Posted by Woods LaFortune LLP on Nov 18, 2014

Canada’s approach to air agreement negotiations involves a search for a careful balancing of the quest for liberalization and a prudential concern for its domestic industry. The airline business is recognized globally for a kind of inherent fragility. The Canadian industry has been no exception with over 100 Canadian carriers, small and large, having gone bankrupt, closed or otherwise merged and consolidated since the dawn of Canada’s air transport industry in the 1920s. Since its creation as a state-owned enterprise in 1936 and following its privatization in 1988 the viability of Air Canada in particular has been an on-going concern of the Canadian government. This concern partially stems from Canada’s wide territory, relatively small and scattered population, and critical reliance on air transport for its own domestic economy and the integration and mutual support of the carrier’s domestic and international networks. Since the integration of Air Canada and Canadian Airlines International in 2001 following the latter’s economic difficulties, the former has been in the unique position in Canada of offering scheduled services on integrated domestic and international networks of significance. While WestJet has grown significantly since its launch in 2006, it might still take many more years and a fleet diversification before it can, like Air Canada, offer integrated networks of comparable size, extent and diversity. From the Government’s viewpoint, exposing Canada’s carriers to full global competition risks undermining Canada’s domestic services and a key part of its own domestic economic infrastructure. In contrast, this is not a concern of major global airlines based in small territories, some without even domestic services, such as Singapore, Qatar or the United Arab Emirates, all known to have pressured Canada to open up its market. It must be noted that many global carriers, such as those operating from the three countries referred to above can benefit from state-ownership status. . This search for balance with a focus on preserving domestic service has had had an effect on policy.  For example, when the Canadian industry was dominated by both Air Canada and Canadian Pacific, the Canadian government went as far as adopting a “division of the world” policy, allocating exclusivity of Canadian carrier...

Posted by Woods LaFortune LLP on Nov 10, 2014

Air Transport Agreements (ATAs) are treaties signed between two countries allowing international commercial air transport services between their territories. These cover matters as diverse as overflight rights, airline designation, safety, and security, use of airports, customs, tariffs, sales and transfer of funds, ground handling and most importantly, traffic rights. The latter are the core economic rights of such treaties, which can specify the number of airlines that can serve the market, the capacity they can offer between them and at intermediate points, and the cities of the two countries between which they can operate. Traffic rights are typically the most contentious issues of an ATA, making them each a kind of trade agreement applying specifically to air transport services trade. The rights granted by ATAs belong to the negotiating countries, each country then designating specific airlines to operate them. The basis for modern ATAs date back to the Chicago Convention of 1944, a multilateral treaty that determined that the commercial aspects of air transport agreements were to be dealt with bilaterally rather than multilaterally. This Convention also created the International Civil Aviation Organization – ICAO, a United Nations Agency with its headquarters located in Montreal. As a key element of the Chicago Convention, it was agreed that no scheduled international air service may be operated over or into the territory of a contracting state without their express permission. Over the following years, ICAO developed a series of traffic rights, known as freedoms of the air. Totalling nine, these freedoms continue to form the basis of rights exchanged bilaterally in air services negotiations today. They are, essentially, in respect of scheduled international air services. ICAO characterizes all “freedoms” beyond the Fifth as “so-called” because only the first five “freedoms” have been officially recognized as such by international treaty. These are: the right to fly across its territory without landing; the right to land in its territory for non-traffic purposes; the right to put down, in the territory of the first State, traffic coming from the home State of the carrier; the right to take on, in the territory of the first State, traffic destined for the home State of the...