Air Canada goes after Westjet CEO
Unproven allegations say Beddoe knew about 'espionage'
Paul Vieira
National Post
Saturday, July 03, 2004
Air Canada has accused Clive Beddoe, the brash chief executive of bitter arch-rival WestJet Airlines Ltd., of being deeply involved in a corporate espionage conspiracy that has landed both carriers in a nasty court battle.
Yesterday was the first time Air Canada pointed the finger directly at Mr. Beddoe, considered one of Canada's star CEOs, and comes three months after it launched a lawsuit against the Calgary carrier and two of its employees, including a co-founder. The lawsuit alleges WestJet unlawfully accessed an internal Air Canada Web site that contained confidential information about its business.
The allegation against Mr. Beddoe is contained in a legal brief filed yesterday with the Ontario Superior Court of Justice. It has not been proven in a court, and WestJet's lawyers plan to file a formal response on Tuesday.
Siobhan Vinish, a WestJet spokeswoman, said the company has "complete confidence in the judicial system and we know when this case is put before the judge the strength of the facts will prevail."
Air Canada's legal brief, prepared by Earl Cherniak, one of Canada's top litigators, says the lawsuit "involves corporate espionage on a massive scale.
"WestJet has not denied using [Air Canada's] confidential information but has refused to disclose the extent and detail of such use. ... Based on the evidence that has been adduced and [WestJet's] lack of disclosure, this court should infer that the misuse and dissemination of the confidential information was extensive and included all the senior management of WestJet, including the CEO, Beddoe."
Previously, the only senior WestJet executive targeted in the lawsuit was Mark Hill, a Beddoe confidant and vice-president of strategic planning. But evidence filed this week revealed at least two other senior WestJet vice-presidents knew of the Web site access. One of the executives assigned a member of WestJet's high-tech department to build software that would allow WestJet to automatically penetrate the Air Canada site and gather key information, namely Air Canada's load factors -- the number of seats filled on its flights.
Air Canada's allegations against WestJet suggest its competitor tapped the internal Web site for 240,000 transactions between May, 2003, and last March, using a password belonging to Jeffrey Lafond, a WestJet financial analyst now on paid leave. Mr. Lafond is also named in Air Canada's lawsuit.
Mr. Lafond had Web site access as part of a severance package he received when his former employer, Canadian Airlines, merged with Air Canada in 2000. With Web site access, he was allowed to book two free trips a year on Air Canada for five years.
WestJet is alleged to have used this information to challenge Air Canada on its most profitable routes by adjusting its schedule based on data unlawfully obtained.
Montreal-based Air Canada has lost market share in recent years to WestJet and was forced to file for bankruptcy protection more than a year ago under the weight of $13-billion in debt.
In its statement of defence, WestJet argues the so-called confidential information it is alleged to have acquired unlawfully is available to the public through various Web sites.
Moreover, WestJet lawyers say the airline never used any information from the Air Canada Web site. Any lost sales and profit Air Canada allegedly suffered, WestJet says, was due to its own "mismanagement of its business, its decision to persist in selling seats on flights for less than cost, its high-cost structure and the poor treatment of its customers."
WestJet said it will pursue a countersuit against Air Canada, largely based on its rival's "unlawful seizure" of garbage bins from Mr. Hill's Victoria-area home. Air Canada hired private investigators to take Mr. Hill's trash, and sent shredded paper to a Houston company to be digitally reconstructed.
In its legal brief, Air Canada alleges Mr. Hill attempted to get rid of shredded copies of computer-generated reports based on Web site data after he was tipped off by an Air Canada employee. (That employee was later hired as WestJet's head of marketing.)
Air Canada learned of Mr. Hill's access last December after receiving a phone call from an anonymous WestJet employee.
Air Canada's lawsuit comes as the airline is in the final stages of its bankruptcy reorganization and WestJet is in the initial stages of a major expansion into eastern Canada. When the suit was filed and the allegations became public, Mr. Beddoe offered his resignation to WestJet's board of directors. The board rejected the gesture.
Mr. Beddoe was a Calgary-based real estate developer and amateur pilot who, in the early 1990s, decided to build a discount passenger airline modelled after the highly successful and profitable U.S. carrier Southwest Airlines.
WestJet, launched Feb. 29, 1996, managed to connect with customers by offering competitive prices and cheery customer service. And the British-born, plain-talking Mr. Beddoe struck a chord with investors, who lapped up stock when the company went public in 1999 on the Toronto Stock Exchange.
© National Post 2004
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