hill for more than a decade. The two
bantered back and forth regularly by email. Occasionally, Hill, known as the industry
genius for industry numbers, would taunt Rodyniuk about Air Canada’s woes.
“Winnipeg-London at 27 percent is not doing much of your bottom line,” he wrote on
January 15, 2004. “I’d be willing to bet my next profit-share cheque that YWG-YXU [the
airports’ call letters] has the lowest load factor of any domestic route operated by AC
today. C’mon. Fess up.”
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Hill’s name also came up in Smith’s conversation with the informant, who said Hill was
the source of the sensitive data. Smith immediately made toe calls: one to Air Canada’s
CEO Robert Milton, and the other to security. An investigation was launched.
First stop: the employee website. A standard airline perk allows employees to travel
almost for free on flights with open seats. Workers receive a personal code so they can
check which flights are available. Air Canada’s manager of online services, Gerald Gunn,
found that someone – or something – had used a single access code to enter the site an
astounding 243,630 times between May 15, 2003, and March 19, 2004, for an average
of 768 hits a day. In one extraordinary day, the site was tapped 4,973 times.
It did not tale long to determine that the code belonged to Jeffery LaFond, a former
Canadian Airlines employee who had accepted a buyout as Canadian Airlines was being
taken over by Air Canada. Part of his package included two Air Canada tickets a year for
five years.
Last winter, as Air Canada secretly tried to piece together what WestJet knew and how,
Rodyniuk continued his email relationship with Hill. In February, he broached a new
subject: He wondered if WestJet might have a job for him.
Here the storyline gets contentious. Air Canada claims Rodyniuk and Hill met for dinner
on Macrh 18. The following morning, Air Canada’s website was entered using Lafond’s
access code for the last time. On March 24, Rodnyiuk quit his job at Zip. The next day,
he showed up at WestJet as director of revenue. Air Canada believes Rodyniuk tipped
Hill off to its investigation.
In his affidavit, Rodyniuk disputes Smith’s account of the tipster phone call. He says he
only learned about the call when Smith asked for help checking out a former Canadian
Airline employee. Rodyniuk admits he wrote the name and number on the slip of paper,
but that information did not come from Smith’s phone display; it came from directory
assistance.
Meanwhile, as Gunn was combing through Air Canada’s website looking for signs of
infiltration, the company’s law firm, Lerners, decided to engage in some espionage of its
own. It hired a private detective agency, IPSA International, to do some sleuthing of a
grittier nature than WestJet’s high-tech screen scraping. Hill often worked from home
in his Victoria’s exclusive Oak Bay suburb. IPSA’s job was to get Hill’s trash: It might
reveal how WestJet was using the data it took from Air Canada’s site. Tiped off by a
neighbour, who had seen a suspicious white truck, Hill caught the IPSA workers last
April. “Do you work for Air Canada?” he shouted at them, snapping photos of the men
and their truck as they loaded his trash and recycling bins into their pickup. The pictures
were printed in newspapers, and the incident gave Hill and WestJet something to be
indignant about. The garbage was on private property, says Hill, whose countersuit
accuses the private dicks and Air Canada of trespassing.
4
Hill’s recycling material included shredded papers. After sorting the trash, the IPSA men
sent the strips to a company in Houston that specializes in reconstituting shredded
papers. The turned out to be reports comparing Air Canada’s and WestJet’s flight loads,
according to Air Canada affidavits.

The day after Hill snapped the photos, and two weeks after Rodyniuk jumped to
WestJet, Air Canada filed a lawsuit against WestJet, Mark Hill and Jeffery Lafond. And
that’s when things got interesting.
Some of the best drama in the case – and some of Air Canada’s best evidence – came in
pre-trial cross-examinations, which took place in a vast glass-walled conference room at
the company’s law firm. Earl Cherniak, Air Canada’s lawyer, is like a sharpshooter –
quiet, precise and dangerous. In late June, he questioned Lafond. The session was well
attended: at least eight lawyers, a couple of airline executives, and Hill, who was to be
examined immediately after. Lafond admitted providing his employee and personal ID
numbers for Air Canada’s website to Hill, but said he didn’t think the load factor
information was relevant. The transcript of the two and half hour cross-examination
reads like a school principal greeting a cheating principal. Had Lafond asked Hill how the
information would be used? Did he know it would be used 243,000 times? Did he know
it was used on an automated basis? No, no and no, answered Lafond.
“Mr. Hill never told you that?”
“No.”
“So, you had no idea, when you were giving Mr. Hill this access that he would use it in
that way?”
“That’s correct.”
“Yes. But if you had known that, you wouldn’t have given it to him, would you?”
“Again, I don’t think the load factor information is very relevant,” said Lafond. (He
nonetheless asked Hill for – and got, on the same day he handed over the codes – an
indemnity saying WestJet would take care of him “for any reason.”)
At the beginning of Lafond’s grilling, Hill kept busy doing a crossword puzzle. By the
time it was his turn in the hot seat, however, Hill was no longer nonchalant. At one
point during the questioning, he was shaking, says one person who was in the room.
Hill told Chernaik that when he first got Lafond’s access code he spent 90 minutes each
evening going into the Air Canada website and analyzing its data. Later, he asked a
WestJet computer expert to create a program that would retrieve the data
automatically. But, said Hill over and over, the laod factor information was available
from other sources. Airlines hire people to stand at airport gates and count passengers
as the board or exit fights, he pointed out. And, over and over, Cherniak told Hill that he
was volunteering information for which he hadn’t been asked. (Hill resigned from
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WestJet this summer, saying it was in his and WestJet’s best interests that they part
company.)
In its defence, WestJet does not deny accessing Air Canada’s website, but it points the
finger at Hill as the one who did the dirty work. Besides, says WestJet, its rivals troubles
are not the result of Hill’s actions, and the flight load information Hill obtained was of
little value.
Much of the case will ultimately revolve around this point. As one lawyer put it, if you
are hit by a car running a red light, the case against the driver will be much tougher than
if you were left brain-damaged than if you are bruised lightly. The next step in this case
may well determine whether Air Canada was bruised or bashed by its rivals’ actions. In
July, WestJet was ordered to turn over its executives’ hard drives for an independent
review, which should help answer some outstanding questions. Who at WestJet knew?
Who used the data? And how useful was it? Claude Proulx, and airline analyst, noted in
a July report that WestJet’s load factors “deteriorated significantly” after it stopped
scraping Air Canada’s data. Meanwhile, Air Canada’s traffic figures have improved
substantially.
In the end, both airlines may be harshly judged. With few controls on its employee
website, Air Canada left itself wide open to snoops. WestJet’s Hill took advantage of his
competitor’s lax security. But most importantly, both – whether as a tactic to divert
attention from falling profits or a ploy to appear less of a bully – have blown things way
out of proportion.
Discussion Questions
1. Did WestJet employees engage in unethical behaviour in this series of events?
Did Air Canada employees?
2. Who are the relevant stakeholders in this case?
3. Does Air Canada’s apparently weak security in this matter reduce any blame to
be accorded to WestJet?
4. Do arguments that the local data was useless or that it was available from other
sources reduce the seriousness of the online snooping?
5. Who gained and lost power in this case?
6. Om May 29, 2006, a settlement was announced. WestJet agreed to pay Air
Canada $% million in costs and to donate $10 million to children’s charities in the
name of the two airlines. It also apologized and described its conflict as
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unethical. Is this a fair outcome? Does it change your views about your answers
to the previous questions?

 

Case Study Group Project Report Assignment
Deadlines:
1. Groups are to submit a one-page, typed written document outlining a synopsis, abstract of the
case Friday, November 9, 2018 in class. The document is to be no longer than one page.
Point form can be used. Group names and student numbers and date at the top of the page.
2. Hand-in hard copy of the FINAL report (that you submitted to the Assignment Folder on
eConestoga) is to be submitted in class November 28, 2018. [REVISED SUBMISSION DATE]
Professional binding not required. Stapled, top left corner.
3. Peer Evaluation Forms submitted to be submitted in class November 28, 2018. [REVISED
SUBMISSION DATE] Submissions to be individual (each group member is to complete and submit
a form with comments for each of their group members) and are considered confidential.
Professional binding not required. Stapled, top left corner.
4. Case Study Group Project FINAL report submitted by November 30, 2018 11:59p [REVISED
SUBMISSION DATE] in the Assignment Folder located on eConestoga
The purpose of this assignment is for you to assume the role of the decision-maker in the case, and go
through the same process as the “real-life” decision-maker. It is essential to demonstrate a logical
thought process and decision making, and communicate your ideas effectively.
This is a group assignment. The case study that is selected “WestJet Spies on Air Canada,” and can be
found under the “Case Study” module on eConestoga.
Expected Compliance Requirements
• This report should comply with the formal case report requirements (i.e. title page, executive
summary, table of contents, subtitles, correct grammatically, no plagiarism, APA style.
• The report should be written in a professional manner without excessive abbreviations or
unexplained jargon. Point form may be used.
• It is expected that you will cite both ideas and direct quotes you have obtained from other
sources. Failure to do so will be considered to be plagiarism
• Turnitin is a requirement. Declining to use Turnitin could result in a zero grade.

In order to receive a first class grade, student(s) must submit a report that is well organized, well
written, accurate, and complete in its analysis. Clarity and conciseness are important. First class reports
will contain no grammatical errors, no spelling errors, and no uncorrected typing errors.
2
Report Requirements
Write in APA Style, including a Cover/Title page, 10 – 12 pages (excluding title & contents pages,
references and appendices), 12 font, doubled-spaced use, headings and numbered pages. The report is
to be submitted as a Word format into the eConestoga Assignment Folder system.
Format and Structure of the Written Report
Proper case format is required, and the report must have the following sections in this order:
1) Title Page – course and section, case name, student name(s), student number and date
2) Contents Page – organize information into logical sections and generate a series of headings and
subheadings
3) Executive Summary – need to summarize the report that follows – its key points – in one page or
less, be clear and concise. CANNOT BE MORE THAN ONE PAGE IN LENGTH.
4) Immediate and Basic Issues –define the immediate and basic issues and include Urgency and
Importance Matrix
5) Analysis of the Case Data – causes/effects & constraints/opportunities
6) Decision Criteria – need to outline what criteria you will use to evaluate and make your
decision(s)
7) Alternatives Analysis – assess alternatives; use of analysis matrix; must have three alternatives
8) Preferred Alternative/Best Solution/Recommendations – State what decision(s) you will make
with respect to the issues in the case, and justify. This must be one of the alternatives you have
evaluated.
9) Action and Implementation Plan – You must outline what is to be done when (short, mid- and
long-term) and where, by whom, for what reason – why, and exactly how.
10) References – Cite ideas and direct quotes you have obtained from other sources (if any)
11) Appendices/Exhibits (if any)
3
Grading Rubric
/100 = % = /15
Marking
Scheme
Criteria
/10 Proper format was followed (10 -12 double-spaced pages) /6
Pages numbered /2
Title page /2
/10 Executive Summary – need to summarize the report that follows – its key points
– in one page or less, be clear and concise.
CANNOT BE MORE THAN ONE PAGE IN LENGTH.
/15 Immediate and Basic Issues – define the immediate and basic issues and
include Urgency and Importance Matrix
/10 Analysis of case data – causes/effects & constraints/opportunities
/10 Decision Criteria – need to outline what criteria you will use to evaluate and
make your decision(s)
/15 Alternatives Analysis – assess alternatives; use of analysis matrix; must have
three alternatives
/10 Preferred Alternative/Best Solution/Recommendations – State what
decision(s) you will make with respect to the issues in the case, and justify. This
must be one of the alternatives you have evaluated.
/10 Action and Implementation Plan – You must outline what is to be done when
(short, mid- and long-term) and where, by whom, for what reason – why, and
exactly how.
/10 Punctuation, grammar, sentence structure, spelling, etc.

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