15
Passenger Transportation
Air Transportation
Air Transport Services
Domestic air passenger transportation is provided within a
deregulated economic framework that has no limits on routing,
capacity or pricing. International schedule passenger services
continue to be offered within a framework of bilateral air agreements
between Canada and over 60 foreign countries. It is the prerogative
of the Minister of Transport to designate which Canadian carriers
will exercise the route rights that have been acquired by Canada
in these agreements. Each year Canada negotiates and puts into
effect new and amended route rights in response to the requests
of Canadian carriers and foreign governments.
Government Policy Initiatives
On April 1, 1998, the Minister announced a review of Canada's
1978 policy on international passenger charter air services. While
the review is underway, the October 1997 proposal of the Canadian
Transportation Agency (CTA) to amend the Air Transportation regulations
that give effect to the existing policy has been suspended. As
part of the policy review, extensive consultations were held with
interested industry stakeholders, including scheduled and charter
air carriers, tour operators and travel agents.
On December 1, 1998, Canada and the US announced an agreement
on implementing intransit pre-clearance services in Canada. Under
this initiative, all Canadian airports with existing US pre-clearance
facilities became eligible for intransit pre-clearance services.
Intransit pre-clearance is currently in place as a pilot project
at Vancouver International Airport and allows arriving international
passengers to proceed directly to US Customs without having to
first go through Canada Customs. A Bill (S-22) was introduced
into Parliament that defines the authorities for US Customs and
Immigration officers in pre-clearance areas in Canadian airports
and ensures travellers' rights under Canadian law. (US officials
will apply US laws relating to entry into the US, but all Canadian
criminal laws and the Canadian Charter of Rights and Freedoms
will continue to apply.) The US government undertook to amend
its law to fully reciprocate Canada's proposed legislation. As
a result of these initiatives, installation of in-transit pre-clearance
facilities will become possible in airports at Toronto (Pearson)
and Montreal (Dorval) in 1999, at Calgary in 2001, and at Edmonton,
Winnipeg and Ottawa after 2001.
On December 10, a Bill (S-23) to amend the Carriage by Air
Act was introduced into Parliament to give Canada the authority
to ratify and implement two key international aviation agreements,
the Guadalajara Convention and Montreal Protocol No. 4.
These two agreements are part of the Warsaw System of international
conventions and protocols related to liability insurance coverage
for the carriage by air of passengers, baggage and cargo. The
Guadalajara Convention extends the application of the international
liability regime to passengers (baggage and cargo) travelling
on a carrier other than the one from which they purchased travel
as a result of code-sharing or where another carrier has been
contracted to operate on its behalf. Montreal Protocol No.
4 amends the liability regime for cargo with stricter liability
and maximum limits. It also simplifies the requirements for cargo
documentation and allows for its transmission electronically.
Also in 1998, the CTA ordered Canadian Airlines, Air Canada
and Air Nova to improve their services for passengers with disabilities
by: enhancing the identification of accessible seating; improving
the handling of wheelchairs, complete with repair and replacement
procedures; and providing better information on specific check-in
procedures to these passengers. Further work by the CTA in this
regard led to the publication of Taking Charge of the Air Travel
Experience: A Guide for Passengers with Disabilities.
Bilateral InitiativesNote 3
On June 2, 1998, the Minister replied to international route
requests from Air Canada and Canadian Airlines. Specifically,
the Minister announced that the federal government would seek,
through bilateral negotiations, rights for a daily Toronto-Hong
Kong service for Air Canada and for a daily Vancouver-Osaka service
for Canadian Airlines.
In his June 2 announcement, the Minister also recognized the
growing strategic importance of commercial alliancesNote 4 within the industry.
In response to increasing global competition, the Minister also
announced that new code-sharingNote 5 opportunities would be provided
for Air Canada and Canadian Airlines. Each carrier was permitted
to name up to five new country markets for code-sharing, subject
to specific conditions and implementation procedures. Three of
these conditions are worth noting: Air Canada's selections in
South America and the Pacific region would be limited to Brazil,
Thailand and New Zealand; some routing constraints were imposed
on any Air Canada code-sharing services to New Zealand and Thailand;
and, during the first year, all such rights would have to be exercised
via an intermediate country. Air Canada selected New Zealand,
Mexico, Brazil, the Netherlands and Thailand as its code-sharing
destinations. Canadian Airlines selected Belgium, Switzerland,
Sweden, Jamaica and South Korea. At year end, the necessary rights
had been obtained from New Zealand, Mexico, the Netherlands and
Thailand (February 1999), in addition to the rights from Sweden
and Belgium, which were already available.
In 1998, at Air Canada's request, an examination of the Canada-Taiwan
market was made to determine whether the threshold of 300,000
one-way scheduled passengers a year as stipulated under Canada's
Second-Carrier Designation Policy was exceeded. If it were, the
entry of a second Canadian carrier would be permitted. In his
June 2 announcement, the Minister denied Air Canada's request
to be designated as the second carrier because he had concluded
that the threshold had not yet been reached. He did, however,
note the rate of growth of that market and indicated that the
department would undertake to review the situation later in the
year. On January 4, 1999, the Minister announced that the threshold
had been reached and that he was designating Air Canada to operate
three times a week to Taiwan.
In March, the Minister announced a successful conclusion to
ground handling arrangements at Keflavik Airport, Iceland. This
was further to consultations with Iceland held in August 1997,
when Icelandair was given the right to operate a third weekly
flight to Halifax and/or Montreal. That right was granted on the
condition that Icelandair and Canada 3000 Airlines could agree
on a ground handling arrangement at Keflavik Airport. As a result
of the new arrangement, Icelandair added the third flight to Halifax,
and in May, Canada 3000 Airlines introduced weekly charter services
from Calgary and Vancouver to Keflavik and beyond to Europe.
On August 7, the Minister designated Air Canada to provide
service between Canada and Lebanon. The carrier selection was
precipitated by a request from the Government of Lebanon for bilateral
air negotiations. Air Canada's designation sets the stage for
the first scheduled air service by a Canadian carrier between
Canada and Lebanon. Air Canada was selected to provide code-sharing
service to Beirut via Frankfurt with Lufthansa (three times
per week) and via London with Middle East Airlines (five times
per week). Canada's negotiations with Lebanon in November 1998
were successful, although no new service by the designated carrier
on either side is expected in the near term.
Also on August 7, the Minister designated Canadian Airlines
to serve the Canada-Chile market. Canadian Airlines proposed to
provide code-sharing service via intermediate points in the US,
where it would connect with the flights of LAN Chile and other
partner airlines onward to Santiago.
On September 1, enhancements to the bilateral air services
agreement with New Zealand were achieved. The new agreement grants
Canadian Airlines the right to code-share with Air Pacific to
New Zealand via Honolulu, and for Air Canada to code-share with
its alliance partners, Air New Zealand and United Airlines. Under
the new agreement, the designated airlines for each country are
able to offer code-shared services between all cities in Canada
and all cities in New Zealand. New rights for own-aircraft services
have also been agreed to, which will permit the doubling of the
airline capacity between the two countries.
On November 26, a code-sharing agreement with Mexico that allows
for dual designation was achieved. This agreement secured rights
to allow both Air Canada and Canadian Airlines to code-share to
and from Mexico with Mexican designated airlines and other alliance
partners. The agreement features the right for two designated
airlines of each country to code-share with the designated airlines
of the other country, as well as airlines of a third country.
In addition, the agreement sets no limitations on the number of
seats sold or the number of flights used for code-sharing, or
where carriers can connect for code-sharing globally. Finally,
it allows access to all cities in each other's territory for code-sharing.
There are also plans to continue negotiations with Mexico in 1999
to conclude a more liberal agreement for own-equipment services.
On December 7, the Minister signed Canada's first bilateral
air services agreement with the Republic of Hungary to bring it
into legal effect. Air Canada initiated scheduled air services
by code-sharing on the flights of its airline alliance partner,
Lufthansa, between Frankfurt and Budapest in the summer of 1998,
on an extra-bilateral basis pending signature of the agreement.
When Malev Hungarian Airlines decides to enter the direct scheduled
air services market, it will have the right to serve up to five
cities in Canada with a combination of its own aircraft services
and code-sharing services.
Service Disruption - The Air Canada Pilots' Strike
Air Canada's scheduled air services were suspended for 13 days
in early September when its pilots went on strike. The airline
used the services of other carriers primarily to bring its passengers
abroad back to Canada. Air Canada's regional subsidiaries, Air
BC, Air Ontario, Air Alliance and Air Nova, were not affected
and continued to operate their normal scheduled services. Domestically,
there was some traffic diversion to other Canadian carriers, which
in some cases operated higher frequencies and additional services.
For example, Canadian Airlines added up to 20 additional flights
per day to accommodate increased demand. WestJet also provided
additional lift. It took Air Canada approximately one week after
the strike ended to resume full operations. Shortly after resuming
normal operations in mid-September, Air Canada initiated deep
fare discounts for a limited period to regain business that was
diverted to other carriers during the strike.
Domestic Services and Traffic
After serving Winnipeg, Manitoba, for two months during 1996,
WestJet returned on March 20, 1998, to serve the city. With its
return to Winnipeg, WestJet provided scheduled services to major
centres in B.C., Alberta, Saskatchewan and Manitoba. WestJet also
operated to Grande Prairie, Alberta, on a charter basis from February
6 to June 21 inclusive. In 1998, WestJet secured access to $27
million US and later signed agreements for delivery of seven B737-200
aircraft, two of which were delivered in late 1998. Two more are
to be delivered in 1999 and the remaining three before the end
of the year 2000.
In April, NorTerra Inc., an investment holding company for
two major Inuit groups, the Inuvialuit Development Corporation
of the western Arctic and the Nunasi Corporation of the eastern
Arctic, created Air NorTerra and purchased the Canadian North
division of Canadian Airlines to provide the service. Based in
Yellowknife, Northwest Territories, Air NorTerra assumed responsibility
for marketing and sales, while operations and maintenance are
provided on contract by Canadian Airlines.
In August, Air Canada realigned its services out of Vancouver
and Calgary with the objective of reducing capacity in western
Canada to better match demand. It generally involved the transfer
of some routes from Air Canada to Air BC and some routes from
Air BC to Central Mountain Air. The changes allowed Air Canada
to re-deploy nine aircraft (2 A320s, 1 A319 and 6 CRJs) from Western
Canada to Central and Eastern Canada and to transborder services.
At the same time, Air Canada added four DC-9s to its western network.
The changes also allowed Air BC to retire one Dash-8 aircraft.
The result was a reduction in the number of non-stop services
and the increased use of Air Canada's partner, Central Mountain
Air, which took over from Air BC routes suited to its fleet of
18-seat Beech 1900 D aircraft. These routes include Vancouver
to Kamloops, Campbell River and Comox, and Calgary to Kamloops
and Grande Prairie .
Table 15-6 outlines these changes.
On October 26, Inter-Canadien assumed the air services formerly
operated by IMP Group subsidiary Air Atlantic and became the nation's
largest regional air carrier east of Manitoba. Inter-Canadien,
which was sold to Canadian Investor Corporation in August 1998,
is a commercial partner in Canadian Airlines' network. Although
Air Atlantic ceased operating on October 25, its parent, IMP Group,
remained active with the acquisition in November of Toronto-based
charter air carrier Air 500.
In November, two Air Canada subsidiaries, Air Nova and Air
Alliance, announced a plan to consolidate and realign their respective
operations by April 1999. The consolidation would combine and
re-deploy the fleet, with Air Nova using the 37-seat Dash-8 and
the 77-seat BAe-146, while Air Alliance would handle all services
that used the 18-seat Beech 1900D. Air Nova would remain based
in Halifax and Air Alliance would continue to be based in Quebec
City. The headquarters of the combined operation would be in Halifax.
Canadian Airlines also initiated a code-sharing arrangement
with Helijet on service between Vancouver and Victoria.
Preliminary statistics suggest that domestic passenger traffic
in 1998 increased by 2.9 per cent from 1997.
Table 15-7 lists the top 20 city pairs for domestic scheduled
and charter passenger traffic.
Table 15-8 shows the changes in domestic enplaned and deplaned
passengers from 1988 to 1997.
Figure 15-14 shows the regional breakdown of domestic passenger
traffic.
Transborder Services and Traffic
February 1998 marked the third anniversary of the 1995 Canada-US
"Open Skies" Air Transport Agreement and with it, the
removal of the last remaining restrictions limiting access to
Toronto by US carriers. In 1998, Air Canada expanded or added
new services to the US, including new non-stop services from Toronto
(Pearson) to San Jose and New Orleans, from Montreal (Dorval)
to Washington (Dulles) and from Ottawa to New York (LaGuardia).
Canadian Airlines added new services between Toronto and Boston
and between Vancouver and San Jose, California.
Fifteen of Canadian Airlines' transborder services were affected
when its alliance partner, American Airlines, was forced to withdraw
code shares on these services during the summer of 1998 to adhere
to contractual terms with its pilots union. Code-sharing on these
services was re-instated on January 1, 1999.
There has been little change in the scope and scale of specialty
service operations by Canadian and American entities based on
the entitlements in the North American Free Trade Agreement (NAFTA).
In 1998, there were 31 Canadian companies authorized to operate
in the US and 24 American companies authorized to operate
in Canada.
Figure 15-15 shows the growth in transborder air traffic over
the last 12 years. Figure 15-16 shows the increase in the number
of seats offered in the transborder market since 1994.
Table 15-9 lists new direct non-stop air services in transborder
markets.
Table 15-10 summarizes the passenger traffic for scheduled,
regional and charter operations, as well as the market shares
held by Canadian and US carriers.
See Appendices 15-1
and 15-2 for
the entry, exit and ongoing activity in the Canada-US scheduled,
regional and charter operations market by air carrier nationality
and points served.
International Services and Traffic
Preliminary statistics indicate a 4.8 per cent increase in
international passenger traffic in 1998 over 1997. In 1997, total
traffic increased by 9.4 per cent over 1996 levels. These figures
include same-plane services by scheduled, charter and regional
carriers. They do not include passengers connecting to international
air services in the US.
Table 15-11 shows international passenger traffic between Canada
and countries other than the US from 1991 to 1997.
Appendix 15-3
lists the international air services provided to and from Canada
as of the end of 1998. These include foreign markets served by
Air Canada and Canadian Airlines, as well as Canadian markets
served by foreign carriers. This appendix also provides a partial
list of foreign markets served by Canada's charter air carriers.
It shows that there are 34 countries currently receiving same-plane,
scheduled services from Canada. Canadian air carriers serve 25
of these countries.
An international airspace agreement allowing North Korean airspace
to be used for overflights went into effect on April 23. This
agreement will help reduce flight times between Asia and North
America by up to 50 minutes. This in turn will reduce fuel and
crew costs.
In anticipation of traffic growth in the international sector,
Air Canada opted to augment its wide-body fleet by acquiring additional
Airbus A330 and A340 aircraft to be delivered over the next four
years.
Air Canada augmented its services with new and expanded code-sharing
arrangements with Star Alliance partners United Airlines and Lufthansa,
as well as with Air New Zealand, Royal Jordanian and Singapore
International Airlines.
Canadian Airlines acquired an Airbus A320 and four B767-300ER
long-range aircraft, two of which were delivered in late 1998.
The two new aircraft permitted the carrier to increase frequencies
on its long-haul routes and to replace the capacity lost when
it retired two DC-10-30 aircraft.
On September 22, Canadian Airlines announced that it had joined
as a founding member a new global airline alliance, oneworld.
Like Star Alliance, the oneworld alliance expands the number of
destinations and options to make air travel easier by creating
a system combining the services of its carrier members. Some of
the features of this alliance include an integrated international
schedule, blended technology, common passenger and baggage handling
procedures, and reciprocal frequent flyer programs.
In 1998, eight Canadian air carriers (Air Canada, Air Transat,
Canada 3000 Airlines, Canadian Airlines, First Air, Royal Airlines,
Skyservice and WestJet) filed international charter programs with
the Canadian Transportation Agency (CTA) to operate services for
tour operators. Major destinations included points in Europe as
well as "sunspot" areas, mainly in the southern US,
Latin America and the Caribbean.
Air Canada and Skyservice provided charter flights for professional
sports teams.
Air Transportation
- 15-1 Status of Transborder
Scheduled Air Services by Nationality
- 15-2 Status of Transborder
Air Services as of December 31, 1998
- 15-3 International Air Services
as of December 31, 1998 (Excluding Canada-US Transborder air
Services)
-
-
NOTES:
3
During international bilateral negotiations, the interests of
both countries are addressed, and understandings on the cities
that can be served, the number of carriers that may operate,
the flight frequency and the type of aircraft to be used are
recorded to form a bilateral air transportation agreement.
4
See Table 13-7 in Chapter 13, Industry Structure.
5
Code-sharing is the ability to sell air transportation under
one airline's name on the flights of another airline. In the
international context, code-sharing allows carriers to sell transportation
on the network of services of code-share partners as if it was
their own. In addition, by coordinating their marketing efforts,
alliance partners can provide a combined product to the consumer,
including one-stop check-in, better coordinated connections,
and priority baggage transfer.
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