Federal Government Unveils International Air Policy, Delays Air Canada's Hong Kong Aspirations

Strategic Insights -

The federal government has released its long-awaited international air policy, which includes significant changes to the current market dynamics. The 11-page policy paper, announced by Transport Minister Douglas Young, reaffirms the 30-year-old status quo that Calgary-based Canadian Airlines International holds the best routes in the fast-growing Asian market. Montreal-based Air Canada has been pushing hard for more access to the Asia-Pacific region, particularly Hong Kong, which is expected to drive new growth in airline travel.

Key Takeaways:

  • The government has denied Air Canada's bid to fly to Hong Kong, a major blow to the airline's aspirations.
  • Canadian Airlines International will continue to hold the best routes in the fast-growing Asian market, including Tokyo and Shanghai.
  • The new policy does not allow two Canadian carriers to compete on any new international routes in the near future.
  • Air Canada has been criticizing the policy for favoring Canadian Airlines, saying it is not fair to be prohibited from competing on Pacific routes while being allowed to compete in Europe.
  • The policy introduces a "use-it-or-lose-it" clause, which will force airlines to use existing route designations or risk losing them.
  • Canadian Airlines was awarded some of Air Canada's European routes, including Frankfurt, Paris, and London.
  • Air Canada has the right to fly to Belgium and the Netherlands but is not using it due to low traffic.
  • Ottawa may choose to open talks with foreign airlines if no Canadian carrier wants to fly to certain countries.

Statistics:

  • The Asian market is growing by 6% a year, with Hong Kong being a significant contributor to this growth.
  • Canadian Airlines has the right to fly to over 30 countries, including Argentina, Chile, Greece, and the Czech Republic.
  • The policy paper notes that those hard-won rights have gone unused "too frequently."
  • The policy will not affect routes between Canada and the United States, which are being negotiated under a different treaty.
  • The government is proposing to establish new financial requirements on charter airlines, including minimum requirements for operating licenses.

Sources:

  • BARRIE McKENNA and OLIVER BERTIN, Ottawa ONT -- BY BARRIE McKENNA and OLIVER BERTIN The Globe and Mail OTTAWA
  • The Globe and Mail, December 29, 1993
  • Transport Minister Douglas Young
  • The Transportation Act, 1993