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Malcolm

The Headline "Aviation Barriers Clip Rivals' Wings

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AVIATION BARRIERS CLIP RIVALS’ WINGS

Passengers’ options are limited even as competition is taking off

  • Calgary Herald
  • 26 Jul 2018
  • ALICJA SIEKIERSKA
getimage.aspx?regionKey=yMdsEf4ZqWFNWh4sjhSzXA%3D%3DTHE ASSOCIATED PRESS Some experts say the airline industry is still one of the most protected in Canada, limiting consumer options, particularly when it comes to domestic travel. According to data from Australia’s CAPA Centre for Aviation, Air Canada and WestJet controlled roughly 82 per cent of the domestic seats, and 66 per cent of the system-wide seats in September.

For the first time in years, competition in the Canadian airline industry is heating up. In June, WestJet Airlines Ltd. launched its ultra low-cost carrier (ULCC) Swoop, offering cheaper flights for the more price-sensitive traveller. Flair Airlines Ltd., another discount carrier, is already in the air, and two additional ULCCs — Enerjet’s FlyToo and Canada Jetlines Ltd. — are eagerly eyeing entries into the market.

International carriers are also looking to fly to and from Canada. Norwegian Air Shuttle ASA, one of the world’s fastest-growing lowcost carriers, in June announced it will begin flying daily between Hamilton and Dublin, as well as offer service between Montreal and Guadeloupe and Martinique.

But even though competition may be increasing in what has largely been a two-player market, some experts say the airline industry is still one of the most protected in the country, limiting consumer options particularly when it comes to domestic travel.

Bill C-49, the Transportation Modernization Act, may have lifted foreign ownership limits to 49 per cent from 25 per cent, but a single international investor or carrier cannot hold more than 25 per cent of the voting interests of a Canadian airline.

The lifted restriction has not really boosted competition — Jetlines and Enerjet received the exemption in 2016, but have yet to formally launch — and the ability for foreign carriers to operate domestically — called cabotage — is still restricted in Canada, as it is in most countries.

Passengers shouldn’t expect these restrictions to dramatically change anytime soon, said Fred Lazar, a professor at York University’s Schulich School of Business in Toronto.

“Every country protects certain industries, either for cultural reasons or supposedly national security reasons, and Canada is no different,” he said. “While there have been attempts to limit foreign ownership rules in the airline industry, it hasn’t progressed that far. As long as you have bilateral treaties and control provisions, that’s going to limit the extent of liberalization in the industry.”

Canada first began deregulating the airline industry in the 1980s, when it decided to privatize Air Canada. The airline became privatized in 1989 and still dominates the Canadian market.

According to data from the CAPA Centre for Aviation, an Australiabased industry researcher, Air Canada and WestJet controlled roughly 82 per cent of the domestic seats, and 66 per cent of the system-wide seats in September. Air Canada alone accounted for 44.5 per cent of the system-wide seat capacity.

Lazar said airline industry protectionism works in two key ways. First, there are foreign ownership limitations, which have gradually been liberalized around the world, but rarely to the extent of allowing complete foreign ownership of an airline.

Australia is one rare exception, allowing full foreign ownership of carriers operating domestically, but maintaining limitations on international carriers. The move, made in the 1990s, was supposed to increase competition, but Lazar said it did little to accomplish that.

“All it did was knock out one of the domestic players (Ansett Australia) and replace it with Virgin Australia,” he said. “At the end of the day, it didn’t increase competition.”

Ashley Nunes, a transportation regulatory analyst at the Massachusetts Institute of Technology (MIT) in Cambridge, Mass., said the historical impetus to restrict foreign ownership has been national security concerns and, to some extent, national pride.

The second form of protectionism, according to Lazar and Nunes, are air service — or Open Skies — agreements. Since the Second World War, countries have negotiated bilateral air service agreements that specify which carriers can operate between them. Canada has more than 100 agreements and many of those have been increasingly liberalized over the past couple of decades, beginning in 1995 with the Canada-U.S. air service agreement, allowing more international airlines to fly in and out of the country.

Robert Kokonis, president of Toronto-based aviation consulting firm AirTrav Inc., said the open skies agreements have worked well to expand the options Canadian consumers have.

“Over the last 10 years, Canada has been very busy signing new bilateral agreements and enhancing existing agreements. Overall, it’s been pretty good,” he said, although he added that some countries can use the agreements to protect their own domestic carriers. “Sometimes it’s a bit of a fine line between what is fair (and ensures a level playing field) and what is protectionism.”

Indeed, some carriers have faced difficulties when trying to expand services in Canada.

For example, United Arab Emirates in 2010 urged the Canadian government to allow its major carriers, Emirates and Etihad Airways, daily flight access to and from Canada. At the time, Air Canada did not fly to Dubai, and chief executive Calin Rovinescu argued changes to the Canada-UAE bilateral agreement were not necessary because expanding capacity was not warranted.

In the end, the Canadian government opted not to expand the bilateral agreement, and Emirates currently operates three weekly flights between Dubai and Toronto.

Michael Tretheway, chief economist at Ottawa-based InterVistas Consulting Group, which works with the aviation industry, said in a report published at the time of the Emirates debate that Canada was “foregoing economic and social benefits” by engaging in “selective protectionism which benefits one set of foreign air carriers by denying opportunity to other foreign carriers.”

Nunes said the spirit of Open Skies agreements has historically been to relinquish government control of the airline industry, but domestic airlines still pressure governments to maintain control and their advantage.

“Everyone loves competition, as long as they don’t have to face any,” he said.

The 2016 Emerson report, an in-depth review of the Canadian Transportation Act, said it was time to reconsider policies that served the nation well when the domestic airline industry needed protection to thrive, but now impair competitiveness.

“Protectionism comes at a cost that is largely borne by Canadian consumers, who pay relatively high airfares, and by the Canadian travel and tourism sector that also, due to higher costs, has been losing market share over a decade,” the report’s author David Emerson said, recommending the government open more international air service agreements that allow a minimum of seven daily flights a week between countries.

“The world is moving towards an open market for air services. Canada’s approach has outlived its usefulness and now renders our air services less competitive, less trade-friendly, and more costly than those of our global competitors”

However, Kokonis said lifting foreign ownership rules further would do little to change the Canadian industry, in part because of the country’s widespread geography and low population density.

Foreign investment, he said, would just provide Canada’s carriers with an additional source of capital, and not necessarily translate to more flights around the world.

But Nunes said lifting barriers in various bilateral air service deals will benefit consumers and potentially improve the product offered by Canadian carriers.

“As long as the status quo is preserved, Canadians end up paying the price for it,” he said.

Lazar said the best approach would be to include the aviation industry within broader trade agreements, with rules regarding subsidies and dumping, and let the best players win.

“If the domestic players are more innovative, more creative, they’ll succeed,” he said. “It doesn’t matter to me what name is on the plane.”

For the most part, Lazar said other countries employ the same tactics as Canada when it comes to protecting their own industries.

“Canada’s no worse than most other countries in the world. It’s not really on the protectionist end of the spectrum, but it’s nowhere near the other end of the scale,” he said. “Nobody really is.”

 

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Of course people want cheaper, but ceding control of our airlines to foreign pressure, allowing more subsidized carriers in (UAE), or introducing cabotage are all big picture losing moves for Canada.

No mention of expensive airports, excessive fees, and the high taxes that Canadian consumers pay for on their ticket price...

If people want cheaper, and want to stimulate the industry, that's what needs to be cleaned up.

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But it’s never the governments fault. It’s those greedy airlines overcharging for flights (even with single digit margins) 🤪

Repeat after me....government is a force for good....government is a force for good. 

CBC says so.   🤪

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46 minutes ago, Critter said:

But it’s never the governments fault. It’s those greedy airlines overcharging for flights (even with single digit margins) 🤪

Repeat after me....government is a force for good....government is a force for good. 

CBC says so.   🤪

in actual fact the airlines were better off under complete regulation as this guaranteed their routes and to some extent their revenues.

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1 hour ago, Critter said:

Repeat after me....government is a force for good....government is a force for good. 

Remember that when someone you love gets cancer. 

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This guy Nunes is a moron - read lots of his articles and he's very laissez-faire about most things - doesn't look at the long term implications at all.  Sure, open the border to a bunch of foreign airlines and the consumer benefits in the short term - cheap fares, Yippee!  In the long term the lost jobs, personal tax revenues and corporate taxes revenues more than offsets any initial windfall.

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42 minutes ago, J.O. said:

Remember that when someone you love gets cancer. 

Re Cancer, I can only speak from personal experience, I got Cancer, had the necessary major surgery and 15 years later still around to talk about it. Alberta Heath Service worked for me.

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20 hours ago, Malcolm said:

Re Cancer, I can only speak from personal experience, I got Cancer, had the necessary major surgery and 15 years later still around to talk about it. Alberta Heath Service worked for me.

Cancer got me.... a short time later...surgery....no requirement for radiation of hemo after the op. Seven years later...still cancer free....Thanks to the Ontario Health Services

PS........... my 3 kids, (who are probably older than most authors on this forum) followed my direction,,,,l all had colonoscopies.)

PPS...... Those who feel a colonoscopy is akin to a fire hose being forced up ones rectum should take heart.....It is probably one of the best short naps you will have......the worst part of a colonoscopy is drinking the laxative the day before. Prior to "going under" my doctor asked if I wanted to watch the procedure.....I declined and said I would wait until the DVD came out.

Finally...over 50??? Get a colonoscopy !!!

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My father in law got sick a number of years ago. His family doctor booked him an appointment with a specialist, it was going to be months down the road before he could be seen.

He became so sick while he waited that he literally turned yellow, went to emerg, diagnosed with cancer. Dead a few months later.

Health care in this country has very few benefits beyond that it is eventually available to everyone, if you can live that long, and there are some very good people that work on the front lines of it. Other than that, we've got absolutely nothing to brag about.

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Well I guess the emojis didn’t convey the intent of the post. And mostly I was referring to its interference in the private sector.

That being said, I don’t think government regulation makes for a healthy industry and the aforementioned taxes, fees and even legislation to “improve” the industry does more harm than good. I would prefer the feds get out of the way and let market forces decide and stop trying to buy votes by forcing lower prices on an industry already working on such slim margins.

as for healthcare, there are pros and cons to socialized healthcare that probably better debated in the political forums.

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It's always nice when you hear that some people manage to survive an encounter with cancer over the longer term.

I stand to be corrected, but I think JO was referring to the decline in the quality of care etc that cancer patients and their families are experiencing in the present day.

 

 

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1 hour ago, DEFCON said:

It's always nice when you hear that some people manage to survive an encounter with cancer over the longer term.

I stand to be corrected, but I think JO was referring to the decline in the quality of care etc that cancer patients and their families are experiencing in the present day.

 

 

He was quite  specific. Thus my reply.

Quote

      Remember that when someone you love gets cancer. 

 

 

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My wife had a brain tumour removed (benign, we hope) about three weeks ago. (Doing fine . Thanks) Caring, great staff. Attached, attentive surgical staff all around. We are not bankrupt. As these things go  - not bad.

Ooops, oops - thread drift...sorry.

 

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Back to the original topic:

Toronto five times weekly from 18 August

DUBAI, U.A.E., 30 July 2018: Emirates today announced that it will introduce two additional flights to its Toronto (YYZ) service, complementing its existing schedule and providing even more choice and convenience to travellers.

The additional Toronto flights will be introduced on August 18 2018 and will operate on a Saturday departing Dubai as EK241 at 03:30and arrive in Toronto at 09:30. The return flight, EK242, leaves Toronto at 14:25 and arrives in Dubai at 11:40 the next day. On Sundays, EK241 will depart at 03:30 and arrive in Toronto at 09:30. The return flight, EK242, will leave Toronto at 14:30 and arrives in Dubai at 11:25 the next day.* Both flights will be operated by the iconic Emirates A380 with private suites in First Class, lie flat seats in Business Class and spacious seats in Economy Class.

Emirates recently celebrated 10 years of operations in Canada last October, demonstrating the airline’s ongoing commitment to the market. Over the past decade, Emirates introduced new aircraft on the route from a Boeing 777 in October 2007 to the flagship A380 in 2009. The A380 scheduled service increased passenger capacity on the Toronto service by 40% and since then, passenger occupancy on the route has been consistently full, averaging 90% with demand outstripping supply. The additional frequency will fulfil the strong demand on the route and add 65% capacity to the market.

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The government should just stop using airlines as a cash cow.  How much if your ticket goes to the government?  Drop those takes and Airlines will be allowed to compete in a more level playing field and thrive. 

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On 7/30/2018 at 6:50 AM, B75/76 said:

Back to the original topic:

Toronto five times weekly from 18 August

DUBAI, U.A.E., 30 July 2018: Emirates today announced that it will introduce two additional flights to its Toronto (YYZ) service, complementing its existing schedule and providing even more choice and convenience to travellers.

The additional Toronto flights will be introduced on August 18 2018 and will operate on a Saturday departing Dubai as EK241 at 03:30and arrive in Toronto at 09:30. The return flight, EK242, leaves Toronto at 14:25 and arrives in Dubai at 11:40 the next day. On Sundays, EK241 will depart at 03:30 and arrive in Toronto at 09:30. The return flight, EK242, will leave Toronto at 14:30 and arrives in Dubai at 11:25 the next day.* Both flights will be operated by the iconic Emirates A380 with private suites in First Class, lie flat seats in Business Class and spacious seats in Economy Class.

Emirates recently celebrated 10 years of operations in Canada last October, demonstrating the airline’s ongoing commitment to the market. Over the past decade, Emirates introduced new aircraft on the route from a Boeing 777 in October 2007 to the flagship A380 in 2009. The A380 scheduled service increased passenger capacity on the Toronto service by 40% and since then, passenger occupancy on the route has been consistently full, averaging 90% with demand outstripping supply. The additional frequency will fulfil the strong demand on the route and add 65% capacity to the market.

Wonder when EK will start service with the A380 or B777 to YXE, YQM, and YYB ????

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