International Trade Committee on Feb. 2nd, 2015

[Marc Rioux]

None of the major carriers has been purchased by foreign carriers or foreign companies or foreign investors. However, there are hundreds and hundreds of smaller operators, and I wouldn't know whether some have received additional investments from foreign entities. Certainly for the major carriers, there's been no takeover or anything like that.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I guess you're saying the effect has been too small to affect the decision of Canadian companies, or there has been very little effect.

[Marc Rioux]

At this point, the limit is still 25% because even though the act was amended, regulations have to be put in place, and those regulations have not yet been put in place. So we're still at a 25% ownership limit, however, many of our large carriers have adopted what is known as a variable voting scheme, which allows foreign investors to invest almost without limit into a Canadian carrier. But at the time of voting, those shares are brought to the limit of 25% of voting interests. This has helped some of our major carriers to access more capital, and has helped them to grow. Air Canada has adopted it. WestJet and many of the big carriers have variable voting schemes.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

That's really interesting. I wasn't aware of that.

Do you know if there's a timeline on when the regulations will come into place to raise the cap to 49%?

[Marc Rioux]

I don't have an answer to that question.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I know that the blue sky policy states that air liberalization initiatives will continue to be guided by safety and security considerations. That's very important. Could you talk more precisely about the way in which ATAs take safety and security considerations into account?

[Marc Rioux]

Sure. Those considerations are paramount. If we take safety, for instance, every foreign carrier has to be certified by Transport Canada. We make sure in that process that they meet our safety requirements in order to be allowed to fly in Canadian airspace. If a foreign carrier wants to come to Canada for the first time, it will have to go through a process that Transport Canada is responsible for, which may include base inspections and various things like that, before it can get its air operator certificate. That's on the safety side.

On the security side, Transport Canada also ensures that the foreign carrier meets our security requirements. There is also a process in place to assess that, which may include base inspections. Transport Canada officials, security inspectors, would go into the other country to inspect the base to make sure they meet our requirements.

[The Chair, Conservative, Randy Hoback]

Thank you.

I'll go to Ms. Grewal.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you, Chair.

Thank you very much for coming to speak to us today, Mr. Christie and Mr. Rioux. Your testimony has helped our committee deepen our understanding of the effects of the global markets action plan in promoting economic development internally and abroad.

The GMAP also allows Canada to engage in economic diplomacy where Canadian companies and families can benefit from access to new emerging markets. While these markets continue to develop and strengthen through the partnership air transport agreements, ATAs, the blue sky policy helps to support this plan. It allows Canadian airlines and airports to grow and compete with the international community.

Our government has imposed sanctions on Russia and has removed Russia as a priority market in the GMAP. Has this affected our air transport agreement with Russia in any way? Could you please elaborate on that?

[Marc Rioux]

We do have an ATA with Russia; however, no Canadian carrier is flying their own services direct to Russia at this point. Until recently there were only two Russian carriers flying on a scheduled basis to Canada. One of them pulled out of the market last fall, and the other flies only once a week. There are not a lot of flights between both territories under the ATA.

That's the situation right now with that country.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Mr. Christie, do you have anything to add?

[Bruce Christie]

No, I have nothing to add to that.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

All right.

How does Canada establish air transport agreements with priority markets? Is Canada initiating these agreements and dictating the terms of the agreements?

[Bruce Christie]

We wouldn't be dictating the terms of an agreement. Basically, if it's our interest to consider expanding an air agreement with another country, we'll approach that country. By that time, we've already heard from our stakeholders, through our consultative process, that they're interested in expanding in that particular market. We'll then approach the other government, either directly through our contacts or through our embassy or mission abroad, to express Canada's interest and willingness to start a dialogue to discuss how we can expand our agreement to the mutual benefit of both parties. Sometimes that process works in reverse, of course.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

I see.

How do Canadian airlines and airports interact with their counterparts in nations that have signed bilateral airport agreements? Do Canada's aviation industries and airlines provide any assistance or any guidance to help their counterparts develop?

[Bruce Christie]

As I mentioned to you, the way the process works is that we receive advice from our airlines, for example, or airports in terms of their priority markets. Once we have an expanded air agreement, then the legal framework is put in place, which we implement and bring into law as a treaty.

I should mention that during negotiations with another government, the airlines, and now airports, participate as observers. Their role is to provide me, as the chief negotiator, with technical support and advice in terms of their interests and to deal with any other technical questions that come up during the negotiation. After the agreement comes into force, our domestic airline initiates contact with their partner airline. They would have to apply for their licences and they would have to work out whatever alliances or joint ventures they want to do to work together as partners, either through co-chairing or through more sophisticated partnering. At that point it becomes two commercial entities negotiating with each other.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

It has been almost eight years now since the blue sky policy was implemented. Has this policy met expectations? Is there anything that needs to be revised?

[Marc Rioux]

The internal analysis done by Transport Canada showed that the policy remains relevant and its implementation has been efficient and effective. For instance, it is calculated that negotiating with another country costs the government around $35,000 on average. That includes the preparation time, travel costs, and so on. When you compare that amount of money to the economic benefits that can flow to the economy from additional services, the analysis, I think, demonstrates that it is good value for money.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Mr. Chair, do I have some more time left?

[The Chair, Conservative, Randy Hoback]

You've used up your time.

I'll go to Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you, witnesses, for being here.

Mr. Christie, I want to pick up on one of the comments you made earlier when you were talking about South Korea and the trade deal. One of the news releases from the Halifax international airport talked about several carriers exporting lobster. Korean Air Cargo was one of them, with each flight carrying between 40 and 50 tonnes of lobster, the largest shipment of which, on December 21, was going to be 100 tonnes. I just wanted to understand. You said the ATA underpins the trade deal. Do they ever collide? Does an ATA ever collide with the trade deal, and how do you deal with that, or are they strictly complementary?

[Bruce Christie]

I would say they're strictly complementary. I can't think of an example where an ATA collided, in terms of Canada's objectives, with a free trade agreement. Again, it's a supporting mechanism. When we look at the amount of cargo representing Canada's exports, for example, I think 30% of Canada's merchandise trade to non-NAFTA markets is through aircraft, so it plays an incredibly important role in terms of expanding our trade. But, no, they work in tandem. They're complementary.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay. You took me to my second question when you talked about 30% of the merchandise exports to non-NAFTA markets, that being up from 27% in 2007 to 30% in 2012. Do we have any more recent numbers from 2012 to 2014? Is 27% to 30% a big number or should I expect to see that grow exponentially in the next number of years?

[Bruce Christie]

The answer to your first question is that I don't know if we have more updated information, but we'll certainly look into that for you.

In terms of the trajectory of that growth, it's difficult to predict how that would grow. As you know, with some of these trade agreements, the tariffs are actually phased out over a given period of time. But ultimately, I think with some of the larger agreements the government has recently negotiated with the European Union and Korea, for example, and looking ahead down the road at the Trans-Pacific Partnership, I think you would see that statistic grow at a higher pace once those agreements come into force.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay, thank you.

I want to go back to the point where we talked about air rights and air services. I'd just like a clarification.

What have we seen? If the aircraft companies are not taking advantage of all the rights that might be available to them at this point in time, do we see that historically their use of these has grown, or do we see an ebb and flow of these agreements and sometimes they take advantage of them and then maybe the next year they don't? Do we see a trend? What are our historical numbers that indicate that these open rights eventually get gobbled up?