Less than two years after its launch, Canada's restrictive policy for dual designation of Canadian carriers on international routes is under serious attack. Air Canada and a coalition of charter carriers have intensified their campaign for a more open designation system, leading some officials to predict that the policy could crumble by year end.
Ottawa once divided the world into separate markets to avoid all competition between Air Canada and Canadian Pacific (now Canadian Airlines International). By the mid-1980s it allowed them to swap routes, but it still enforced a single designation policy. Last year, the transport minister first announced dual designation to countries where the incumbent Canadian carrier's annual traffic exceeded 300,000 passengers. 'This was a solid step forward,' says Ross MacCormack, Air Canada's vice president for corporate strategy, 'but it doesn't go far enough and it's applied far too rigidly.'
The policy attracts a series of complaints. First, the 300,000 passenger threshold only counts people travelling on scheduled flights. Traffic to Mexico is twice that, but over half the passengers fly charters. Hence, Ottawa allows one scheduled Canadian carrier to Mexico, Italy, and several other countries.
Second, the threshold applies to countries, not city pairs. Thus, Air Canada is the only Canadian carrier that can operate Montreal-Paris. Even though this is one of Canada's busiest transatlantic routes, no other Canadian carrier can serve it because Canadian Airlines elects to serve Paris from other Canadian gateways. Yet, three French airlines fly to Montreal. Yves Dufresne, Air Canada's international affairs director, says: 'We are being out-liberalised by the French government.'
The third complaint is that a maximum of two Canadian airlines are allowed on a country-pair. Yet Canada 3000, Royal Airlines and Air Transat all operate international charters and want scheduled services.
Fourth, critics say the threshold is applied rigidly. The National Transport Agency recently rejected a suggestion to allow both Air Canada and Canadian to fly a new route to Budapest. Because neither airline had previously served Hungary, neither obviously had passed the 300,000 passenger threshold.
Finally, even when the agency designates a second carrier it may restrict its capacity to protect the first. Air Canada is especially vocal about this on the Hong Kong route, where Ottawa has limited it to four weekly frequencies, even though Cathay Pacific has increased Hong Kong-Canada capacity so much that it now offers more than double the seats available on Canadian Airlines.
Proponents of a change say the policy's only purpose is to protect Canadian Airlines from competition. But they also claim members of parliament are concerned about the imbalances it creates at a time when the government is pushing pro-competitive policies in other sectors.
'The bilateral regime is antiquated enough. Why must we superimpose another layer of internal restrictions?' asks Dufresne. Air Canada's requests for more Hong Kong frequencies have spawned meetings with Canada's prime minister, minister of transport, and minister of foreign affairs, according to Dufresne. 'Politicians are starting to realise that Canada has more serious problems than this,' he says. 'It cannot continue this micromanagement of Canadian aviation.'
David Knibb
Source: Airline Business
