hkskyline
November 11th, 2005, 05:02 PM
Canada's closing sky
The country must avidly pursue open skies talks or be left out of more liberated world markets
Chris Sorensen
Financial Post
11 November 2005
The term "open skies" is like "free trade" in the sense that it often promises more than it delivers. While Ottawa is fond of touting its ongoing open skies efforts with Washington as the regulatory equivalent of breaking the sound barrier, observers say the reality is that Canada is actually in danger of lagging behind several other developed nations, which are working on establishing a truly open market above the clouds.
Negotiators, airlines and stakeholders representing Canada and the United States are meeting this week in Washington to discuss the further liberalization of a Canada-U.S. open skies agreement that was signed in 1995. Although the details of the negotiations aren't public, most believe that Transport Minister Jean Lapierre is aiming to emerge with an agreement over so-called Fifth-Freedom rights between the two countries.
Although not unimportant, such a deal is a far cry from the NAFTA-of-the-skies that U.S. Secretary of Transportation Norman Mineta has publicly envisioned. It would allow, for example, a Canadian airline to fly from Toronto to New York, pick-up U.S. passengers, and then continue on to a city in Central or South America. Similarly, U.S. air carriers would be given the right to pick up Canadian passengers before flying overseas to a foreign country.
In theory, such an arrangement will boost competition in both countries and give people more travel options. But while Canadian air carriers like Air Canada and WestJet Airlines Ltd. no doubt covet increased access to the giant U.S. market, providing they can secure additional access to landing slots and airport gates at U.S. airports, it's unlikely U.S. carriers would jump at the opportunity to stop over in Canada en route to Europe or Asia -- particularly since the entire industry is moving toward a model that eschews stopovers and connections in favour of more point-to-point flying.
"I would think that the American customer, like customers all over the world, would prefer a direct flight," said Peter Wallis, head of the Van Horne Institute for International Transportation at the University of Calgary.
If that's the case, then any new "open skies" announcement stemming from the current talks will do relatively little for Canadian travellers who are anxiously awaiting to experience cheaper U.S. fares without having to drive across the border.
Potentially more meaningful would be a cabotage agreement that allows U.S. air carriers to fly between Canadian cities and Canadian carriers to do the same in the United States. But the concept of unfettered competition, no matter how beneficial for travellers, is so controversial in the lumbering North American airline industry that Mr. Lapierre was forced to state in advance of the talks that cabotage would not be on the table.
That means that, for the foreseeable future, Canada, the United States and Mexico will remain light-years behind the European Union, which in 1997 completed the deregulation of its airline market by allowing any airline in an EU-member country to operate anywhere in the region without route or fare restrictions. The result, according to analysts, was the emergence of new low-cost air carriers such as Ryan Air and EasyJet, which are now reshaping the industry by offering rock bottom air fares across the continent.
That's not to say further liberalization of the 1995 Canada-U.S. open skies agreement is a waste of time. The 1995 accord is credited for giving the entire North American industry a shot in the arm, boosting the number of crossborder trips by 40% in its first five years, according to some accounts. Noted Mr. Wallis: "What they are doing is laying the opportunity out there for anyone who wishes to take advantage of it. And that's a positive thing because potentially the consumer will have more choice of airlines and air fares."
In a bid to replace the hodgepodge of air services agreements with various European countries, the United States is seeking to establish a single air services deal with all EU members. The two sides have agreed in principle that European airlines and cargo carriers should be able to fly to the United States from anywhere in the EU. They now can only fly to the U.S. from their home countries.
Canada, by contrast, has adopted a wait-and-see strategy before it dives into discussions with the EU, according to Lucie Vignola, a Transport Canada spokeswoman.
While such an approach is pragmatic and inherently "Canadian" in nature, it also puts Canada at risk of coming late to the open skies party should one be thrown.
Pierre Jeanniot, a former CEO of Air Canada and former director general of the International Air Transport Association, argued in a recent paper published by the Montreal Economic Institute that Canada should initiate open skies talks with the EU, including the question of cabotage, to gain a head-start in the global liberalization of the air.
Such a move, he argued, would have the advantage of readying the domestic airline industry for the more controversial prospect of a reciprocal cabotage agreement with the United States, which would ultimately be necessary if North America were to move toward an EU model. It could also give the U.S. an opportunity to "test" an eventual integrated Europe-North America aviation market.
In an interview, Mr. Jeanniot warned that Ottawa's cautious approach risks leaving Canada as an afterthought as the world moves toward more integrated markets.
"My concern, which I've raised with the Minster of Transport, is that if the United States and the European Union are successful in establishing an open air market, Canada might find itself at a disadvantage because it has been left out."
The country must avidly pursue open skies talks or be left out of more liberated world markets
Chris Sorensen
Financial Post
11 November 2005
The term "open skies" is like "free trade" in the sense that it often promises more than it delivers. While Ottawa is fond of touting its ongoing open skies efforts with Washington as the regulatory equivalent of breaking the sound barrier, observers say the reality is that Canada is actually in danger of lagging behind several other developed nations, which are working on establishing a truly open market above the clouds.
Negotiators, airlines and stakeholders representing Canada and the United States are meeting this week in Washington to discuss the further liberalization of a Canada-U.S. open skies agreement that was signed in 1995. Although the details of the negotiations aren't public, most believe that Transport Minister Jean Lapierre is aiming to emerge with an agreement over so-called Fifth-Freedom rights between the two countries.
Although not unimportant, such a deal is a far cry from the NAFTA-of-the-skies that U.S. Secretary of Transportation Norman Mineta has publicly envisioned. It would allow, for example, a Canadian airline to fly from Toronto to New York, pick-up U.S. passengers, and then continue on to a city in Central or South America. Similarly, U.S. air carriers would be given the right to pick up Canadian passengers before flying overseas to a foreign country.
In theory, such an arrangement will boost competition in both countries and give people more travel options. But while Canadian air carriers like Air Canada and WestJet Airlines Ltd. no doubt covet increased access to the giant U.S. market, providing they can secure additional access to landing slots and airport gates at U.S. airports, it's unlikely U.S. carriers would jump at the opportunity to stop over in Canada en route to Europe or Asia -- particularly since the entire industry is moving toward a model that eschews stopovers and connections in favour of more point-to-point flying.
"I would think that the American customer, like customers all over the world, would prefer a direct flight," said Peter Wallis, head of the Van Horne Institute for International Transportation at the University of Calgary.
If that's the case, then any new "open skies" announcement stemming from the current talks will do relatively little for Canadian travellers who are anxiously awaiting to experience cheaper U.S. fares without having to drive across the border.
Potentially more meaningful would be a cabotage agreement that allows U.S. air carriers to fly between Canadian cities and Canadian carriers to do the same in the United States. But the concept of unfettered competition, no matter how beneficial for travellers, is so controversial in the lumbering North American airline industry that Mr. Lapierre was forced to state in advance of the talks that cabotage would not be on the table.
That means that, for the foreseeable future, Canada, the United States and Mexico will remain light-years behind the European Union, which in 1997 completed the deregulation of its airline market by allowing any airline in an EU-member country to operate anywhere in the region without route or fare restrictions. The result, according to analysts, was the emergence of new low-cost air carriers such as Ryan Air and EasyJet, which are now reshaping the industry by offering rock bottom air fares across the continent.
That's not to say further liberalization of the 1995 Canada-U.S. open skies agreement is a waste of time. The 1995 accord is credited for giving the entire North American industry a shot in the arm, boosting the number of crossborder trips by 40% in its first five years, according to some accounts. Noted Mr. Wallis: "What they are doing is laying the opportunity out there for anyone who wishes to take advantage of it. And that's a positive thing because potentially the consumer will have more choice of airlines and air fares."
In a bid to replace the hodgepodge of air services agreements with various European countries, the United States is seeking to establish a single air services deal with all EU members. The two sides have agreed in principle that European airlines and cargo carriers should be able to fly to the United States from anywhere in the EU. They now can only fly to the U.S. from their home countries.
Canada, by contrast, has adopted a wait-and-see strategy before it dives into discussions with the EU, according to Lucie Vignola, a Transport Canada spokeswoman.
While such an approach is pragmatic and inherently "Canadian" in nature, it also puts Canada at risk of coming late to the open skies party should one be thrown.
Pierre Jeanniot, a former CEO of Air Canada and former director general of the International Air Transport Association, argued in a recent paper published by the Montreal Economic Institute that Canada should initiate open skies talks with the EU, including the question of cabotage, to gain a head-start in the global liberalization of the air.
Such a move, he argued, would have the advantage of readying the domestic airline industry for the more controversial prospect of a reciprocal cabotage agreement with the United States, which would ultimately be necessary if North America were to move toward an EU model. It could also give the U.S. an opportunity to "test" an eventual integrated Europe-North America aviation market.
In an interview, Mr. Jeanniot warned that Ottawa's cautious approach risks leaving Canada as an afterthought as the world moves toward more integrated markets.
"My concern, which I've raised with the Minster of Transport, is that if the United States and the European Union are successful in establishing an open air market, Canada might find itself at a disadvantage because it has been left out."