Mr. Speaker, I am pleased to speak to the hon. member's motion concerning the government's policy framework for the airline restructuring in Canada announced on October 26 by the Minister of Transport.
The motion before us concerns whether the current prohibition on any person or persons holding more than 10% of Air Canada voting shares should be maintained. The government has clearly stated in its policy framework that it is prepared to consider increasing the limit to a new level after input from parliamentarians, if such a measure contributes to achieving a healthy Canadian controlled airline industry. In this context it articulated a number of key elements in its policy framework, including the desire to foster as much competition as possible in the airline industry in Canada.
This framework also clarifies the government's intention to review Canadian international air policy in a new Canadian airline environment.
A revised international air policy is a critical element of the new policy framework for airline restructuring. International air services account for more than 50% of the revenues of Canada's two major airlines, Air Canada and Canadian Airlines International.
These services are even more important to Canadian's largest charter carriers: Air Transat, Canada 3000, Royal Aviation and Sky Service. These carriers operate extensive passenger charter services both domestically and throughout the world. In his policy framework announcement the minister clearly stated that the government would revise its policies for international scheduled and charter air services with a view to removing unnecessary restrictions on air services.
I am sure members would all agree that such a commitment is clearly warranted now that the industry structure appears to be changing. Canada's international charter policies, for example, were developed in 1978. One of its primary objectives was to allow charter carriers to compete effectively with scheduled carriers like Air Canada and Canadian Airlines for international leisure passengers.
The objective has been implemented through regulations administered by the Canadian Transportation Agency and effected through a series of charter fences such as pre-booking and minimum stay requirements. Therefore a policy approach that protects parts of the market for scheduled services from charter competition was deemed to be in the public interest.
In an environment where Canada might be faced with one dominant Canadian scheduled carrier operating both domestic and international air services, the minister has clearly signalled that the current degree of protection for scheduled air carriers from charter service competition on international routes will be reviewed.
The minister has also indicated that the government intends to review its international scheduled air policy. This is the policy framework by which the Minister of Transport exercises his authority to assign to specific Canadian carriers the right to operate scheduled international routes to specific countries.
Other than the Canada-U.S. market where any number of Canadian carriers may be designated, today's policy framework designation of international routes states that two Canadian carriers may be designated in markets exceeding 300,000 scheduled passenger trips per year.
In markets below that threshold only one Canadian carrier will be designated. This policy framework has developed over time. Historically international scheduled routes were granted to Air Canada and CP Air, later known as Canadian Airlines International. This approach was known as the division of the world approach whereby each carrier was assigned exclusive access to specific markets in order to support the broad viability of each carrier's operations.
Changes have evolved to make the approach more transparent and more competitive. The current policy framework includes a use it or lose it approach whereby airlines that are granted designations must operate them at a minimum level of service or potentially lose them to another air carrier.
Given the potential changes to the airline structure in Canada, the minister has indicated a need to revise these policies with a view to removing all unnecessary restrictions on air services. This clearly is in keeping with the objective of fostering competition as articulated in the new policy framework which has formed part of the recently released recommendations of the commissioner of competition in his letter to the minister.
The government has stated its intention to reconsider its approach to the 60 plus bilateral air agreements the government has negotiated with other countries. We will determine the extent to which Canadian and foreign carriers should have more international route opportunities. These agreements or treaties guarantee the airlines assigned by each country the right to operate specific international scheduled routes, the frequency of services permitted, the type of aircraft that may be operated, and even the number of airlines that may be authorized to operate.
Canada's bilateral air agreements are varied in their degree of openness. Sometimes Canada is not able to secure at the negotiating table all the rights it may seek. In the end this can have an impact on the kinds of services that may be operated. Canada does have considerable experience with open or liberal bilateral agreements.
The Canada-U.S. open skies agreement is a case in point. Before the agreement was concluded some 82 city pairs received non-stop scheduled services. After the agreement the number of such city pairs increased to 135. Passenger traffic has increased by 8.5% a year. The Canadian charter industry has remained active and has converted many of its services from charter to regular scheduled flights. Furthermore the Canadian airline industry has increased it share of the Canadian-U.S. market from 43% in 1994 to 49% in 1997.
In the context of a restructured industry where we want to foster and enhance competition and provide opportunities for Canadian carriers to operate international scheduled services, the government's decision to review its approach to negotiating bilateral air agreements, combined with a review of its international air policies, will be timely and warranted. The government has proposed an approach that will promote a healthy and viable air transport system in Canada.