The 1988 Air Transportation Regulations address the circumstances under which commercial air operators may be licensed in Canada. The regulations also deal with issues such as tariffs, general conditions of contract and service provision to persons with a disability. Much of the regulations is devoted to addressing charter operations and sets out in great detail the rules that apply to traditional charter types. Changes in the industry have overtaken the regulations and for many years now Canadian air policy has recognised that it is undesirable to apply the old 'charter fences' such as advance purchase, minimum fare and minimum stay. The Transportation Agency has long granted exemptions from the restrictive rules, but they remain on the books. A number of attempts have been made to reform the regulations over the last 20 years, but all of these have collapsed under the weight of accumulated and complicated provisions.
Over a year ago, the agency decided to adopt a new approach. Rather than attempting to overhaul the regulations in their entirety, the task will be approached in stages. The Regulatory Projects Group within the International Agreements and Tariffs Directorate was tasked with consulting stakeholders and drafting proposed amendments. The first consultations took place in Spring 2010 and on April 2 2011 the proposed Phase One amendments were published in Part I of the Canada Gazette. Interested parties had 30 days to submit comments, following which it is anticipated that the agency will adopt the amendments, subject to the approval of the governor in council.
The main proposed amendments in Phase One of the regulations are set out below.
Phase One exclusions
The regulations consist of seven parts and 13 schedules. Phase One addresses Parts I and II, which deal with such things as financial requirements, wet lease and code share arrangements and licensing of commercial air carriers. However, there are two notable exceptions to the scope of the Phase One review. Section 3 (which is in Part I) of the regulations identifies certain services which are exempt from regulation. The exemption rules begin with Section 56(2) of the Transportation Act, which exempts several enumerated operations as well as any "other prescribed air service". The additional prescribed services are those listed in Section 3 of the regulations and include aerial advertising, fire fighting and survey services. Whether other types of operation should be prescribed (eg, air ambulance) is a controversial matter and the Regulatory Projects Group has decided this issue should be deferred for future consideration. Likewise, the rules regarding mandatory insurance, although found in Part I of the regulations, have not been considered in Phase One.
Although Section 7 of the regulations, which deals with mandatory insurance, has been excluded from Phase One, the proposed amendments do address the question of the insurance required to support an application for approval of a code share agreement. The new regulatory language largely reflects the current practice (which is based on directions from the agency rather than formal regulation), but there are a few differences between the wording of the proposed regulatory text and the existing directions. The agency has typically been very exacting in its scrutiny of documents submitted to prove the existence of adequate insurance and it is likely that close attention to the differences will be essential to obtaining timely approvals.
Another change which will affect code share approvals involves filing deadlines. At present, the regulations require an application for approval to be completed 45 days before the commencement of the proposed code share operation. This is often inconvenient and carriers regularly apply for exemptions to permit filing on shorter notice. The proposed text will reduce the period from 45 days to 30 days. The intention is to reduce greatly the number of exemption applications. At present, it is often possible to process a code share application in less than 30 days and it will be interesting to see whether the agency will continue to accommodate requests for shorter filing periods.
In keeping with the objective of eliminating unnecessary filings, the current requirement that licencees file an annual declaration of continuing status with the agency would be removed from the regulations.
A welcome change, which will eliminate the need for exemption applications, concerns the names which may appear on an aircraft. The current regulations have a prima facie rule which restricts the carrier to displaying its own name (and authorised trade names) on its aircraft. Applications for exemptions to allow the name of, for example, a tour operator have become common and are generally allowed. The need for these exemption applications would be disposed of by a blanket exemption: "Despite any other provision of these Regulations, a person does not contravene these Regulations by advertising on an aircraft." In an explanatory note to the regulatory text, the agency states that "the painting of an aircraft is a business decision" and it is clearly one that the agency does not intend to regulate in the future.
The circumstances in which normal course wet leasing will be allowed without agency approval would be expanded by the amendments. As things now stand, it is allowable to conduct domestic operations on a wet lease basis and without agency approval, provided that both the carrier selling the service and the operating carrier are Canadian and hold licences from the agency. This restrictive rule long pre-dates the current air services agreement between Canada and the United States (signed in 2007), which provides for an 'open skies' regime between the two countries. In recognition of the more liberal regime, the liberty to operate a normal course wet lease without agency approval will be extended to trans-border services in cases where the seller (or operator) of the service is a citizen of the United States.
Charter types simplified
The detailed regulation of charter types is currently set out in Parts III and IV of the regulations, and these parts are not the subject of Phase One revisions. However, the proposed text does introduce two new simplifying terms which will eventually replace the advance booking charter, inclusive tour charter, common purpose charter and entity charters. All passenger charters will eventually be passenger resaleable charters or passenger non-resaleable charters. As definitions of these simplified terms are yet to be introduced, it is necessary to maintain the definitions of the traditional charter types until the revision project reaches Parts III and IV.
Financial requirements for operating domestic air service
Included in Part I of the regulations are rules which specify the financial requirements that must be met by parties applying for a licence to operate a domestic air service. These are quite onerous and compliance requires a good deal of work. There will be no change in the substance of the requirements, but a redundancy will be eliminated. Currently, a carrier which has already met the requirement for a service using large aircraft must demonstrate compliance again if it introduces medium aircraft to its fleet. This latter requirement will be eliminated.
While the proposed changes are relatively modest and, for the most part, represent current practice, they are nevertheless welcome. The long history of failure to accomplish the renewal process in a single amendment justifies the decision to divide the task into more manageable phases. It is to be hoped that Phase One will soon be brought to a successful conclusion and that the process will continue. It will be of particular interest to see whether some of the more potentially controversial provisions, such as a definition of which types of operation are excluded from the regulation rules altogether, are addressed in Phase Two.
For further information on this topic please contact Gerard A Chouest at Bersenas Jacobsen Chouest Thomson Blackburn LLP by telephone (+1 416 982 3800), fax (+1 416 982 3801) or email ([email protected]).