Ottawa eyes competition in the skies

[Blastor]

Ottawa eyes competition in the skies
Sharp policy shift

Peter Brieger / National Post

Saturday, October 30, 2004

The federal government is mulling a dramatic overhaul of the country's airline industry, including the elimination of limits on foreign ownership in Canadian airlines and even letting U.S. carriers fly passengers between Canadian destinations.

In a stark policy shift from one of his predecessors, Jean Lapierre, the Transport Minister, said yesterday Canada must open up its airline sector and force Air Canada to survive on its own. The national carrier emerged from bankruptcy restructuring earlier this month.

"For nearly a quarter of a century, the federal government's air policies have been built on protecting what we have, rather than building something better, protecting against loss of service, against the loss of our national flag carrier," Mr. Lapierre said in a speech to airline executives in Toronto. "The time for this approach is over."

The trend around the world has been to move away from a "traditional industry model" that counted on closed domestic markets and "strong" national airlines, he said.

It is unclear how far the government will go in terms of loosening restrictions on the sector.

A wide-ranging list of proposals -- including a review of air service agreements with more than 70 countries -- is going to be studied by a parliamentary committee, which could make recommendations early next year, Mr. Lapierre said.

The minister declined to say whether he personally supports air industry liberalization.

"By next spring, we should have something in hand and then move forward very quickly," he said. "[But] I'd be crazy to prejudge the outcome of the committee."

Meanwhile, Mr. Lapierre defended Ottawa's decision to extend $1.5-billion in loan guarantees to Air Canada so it can buy as many as 45 regional jets from Montreal-based transportation giant Bombardier Inc.

All Canadian airlines are eligible for similar help, but the practice has been derided by critics as "corporate welfare" paid for with public money.

"I'm very excited about the idea that Canadian airlines who buy Canadian planes could get financing," Mr. Lapierre told reporters after his speech. "This program opens the door for airlines who might have had financing problems."

As for airline ownership limits, foreigners cannot hold more than 25% of a Canadian carrier.

Proponents of higher limits, including Air Canada, say it would benefit the industry to raise that figure to at least 49%, just under what is required for ownership control of a company.

Raising the ceiling, or ditching it altogether, would give Canadian airlines better access to foreign capital, allowing them to beef up their own operations, said Jacques Kavafian, an industry analyst in Toronto.

"It's great," he said of the proposed changes. "I think the sooner the better. The 25% ownership limit is outdated. You won't find a single living soul that would be against raising the limit. Well, I think there was one -- David Collenette was his name."

Mr. Collenette, a former federal transport minister, opposed deeper integration of the North American airline industry, a view that ran counter to the one held by Paul Cellucci, the current U.S. ambassador to Canada.

Earlier this year, Mr. Cellucci renewed his call to liberalize North American air travel and Mr. Lapierre said he would like to renegotiate the 1995 Open Skies agreement, which regulates air travel between the United States and Canada.

Those talks may pave the way for U.S. carriers to fly between Canadian cities -- a practice that is currently prohibited -- if Canadian airlines are afforded similar access to the U.S. market, Mr. Lapierre said.

The U.S. Ambassador and Norman Mineta, the U.S. Transportation Secretary, are "enthused" about reopening talks over the bilateral treaty, he added.

Mr. Lapierre shrugged off concerns that U.S. airlines would go after popular routes while ignoring flights between small Canadian centres.

"If there is a market, someone will want to fly there," he said. "The problem for the smallest regions is not competition. The problem is volume."

Competition from the likes of WestJet Airlines Ltd. and CanJet Airlines has been good for consumers and the industry as a whole, he said, adding that the European Union already allows airlines to operate anywhere within the 25-nation trade club.

Airline analyst Mr. Kavafian said the idea is a "good thing philosophically," but he doesn't see any advantage for Canadian or U.S. carriers to fight over each other's domestic routes when the industry is struggling to recover from a slump in business that left several U.S. airlines in bankruptcy court.

"Whatever one airline gains here they might lose [in their home market]," he said. "I think it's totally unlikely -- it's a pipe dream.

"What we really need is three or four years of stability in the industry."

© National Post 2004

[Blastor]

Can you imagine Jetblue flying: Toronto-Montreal-Qc city-Newyork-Boston-Buffalo-Chicago-Toronto?

Bye-bye Westjet and Jetsgo!

[Aces High2]

Mr. Kavafian is the only person who makes any sence in this whole issue.

[Panama Jack]

While we are quick to forcast the demise of Canadian carriers, tell me one more time why it isn't companies like Westjet, Jetsgo, and Air Canada that could come out on top?

Three observations:


1) According to frequent travellers surveys, Air Canada's service is superior to that of any US carrier, including business class service.

2) Canadian labour costs for airline workers are comparitively lower than those in the United States.

3) Canadian carriers may get an increased advantage by tankering cheaper fuel from the United States to fly current domestic segments.


So in the end, you might just see a showdown of Southwest vs. Westjet (maybe even with Kelleher and Beddoe arm wrestling).

Now if they talk about unfettered cabotage, where any nation's airline is able to operate domestically with in Canada . . . well, it's not too late to go back to school fellas.

[. ._]

I don't think it's such a bad thing- as long as our politicians don't sell us down the river.

A true open skies agreement would allow their pilots to work up here, and ours to work down there. With the pool of pilots up here, it would drive down wages across North America. Good for profits, and consumers. Imagine a $90K a year CDN crew competing with a $200US crew. WE WIN! Canadian jobs everywhere!

Of course, our politicians will f*ck it up, and we'll be screwed once again. What do I know? I fly a Zlin.

-istp

[LT]

Of course, our politicians will f*ck it up, and we'll be screwed once again.

Exactly, *sigh*

[Canus Chinookus]

what worries me isn't the quality of service, or even the canadians ability to put out a superior product. What worries me is the size of the US carriers. Even if you combine all the canadian carriers into one company, we'd still be pipsqueaks compared to the US carriers.