Recent developments and trends
Are there any notable recent developments or trends in the aviation sector in your jurisdiction?
Several developments that have recently arisen and that are expected in 2018 are worthy of mention.
First, the federal government is expected to enact new passenger rights legislation relating to air carriers in 2018. As of August 2017, the draft legislation (Bill C-49) had passed second reading in the House of Commons. The new legislation will, among other things:
- introduce new foreign ownership limits for airlines; and
- create standards and establish minimum compensation for:
- voluntary denied boarding situations;
- lost or damaged luggage;
- tarmac delays;
- children being seated next to parents; and
- carriage of musical instruments.
Second, a ruling is expected from the Supreme Court of Canada in the appeal of Lukács v Delta Air Lines, Inc (2016 FCA 220), in which the court will determine whether the Canadian Transportation Agency is permitted to apply the common law legal tests for standing on consumer complaints made to it by the general public. In this case, the complainant launched a complaint with the agency regarding Delta Air Lines’ policies with respect to the carriage of obese persons. Mr Lukács was not obese himself and was not acting on behalf of an obese passenger. The case is important in that it will establish whether consumer rights advocates with no personal interest in a complaint must be heard.
Finally, in the Ontario case of Thorne v Hudson (2016 ONSC 5507) the Ontario Superior Court held that the US federal General Aviation Revitalisation Act 1994, which statute-bars claims against general aviation aircraft or parts manufacturers from the date when the aircraft or part was delivered to its original purchaser, has no application in Canada. This result was affirmed by the Ontario Court of Appeal in 2017. A decision on leave to appeal to the Supreme Court of Canada is pending.
What is the primary domestic legislation governing the aviation industry in your jurisdiction?
As pertains to regulatory concerns, two primary legislative enactments govern aviation on Canada. The Aeronautics Act (RSC 1985, c A-2), along with the Canadian Aviation Regulations (SOR/96-433) promulgated thereunder, apply on matters of airports (and aerodromes), aircraft registration, airworthiness, unmanned aerial vehicles, flight safety, crew licensing and security, On issues relating to customer experience (including accessibility issues), licensing for the sale of publicly available air services, regulation of charter services and foreign ownership, the guiding legislation is the Canada Transportation Act (SC 1996, c 10) and the Air Transport Regulations (SOR/88-58).
In the case of international carriage, liability issues are governed by the Carriage by Air Act (RSC 1985, c C-26), which codifies the regime set out under the Warsaw Convention (1929), the Hague Protocol (1955), the Montreal Additional Protocol 4 (1975) and the Montreal Convention (1999) in Canada.
Liability for domestic carriage in Canada is not governed by legislation specific to the aviation industry; rather, issues of this nature are determined by common law principles of tort and contract.
In Quebec, these claims are governed by the Quebec Civil Code, based on the Napoleonic Code.
What international aviation agreements has your jurisdiction concluded?
Canada is a signatory to all of the main civil aviation liability conventions, including the Warsaw Convention, the Hague Protocol, the Montreal Additional Protocol 4 and the Montreal Convention, all of which were brought into force by the Carriage by Air Act.
In addition, Canada is a signatory to the Chicago Convention (1944), the Tokyo Convention (1963) and the Cape Town Convention (2001).
Which government bodies regulate the aviation industry and what is the extent of their powers?
In the aviation sphere, Transport Canada (a federal institution) is responsible for issuing air operator certificates to domestic operators and foreign air operator certificates to foreign carriers operating to or from Canada, whether those carriers serve Canadian points directly or through code share agreements with other licensed carriers. Transport Canada also regulates crew licensing, drones, aviation security, aerodromes, airworthiness and flight safety, among other things.
The Canadian Transportation Agency (also a federal institution) regulates the less mechanical aspects of the aviation industry. A licence from the agency is required in order to sell air transportation to or from Canada. The agency serves a regulatory function by providing oversight and, where applicable, approvals for code share agreements, wet leasing, charter operations, tariff filings, service schedules and makes determinations with respect to foreign ownership requirements.
In addition, and quite separate from its role as a regulator, the agency has an adjudicative function in that it reviews complaints made to it against air carriers by members of the public.
Air carrier operations
What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?
In order to operate in Canada, domestic commercial air carriers must obtain an air operator certificate from Transport Canada as well as a licence to operate a publicly available air service from the Canadian Transportation Agency.
Foreign air carriers must obtain a foreign air operator certificate (FAOC) from Transport Canada. Carriers based outside the United States or the European Union may be required to pass a base inspection by Transport Canada staff before the FAOC is issued. Areas of interest for Transport Canada in base inspections include the maintenance procedures used by the foreign air carrier and security of the foreign hub where the foreign air carrier is based.
In addition, foreign carriers must obtain a licence to sell air services to or from Canada from the agency. Once this licence is obtained, air carriers must file an international tariff with the agency (and post it on their website) and a service schedule before commencing operations.
To the extent that a foreign air carrier operates in Canada on a code share basis with another licensed carrier, the marketing foreign carrier must obtain the agency’s approval of the code share arrangement.
Ownership and control
Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?
As of August 2017, foreign ownership of a Canadian domestic carrier is restricted to 25%. It is anticipated that in 2018, this limit will increase to 49% with the passage of Bill C-49.
In addition to foreign ownership requirements, domestic carriers must also be controlled in fact by Canadians. There is no legislated definition of this term. Rather, the determination is made by the agency on a case-by-case basis.
What financial thresholds must air carriers meet to obtain operating authorisation?
Particulars on financial requirements for air carriers are set out in Section 8.1 of the Air Transport Regulations (SOR/88-58). In order to meet the required threshold, an air carrier must establish to the satisfaction of the agency that:
- it has accurately reported the start-up costs for that carrier in the previous 12 months; and
- it has reasonably estimated the costs of operating and overhead costs for the initial 90-day period.
Once this has been accomplished, the prospective carrier must demonstrate that it has access to the funds required for the initial 90-day period (throughout that period) without accounting for any operational revenue. These funds may be accessible, in varying degrees, through lines of credit, issuance capital stock (with restrictions) and partner capital.
What is the required level of insurance coverage for air carrier operations?
The insurance requirements for domestic and international air services are set out in Sections 6 and 7 of the Air Transport Regulations. In regard to liability coverage, air carriers must hold a minimum coverage limit of C$300,000 per passenger seat on the aircraft used for any particular operation.
In addition, air carriers require a minimum limit for public liability as follows:
- C$1 million for an aircraft with a maximum take-off weight (MTOW) of 7,500 pounds (lbs) or less;
- C$2 million for an aircraft with a MTOW of between 7,500lbs and 18,000lbs; and
- C$2 million plus C$150 per lb over 18,000lbs for an aircraft with a MTOW of greater than 18,000lbs.
What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?
Safety standards for commercial operators are detailed in the Canadian Aviation Regulations (SOR 96-433). Distinct subparts apply to foreign air operations, aerial operations, air taxis, commuter airlines, aircraft maintenance by air operators and unmanned aerial vehicles.
What environmental obligations apply to air carrier operations?
Environmental issues in Canada are addressed by federal and provincial legislation in a complex assortment of statutory and regulatory enactments.
The main federal legislation of general application on environmental regulation in Canada in the Canadian Environmental Protection Act 1999 (SC 1999, c 33), which deals with regulation of toxic substances, air and water pollution and waste disposal.
In addition, each province has laws of general application in this area.
For example, Ontario has enacted the Environmental Protection Act (RSO 1990. cE.19), and regulations thereunder, which deal with, among other things, the discharge of pollutants into the environment, waste management, oils spills and offences relating to environmental matters. This legislation imposes particular duties that have relevance to the aviation industry, such as:
- the duty to report spills to the authorities;
- the duty to undertake clean-ups of spills to the pre-spill state; and
- accountability for clean-up costs incurred by municipalities that responded to the incident.
As for legislation that applies more specifically to the aviation realm, industry participants have obligations under the Transportation of Dangerous Goods Act 1992 (SC 1992, c34) and the Transportation of Dangerous Goods Regulations (SOR/2001-286) address the carriage and storage of dangerous goods. Part 12 of the regulations specifically deals with air transport. The act applies to operators which:
- transport or import dangerous goods;
- manufacture, ship and package dangerous goods for shipment; or
- manufacture containment and storage materials for dangerous goods.
Under this legislation, transporters are required to have an emergency response plan and security training before importing dangerous goods.
Noise operating criteria at aerodromes are addressed under Sections 602.105 and 602.106 of the Canadian Aviation Regulations (SOR 96-433).
Air traffic control
How are air traffic control services regulated in your jurisdiction?
Canada’s civil aviation navigation system (ANS) is operated by NAV Canada, a not-for-profit corporation with no share capital. NAV Canada derives its authority from the Civil Navigation Services Commercialisation Act (SC 1996, c 20).
Air carriers operating in Canada are charged for use of the ANS based on weight and distance flown. The charges are intended to be set at levels that are in line with the costs of operating the service. There is an appeal process to the agency for carriers which wish to dispute the reasonableness of their charges.
Do any licensing requirements apply to specific routes?
Specific routes are authorised by the agency in the course of issuing a licence. In doing so, the agency has reference to the routes authorised in the bilateral air service agreements between Canada and many foreign states. Most notably, Canada has negotiated ‘open skies’ agreements with the United States and the European Union.
For the most part, Canada favours open skies arrangements when negotiating bilateral air service agreements, but there are exceptions to this rule, particularly with respect to the United Arab Emirates.
Are any public service obligations in place with respect to remote destinations?
There are no requirements for air carriers in Canada to serve remote locations. However, where an air carrier seeks to withdraw from serving such a location or to reduce capacity significantly by 50% or more to that location, it may be required to provide 30 to 60 days’ notice. Carriers in this scenario must also “provide an opportunity for elected officials of the municipal or local government… to meet and discuss with the licensee the impact of the proposed discontinuance or reduction”.
Do any special provisions apply to charter services?
Air charter operations have a separate regime, which is overseen by the agency. Such operators must obtain a licence from the agency for both domestic and international services. The specifics pertaining to international charters (excluding the United States) can be found in Part III of the Air Transport Regulations; the details on trans-border charters to the United States are set out in Part IV.
The charter provisions are currently under review and there is an expectation that they will be simplified somewhat. In the interim, the agency has been inclined to grant exemptions to carriers on some of the requirements set out therein.
What taxes apply to the provision of air carrier services?
Air carriers operating in Canada must register an account with the Canada Revenue Agency (CRA), Canada’s federal tax authority. Domestic air carriers must collect harmonised sales tax (HST) for most provinces (the province of Quebec has an idiosyncratic tax system that differs from the rest of Canada). Although foreign air travel is zero rated for HST, foreign air carriers must still register with the CRA.
Both domestic and foreign air carriers must collect the air travellers security charge (ATSC), which is used to fund the Canadian Air Transport Security Authority, charged with providing security relating to passengers and hold baggage at Canadian airports. The ATSC is collected by the CRA.
Consumer protection and liability
Are airfares regulated in your jurisdiction?
Section 66 of the Canada Transportation Act (SC 1996, c 10) allows “a person” to file a complaint with the Canadian Transportation Agency that an air carrier operating a domestic route is charging a fare or cargo rate (or a range of fares or rates) that is unreasonable. Where the agency sustains the complaint, it may:
- disallow the fare or rate;
- direct the air carrier to charge a lower rate; or
- direct the air carrier to refund unreasonable amounts with interest to overcharged persons.
However, complaints of this nature are rare and attract attention only on routes with little or no competition.
There is no such provision for international routes.
What rules and liabilities are air carriers subject to in respect of:
(a) Flight delays and cancellations?
At the time of writing, no specific legislation defines compensation for flight delays and cancellations. However, when a passenger complains to the agency about such an event, the agency will review an international tariff filed by an air carrier and ensure that the carrier honoured its obligations to the aggrieved passenger as those obligations are set out in the tariff.
However, the federal government tabled Bill C-49 in Parliament in May 2017, which requires the agency, in consultation with the minister of transport, to make regulations on issues including the minimum standards of treatment of passengers that the carrier must meet and the minimum compensation to be paid for inconvenience when the delay or cancellation is within the air carrier’s control.
Bill C-49 is expected to come into force (with modifications) in late 2017 or 2018.
(b) Oversold flights?
As is the case with flight delays and cancellations, no specific legislative enactments deal with the issue of oversold flights. However, this issue will be explicitly addressed with the enactment of Bill C-49. The new provisions will set standards on how to deal with oversold flights and the compensation that is to be paid.
For now, the agency oversees complaints of this nature by determining whether the air carrier in question properly applied the relevant provisions of its tariff.
(c) Denied boarding?
At this time, the issue of denied boarding is left for carriers to address in their publicly filed international tariffs. However, denied boarding is also addressed in Bill C-49 (see (a) above).
In this regard, the agency, in consultation with the minister of transport, must make regulations or the minimum standards of treatment and minimum compensation payable to passengers who have been denied boarding where the relevant circumstances were within the air carrier’s control.
(d) Access for disabled passengers?
Part V of the Canada Transportation Act deals comprehensively with the accommodation of persons with disabilities. The issue is addressed in detail in the Personnel Training of the Assistance of Persons with Disabilities Regulations (SOR/94-42) and Part VII of the Air Transport Regulations (SOR/88-58). In addition, the agency has established accessibility standards for air carriers with 30 or more passenger seats and operators of aircraft with 29 or fewer seats. It has also prepared a Communications Code relating to removing communication barriers for passengers with disabilities.
When an application is made, the agency is empowered to inquire into a matter to determine whether an air carrier’s policy results in an undue obstacle to the mobility of persons with disabilities. The agency has broad powers to change an air carrier’s tariff to correct any such situations. A sizable amount of jurisprudence from the agency (and appeals of agency decisions) has resulted on issues as diverse as:
- service animals;
- the use of medical oxygen on board the aircraft;
- passengers who are too large to occupy one seat;
- passengers who require a medical attendant in flight;
- the ability of a passenger to self-declare his or her own independence for travel;
- allergies to food and pets on board the aircraft;
- use and carriage of wheelchairs;
- provision of accessible technology; and
- passengers travelling on stretchers.
Accessibility issues continue to be controversial and the subject of the agency’s attention.
(e) Lost, damaged or destroyed luggage?
As set out above, at present the agency will ensure only that air carriers are complying with their tariffs when dealing with this issue. The matter will be addressed more specifically when Bill C-49 is passed in late 2017 or 2018.
(f) Retention and protection of passenger data?
Privacy issues relating to air carriers are overseen by the Office of the Privacy Commissioner of Canada under the Personal Information Protection and Electronic Documents Act (PIPEDA) (SC 2000, c 5). PIPEDA requires that “personal information that is no longer required to fulfil the identified purpose should be destroyed, erased or made anonymous”.
The retention period for passenger data will vary with the nature of the records and the purpose for which they were collected. For example, records relating to liability issues will likely be retained for a period consistent with the limitation period for commencing an action (eg, two years for international carriage under the regime under the Warsaw Convention (1929), the Montreal Additional Protocol 4 (1975) and the Montreal Convention (1999). The period may be longer for records relating to tax issues, given that the federal taxation authority has recommended in an information circular that such records should be retained for a period of six years beyond the tax year to which the record pertains.
What rules and liabilities apply to the air carriage of cargo?
In the case of domestic carriage, the common law principles of tort and contract apply (except in Quebec, where such matters are determined by the Quebec Civil Code).
In the case of international carriage by air, where the Warsaw/Montreal liability regime applies, these conventions govern the liabilities of the air carrier as brought into force by the Carriage by Air Act (RSC 1985, c C-26).
Marketing and advertising
Do any special rules apply to the marketing and advertising of aviation services?
The Canada Transportation Act regulates the advertisement of fares in Part V.1 of the Air Transport Regulations. In short, the price advertised must be the total price, including all fees and charges that a passenger must pay to obtain the air service.
The advertisement must also indicate the point of origin and destination (cities, not countries), whether the service is one way or round trip and any booking limitations.
Do any special rules apply to consumer complaints handling in the aviation industry?
No special rules apply to complaints handling. However, where a complaint is made to the agency by an aggrieved passenger, the agency’s role will be to determine whether the air carrier resolved the complaint in a manner that is consistent with that set out in its international tariff (which must be filed with the agency and kept up to date). Unless the relevant tariff provision is found to be unreasonable by the agency, the air carrier will typically prevail in the complaint if it acted in accordance with its tariff provisions.
What are the requirements for entry in the domestic aircraft register?
In order to obtain a registration for an aircraft in Canada, Transport Canada requires that the following steps be undertaken:
- The prospective registrant must ensure that the aircraft meets that Canadian airworthiness requirements.
- The aircraft may not be registered in any other state. Proof of deregistration from the last country of registry must be provided.
- The prospective registrant must apply to Transport Canada for an aircraft registration mark. A special mark may be requested for a fee.
- An application must be made to register the above mark to the aircraft in question.
- Type-specific documentation must be submitted to Transport Canada with the application, as well as a bill of sale and a photograph of the aircraft identification plate.
- The registration fee must be paid.
Mortgages and encumbrances
Is there a domestic register for aircraft mortgages, encumbrances and other interests? If so, what are the requirements and legal effects of registration?
There is no domestic registry of this sort in Canada. However, the Cape Town Convention came into force in Canada on April 1 2013, thereby allowing for the registration of Canadian security interests in aircraft objects with the International Registry of Mobile Assets from that date onwards.
Before the Cape Town Convention came into force in Canada, security interests had to be registered separately in each of Canada’s provinces and territories.
What rules and procedures govern the detention of aircraft?
Both NAV Canada, the Canadian provider of air navigation services (under the Civil Air Navigation Services Commercialisation Act RSC 1996, c 20), and airport authorities (under the Airport Transfer (Miscellaneous Matters) Act SC 1992, c 5) have the authority to apply to a court for an order to seize and detain an aircraft where the operator of that aircraft has outstanding fees and charges.
Aircraft are also subject to detention by the local sheriff’s office when the operator is a judgment debtor, provided that all of the usual formalities are carried out.
Safety and maintenance
What rules and procedures govern aircraft safety and maintenance?
The Canadian Aviation Regulations (SOR/96-433) detail the aircraft maintenance requirements, as well as requirements for approved maintenance organisations. Much of the regulation pertaining to these issues comes from self-reporting via the safety management systems (SMS).
Parts 107.02 and 107.03 of the regulations dictate that air operators must establish an SMS system that includes:
- a safety policy on which the system is based;
- a process for setting goals for the improvement of aviation safety and for measuring the attainment of those goals;
- a process for identifying hazards to aviation safety and for evaluating and managing the associated risks;
- a process for ensuring that personnel are trained and competent to perform their duties;
- a process for the internal reporting and analysis of hazards, incidents and accidents and for taking corrective actions to prevent their recurrence;
- a document containing all safety management system processes and a process for making personnel aware of their responsibilities with respect to them;
- a process for conducting periodic reviews or audits of the safety management system and reviews or audits for cause of the safety management system; and
- any additional requirements for the safety management system that are prescribed under the Air Transport Regulations (SOR/88-58).
One of the features of the Canadian version of the SMS is the accountable executive, which applies to certain certificate holders (including operators of commercial air services). Under the Canadian system, the accountable executive retains all liability for non-compliance with the regulations.
What is the state of regulation on unmanned aerial vehicles (drones) in your jurisdiction?
Canada's regulatory framework under the Canadian Aviation Regulations distinguishes between unmanned air vehicles (UAVs) and model aircrafts. A 'model aircraft' is an aircraft with a total weight of 35 kilograms (kg) or less that is used for recreational purposes, while a 'UAV' is defined as a "power-driven aircraft, other than a model aircraft, that is designed to fly without a human operator on board".
Transport Canada commercial operators may obtain special flight operation certificates (SFOCs). While SFOCs are generally time and location-specific and limited, longer-term or blanket authorities are possible where the operator has an established history of approved SFOCs.
Operators that are subject to SFOCs must provide detailed information to Transport Canada, including:
- the purpose of the operation;
- the date, time and location of the flight;
- the boundaries of the area in which the flight will take place; and
- the safety plans.
To qualify for an exemption from obtaining an SFOC, Transport Canada requires that commercial UAV operators comply with several flight rules and conditions. For example, such operators must have public liability insurance of at least C$100,000 in place and must maintain continuous unaided visual contact with the UAV (visual line of sight piloting).
In March 2017 the minister of transport issued the Interim Order Respecting the Use of Model Aircraft which, among other things, prohibited the operation of drones (weighing 250 grams to 35kg) from flying:
- higher than 90 metres (m);
- at night;
- within 75m of buildings, vehicles or people;
- within 9 kilometres of the centre of any aerodrome where aircraft take off or land;
- over forest fires, emergency response scenes or controlled airspace; or
- without contact information marked on the drone.
How are air accidents investigated in your jurisdiction?
The Canadian Transportation Accident Investigation Safety Board of Canada (TSB) is authorised to investigate, among other things, civil aviation occurrences that take place in Canada or are under Canadian air traffic control. The TSB operates independently from the aviation regulatory agencies in Canada.
The TSB’s investigative powers are far-reaching. It has the right, for example, to conduct searches, cordon off an accident site, seize evidence and compel witnesses to provide sworn statements. Where the TSB is unable to secure cooperation of persons required to assist it, it may apply to the court for an order requiring compliance. Continued failure to comply could result in a finding that the non-compliant person is in contempt of court.
The Royal Canadian Mounted Police (RCMP) is also authorised to investigate aviation occurrences, but the RCMP’s involvement is usually restricted to situations where there is a concern that the criminal law may have been violated.
What liability regime governs death, injury and loss arising from air accidents?
For domestic carriage, the usual common law principles of contract and tort govern liability. In Quebec, these disputes are governed by the Quebec Civil Code.
In the case of international carriage by air (whether in Quebec or the rest of Canada), the liability regime under the Warsaw Convention (1929), the Montreal Additional Protocol 4 (1975) and the Montreal Convention (1999) applies.
In Thibodeau v Air Canada (2014 SCC 67) the Supreme Court of Canada held that the Warsaw/Montreal liability regime is an exclusive code of liability where that regime applies – meaning that any claim not specifically contemplated under the conventions is not tenable.
What are the reporting requirements for air accidents?
Part 1 of the Canada Transportation Safety Board Regulations (SOR/2014-7) requires that the owner, pilot-in-command and any crew member of an aircraft that is the subject of an accident to make a report to the TSB wherever:
- a person is killed or sustains a serious injury as a result of:
- being on board the aircraft;
- coming into direct contact with any part of the aircraft, including parts that have become detached from the aircraft; or
- being directly exposed to jet blast, rotor down wash or propeller wash;
- the aircraft sustains structural failure or damage that adversely affects its structural strength, performance or flight characteristics and would normally require major repair or replacement of any affected component, except for:
- engine failure or damage, when the damage is limited to the engine, its cowlings or accessories; or
- damage limited to propellers, wing tips, antennae, tires, brakes, fairings or small dents or puncture holes in the aircraft’s skin; or
- the aircraft is missing or inaccessible.
In the case of an incident involving a commercial air service aircraft (or with a maximum take-off weight of 2,250 kilograms or greater), a report must be made if:
- an engine fails or is shut down as a precautionary measure;
- a power train transmission gearbox malfunction occurs;
- smoke is detected or a fire occurs on board;
- difficulties in controlling the aircraft are encountered owing to any aircraft system malfunction, weather phenomena, wake turbulence, uncontrolled vibrations or operations outside the flight envelope;
- the aircraft fails to remain within the intended landing or take-off area, lands with all or part of the landing gear retracted or drags a wing tip, an engine pod or any other part of the aircraft;
- a crew member whose duties are directly related to the safe operation of the aircraft is unable to perform his or her duties as a result of a physical incapacitation which poses a threat to the safety of persons, property or the environment;
- depressurisation of the aircraft occurs that requires an emergency descent;
- a fuel shortage occurs that requires a diversion or requires approach and landing priority at the destination of the aircraft;
- the aircraft is refuelled with the incorrect type of fuel or contaminated fuel;
- a collision, a risk of collision or a loss of separation occurs;
- a crew member declares an emergency or indicates an emergency that requires priority handling by air traffic services or the standing by of emergency response services;
- a slung load is released unintentionally or as a precautionary or emergency measure from the aircraft; or
- any dangerous goods are released in or from the aircraft.
The initial report must be made as soon as possible and by the quickest means available. The full report must be delivered as soon as the information is available within 30 days of the incident.
What rules govern the ownership of airports (both public and private)?
The 26 most used airports in Canada – mostly in the national and provincial or territorial capitals – are members of the National Airports System (NAS). Together they service 94% of the scheduled passenger and cargo traffic in Canada.
The federal government began divesting itself of these facilities in 1994 and now each of these aerodromes is operated by a local airport authority managed by a not-for-profit board of directors (many of which are government appointees), which is intended to be self-sustaining.
The federal government has retained ownership of the underlying land at the airports and has entered into long-term ground leases with each NAS airport. The ground lease rates (which are often pegged at a percentage of airport revenue) have been a matter of significant controversy, with some commentators claiming that lease payments may be as high as 30% of operating budgets.
As the original terms on the ground leases approach their expiry date, there has been increased public discourse on fully privatising the NAS’s operations. Some of the available options were most recently discussed a 2016 review of transportation in Canada entitled “Pathways: Connecting Canada's Transportation System to the World”.
What is the authorisation procedure for the operation of airports?
Certification of an airport in Canada is governed by Part III of the Canadian Aviation Regulations (SOR/96-433). The Transport Canada standards are listed in TP 312 – Aerodrome Standards and Recommended Practices. Certification is required only when:
- the aerodrome is located within the built-up area of a city or town;
- the aerodrome is by an air carrier as a main operations base or for scheduled passenger-carrying service; or
- the minister considers certification is in the public interest.
In order to obtain certification as an airport, the applicant must submit an airport operations manual to the minister of transport for approval. The airport operations manual must demonstrate that the proposed airport meets “the applicable standards and recommended practices publications… and satisfies an conditions specified by the ‘[minister of transport]”.
Once certified, the particulars of the aerodrome are published in:
- Canada Air Pilot;
- Canada Flight Supplement;
- Water Aerodrome Supplement; or
- AIP Canada.
What ongoing operating requirements apply (including obligations relating to safety, security and facilities maintenance)?
Airports in Canada are subject to regulation under the Aeronautics Act (RSC 1985, c A-2) and the regulations thereunder, particularly Part III (Aerodromes, Airports and Heliports) of the Canadian Aviation Regulations. The standards are further detailed in Transport Canada publications, such as TP 312 – Aerodrome Standards and Recommended Practices.
In accordance with Section 302.08(5) of the Canadian Aviation Regulations, certified airports must be operated in accordance with the airport operations manual, as described above.
Finally, the ground leases at airports executed with the federal government provide a significant amount of quasi-regulatory direction to the boards of airports as to the manner in which their operations are to be carried out.
What airport charges apply and how are they regulated?
There are two main airport charges in Canada. The first is the air travellers security charge, which is set by Parliament and its collection is administered by the Canada Revenue Agency (CRA). All carriers operating in Canada must register for the collection of this charge. The CRA conducts audits on a regular basis to ensure compliance.
The second charge that may levied is the airport improvement fee (AIF). The applicability and amount of the AIF is set by each airport in Canada. AIFs are typically implemented to undertake capital projects and to service debt.
In both cases, the amount of the charge is collected by the air carrier and remitted to the CRA or the local airport authority as the case may be.
What regulations govern access to airports?
Domestic carriers holding licences from the Canadian Transportation Agency have access to Canadian airports as of right. The same is also true for foreign carriers, provided that they have bilateral or extra-bilateral authority to access the airport in question.
What regime governs the allocation of airport slots (including slot transfer, revocation and disputes)?
Most of the NAS airports in Canada are not slot controlled. The exceptions are Toronto Pearson (YYZ), Toronto City Centre (YTZ) and Vancouver International (YVR). Both YYZ and YVR are International Air Transport Association (IATA) coordinated (Level 3) for the entire season and therefore:
- participate in the IATA Slot Conference;
- are subject to the IATA Worldwide Slot Guidelines; and
- have appointed a slot coordinator.
Slots at YTZ are overseen by the Toronto Port Authority.
How are ground handling services regulated?
For the most part, there is no specific regulation of ground handling service providers in Canada. However, they are governed by the laws of general application, including the Competition Act (RSC c C-34), as well as the laws of general application to the airport environment.
The agency has previously issued rulings suggesting that accessibility complaints brought by passengers with disabilities relating to difficulty in using airport services do not require the involvement of ground handlers providing those services.
Do any sector-specific competition regulatory/legal provisions apply to the aviation industry in your jurisdiction?
For the most part, there are no sector-specific rules pertaining to the aviation industry in competition law, meaning that the general legislation – the Canada Competition Act (RSC 1985. c C-34) – applies. However. the Canada Transportation Act (SC 1996, c 10) specifically allows the governor in counsel, on the recommendation of the minister of transport and the minister responsible for competition policy, to direct the Canadian Transportation Agency to take steps to stabilise the national transportation system, including the imposition of capacity and pricing restraints. Such steps are explicitly mandated to take precedence over the Competition Act.
Moreover, the Canada Transportation Act specifically provides that in the event of inconsistency between an international agreement (eg, an air services agreement) or convention respecting services to which Canada is a party and the Competition Act, the agreement or convention will prevail to the extent of the inconsistency or conflict.
Code sharing and joint ventures
What (if any) competition concerns arise in relation to code sharing and air carrier joint ventures?
In Canada, the Competition Bureau does not grant antitrust immunity. Section 45 of the Competition Act makes it a criminal offence for competitors to conspire, agree or arrange to fix prices, among other manipulations of the market for a product or service. In general, an investigation under the criminal provisions of the Competition Act requires evidence of an agreement that is likely to harm competition without any pro-competitive benefits.
At a more general level, according to the Canadian Competition Bureau's Competitor Collaboration Guidelines (2009), in general, the bureau or commissioner will not challenge an agreement under Section 90.1 where the market share held by the parties to the agreement is less than 35%. Beyond this, Section 90.1 provides explicitly for an efficiency exception: a framework where efficiency gains likely to be brought about by an agreement are considered against the anti-competitive effects that are likely to result from the agreement.
The Competition Act also contains a provision that allows the Competition Bureau to review a collaboration between competitors that does not rise to the level of a criminal offence.
What rules govern state aid in the aviation industry? Do any exemptions apply?
There are no specific rules pertaining state aid in the aviation industry in Canada. However, state aid is provided on an ad hoc basis to industry participants. For example, in 2017 Bombardier was the recipient of C$3 billion in federal, provincial and local subsidies. This caused the Brazilian government to request that the World Trade Organisation establish a dispute settlement panel to address the issue.
Have there been any notable recent cases or rulings involving competition in the aviation industry?
There are a number of ongoing class actions relating to the application of fuel surcharges which are founded on alleged violations of the Competition Act but, while some of the defendant air carriers have reached settlements, the majority of the defendants continue to await a certification hearing.
What aviation-related disputes typically arise in your jurisdiction and how are they usually resolved?
Typically, most aviation-related disputes are heard through the courts of the various provinces in Canada. More significant matters are addressed in the superior courts of each province, with some variation in the rules of practice in each jurisdiction. Modest claims by passengers are often brought in small claims courts. Depending on the province, the maximum recovery in this forum ranges from C$10,000 and C$25,000. Not all provinces permit legal representation in small claims courts (although most do).
Passenger complaints relating to delay of passengers or baggage can also be dealt with by the Canadian Transportation Agency. However, the agency’s role is to ensure that the air carrier in question correctly applied its tariff. The agency has no authority to award damages for pain and suffering or mental distress.
Similarly, accessibility issues for disabled passengers are also handled by the agency. The agency has the authority to, among other things, require an air carrier to amend its tariff where its procedures amount to the imposition of an undue obstacle to the mobility of a person with a disability.