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Air carrier operations

Operating authorisation

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.

Financial requirements

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.

Insurance coverage

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.

Safety requirements

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.

Environmental obligations

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.

Routes

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”.

Charter services

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.

Taxes

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.

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