WestJet and Air Canada settled their contentious dispute over alleged corporate spying and unauthorized data collection by WestJet executives, with the Calgary-based LCC agreeing to pay C$15.5 million ($14 million)--C$5.5 million covering AC's legal costs in the matter and C$10 million to charity--and Chairman and CEO Clive Beddoe apologizing to his primary rival for "misconduct."Air Canada sued WestJet for C$220 million in 2004, alleging that carrier officials illegally entered AC's reservations system to gather critical data. In a joint statement, the airlines detailed "unethical and unacceptable" activities "undertaken with the knowledge and direction of the highest management levels of WestJet."

The statement confirms that in 2003 and 2004, WestJet executives "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...WestJet sincerely regrets having engaged in this practice and unreservedly apologizes to Air Canada and [AC Chairman, President and CEO] Mr. Robert Milton."

AC said it has withdrawn its claims against its rival and "all legal proceedings between the parties have been terminated." It alleged in court filings that an employee who moved from AC to WestJet used his old passwords to enable WestJet executives to access AC's employee website more than 240,000 times. WestJet co-founder and VP-Strategic Planning Mark Hill resigned in July 2004 as the controversy heightened. AC has maintained throughout the dispute that Beddoe was aware of the hacking.

The two airlines are fierce competitors in Canada's domestic market, with the flag carrier holding a 60% share and the LCC a 30% share. WestJet, founded in 1996 and modeled after Southwest Airlines, has engaged AC in heated fare wars that have forced the larger airline to keep fares low on many high-density domestic routes and offer its own low-cost services.