Rules Block Cheap Air Fares
Canadians are denied lower-cost air travel because of federal limits on foreign ownership, says the chair of a Canada Transportation Act review panel. Current law limits foreign investors to 25 percent ownership in any Canadian commercial airline.

“The restrictions on foreign ownership are particularly onerous for start-up carriers,” said David Emerson, former industry minister. “Canada has not really had an ultra low-cost carrier, and what we heard from our consultations is for an ultra low-cost carrier to start up in Canada, it needs to get financing – and it’s difficult enough to get financing if you’re not a publicly-traded company in Canada,” he said.

Emerson recommended foreign investors’ limits increase from 25 to 49 percent for commercial carriers, and 100 percent for all-freight and specialty air services. The proposals were detailed in Emerson’s February 25 report Pathways: Connecting Canada’s Transportation System To The World.

Testifying at the Commons transport committee, Emerson said raising ownership limits was important. “We really need to allow these start-ups access to foreign capital to make sure that, over time, Canada does get a more competitive air sector through the ultra low-cost route,” he said.

“I think we have a major problem nationally in terms of attracting major investments,” he said. Emerson also said regulators are too slow in sanctioning air agreements that allow more foreign carriers to inaugurate Canadian routes.

“Emirates Air has wanted to increase their frequencies into Canada,” said Emerson. “We’ve rejected them as a country and there’s bad blood now with the carriers and the country as a result of that decision. What has happened is Emirates is now flying out of Seattle. You’ve got Air Canada and WestJet flying people by the droves down to Seattle to get on an Emirates flight so they can gateway through Dubai.”

“It’s total craziness,” he said. “It’s happening elsewhere.”

MP Kelly Block (Carlton Trail, Sask.), Conservative transport critic, said cabinet should act on the Pathways recommendations. “European investors want to come to Canada to invest in a new airline but this government is blocking their entry,” said Block.

“Your report recommends raising the foreign ownership threshold to 49 percent,” said Block; “What signal does government send to foreign investors when they take so long to make a decision?”

Transport Canada earlier confirmed it would not hold any public hearings on Pathways proposals. “They will not be open, public conversations,” Ellen Burack, the department’s director of environmental policy, earlier testified at the Senate energy committee; “Of course the Minister can’t sit down with every Canadian to have this conversation.”