Order No. 2016-A-198

BACKGROUND

Hong Kong Airlines Limited (applicant) has applied to the Canadian Transportation Agency (Agency) for an exemption to permit it to sell, cause to be sold or publicly offer for sale in Canada a scheduled international service between Hong Kong and Canada, in the absence of a licence.

Section 59 of the CTA states that no person shall sell, cause to be sold or publicly offer for sale in Canada an air service unless, if required under Part II of the CTA, a person holds a licence issued under that Part in respect of that service and that licence is not suspended.

The applicant has applied for a scheduled international licence to operate a service between Hong Kong and Canada. However, as the application is not yet complete, an exemption from the application of section 59 of the CTA has been requested.

The applicant indicates that it intends to commence commercial activities in Canada on June 30, 2017 and that it is in the process of obtaining a Canadian aviation document (CAD) from Transport Canada, which is required to complete the licence application.

The applicant states that passengers on long-haul international flights usually make reservations months in advance prior to departure and that the exemption is necessary to assist it in securing bookings in advance of the launch to make this new route economically successful.

ANALYSIS

The Agency deals with applications for exemptions from the application of section 59 of the CTA on a case by case basis. The Agency recognizes that section 59 is a consumer protection measure. It is intended to prevent situations in which consumers in Canada pay for a service to an entity that does not hold an Agency licence and are left out of pocket or experience any manner of inconvenience or hardship that may result if that entity does not commence operations on schedule.

Accordingly, the Agency, prior to granting an exemption from the application of section 59 of the CTA, must be satisfied that the applicant is taking all the necessary steps to meet all licence issuance requirements and that the applicant has demonstrated a high probability of obtaining the required licence prior to the proposed start of operations.

A foreign applicant for a scheduled international licence must establish that it:

1. has been designated by the government of its state or an agent of that government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada;
2. holds, in respect of the air service, a document issued by its government or agent that, in respect of the service to be provided under the document, is equivalent to a scheduled international licence;
3. has the prescribed liability insurance coverage in respect of the service to be provided under the licence; and,
4. holds a CAD.

The applicant has been designated by the Secretary for Transport and Housing of the Government of Hong Kong to operate an air service under the terms of the Agreement between the government of Canada and the government of Hong Kong concerning Air Services signed on June 24, 1988.

The applicant holds a document issued by its government that is equivalent to a scheduled international licence and has the prescribed liability insurance coverage.

The Agency notes that Transport Canada advises that it expects that the applicant will be issued a CAD in time for the proposed start-up date.

Accordingly, the Agency is satisfied that there is a high probability that the licence will issue prior to the intended start-up date on June 30, 2017.

In the present circumstances, considering the intent of section 59 of the CTA and the fact that the applicant is taking all the necessary steps to meet all licensing issuance requirements, the Agency finds that compliance by the applicant with section 59 of the CTA is unnecessary.

Accordingly, the Agency, pursuant to paragraph 80(1)(c) of the CTA, exempts the applicant from the application of section 59 of the CTA, effective from the date of this Order, permitting it to sell, cause to be sold or publicly offer for sale in Canada, a scheduled international service between Hong Kong and Canada, without holding the required licence, subject to the following conditions:

1. All advertising in any media, whether written, electronic or telecommunications, shall include a statement that the air service is subject to government approval, unless and until the section 59 exemption expires following the issuance of a licence. All prospective passengers shall be made aware, before a reservation is made or a ticket issued, that the air service is subject to government approval;
2. The applicant shall apply its published tariffs, on file with the Agency and in effect, to sales of transportation for each scheduled point;
3. This exemption does not relieve the applicant from the requirement to hold a licence in respect of the service to be provided and, accordingly, no flights shall be operated until the appropriate licence authority has been granted; and,
4. Should the licence not be issued or not issue by the time an air service sold to a passenger is to be used, the applicant shall arrange to provide alternative air transportation by an appropriately licensed air carrier, at no additional cost for all passengers who have made reservations with the applicant. If such arrangements are not possible or acceptable to the passenger, the applicant shall arrange to provide a full refund of all monies paid by the passenger.