The move follows the government's promise to ensure Air Canada does not abuse the dominant position gained with its takeover of Canadian Airlines. As part of the new laws, the transport agency can order changes if it finds that airline practices are unreasonable or discriminatory. Canada's Competition Bureau also has broad new powers to investigate predation or abuse of dominance and to issue cease and desist orders.
Air Canada argues that lawmakers may have overreacted, but some rivals wonder just how effective these new laws will actually be.
On the controversial law that prevents any shareholder from owning more than 10% of Air Canada's voting shares - the rule that ultimately trumped the Onex takeover bid - Colletette admits that the government only could raise the level to 15%. Air Canada threatened to walk away from the deal and leave Canadian stranded if the stake percentage was raised higher, Collenette recalls. "Air Canada told us this was a deal-breaker," he says. "We were not in a position to call their bluff."
Robert Milton, Air Canada's chief executive, admits that service standards have slipped during Air Canada's integration of Canadian. Three days after the appointment of the new complaints commissioner, Milton apologised publicly and unveiled new service-related initiatives, including the addition of 2,000 employees.
Meanwhile, John Baker, Air Canada's general counsel, told a Montreal aviation law conference that he felt the new legislation "had gone too far too quickly". He cited a new rule allowing the transport agency to decide if fares to small communities are unreasonable. If it finds they are, the agency can order a rollback or refund, or require an airline to offer more seats at a given fare. This, Baker complains, illustrates "a drive to regulate with Air Canada as the target".
Angus Kinnear, chief executive of Canada 3000, takes a different tack. At the same conference he argued that, rather than pass new laws, it would be more effective to limit Air Canada and its alliance partners to no more than 65% of the slots at any airport during any operating period. "Unless slots are available," Kinnear warns, "there can be no competition."
Source: Airline Business
