9 AIR TRANSPORTATION
MAJOR EVENTS IN 2004
AIR CANADA
In 2004, Air Canada continued the restructuring efforts it
began after filing for court protection under the Companies'
Creditors Arrangement Act (CCAA) on April 1, 2003. Over
the course of its restructuring, the airline achieved a number
of objectives that were critical to its emergence from the
CCAA. It significantly reduced its annual operating costs,
erased its debt burden, and raised more $1.8 billion in
new equity to ensure sufficient liquidity upon exit.
On August 17, 2004, creditors approved Air Canada's
Plan of Arrangement (i.e., its restructuring plan) by a near
unanimous vote. The Plan received final approval by the
Ontario Superior Court of Justice on August 23, 2004.
After 18 months of significant restructuring, Air Canada
successfully emerged from bankruptcy protection on
September 30, 2004, with a revitalized business plan
and balance sheet.
AIR LIBERALIZATION
The Government requested the assistance of the
Standing Committee on Transport (SCOT) to conduct a
review of whether Canada should further liberalize its
approach to the economic regulation of the air industry.
On November 4, 2004, a guidance document designed to
help the Committee identify the issues that need to be
addressed and to provide specific questions for
consideration was submitted to the SCOT. The objective
is for the Committee to report on the views of
stakeholders and the interested public, and identify the
priorities and policy principles that should guide Canada's
air liberalization efforts over the next ten years. The
review is expected to begin in early 2005.
AIR TRAVEL COMPLAINTS
COMMISSIONER
Ms. Liette Lacroix Kenniff was the Air Travel
Complaints Commissioner until September 2004, having
been re-appointed by the Minister of Transport in
September 2003 for an additional one-year term. The
Commissioner released two reports in 2004 for the
calendar year 2003. The first report covered the first six
months of 2003 and cited a decrease in the number of
complaints received by the Commissioner's office over
the previous six-month period, due partly to lower-thanaverage
air traffic levels. In her second report, covering
the final six months of 2003, the Commissioner noted
that fewer complaints were made against Air Canada
during its bankruptcy protection, thus further reducing
the total number of complaints filed. Each of the
Commissioner's reports noted that the number of
complaints continued to decline.
AIRPORT RENT POLICY REVIEW
A review of the rent policy for 21 Airport Authorities in
the National Airports System (NAS) was launched in
2001, in response to the demands of airports and aviation
communities and to the issues raised by the Auditor
General in October 2000. The review is designed to
assess whether the federal government's airport rent
policy balances the interests of all stakeholders, including
the air industry and Canadian taxpayers. It has been
conducted at the same time as, but independently of, the
development of proposed airport legislation. Efforts were
undertaken to produce new airport legislation throughout
2004. New legislation is expected to be tabled in the
spring of 2005.
During 2002 and 2003, Transport Canada, with the
assistance of independent financial experts, embarked on
a number of key studies examining the value of leased
NAS airports, the impact on the air sector and the
travelling public, and the fairness and equity of the current
rent model. These studies were completed in 2004 and
will be used as key inputs to a government decision
expected in 2005.
REGIONAL AND SMALL AIRPORTS STUDY
In 2004, Transport Canada completed a study to
analyze the financial viability of regional and small
airports that have been transferred by the Department
since the introduction of the National Airports Policy
(NAP) in 1994. The NAP provides a framework that
defines the Government of Canada's role regarding
airports. The study was launched following the decision to
continue the divestiture initiative; it will serve to help the
Department understand the impact of federal government
divestitures on affected communities. More than 90 airports
across the country were approached to participate in
the study. Of these, approximately 70 per cent responded
in full or in part to the survey sent to them in the summer
of 2003. The completed study was released on
September 23, 2004, and can be found on the Web at
www.tc.gc.ca/programs/airports/menu.htm.
AIR TRAVELLERS SECURITY CHARGE
The Air Travellers Security Charge came into effect on
April 1, 2002, to fund the cost of the enhanced air travel
security system that was introduced in response to the
2001 terrorist attacks in the United States. The charges
were initially set at $12 per enplanement, up to a
maximum of $24 per ticket, for air travel within Canada,
$12 for transborder air travel to the continental United
States, and $24 for other international air travel.
Beginning in March 2003, the charge for travel within
Canada was reduced to $7 for one-way travel and to $14
for round-trip travel. A further reduction took effect on
April 1, 2004. Current charges are set at $6 each way for
domestic flights, $10 for transborder air travel and $20 for
other international travel.
The security charge was applicable in 2004 to flights
between the 89 airports in Canada at which the Canadian
Air Transport Security Authority delivers the enhanced air
travel security system.
COMPUTER RESERVATION SYSTEMS
On May 7, 2004, following extensive consultations by
Transport Canada in 2003 and 2004 with members of the
travel distribution industry, air carriers and other
governments, the amended Computer Reservation
Systems Regulations were published in the Canada
Gazette, Part II. The amendments move to a more
deregulated system, while continuing to protect the
interests of air travellers. They also recognize significant
changes, such as the emergence of the Internet as an
information and sales tool, which have occurred since the
original regulations were put in place in June 1995.
Airlines, for example, will no longer be required to
participate in all computer reservation systems operating
in Canada. Rather, they will be able to decide how best to
distribute and sell their air services. At the same time, the
regulations will continue to ensure that travel agents have
access to neutral and non-discriminatory information on
behalf of consumers and that no carrier is disadvantaged
in computer reservation system displays. Overall, the
amended regulations give way to market forces in many
areas that were previously regulated and allow for
stakeholders to negotiate on more commercial terms,
benefiting all industry stakeholders.
Transport Canada will continue to actively monitor
changes in the airline and travel distribution industries, as
well as the evolution and development of technology in air
travel distribution, due largely to the emergence and
significance of the Internet.
ELECTRONIC COLLECTION OF AIR
TRANSPORTATION STATISTICS
The Electronic Collection of Air Transportation Statistics
(ECATS) initiative began in April 2003 with the objectives
of collecting operational air transportation statistics
electronically from the approximately 170 air carriers
serving Canada, improving the timeliness of air
transportation statistics to industry and government and
reducing the reporting burden and associated costs to
stakeholders. Transport Canada is currently collecting air
transportation data electronically from the majority of
airlines originally identified in the list of 170 airlines and
the initiative remains on schedule with a completion date
of March 31, 2005. Planning for the second phase of
ECATS is well underway with a focus on expanding the
electronic collection process to include air cargo, general
aviation and other air carrier information.
THIRD-PARTY WAR AND TERRORISM
LIABILITIES INDEMNITY
Since international insurers withdrew previous levels of
coverage following the events of September 2001, the
federal government has been providing short-term
indemnification for third-party war and terrorism liabilities
for providers of essential aviation services in Canada.
This indemnity remained in force in 2004 for renewable
periods of 90 days. Despite some recovery in the
insurance markets, previous levels of coverage were still
not available at reasonable prices. Other countries
provide similar support to their carriers.
CAPE TOWN CONVENTION AND PROTOCOL
On March 31, 2004, Canada became the 28th State to
sign the Convention on International Interests in Mobile
Equipment and the Protocol to the Convention on
International Interests in Mobile Equipment on Matters
specific to Aircraft Equipment.
Bill C-4, an Act to implement the Convention on
International Interests in Mobile Equipment and the
Protocol to the Convention on International Interests in
Mobile Equipment on Matters Specific to Aircraft
Equipment, was introduced in the House of Commons on
October 8, 2004. The Bill and the eventual ratification of
Convention and Protocol will facilitate and encourage
international asset-based financing, i.e., financing using
the value of equipment as security for payment. The new
insolvency rules would reduce the risks associated with
financing aircraft, thereby providing greater certainty to
creditors. The harmonized legal framework is expected to
improve sales for aircraft manufacturers and financiers
while minimizing their risk of loss.
PRECLEARANCE
United States border preclearance allows travellers and
their goods to be inspected by U.S. preclearance officers
for the purposes of customs, immigration, public health,
food inspection, and plant and animal health before flights
depart from Canada for U.S. destinations. This enables
travellers to be treated as domestic passengers upon
arrival in the U.S., where they can enjoy shorter and
easier connections to other U.S. cities, as well as direct
access to U.S. airports that have no customs and
immigration inspection facilities.
In December 2004, the Government of Canada
announced the United States' agreement to extend the
Canada-U.S. preclearance program to Halifax
International Airport. The United States will extend
preclearance to Halifax as soon as the airport's new
preclearance facility is completed. Halifax becomes the
eighth Canadian airport to offer preclearance, in addition
to Vancouver, Calgary, Edmonton, Winnipeg, Toronto,
Ottawa and Montreal.
MULTIPLE DESIGNATION POLICY
In 2004, the Minister awarded new designations
pursuant to the 2002 multiple designation policy. The
policy allows all Canadian carriers to apply to operate
scheduled international air services to any international
market. The designations are as follows: Air Transat
(Toronto – Manzanillo (Mexico) and Winnipeg – Puerto
Vallarta), Zoom Airlines (Ottawa – Puerto Vallarta),
CanJet Airlines (Dominican Republic) and an extension of
Air Canada's temporary designation to Grenada.
INTERNATIONAL CARGO TRANSSHIPMENT
POLICY
In the Fall 2004, the Minister announced his decision to
approve an application from the Winnipeg Airport
Authority for the participation of the Winnipeg
International Airport in the federal government's
international air cargo transshipment program. The
transhipment program was developed in the 1980's to
assist smaller or under-utilized airports by allowing air
carriers, in the absence of operating rights under bilateral
air transport agreements, to carry cargo to and from
Canada enroute to third countries. Winnipeg International
Airport becomes the fifth Canadian airport to participate
in the program alongside Mirabel, Hamilton, Windsor,
and Gander.
BILATERAL AGREEMENTS
Canada had more than 70 bilateral air transport
agreements or arrangements for international air services
in place at the end of 2004. The federal government
participated in seven rounds of negotiations with five
countries and held consultation meetings with fourteen
other countries during the year. An amended air transport
agreement was concluded with the Russian Federation
expanding the rights to operate to and to overfly one
another's territory. Similarly, an agreement was reached expanding the airline operating opportunities for
scheduled air services between Canada and Japan.
Pending the conclusion of an agreement with the
Republic of Colombia, a temporary arrangement was
reached permitting limited air services. Temporary air
services arrangements with Israel and Singapore were
extended allowing existing air services to continue. An
arrangement was reached with Brazil regarding the
weekly frequency of flights, and new tariff regimes were
put in place with Barbados, St. Kitts, Saint Lucia, and
Trinidad and Tobago.
Major Events in 2004
Infrastructure
Industry Structure
Price, Productivity and Performance
Freight Transportation
Passenger Transportation
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