Decision No. 234-A-2004

May 6, 2004

File Nos. M4212-C417-3-1
M4820-2-F3

Corse Air International, doing business as Corsair (hereinafter Corsair), has applied to the Canadian Transportation Agency (hereinafter the Agency) for the approval set out in the title. The application was received on February 27, 2004.

Under Licence No. 975149, Corsair is authorized to operate a scheduled international service between France and Canada in accordance with the Agreement between the Government of Canada and the Government of the French Republic on Air Transport signed on June 15, 1976, as amended (hereinafter the 1976 Agreement).

Condition No. 1 of Licence No. 975149 states:

The Licensee is authorized to operate a scheduled international service on Route 1 of the French Route Schedule of the 1976 Agreement, between Paris, France and Montréal, Quebec/Toronto, Ontario, Canada.

Condition No. 2 of Licence No. 975149 states:

The operation of the scheduled international service authorized herein shall be conducted subject to the provisions of the Agreement and to any arrangements related thereto as may be agreed to between Canada and France.

Corsair is requesting the extra-bilateral authority to serve the point Moncton, New Brunswick, Canada, as service at this point is not provided for in the 1976 Agreement. Under the terms of the Agreement, Corsair is authorized to serve Route 1 which covers the points Montréal and/or Toronto only for own aircraft services. Moncton is therefore not a point that may be served by Corsair.

Due to the extra-bilateral nature of Corsair's requested authority, the Agency, by letter dated March 1, 2004, gave notice of the application to parties that may have an interest, namely Air Canada, Air Transat A.T. Inc., carrying on business as Air Transat (hereinafter Air Transat), and the Greater Moncton Airport Authority Inc. (hereinafter Moncton Airports). Each of these parties filed an intervention in respect of the application. Corsair did not reply to any of these interventions.

ISSUE

The issue to be addressed is whether to authorize Corsair to operate a scheduled international passenger service to and from Moncton.

POSITIONS OF THE PARTIES

Corsair indicates that for the 400th anniversary celebrations of the founding of Acadia during the summer of 2004, the Government of New Brunswick is requesting the operation of a once-weekly service between Moncton and Paris from June to September 2004. Corsair states that the flight is the result of a partnership between the Government of New Brunswick, Moncton Airports, the European Bureau of the Canadian Tourism Commission, the City of Moncton and the City of Dieppe. For these reasons, Corsair has requested that a special permission be granted to it allowing it to operate the proposed flights during the summer season of 2004.

Moncton Airports intervened in support of Corsair's application. It notes that 2004 marks the 400th anniversary of the landing of the first Acadians in this country and New Brunswick will be celebrating this historical event; a large part of the celebrations involves inviting tourists from France. The intervener submits that this event is considered extremely important given the strong ancestral links between the Acadians and the French. According to Moncton Airports, Corsair's proposed air service will meet that need for 2004 and may evolve into something of a more permanent nature as this region and France have much to offer each other.

Moncton Airports adds that despite numerous efforts by it and others to have Canada's national air carrier increase domestic and international services to/from New Brunswick, the Moncton airport has been consistently turned away in favour of larger hub operations.

Air Transat maintains that the application is essentially the result of the highly restrictive nature of the 1976 Agreement, which severely limits the services that may be offered by designated carriers to a small number of points in the other Contracting Party's territory. The intervener submits that efforts have been undertaken recently by the two countries in an attempt to achieve a long overdue modernization of the bilateral air services regime. Unfortunately, the last such initiatives in June and July 2003 were unsuccessful.

Air Transat adds that it recently filed an application with the French aeronautical authorities and the Agency for extra-bilateral authority to operate a weekly scheduled air service between Toronto/Montréal and Toulouse (France) from July 5 to September 7, 2004 (10 flights). Air Transat is therefore exceptionally prepared, in a spirit of reciprocity, to support Corsair's application on the sine qua non condition that the French authorities clearly demonstrate their willingness to approve Air Transat's request. Air Transat states that it would strongly object to the granting of the requested authority should it be made clear in the interim by France that approval of its application was not forthcoming for whatever reason.

Air Canada indicates that the Agency is well aware of the Canadian Government's recent attempts to modernize the 1976 Agreement which can be considered to be antiquated. In fact, of all of Air Canada's major European partners, France remains the only country with whom Canada does not have a relatively liberal agreement.

Air Canada submits that under the provisions of the current 1976 Agreement, Air Canada's own aircraft services to Paris rely primarily on both local and network traffic. If approved, Corsair's proposed extra-bilateral operations to Moncton will adversely impact Air Canada by diverting network traffic from its scheduled services to Corsair's extra-bilateral service. By virtue of its geographic location, Moncton can be viewed as a catchment area for Fredericton, Saint John and Charlottetown, further eroding Air Canada's network traffic from these cities.

Air Canada notes that Air Transat has recently applied for extra-bilateral authority to operate a scheduled service to Toulouse. In essence, Air Transat is trying to convert its already existing charter operation into a scheduled service. In Air Canada's opinion, this represents a marginal value-added for Air Transat and this carrier will not experience a significant gain in passenger demand as this is a market that Air Transat has already developed throughout the years. On the other hand, Corsair is not in the Moncton-Paris market. Should the Agency grant Corsair extra-bilateral access to Moncton, it would provide access to a "new" market for Corsair, at the expense of a Canadian carrier, namely Air Canada.

Air Canada states that while it can appreciate the provincial and regional interests in Corsair's proposed extra-bilateral service to Moncton, it asks the Agency to not lose sight of the issues and its concerns. According to Air Canada, Corsair is free to conduct service to Moncton on a charter basis and, therefore, recommends that the Agency deny the application for extra-bilateral operations.

ANALYSIS AND FINDINGS

The Agency has reviewed and considered the application, the opposing intervention of Air Canada and the interventions filed by Air Transat and Moncton Airports.

Pursuant to subsection 78(2) of the Canada Transportation Act (hereinafter the CTA), the Agency may vary the terms and conditions of a licence on a temporary basis for international air services that are not permitted in an agreement, convention or arrangement to which Canada is a party. Therefore, any authorization granted by the Agency pursuant to subsection 78(2) of the CTA is an exception that goes beyond the rights that countries have negotiated between themselves.

As noted in the pleadings, Corsair's request for extra-bilateral authority is to operate its Paris/Montréal scheduled service via Moncton, a point not provided for in the Canada/France 1976 Agreement. The service would be provided once a week from June 30 to September 2, 2004, for a total of 10 flights.

The Agency notes that Air Transat supports Corsair's application on the condition that the French authorities demonstrate their willingness to approve Air Transat's request for extra-bilateral authority to operate a weekly scheduled air service between Toronto/Montréal and Toulouse from July 5 to September 7, 2004. The Agency does not make decisions contingent on future events; however, the Agency is hopeful that the French Government will give favourable consideration to Air Transat's request.

Air Canada maintains that should Corsair's proposed extra-bilateral operations to Moncton be approved, this would have an adverse impact on Air Canada. That is, network traffic would be diverted from Air Canada's scheduled services to Corsair's extra-bilateral service. The Agency notes that the proposed service by Corsair is directly related to the special 400th anniversary celebrations and is, therefore, incremental traffic that otherwise would not be travelling between France and Canada. Therefore, the Agency is not convinced that the proposed service at Moncton would divert existing traffic from Air Canada's regular services in the Atlantic region.

The 400th anniversary celebrations have been planned for quite some time and, as indicated by Corsair, are the result of an initiative of the Government of New Brunswick to have a direct link between Moncton and Paris. The Agency is of the opinion that this historical event is very important for the tourism industry of the Atlantic region. If Corsair were authorized to serve Moncton, it would provide direct air services between Canada and France, which services would be more convenient to the passengers destined for Moncton. The Agency also notes that neither Air Canada nor Air Transat offered to amend their scheduled air services to accommodate the traffic participating in the 400th anniversary festivities.

Accordingly, the Agency, pursuant to subsection 78(2) of the CTA, hereby varies Condition Nos. 1 and 2 of Licence No. 975149 to the extent necessary to permit Corsair to provide an international scheduled air service on the route Paris/Moncton/Montréal/Paris from June 30 to September 2, 2004.

In all other respects, the service authorized herein shall be operated in accordance with the 1976 Agreement.

The authority granted herein does not exempt Corsair from the requirements of other legislative acts or regulations, including those of Transport Canada.

This Decision shall form part of Licence No. 975149 and shall remain affixed thereto as long as the said Decision is in force.