What We Heard: Summary Of Input Received On The Modernization Of Air Transportation Regulations

Executive summary

The Canadian Transportation Agency (CTA) launched its Regulatory Modernization Initiative (RMI) to seek the advice of stakeholders, experts and Canadians in general on updating and improving the regulations it administers to ensure that they keep pace with changes in business models, user expectations and best practices in the regulatory field.

This report provides a summary of the submissions and advice received on the second phase of the RMI consultations – which was focused on elements of the Air Transportation Regulations (ATR)– between December 2016 and October 2017. Fifteen formal written submissions were received and twelve bilateral meetings were held. 

The comments, suggestions, ideas and proposals are summarized in this report in eight categories: charters and advance payment protection (APP); code-sharing and wet-leasing; air insurance; new business models and industry tools; excluded services; Canadian ownership and control; monitoring, compliance and enforcement; and CTA guides and tools.   

The consultations indicate that:

• There is wide support for simplifying and modernizing the ATR.  
• Amendments to the ATR should be responsive to the evolution of the business practices and avoid the imposition of onerous administrative burdens.
• There is wide support for eliminating, modernizing and streamlining regulatory requirements related to charter provisions.
• Some industry and consumer groups believe that the advance payment protection (APP) requirements found in the ATR should be eliminated, while others believe APP should be maintained.
• Most stakeholders support distinguishing code-sharing and wet-leasing activities in the ATR, although one stakeholder was concerned that unduly rigid definitions could hinder flexibility.
• For the most part, stakeholders support simplification of the approval requirements for code-sharing and wet-leasing.
• Industry voiced concerns regarding increasing the minimum passenger and public liability insurance coverage minimums. 
• Industry also voiced concerns with moving to a passenger liability insurance coverage requirement that is calculated on a per passenger basis.
• The majority of stakeholders were supportive of a change to the liability insurance exclusions.
• There is wide support for modernizing the annual insurance filing requirement process.
• Stakeholders were supportive of additions to the list of excluded services found in the ATR.

Background

Canada’s national transportation policy is contained in the Canada Transportation Act and declares that "a competitive, economic and efficient national transportation system that meets the highest practicable safety and security standards and contributes to a sustainable environment and makes the best use of all modes of transportation at the lowest total cost is essential to serve the needs of its users, advance the well-being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada."

In the area of air transportation, the CTA's wide-ranging responsibilities include:

• issuing licences to operate publicly available air services;
• administering an international charter regime, including permits and flight notifications;
• authorizing the use of aircraft and crew of other carriers;
• administering an air tariff regime and reviewing air carrier tariffs for clarity, reasonableness and no undue discrimination;
• participating in bilateral air transport agreement negotiations;
• regulating air price advertising;
• inspecting air carriers and facilities;
• facilitating and adjudicating certain air-related complaints; and,
• performing an oversight role to ensure compliance by industry with respect to matters such as air fares, rates and charges, terms and conditions of carriage, code-sharing, wet-leasing and charters.

The ATR were published over 25 years ago pursuant to the National Transportation Act, 1987 (which was replaced in 1996 by the Canada Transportation Act). The ATR are in need of updates to reflect changes in the domestic and international aviation sectors, remove unnecessary regulatory burdens, and foster a competitive and efficient industry.

The CTA launched the RMI in May 2016 with four consultation phases and with the goal of modernizing all regulations administered by the CTA in order to keep pace with changes in business models, user expectations and best practices in the regulatory field. Consultations on the ATR were the RMI's second consultation phase.

Consultative process

In December 2016, the CTA issued a discussion paper that focused on key issues related to charters and APP, licensing, and compliance, monitoring and enforcement.

In September 2017, to further support the discussion, the CTA provided stakeholders and the public with three additional discussion papers. The purpose of these discussion papers was to outline in greater detail options that the CTA may consider with respect to the provisions found in the ATR. 

At the conclusion of consultations in October 2017, the CTA had received 15 formal written submissions and held 12 bilateral meetings with stakeholders. The comments, suggestions, ideas and proposals from stakeholders are summarized in the "What we heard" section of this report. In some cases, input received has been merged to avoid duplication. In other cases, if there were no submissions, a topic included in the discussion paper is not included in this summary.

What we heard

Charters and advance payment protection

The ATR include provisions regarding chartered and scheduled air services. Charter provisions represent a considerable portion of the ATR and have not been significantly updated since 1996. Since this time, industry practices have continued to evolve, including a notable shift from charters to scheduled services.

General Comments

Industry stakeholders

• A simplified, modernized approach to the charters requirements found in the ATR that would protect bilateral agreements is encouraged.
• Future regulations should be flexible enough to promote and accommodate the evolution of the industry without imposing an onerous administrative burden.
• There should be a clear distinction between scheduled and non-scheduled services as scheduled services are subject to rules found in international agreements and national law, whereas non-scheduled services are not.
• Time restrictions should be imposed on non-scheduled services to limit the operation of a scheduled service disguised as a non-scheduled service.

Consumer groups

• The existing regulatory regime is adequate for oversight of non-scheduled services.

Canadian originating charters

Number of Canadian originating charter types

Part I of the ATR defines eight different types of Canadian-originating charters. Some of these types are no longer used. Others appear to be out of sync with today's modern aviation industry.

Two potential ways of consolidating the charter types were identified, which attempt to group the associated regulations in a way that reflects broad industry practice and passenger and consumer expectations. One approach presents a distinction between charter types based on whether the charter could be resold to the public for the transportation of passengers and includes a category for goods charters. The other proposes to maintain two categories of charters (one for passengers and one for goods).

Industry stakeholders

• A reduction in the number of charter categories is supported.
• Replacing the existing Canadian-originating charter categories into passenger and goods charters would be beneficial.
• Charter types should be eliminated altogether due to the ever-evolving aviation industry. Another argued that the distinction between charter types based on whether the charter is for resaleable or non-resaleable passenger transportation or goods transportation should be maintained.
• A distinction between resaleable and non-resaleable charter types would insulate small carriers from the requirement to provide a financial guarantee for funds that are rarely at risk.

Charter Requirements

Certain types of charter provisions found in the ATR were established to strictly regulate competition between international scheduled services provided by Canadian air carriers and charterers. Currently, these provisions include elements such as minimum advance booking, tour packages, maximum number of points served, minimum stay, minimum price per seat and prohibition of one-way travel. In recent years, the international air transportation industry has evolved to a more liberalized environment, providing for a greater variety and number of services in the marketplace.

In light of this gradual industry evolution and to reduce the administrative burden, certain regulatory provisions related to licensing requirements, conditions relating to the nature of the charter activities, and requirements related to the size of the aircraft could be amended or eliminated.

Industry stakeholders

• Eliminating, modernizing and streamlining regulatory requirements, while maintaining the obligation to have a certain licensing authority in place is supported.
• Non-scheduled services should be provided pursuant to the air carrier's non-scheduled licence and should not be listed in any timetable of the air carrier.
• Granting exemptions to the 100% charter capacity requirement in the event that there are no direct designated air services in the bilateral market in question is recommended.
• It is unclear why the aircraft size should be a trigger to obtain a charter program permit; however, there is some support for the retention of this trigger.

Foreign-originating charters

The current regulatory requirements for foreign-originating charters were established to create a regime in which the country-of-origin rules for charter traffic can be routinely accepted, consistent with international agreements and the CTA's jurisdiction.

Other regulatory requirements were established to steer the non-discretionary traveller to use scheduled services. In today's liberalized market, these regulatory constraints appear to no longer respond to the needs of the travelling public.

Industry stakeholders

• Streamlining foreign-originating charters requirements is supported.
• There is regulatory disharmony on an international level in foreign-originating charter processes, which leads to an undue administrative burden and operational constraints.
• Any streamlining must allow the CTA to ensure that a program of foreign-originating charters is not created to circumvent the requirements of a scheduled licence.
• There is a need to revise and even eliminate regulatory requirements that create unnecessary regulatory constraints, such as minimum advance booking before each flight, the obligation for passengers to purchase return transportation, and a minimum period of stay in a foreign country prior to return. 

Advance payment protection

Air carriers who operate resalable passenger Canadian-originating charters are required to protect advance payments they receive from charterers/tour operators.

Over the past 15 years, the consumer protection value of APP has been significantly eroded and the need to maintain this regulatory requirement is being reviewed.

Industry stakeholders

• Industry generally agrees that APP is not needed, especially when air carriers meet liquidity and cash flow thresholds and passengers are already covered by travel consumer financial protection rules. However, it is also argued that APP should be maintained for consumer protection purposes, that it represents the normal cost of doing business, and that keeping APP has little downsides.
• APP should be maintained when passengers are not covered by credit card protection or travel consumer financial protection rules.
• There is already sufficient consumer protection available in some provinces, and APP is not necessary and carries an unnecessary administrative burden.

Consumer groups

• It is time to eliminate APP, as the majority of bookings are completed through credit cards (with embedded protection for passengers), and a number of provinces have travel industry protection in place.
• Eliminating APP puts the consumer at risk of losing their money if the charterer cannot or does not find replacement air services.
• Eliminating APP could impact provincial industry compensation funds as a result of an increase in claims, and this risk transfer may lead to increased fund exposure with no offsetting relief.

Experts

• APP is an outmoded and under-utilized regulatory burden that should be eliminated.
• The majority of consumers now make bookings, even on charters, through their credit cards, which afford a significant level of protection and the vast majority of Canadian consumers book through the three provinces that have travel industry protection in place.
• At no time was real protection afforded by this regime, and there were very few claims under the system, even after major airline failures.

Permit and notification filings

Replacing the existing requirements for the application for and receipt of a charter permit in the ATR with an advance notification to the CTA within 48 hours of each flight would retain the flow of information for regulatory oversight and monitoring, while reducing the administrative burden of a charter permit issuance process.

Industry stakeholders

• The 48-hour advance notification is a realistic timeframe, although a 72-hour timeframe is also recommended.
• Allowing for notification will depend on whether there is a need for such review, which could be political or security-related.

Provision of aircraft with flight crew

General comments

Industry stakeholders

• Code-share carriers should not require an Air Operators Certificate (AOC) as part of the licensing requirements, but instead should receive a "code-share approval." This approval could have similar ATR licensing conditions, but would include the prohibition to sell services without a licence or code-share approval.
• Code-share carriers should be required to ensure that code-share operators are safe, insurance is available, financial fitness is sufficient, traffic rights and foreign ownership requirements are complied with, and there is public disclosure of the name of the operator.
• Similar to regimes in the United States, the framework for code-share arrangements should apply to wet-lease arrangements.
• Dry-lease aircraft should be restricted as they are circumventing the Wet-Lease Policy.
• Wet-lease applications should not form the basis of an airline's business model.

Consumer groups

• There should be a code-share only licence which does not require both carriers in an arrangement to hold an AOC.
• The 20 percent limit specified in the Wet-Lease Policy should apply to full-time aircraft, to avoid carriers dry-leasing an aircraft to artificially inflate the number of aircraft on their AOC.
• There should be a prohibition on the use of wet-leased foreign aircraft by Canadians during a labour dispute involving a carrier's flight crew.
• Wet-lease applications or notifications of an application should be served on Canadian carriers' flight crew bargaining representatives for comments.
• New regulations should include the International Civil Aviation Organization's work on Article 83 regarding aircraft leasing.

Distinguish code-sharing and wet-leasing

Currently, sections 8.2 to 8.5 of the ATR impose the same requirements on all arrangements under which a licensed air carrier proposes to provide a service by using all or part of an aircraft with flight crew provided by another company.

To make clear the difference between these types of arrangements and to establish distinct requirements between two very different types of arrangements, the definitions currently found in the CTA's application guides, for code-sharing and wet-leasing activities, could be included in the ATR.  

Industry stakeholders

• The definitions for code-share and wet-lease arrangements currently found in the CTA's application guides are consistent with practices in the industry.
• Clear definitions could provide greater certainty through uniformity and transparency, and could facilitate compliance.
• There is a lack of clarity in the industry between code-share, charter, wet-lease and capacity purchase agreements, as various regulators around the world use different terms and have different regulatory requirements for each.
• Including these definitions could also lead to unnecessary rigidity as such operations do not fit within one unique regime and could hinder the flexibility needed for innovative business arrangements.
• Damp-leases, dry-leases and interlining arrangements could also be defined.
• A code share-only license category that does not require or rely on a Canadian Aviation Document being in place is recommended.

Amend approval requirements for code-sharing and wet-leasing

When a licensed air carrier wants to use an aircraft with a flight crew provided by another person, it must apply for approval at least 45 days before the first planned flight. This requirement provides a means to verify that commercial relationships such as code-sharing are consistent with negotiated bilateral agreements.

Amending the ATR to allow for a notification of 5 business days prior to the flight for code-share agreements when bilateral agreements allow for such arrangements, could allow for timelier introduction of new air services and could benefit both air carriers and the traveling public.

For wet-leasing arrangements, reducing the minimum filing time from 45 days to 15 business days prior to the first flight would decrease administrative burden on the air carriers without affecting passengers.

Industry stakeholders

• Granting three-year code-share approvals is unnecessary, especially where open skies agreements exist.
• Considering the ever-evolving code-share markets, it may be more efficient to provide a blanket approval on a country basis rather than a market basis.
• Moving to a notification for code-sharing instead of an approval process, especially where bilateral agreements contain open code-share rights is supported.
• It is recommended that reciprocity in the notification for code-sharing arrangements be addressed.
• To alleviate the regulatory burden, the requirement for a marketing carrier to hold a license in code-share situations be eliminated and replaced with a code share approval. This approval requirement should be waived when liberal bilateral air service agreements are in place.
• Approval for code-share arrangements should be required when the terms of the arrangement go beyond what is in the international agreement.
• There should be a clear distinction between code-share and wet-lease arrangements.
• For wet-leasing arrangements, there was a lack of consensus regarding the 15‑business day filing time. There is some support for a longer period and some support for the simplified approval process as envisioned for code-share arrangements.
• The current wet-lease filing requirement allows a licensee to maximize its quota by timing its application to coincide with the maximum number of dry-leased aircraft on its Air Operator Certificate (AOC), which is an unfair advantage over competing carriers that seek to maximize their year-round fleets.
• Reducing the timelines would align with modern-day commercial realities.

Consumer groups

• Code-sharing arrangement timelines should be reduced to align with modern-day commercial realities.
• The reduction of the 45-day filing time for wet-lease arrangements should be modified to a more reasonable timeline – 7 days or less – instead of 15 days.

Experts

• The regulatory approval process is no longer necessary for code-share arrangements.
• The requirement to obtain a pre-approval for international code-share arrangements should be removed.
• Operating carriers and marketing carriers should not be required to have each other listed as additional insured as a condition of permitting code-sharing and wet-leasing.

Remove the requirement for CTA approval of arrangements with US carriers

The ATR specify that two Canadian licensed air carriers who wish to enter into arrangements for either a domestic service or a service between Canada and the US for the provision of aircraft with flight crew can do so without seeking the approval of the CTA.

Removing the requirement for CTA approval with respect to arrangements for services between Canada and the US when such service is operated by licenced air carriers that are either or both Canadian or US carriers could facilitate the introduction of more competitive air services for Canadian travellers.

Industry stakeholders

• The removal of this requirement when such service is operated by licenced carriers is supported.
• A notification system should be implemented to inform other air carriers when Canadian carriers enter into an agreement with American air carriers.

Air insurance

The ATR specify the minimum amounts for passenger and public liability insurance coverage and the allowed exclusions or waiver provisions that the insurance policy may contain.

Insurance coverage for passengers

Minimum passenger liability coverage

Currently, the minimum amount of passenger liability insurance is CAN$300,000 per passenger seat. This minimum requirement was last updated in 1983.

Amending the ATR to increase the amounts for insurance coverage for passenger liability to an adjusted amount that is not less than the change in the level of inflation from 1983, and to allow for an adjustment to this amount for inflation every 5 years would ensure that Canadians are protected to the same degree as they were when the requirements were established.

Industry stakeholders

• The current air insurance regime is outdated.
• Any increase would increase the cost to the travelling public with no gain in travelling experience.
• Many Canadian carriers are carrying passenger liability coverage in excess of the minimum requirement.
• An increase to approximately CAN$680,000 per passenger seat is excessive and does not align with other jurisdictions.
• Adequate coverage would be in the CAN$300,000-$500,000 range.
• An increase in air insurance amounts should occur over time to avoid a sudden increase in demand for aviation insurance.
• Regular reviews and updates regarding minimum levels of liability is supported.
• The five-year adjustment is reasonable, but does not necessarily ensure appropriateness and adequacy of coverage.
• The increase in passenger liability levels would not have a material impact on larger commercial carriers.
• It should be up to industry to decide on the amount of insurance to be held and it is questioned why government intervention is needed. 

Consumer groups

• One group was not aware of any situation in which insurers’ payments have been inadequate and indicated that large carriers in Canada generally have coverage that far exceeds the current regulatory minimum.
• Any increase in coverage may lead to an increased cost for the travelling public.
• Minimum level amounts should be established through consultations and reviewed every 5 to 10 years for inflation.

Experts

• The present limits are extremely low and there is a need to increase minimum passenger liability coverage.

Alignment with the Montreal Convention

For international travel, limits of liability are subject to the Convention for the Unification of certain Rules for International Carriage by Air (Montreal Convention). The Montreal Convention establishes liability insurance coverage limits for injuries sustained by passengers while on board an aircraft or during embarking or disembarking.

Currently, the ATR are not clear on whether the air carrier is required to hold insurance coverage for injuries sustained by passengers while embarking or disembarking the aircraft.

Industry stakeholders

• Aligning with the Montreal Convention regarding embarkation and disembarkation is supported.
• There is no utility in clarifying the scope of application of the Montreal Convention, as it is well established and settled.
• An alternative could be to require any insurance coverage to cover, as a minimum, the limits of liability set by the Montreal Convention.

Per seat vs. per passenger basis for insurance coverage

The passenger liability insurance coverage requirement is currently based on the number of passenger seats onboard the aircraft.

Amending the ATR from per seat to per passenger coverage would align Canada with comparable jurisdictions and international conventions to which Canada is a signatory.

Industry stakeholders

• This change would impose an undue administrative burden.
• There would be a lack of consistency in coverage per airline.
• Passenger numbers would have to be calculated frequently and constantly.
• Providing coverage on a "per passenger seat basis" is a fair proxy, reasonably accounts for normalized traffic, and is a more stable approach.
• The change of liability amounts on a "per passenger basis" would lower the insurance cost for carriers who do not operate with all of their seats occupied.

Insurance coverage for public liability

Minimum public liability coverage

As with minimum passenger liability insurance coverage, inflation has eroded the amount of the minimum insurance coverage for public liability, as the amount in the ATR has not been updated in over 30 years.

Amending the ATR to increase the amounts for insurance coverage for passenger liability to an adjusted amount that is not less than the change in the level of inflation from 1983, and to allow for an adjustment to this amount for inflation every 5 years would ensure that Canadians are protected to the same degree as they were when the requirements were established.

Industry stakeholders

• Increasing the levels for inflation would be too high.
• An analysis to investigate the average losses should be conducted to establish a sound minimum threshold.
• Any change to the minimum level should be adopted over time to allow the aviation sector and market to adjust.
• A five to ten-year adjustment is reasonable.
• Minimum levels of public liability should be increased to reflect industry practice.
• The increase in public liability levels would not have a material impact on larger commercial carriers, while there could be a minimal impact on carriers who operate small aircraft.

Persons not on board

As written, the ATR provide passengers on board the aircraft a guaranteed minimum amount of insurance coverage per passenger seat, while minimum insurance coverage for public liability is governed by aircraft size. This means that if there is significant damage to physical property or if a large number of persons on the ground are injured or killed, persons on the ground may benefit from little or no insurance coverage.

Amending the ATR in order to provide minimum public liability insurance coverage that includes the same per person coverage for persons onboard and not onboard the aircraft would create consistency in coverage. It would also better align the ATR with US provisions, which require the same amount of insurance coverage for persons on the ground as for passengers on the aircraft.  

Industry stakeholders

• The amendment is supported by some, while others feel that it would be impractical and difficult for an underwriter or corporation to quantify the potential exposure.
• This is a matter that should be considered in light of industry minimum insurance best practices.
• This provision would make insure unaffordable and impact the cost of a fare for an air traveller.

Exclusions

Air carrier employees

The minimum public liability insurance requirements in the ATR cover all persons not on board the aircraft who are injured or killed, except for the air carrier's employees. The rationale behind this exclusion is that employees are entitled to workers' compensation when working within the course of their duties.

Amending the ATR to remove this exclusion would provide public liability insurance coverage to employees who are not acting in the course of their duties.

Industry stakeholders

• Employees not on board the aircraft who are not acting in the course of their employment should be included in an air carrier’s public liability insurance requirements.
• Employees who are not acting in the course of their employment are already covered for public liability in most policies.

Chemical drift

The ATR currently allow an air carrier's liability insurance to exclude chemical drift. Chemical drift can result from aerial spreading or spraying of pesticides from an aircraft, and the ATR do not apply to these types of services.

Industry stakeholders

• The chemical drift exclusion should be removed from the ATR.
• The exclusion should be kept on the basis that only carriers causing chemical drift as part of their business should be obligated to purchase insurance to cover that risk.

Public liability vs third party liability

Certain sections of the ATR refer to "third party liability insurance coverage," whereas other sections refer to "public liability". When referring to the same concept and for the sake of clarity and consistency, the ATR could be amended to adopt one term throughout the ATR.

Industry stakeholders and consumer groups

• Replacing "public liability" with "third party liability" is supported.

Insurance provisions related to aircraft with flight crew arrangements

The ATR require that a licensed air carrier (contracting carrier) who uses the aircraft and crew of another air carrier (operating carrier) to hold liability insurance though its own insurance policy or be named as an additional insured under the operating carrier's policy.

The ATR further require that, where additional insurance is provided, there must be a written agreement that the operating carrier will indemnify or hold harmless the contracting carrier for passenger and public liability. This indemnity provision could transfer to the operating carrier greater financial responsibilities than a standard insurance policy would cover.

In addition, the CTA's guidance material requires that the contracting carrier be named as primary insured and without right of contribution from any other insurance policy that may be held by the contracting carrier. Regulatory language requiring both the additional insured endorsement and a contractual liability agreement would provide more predictability and protection for passengers, minimizing the risk of delays in obtaining compensation.

Industry stakeholders

• The indemnity provisions are part of a separate agreement between operators. It is a business decision that does not relate to insurance and should be removed to simplify the process of insurance filings.
• This is a helpful inclusion in the ATR.
• Amending the ATR to require the additional insurance afforded to the contracting carrier be primary without the right of contribution from any other insurance policy held by the contracting carrier is supported, as this is a standard contract requirement.

Experts

• Eliminate the requirement to name insurance issued by participants in code-share and wet-lease applications, as both participants have separate licences.

Other issues related to insurance

The CTA is examining whether it should combine its certificate of insurance and certificate of endorsement forms. Combining these forms would provide efficiencies without impacting the integrity of the program.

The CTA also asked whether any changes should be made to the above-mentioned forms and to the annual filing requirement process. 

Industry stakeholders

• The certificate of insurance and the certificate of endorsement should be combined.
• The certificate of endorsement is redundant, not necessary, and should not be retained.
• There is no need to make changes to the insurance certificates.
• The following changes to the forms and to the annual filing process are suggested:
  • retain the written confirmation that limits meet or exceed the minimum insurance liability limits;
  • create an online version of the insurance forms and a secure repository to file insurance documentation;
  • eliminate duplicate and redundant insurance verifications; and,
  • provide a simplified and renewed version.
• Any changes should be standardized and be made in consultation with the aviation brokerage community.
• Eliminate duplicative and redundant insurance verifications.

Experts

• The following changes to the forms and to the annual filing process are suggested:
  • eliminate the CTA's unique documentation format;  
  • eliminate the percentage participation from the certificate of insurance;
  • accept that a foreign carrier can be insured for domestic service pertaining to the carrier's country of origin;
  • do not reject certificates where "all" aircrafts are insured with the inclusion of the list of the carrier's fleet; and,
  • remove the naming convention. 

New business models and industry tools

The CTA asked stakeholders for their views on whether the regulations need to be amended to proactively keep pace with changing air service business models.

Industry stakeholders

• New technologies and innovations are being adopted by passengers at a record pace.
• A flexible regulatory regime is encouraged to avoid having to constantly amend the regulations.
• Enforcement efforts should be flexible enough to keep up with information technology advances (e.g. banner advertising).
• Regulations need to be amended to allow for a fair playing field across carriers and that all competitors, travel agents and resellers be subject to the same regulatory requirements.
• Technology and evolving business models have blurred the lines between sellers and providers of air transportation services.
• All entities selling air services should be licenced (including resellers).
• The aviation industry is overregulated and the focus should be on creating and implementing tools to make good transportation even better.

Consumer groups

• Regulations need to be updated to proactively keep pace with changing air service business models, specifically with regards to modernizing airline distribution.

Experts

• The regulations should be updated to reflect ultra-low cost carriers (ULCCs), domestic resellers, fractional ownership and exemptions for parcel services.

Excluded services      

The CTA also asked whether the list of excluded services found in the ATR could be amended to take into account the current aviation sector environment.

 Industry stakeholders

• The list of excluded air services needs to specify all air vehicles (e.g. foreign-owned remotely-operated air vehicles operating in Canada).
• Additional services do not require exclusion.

Experts

• The list of excluded air services should be amended to include lodge operators and helicopter services, as hunting and fishing lodge fees include the movement of clients into and out of the base by air and helicopter operators rely on their contractual documents for their terms and conditions of carriage.

Canadian ownership and control

On November 3, 2016, the Minister of Transport announced that the Government would introduce legislative amendments that would increase the maximum voting interest that may be held by non-Canadians from 25 percent to 49 percent while capping the interest of any single foreign investor at 25 percent. This proposed amendment is included in Bill C-49, the Transportation Modernization Act, which is currently before Parliament.

With the planned increase in foreign ownership thresholds, the CTA requested input on the current approach it takes when undergoing Canadian ownership and control reviews. The CTA also asked for comments on the approaches used by other jurisdictions to determine control in fact, and whether it should make public determinations regarding control in fact.

Industry stakeholders

• The set of criteria and test for control-in-fact should be robust, rigorous and applied in a predictable manner to account for practical realities.
• Transparency in the assessment criteria for stakeholders to provide input is encouraged.
• Review the nationality of pilots, relationship with off-shore equity partners, and particulars of any dry-lease arrangements.
• The Chairman of the Board of Directors of the licensee should be a Canadian citizen.
• The CTA should continue to monitor control-in-fact requirements more closely, with the proposed changes to foreign ownership in Bill C-49.
• All relevant considerations and factors to decide control-in-fact need to be considered on a case-by-case basis.
• The control-in-fact determinations should be made public and that public determinations will increase transparency and clarity, and will set out explicit parameters. However, it was noted that the confidentiality of business secrets, as well as managerial, financial and operational air carrier relationships should be considered before making the determination public.
• It is recommended that the CTA review the interpretation guidelines and methodologies from the European Commission and the United Kingdom's Civil Aviation Authority when assessing the ownership and control requirements.

Consumer groups

• The CTA should create a mechanism by which government bodies can seek and rely on the CTA in applying the Canadian test.

Experts

• Any foreign investor making an investment in a Canadian air operation desires complete control over that operation in order to ensure that their proven business model is created and continued in the Canadian operation, and that they receive the rewards of that experience.
• A level of ownership below 20 percent should not be required to confirm the lack of "de facto" control.

Monitoring, compliance and enforcement

Through a variety of monitoring and compliance tools and activities, the CTA seeks to ensure that air carriers and service providers comply with their obligations.

Input was requested on how the CTA could update its monitoring, compliance, and enforcement regime. The CTA also asked whether its communications, guidance materials and tools support the achievement of ongoing compliance with CTA decisions, determinations and regulatory requirements.

Industry stakeholders

• As with domestic carriers, foreign carriers should be subject to inspections by enforcement officers.
• Moving away from a complaint-based approach to an enforcement-based approach which reviews patterns/systemic problems rather than individual issues is recommended.
• Developing more guidelines and tools to help operators comply with legislative and regulatory requirements.
• Violations should not be so punitive, but should instead be used as a basis to start a dialogue between enforcement officers and operators.
• Oversimplified publicity products should not be created, as the applicable rules lead to confusion and promote minor matters that do not have a systemic cause.
• The CTA should improve the search engine for its decisions.
• The CTA should provide the ability to upload updated compliance filings directly online.

Consumer groups

• The CTA should ensure that policies and regulations within its purview take a more strategic view regarding Canadian Aviation Regulations principles.
• Licence applications should be reviewed with diligence and be provided online.

CTA guides and tools

The CTA also requested comments on its current suite of guides and tools as they relate to the air sector. Specifically, the CTA requested feedback on whether these documents are easy to find, readily accessible, clear, relevant, and provide the necessary information to assist stakeholders.

Consumer groups

• The use of the tools included in the International Air Transport Association's Smarter Regulation is recommended.

Experts

• The CTA website should be made easier to navigate when trying to retrieve CTA guidelines and templates.

Next steps

The CTA appreciates the participation of industry, consumer rights organizations and the general public throughout these consultations. The input received will assist the CTA as it works to modernize the ATR.

Submissions were received on passenger protection matters. Those submissions will be considered in the context of the third phase of the RMI, which will be launched when Bill C-49 receives Royal Assent, assuming it is passed by both houses of Parliament.

The CTA aims to complete consultations and draft modernized regulations for all components of the RMI by the end of 2018 or 2019.