Bill C-49, An act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts has now been passed by the House of Commons and the Senate and received Royal Assent on May 23, 2018. This legislation makes significant changes to the regulation of air travel and airlines in Canada with regard to the Canada Transportation Act (“CTA”) and the Canadian Transportation Agency (“Agency”).

Foreign Ownership Restrictions Eased

Under section 61 of the CTA, one of the requirements for the issuance by the Agency of a licence to operate a domestic air transportation service is that the applicant must be “Canadian.” Section 55(1) of the CTA previously defined the term “Canadian” as a Canadian citizen, a permanent resident, a government in Canada, or a corporation or entity controlled in fact by Canadians and of which at least 75% of the voting interests are owned and controlled by Canadians.

On November 3, 2016, Minister of Transport Marc Garneau signalled his intention to update these rules to ease foreign ownership restrictions when he announced exemptions to the ownership requirements for Canada Jetlines Ltd. and Enerjet, two new airlines planning domestic and international services.

With the adoption of bill C-49, the terms of these exemptions have now become law and the CTA’s foreign ownership cap has passed from 25% to 49%. That said, a single foreign corporation or entity can only own up to 25% of the voting interests, and any number of foreign airlines may together own a total of 25% of the voting interests of a “Canadian” airline. In addition, bill C-49 does not modify the CTA’s requirement that notwithstanding any foreign participation, a “Canadian” entity must be “controlled in fact” by Canadians.

Passenger Rights Regulations

With the adoption of bill C-49, the CTA requires that the Agency make regulations establishing a new airline passenger rights regime. The regulations will govern flights to, from and within Canada, including connecting flights, and will specify the requirements governing a carrier’s obligations in the case of flight delay, cancellation or denial of boarding, as well as minimum standards of treatment, compensation and assistance in completing the planned itinerary. The regulations will prescribe an air carrier’s obligation to make available in plain language its terms and conditions of carriage as well as any recourse available to passengers utilizing its services. In addition, the regulations will prescribe minimum compensation for lost or damaged baggage, obligations with respect to delays over three hours where an aircraft is on the tarmac, and a carrier’s obligation to seat young children near a parent, guardian or tutor. The Minister of Transport is also authorized to order the Agency to make regulations respecting any of a carrier’s other obligations towards passengers.

Voluntary Review of Air Transportation Arrangements

Bill C-49 modifies the CTA to include a voluntary review process for air transportation “arrangements,” defined as any arrangement or agreement whereby airlines coordinate with respect to the operation or marketing of services. Parties may submit such arrangements to the Minister of Transport and the Commissioner of Competition under a process that applies to transactions that are caught neither by the mandatory merger regime of the CTA, nor the mandatory reporting requirements of the Competition Act (“CA”). Once an arrangement is reported, the Minister of Transport will review in order to determine whether the arrangement raises significant considerations with respect to the public interest, and the Commissioner of Competition will report to the Minister and the parties any concerns regarding potential prevention or lessening of competition that may occur as a result of the proposed arrangement. If in either case the response is affirmative, further review is necessary, submissions may be made, and a final decision is made by the Minister. Significantly, although this process is voluntary, a negative decision by the Minister will have the effect of prohibiting the arrangement. The process set out by bill C-49 will thus have disadvantages, but also advantages: a favorable decision under the voluntary review regime with have the effect of exempting parties from certain provisions of the CA. Indeed, bill C-49 amends that act to exempt arrangements that have been approved under the CTA’s voluntary regime from CA provisions including cartel conspiracy; bid rigging; agreements and joint ventures between competitors; and mergers.