Discussion Paper On Regulatory Modernization For Air Transportation

Table of Contents

Background

On May 26, 2016 the Canadian Transportation Agency launched an initiative to review and modernize the full suite of regulations it administers. Many of these regulations date  back 25 years or more, and need to be updated to reflect changes in user expectations, business models and best practices in the regulatory field. 

The Regulatory Modernization Initiative (RMI) is anchored in three goals:

  • Ensuring that industry’s obligations are clear, predictable and relevant to a range of existing and emerging business practices.
  • Ensuring that the demands associated with compliance are only as high as necessary to achieve the regulations’ purposes.
  • Facilitating the efficient and effective identification and correction of instances of non-compliance.

 The RMI includes the review of existing guidance documents and other tools.

Current legislative and regulatory context

Canada’s National Transportation Policy, as declared in the Canada Transportation Act (CTA), is intended 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".

The Agency:

  • issues licences to operate publicly available air services;
  • administers an international charter regime, including permits and flight notifications;
  • authorizes the use of aircraft and crew of other carriers;
  • administers an air tariff regime and reviews air carrier tariffs for clarity, reasonableness and no undue discrimination;
  • participates in bilateral air transport agreement negotiations;
  • regulates air price advertising;
  • inspects air carriers and facilities; and,
  • facilitates and adjudicates certain air related complaints.

The Agency also performs 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.

Consultation scope

The intent of this phase of the RMI is to update the existing Air Transportation Regulations (ATR), based in part on input received during consultations with stakeholders, experts and interested members of the public. The Agency is seeking comments and ideas to inform the development of proposed changes to the ATR and other guidance materials (identified in Annex A).

The Agency has identified the following items for consideration:

You are welcome to identify any additional considerations or proposals related to the ATR.

The Agency has already started its consultation process on accessible transportation and will begin consultations on rail-related regulations and on consumer protection for air travellers in 2017.

Item 1: Charters and advance payment protection

International charter flights are subject to Agency approvals and filing requirements.

Given the evolution of government policy and industry practice over the last 20 years, the regulations governing these activities may require updating.

Air carriers who operate resalable passenger charters originating in Canada (such as Advance Booking and Inclusive Tour Charters) are required to protect advance payments they receive from charterers. This requirement is in place to ensure that if an air carrier fails to perform the flights for which it was contracted, the charterer will be reimbursed. The two protection mechanisms that are currently used are the Letters of Credit and Agreements of Guarantee, which are submitted to the Agency in a form provided in the charter permit guidelines.

At one point, the advance payment protection regime provided passengers with some benefits such as refunds to passengers for cancelled flights. However, in recent years, countries that were once exclusively served by charter flights are now primarily served by scheduled air services. The number of international charter flights that are subject to advance payment protection has fallen dramatically, with the result that less than 1% of all Canadian origin international passengers are currently protected by this regime.

For more information about charter activities and Advance Payment Protection, as well as further consultation questions, please see the following annex.

Questions

  1. To what extent does the existing regulatory regime for charters continue to serve public policy goals?
  2. Has charter activity evolved to encompass a broader scope of activities?
  3. How could the ATR, as they relate to charters and advance payment protection, be updated to reflect today's reality? What value would these changes bring?

Associated guides and tools

Item 2: Licensing

A. Code-sharing and wet-leasing

Sections 8.2 to 8.5 of the ATR set out the regulatory requirements for the use and provision of aircraft with flight crew of other air carriers, including:

  • public disclosure;
  • holding the appropriate licence;
  • Canadian aviation document and liability insurance; and
  • obtaining prior approval from the Agency in certain circumstances.

These requirements apply to wet-lease and code-share arrangements between air carriers for the transportation of both passengers and goods. Where prior approval is required, the Agency aims to issue these authorities within 15 business days of receiving a complete application.

These provisions were established during a time when code-share arrangements had not yet become a common way of exercising traffic rights under bilateral agreements. Since then, the international industry has changed to using code-sharing as a major marketing tool and code-share arrangements have become the standard way of providing air services among licensed carriers.

Canada has signed code-share-only bilateral agreements to facilitate the use of code-sharing to expand smaller markets. While the Agency has shifted to issuing longer term or indefinite approvals for some international agreements, it still processes approximately 100 code-share approvals annually.

In 2014, the Minister of Transport issued a direction to the Agency entitled Ministerial Direction for International Service – Canada’s Policy for Wet-Leasing (Wet-Lease Policy). The Wet-Lease Policy applies to the assessment by the Agency of wet-lease applications where Canadian carriers propose to enter into wet-lease arrangements of more than 30 days with foreign carriers to provide international passenger services. The direction is intended to provide for reciprocity with foreign jurisdictions and ensure that aircraft secured through such an arrangement account for the minority of leases of Canadian registered aircraft. 

For more information about code-sharing and wet-leasing, as well as further consultation questions, please see the following annex.

Question

  1. Should the ATR be amended with regard to code-sharing and wet-leasing, and if so, how?

Associated guides and tools

B. Air insurance

The ATR set out the liability insurance requirements for licensees.

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

Currently, the minimum amount of liability insurance covering risks of injury or death of passengers is $300,000 per passenger seat.

Licensees are required to file, on an annual basis, a certificate of insurance and an accompanying endorsement. Failure to file these documents will result in suspension or cancellation of the licence.

Air insurance provisions were last updated in 1983 – more than 30 years ago. Minimum coverage for both passenger and public liability coverage have not increased since then.

For more information about air liability insurance provisions, as well as further consultation questions, please see the following annex.

Questions

  1. What changes to the ATR might be considered to improve the air insurance regime and ensure that air insurance requirements continue to be appropriate over time?
  2. What would constitute an adequate amount of passenger liability and public liability coverage and why?
  3. What amendments, if any, could be made to: the allowed standard exclusion clauses; the certificate of insurance form; the certificate of endorsement; and the annual filing requirement?

C. New business models and industry tools

Business models in the airline industry are rapidly evolving.

Throughout this change, the Agency must ensure that the interests of users are taken into account while facilitating innovative approaches to business models. A balanced approach can increase choice and allow industry stakeholders to benefit.  

The Agency is seeking stakeholder views to ensure that innovative ideas are not discouraged under the existing regulatory framework.

Question

  1. Do the regulations need to be amended to proactively keep pace with changing air service business models? If so, how?

D. Excluded services

Section 3 of the ATR and section 56 of the CTA list the air services that are currently excluded from the licensing provisions.

Questions

  1. Are there changes required to the current list of excluded air services? What is the rationale for any additions to or deletions from the list?
  2. Do the cited categories within the ATR remain relevant?

E. Canadian ownership and control

The CTA provides the eligibility criteria for holding a licence issued by the Agency, one of which is to be Canadian as defined in subsection 55(1) of the Act. The Canadian requirement is a condition of market entry, as well as an ongoing requirement that must be complied with at all times.

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.

Agency reviews of Canadian ownership and control are currently conducted on a confidential basis with the applicant or licence holder. Given the sensitivity of the commercial information considered in the application, few of these reviews have generated a public record or public release of the Agency's reasons for a decision.

The Agency's interpretation notes on Canadian Ownership Requirement and on Control in Fact explain the approach the Agency currently follows and the factors it considers in making those determinations. With the planned increase in foreign ownership thresholds, it becomes even more important for the Agency to have a predictable, up-to-date set of criteria and steps for making its control in fact determinations. It is also critical for all industry players that the approach the Agency adopts be clearly communicated and well understood.

Questions

  1. What changes should the Agency make to the current approach outlined in the interpretation notes?
  2. What approaches are used by other jurisdictions to determine control in fact that the Agency could consider adopting? Why are these approaches suitable and appropriate reforms to the Agency's existing approach and what, if any, unintended consequences could they present?
  3. Under what circumstances should the Agency make public its determination on control in fact? What would be the benefits of adopting such an approach: for the industry, for licence applicants and for licence holders, and for Canadians more broadly? What would be the risks and how might they be mitigated?

Item 3: Monitoring, compliance and enforcement

When licensed air carriers do not meet their legislative and other obligations, public policy objectives are undermined,  the public may be placed at greater risk, and compliant air carriers can suffer a competitive disadvantage. Through a variety of monitoring and compliance tools and activities, the Agency seeks to ensure that air carriers and service providers comply with their obligations.  

Currently, Agency enforcement officers conduct periodic inspections and targeted investigations to ensure compliance with regulatory requirements. Enforcement officers also provide guidance and education to assist carriers in achieving compliance, and in certain instances, may use their powers to impose monetary penalties. The Agency recently began the development of a framework for a more systemic, risk-based approach to monitoring and compliance activities.  

The summary of enforcement actions taken by the Agency provides a list of recent enforcement activities.

Questions

  1. How should the Agency's monitoring, compliance, and enforcement regime be updated? Are there improvements that could be considered to further support effective Agency action?
  2. Do the Agency's communications and guidance materials and tools support the achievement of ongoing compliance with Agency decisions, determinations and regulatory requirements?

Additional perspectives – Agency guides and tools

The Agency is also seeking views on its current suite of guides and tools (see Annex A) as they relate to the air sector. Specifically, the Agency seeks feedback on whether these documents are easy to find, readily accessible, clear, relevant and provide the necessary information to assist stakeholders.

Questions

  1. Are there any current guides or tools that require updating to more effectively achieve public policy goals, or better align with best practices in the regulatory field? If so, what changes could be considered?
  2. Are there other guides or tools that would be useful?

Your input

Please submit your feedback at consultations@otc-cta.gc.caSign language video submissions can also be uploaded.

All submissions will be considered public documents and will be posted on the Agency's website in the official language in which it was submitted, along with your name or that of the organization represented. We encourage you to review the information and to submit responses to the key questions highlighted in this document.

Consultations on air transportation will be completed by summer 2017. What we hear will help the Agency prepare a summary document and draft updated regulations by the end of 2017, for implementation in 2018.

Annex A: Guides and tools

The Agency provides a range of tools and guidance documents:

Charters

Licencing

Air price advertising

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