Canada: Changes En Route: Bill C-49 Becomes Law, Canadian Airlines Get New Ownership Rules

On May 23, 2018, the Transportation Modernization Act (Bill C-49) came into force, making several important amendments to the Canada Transportation Act (Act). Bill C-49 aims to grow the transportation industry, modernize the transportation regulatory framework in Canada and enhance consumer protection.

Bill C-49 received royal assent on May 23, 2018. It had previously been passed by the House of Commons in November 2017, but was sent back twice by the Senate before ultimately being approved on May 22, 2018.

Bill C-49 addresses air, rail and marine transportation. This bulletin discusses the notable changes made to the air transportation industry, such as easing foreign ownership restrictions on Canadian airlines and creating an air passenger bill of rights and a new process for reviewing air carrier joint ventures.

EASING FOREIGN OWNERSHIP RESTRICTIONS ON CANADIAN AIRLINES

Before the passing of Bill C-49, airlines in Canada were required to be controlled in fact by Canadians or corporate entities of which at least 75 per cent of the voting interests were owned and controlled by Canadians. This meant that no foreign investor could hold more than 25 per cent of the voting interest in a Canadian airline.

In an attempt to attract foreign investors into the Canadian aviation industry, Bill C-49 increased the foreign ownership limit on Canadian airlines from 25 per cent to 49 per cent. Two "safeguards" accompany the increase in foreign ownership limit:

  1. No more than 25 per cent of the voting interests are owned directly or indirectly by any single non-Canadian
  2. No more than 25 per cent of the voting interests are owned by one or more non-Canadians authorized to provide air services in any jurisdiction.

Therefore, even though the foreign ownership limit has been raised to 49 per cent, individual foreign investors cannot own more than 25 per cent of a Canadian airline and foreign air carriers, collectively, cannot own more than 25 per cent of a Canadian airline.

AIR PASSENGER BILL OF RIGHTS

Bill C-49 provides a mandate for the Canadian Transportation Agency (CTA) to develop an air passenger bill of rights that would apply to both Canadian and foreign air carriers operating services to and from Canada.

The stated goal of the air passenger bill of rights is to ensure that air passenger rights are clear, consistent and fair for both travellers and air carriers. Canada's Minister of Transport, Marc Garneau, has stated that the air passenger bill of rights will impose administrative monetary penalties on air carriers in situations where a passenger has been bumped from an overbooked flight, had luggage lost or damaged, or was stuck on a tarmac for extended periods of time.

The CTA is seeking input from the public on what obligations and standards should be included in the air passenger bill of rights.

JOINT VENTURE REVIEW PROCESS

Bill C-49 amends the review process of air carrier joint ventures and empowers the Minister of Transport to determine whether the joint venture is in the public interest and fair competition.

Before the passing of Bill C-49, proposed air carrier joint ventures were reviewed by the Competition Bureau for possible harm to competition under the Competition Act. This process did not allow for the consideration of the wider public interest benefits that are obtained through the collaboration and coordination of the operation or marketing of air carrier services. Alliances between air carriers and code-sharing are commonplace, as air carriers frequently share routes, schedules and revenue.

Under the new review process, the Minister of Transport will assess the public interest benefits of the proposed joint venture and any impacts it may have on fair competition. The Commissioner of Competition will provide a report to assist the Minister of Transport in their review. If the Minister of Transport is satisfied that the proposed joint venture is in the public interest, he or she has the authority to approve it, without separate approval from the Competition Bureau.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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