On Tuesday, 16 May 2017, Minister of Transport Marc Garneau introduced Bill C-49, the Transportation Modernization Bill, amending several key provisions of the Canada Transportation Act (the “Act”). The Bill is in line with the Government’s stated objective of modernizing and updating the transportation regulatory framework in Canada and enhancing consumer protection.

The Bill contains several provisions that are specific to the air transportation sector. The proposed amendments include provisions relating to air passenger rights, foreign ownership interests in Canadian air operators and commercial arrangements between transportation undertakings providing air transportation.

Passenger rights regime to be implemented

Canada is a party to the Montreal Convention and accordingly passenger rights and air carrier liabilities for international flights to and from Canada are subject to the provisions of the Convention. That said, unlike certain other jurisdictions such as the United States and the European Union, the Canadian regulatory framework does not currently contain specific provisions relating to passenger rights, and only requires air carriers to include certain provisions regulating the rights of passengers in their tariffs, including in respect of compensation for denied boarding, flight delays and cancellations, etc. Any such provisions are required to be reasonable and non-discriminatory failing which they may be disallowed by the Agency.

Of significant interest and drawing the most attention thus far are the provisions of the Bill relating to air passenger rights. These amendments are aimed at establishing a new air passenger rights regime in Canada and would apply to Canadian air carriers and equally to foreign airlines operating services to and from Canada. It is important to note that the Bill does not contain any specific provisions regulating air passenger rights. Rather, it authorizes the Canadian Transportation Agency (the “Agency”) to make regulations in respect of various matters affecting air passengers including:

  • providing passenger with information regarding the terms and conditions of carriage and recourses available against the carrier;
  • establishing carrier obligations in cases of delays, cancellations and denial of boarding including minimum standards for passenger treatment in cases of delays, cancellations and denial of boarding in situations both within and outside the carrier’s control, carrier’s obligations to ensure that passengers complete their itinerary and are provided timely information and assistance; and
  • establishing minimum amounts of compensation payable in certain cases, including for lost or damaged baggage.

All of a carrier’s obligations established by regulation would be deemed to be included in the carrier’s tariff and hence form part of the contract of carriage between the passenger and the carrier.

Bill C-49 also restricts the right to make a complaint to the Agency alleging a violation of any term or condition of carriage by the holder of a domestic licence only by a person that was adversely affected.

Increased oversight of mergers, acquisitions and arrangements

The Act currently includes a review and approval regime for mergers and acquisitions involving transportation undertakings that exceed certain monetary thresholds, Bill C-49 creates a separate review regime for arrangements between two or more air operators involving collaborations to coordinate any aspect of the operation or marketing of air services including prices, routes, schedules, revenue sharing, etc. Alliances and code-sharing – which are ubiquitous in international air transportation among airlines – are likely contemplated in these provisions. A party to such a transaction may give notice to the Minister of Transport (the “Minister”) with a copy to the Commissioner of Competition (the “Commissioner”). If such a notice is given and the Minister is of the opinion that the proposed arrangement involves significant public interest, the arrangement would be subject to a review process, in which the Minister would also consider a report prepared by the Commissioner. If the Minister is satisfied that the proposed arrangement is in the public interest, the Minister is to authorize it and specify any terms and conditions relating to the public interest and competition that the Minister considers appropriate.

As currently drafted, the Bill grants a party to such a transaction the option of notifying the Minister and seeking pre-authorization of such an arrangement. The provision appears to be a mechanism for seeking competition or antitrust immunity for commercial transactions involving competitor collaborations.

Foreign ownership restrictions eased

A significant change introduced by Bill C-49 concerns the definition of “Canadian” for the purposes of the Act. Under the proposed amendments, a Canadian corporation or other incorporated entity may have up to 49% of its voting interests held by non-Canadians, provided that no single non-Canadian holds more than 25% of the voting interests. Further, non-Canadian air operators may not hold more than 25% of the voting interests in a Canadian corporation or an entity, either individually or in the aggregate. The Bill as it currently stands would not otherwise affect the requirement that air carriers must be controlled by Canadians.

What’s next?

The Agency currently adjudicates complaints brought by passengers, and has created a body of case law that carriers are counseled to follow, or risk sanction by the Agency. In these decisions, the Agency has addressed many of the issues that it is now charged with regulating under the Act. As such, it would not be surprising to see the Agency codify as regulations its past decisions.