No. H 035/07
For release March 12, 2007

CANADA'S NEW GOVERNMENT DELIVERS
GREATER AIR TRAVEL CHOICE THROUGH OPEN
SKIES AGREEMENT WITH THE UNITED STATES

OTTAWA -- The Honourable Lawrence Cannon, Minister of Transport, Infrastructure and Communities, and United States (U.S.) Secretary of Transportation Mary E. Peters, today announced that the Open Skies agreement between Canada and the U.S. has now come into force.

"Canada's international air policy encourages the development of new markets, new services and greater competition," said Minister Cannon. "For travellers, this means more choices in terms of destinations, flights and routes."

"By opening the skies with our closest friend and one of our strongest trading partners, we will give businesses new freedom to compete and travellers new conveniences to get where they need to go," said Secretary Peters. "Our new aviation relationship will stimulate stronger partnerships, innovation, more choices and lower prices – to the benefit of both our countries."

The new Open Skies agreement will enable Canadian passenger and cargo carriers to use the larger U.S. market as a platform to serve a third country and vice-versa. Other potential benefits include the development of new markets, new services, lower prices, and greater competition.

The 1995 air services agreement between Canada and the United States created an open regime for air services between both countries. There were, however, constraints regarding air services between each other's territory and a third country. The Open Skies agreement removes these restrictions.

The new agreement is in line with the recently announced Blue Sky policy, which was developed to help the air industry continue to make a significant contribution to Canada's growth and prosperity.

A backgrounder on the Open Skies agreement with the U.S. is attached.

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Backgrounder

OPEN SKIES AGREEMENT WITH THE UNITED STATES

The Canada-United States (U.S.) air transportation market is unique in the world. The Open Skies agreement between the two countries is expected to provide more opportunities for better air services, increased flight options, greater efficiencies for airlines, increased competition and reduced prices for consumers.

Scheduled air services between Canada and the U.S. were previously governed by the February 24, 1995 air transport agreement, which provided substantial benefits to travellers, shippers and the air transport industries of both countries. Following implementation of the agreement, the Canada-U.S. air transportation market experienced rapid growth.

While the 1995 agreement provided open access between the Canada-U.S. markets, it restricted Canadian and U.S. air carriers' access to each other's international markets. For example, except in very limited instances, a Canadian carrier could not pick up traffic in the United States and fly to another country.

In recent years, many stakeholders in Canada identified an expansion of the Canada-U.S. agreement as a priority. In 2005, Canada and the U.S. agreed that discussions on further liberalization of the 1995 agreement were timely.

Under the Open Skies agreement, air carriers of both countries will be able to:

• pick up passenger and/or all-cargo traffic in the other partner's territory and carry it to a third country as part of a service to or from their home territory;
• operate stand-alone all-cargo services between the other partner's territory and a third country; and
• offer the lowest prices for services between the other partner's territory and a third country.

The liberalized agreement does not permit a U.S. carrier to carry domestic traffic between Canadian cities or vice versa, a practice known as cabotage.

Transport Canada estimates that the Canada-U.S. air transportation market generated approximately 19.8 million passengers in 2005, making it the largest international air transportation market in the world.

March 2007