9 AIR TRANSPORTATION

MAJOR EVENTS IN 2002

Air Travel Complaints Commissioner

The Minister of Transport appointed a new Air Travel Complaints Commissioner, Ms Liette Lacroix Kenniff, in September 2002. In January 2003, the Commissioner released her report, for the period of January 2002 to June 2002. The report showed that the public made fewer complaints than in previous periods, 2,205 between July 2001 and June 2002 compared with 2,745 complaints during the previous year. Most complaints between January and June 2002 were about quality-of-service issues (33 per cent), followed by flight schedules (20 per cent), ticketing (13 per cent) and baggage handling (12 per cent). About two thirds (68 per cent) of complainants indicated that they were fully or partially satisfied with the outcome of complaints handled by the Commissioner's office. As part of her report, the Commissioner recommended that air carriers show the true cost of the ticket in their advertisements; avoid misleading advertising; publicly and prominently display their limits of liability; and compensate passengers for any downgrades in service.

Canada Airports Act

In 2001, the Government of Canada announced its intention to develop a Canada Airports Act. The proposed legislation will clarify the roles and responsibilities of airport authorities. Preliminary drafts have focused on a number of other issues, including accountability to the public and users, improved governance, principles for setting fees, oversight of ancillary activities, and requirements to respect Canada's international obligations.

The legislation builds upon the 1994 National Airports Policy and will complete the legislative base for all components of the air industry, including NAV Canada, airlines and airports. The legislation will address the issues raised in the Local Airports Authority Lease Review Consultation Report, the concerns expressed by the Auditor General in October 2000, and the July 2001 report of the Canada Transportation Act Review Panel. It is expected that the Bill will tabled in the House of Commons in March 2003.

Rent Review

In 2001, the Government of Canada announced that it would review the rent policy for leased airports in the National Airports System, as the majority of transfers to local operators were completed. The review is in response to the demands of airports and aviation communities and to the concerns expressed by the Auditor General in October 2000. It will ensure that the federal government's airport rent policy balances the interests of all stakeholders, including the air industry and Canadian taxpayers. The review is being conducted at the same time as, but independently of, the development of the proposed Canada Airports Act, and involves consultations with stakeholders.

Computer Reservation Systems

Most airlines use a computer reservation system to distribute their air services to travel agents for sale. These systems are governed by regulations passed in 1995 under the Aeronautics Act to ensure adequate competition. To address the restructuring of the Canadian air market as well as increased reliance on Internet bookings, Transport Canada began a review of its regulations respecting computer reservation systems. Results of this review are expected in June 2003.

Air Travellers Security Charge

The Air Travellers Security Charge, announced in Budget 2001 of the federal government, became effective on April 1, 2002. The charge is paid by air travelers to fund the costs of the enhanced air travel security system introduced in response to the terrorist attacks in the United States of September 11, 2001. The air carrier collects the charge from the purchaser of an air transportation service at the time of payment for the air travel. The cost of the charge was 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. For domestic travel, the charge applies to flights between the 89 airports at which the Canadian Air Transport Security Authority delivers the enhanced air travel security system.

Amendments to the Competition Act

Bill C-23, passed in June 2002, allows the Competition Tribunal to extend the duration of cease and desist orders issued by the Commissioner of Competition where necessary for the Commissioner to complete an examination of a matter. The Bill also gave the Tribunal its own power to issue a cease and desist order while an investigation by the Commissioner is under way. Cease and desist orders are used to stop potentially anti-competitive activity prior to a final decision being made on the legitimacy of the activity in question. Bill C-23 also gives the Competition Bureau the power to impose administrative monetary penalties of up to $15 million on a person operating a domestic air service that is found to have abused its dominant position.

Electronic Collection of Air Transportation Statistics

Electronic Collection of Air Transportation Statistics (ECATS) is a pilot project for collecting and providing air transportation data to the industry, with the assistance of Statistics Canada and the Canadian Transportation Agency. Six airports and five airlines took part in the project, and the evaluation made by participants recommended to expand ECATS to all carriers and airports.

Airline Compensation Program

On October 2, 2001, the Minister announced a $160-million program to compensate Canadian air carriers and specialty air operators for losses resulting from the closure of Canada's airspace following the terrorist attacks of September 11, 2001. The first payments were made in October 2001, and all payments, which totalled $99,318,412.98, were completed by May 2002.

Third-Party War and Terrorism Liabilities Indemnification

On September 22, 2001, after international insurers withdrew previous levels of coverage, the federal government announced that it would provide short-term indemnification for third-party war and terrorism liabilities for providers of essential aviation services in Canada. This indemnity continues to be in force, for renewable periods of 60 days. Efforts are still under way to develop an international, longer-term solution.

Provincial and Territorial Initiatives

On November 14, 2002, the Government of Quebec and Air Canada announced a three-year agreement under which the airline provides reduced fares to non-government users of air transportation services on 15 regional routes and continuation of service on these routes in return for the Quebec government increasing purchases of air services from Air Canada. Following a complaint from Jetsgo, the Competition Bureau examined the agreement but found that it did not breach the Competition Act.

The Yukon adopted its Government Air Travel Policy in April 2002 stipulating that the government has to purchase air travel equally between competing airlines that provide year-round service. It also allows the government to temporarily stop doing business with any airline it believes is trying to drive other carriers out of the market. The Nunavut Territorial Government is in the process of assessing air services in the territory with a view to working with carriers to improve routings and frequencies.

Preclearance Act

The Preclearance Act and its accompanying regulations entered into force on May 1, 2002. Under the Act, U.S. border inspectors may administer, within the confines of preclearance areas at designated Canadian airports, certain U.S. laws related to customs, immigration, public health, food inspection, and plant and animal health.

However, U.S. preclearance officers cannot exercise the authorities granted under the Act until preclearance areas have been designated and the 2001 Canada-U.S. Preclearance Agreement is brought into force. The designation of preclearance areas, which is the responsibility of the Minister of Transport (in consulation with the Minister of Foreign Affairs), and the entry into force of the Preclearance Agreement are expected to occur in 2003.

The entry into force of the Preclearance Agreement will formalize intransit preclearance at Vancouver (currently provided on a pilot basis) and allow for its introduction at Calgary, Montreal and Toronto. Other Canadian airports with U.S. preclearance (Edmonton, Ottawa, Winnipeg) will subsequently be eligible for intransit preclearance.

Multiple Designation Policy

On May 21, 2002, the Minister announced a new multiple designation policy that allows all carriers to apply to operate scheduled international air services to any air market regardless of market size. Previously, the policy allowed for designation of only one Canadian carrier in markets where there are fewer than 300,000 one-way scheduled passenger trips per year. The threshold was eliminated to encourage competition, innovation and growth in the airline industry, and to provide increased international travel options for consumers. The modification to the policy allowed for Air Transat to be designated to serve a number of new European destinations: Portugal, Belgium, the Netherlands, Ireland, Italy and Poland. The new policy has no effect on the Canada-U.S. Open Skies Agreement, which already allowed for multiple designations.

Bilateral Agreements

Canada established its schedule for bilateral air transport negotiations in 2002. This was in response to the priorities of Canada's air carrier industry and to requests from foreign governments. Canada's charter air carriers showed a continued interest in operating scheduled international air services in 2002.

Significant amendments and expanded air service opportunities were obtained through bilateral air transport agreements concluded with Italy in May, the Czech Republic in June, Switzerland in October and Hong Kong in December. More cities in Canada are now open for scheduled air services, as are more cities in Italy and Switzerland. Canadian, Swiss, Italian, Czech and Hong Kong airlines now have greater flexibility in deciding whether to operate their own aircraft and/or code-share air services. The amended agreements with Italy, the Czech Republic and Switzerland contain strong aviation safety and security provisions and allow airlines greater flexibility in capacity and offered prices. New arrangements with Hong Kong include the addition of liberal code-share rights, which allow one airline to put its designator code on another airline's flight. These new rights will allow Air Canada and any other Canadian airline that may be designated in the future to share codes with other airlines to, from and beyond Hong Kong, a principal Asian gateway. Cathay Pacific Airways and any other designated airlines of Hong Kong will enjoy similar opportunities to, from and beyond Canada. Air service arrangements with Israel and New Zealand were extended during the year providing new opportunities for airlines.

Major Events in 2002

Infrastructure

Industry Structure

Freight Transportation

Passenger Transportation