THE AVIATION INDUSTRY AS AN ECONOMIC ENABLER Air Canada submission to the review of the Canada Transportation Act February 2015 TABLE OF CONTENTS I. EXECUTIVE SUMMARY ........................................................................................ 3 II. BACKGROUND ................................................................................................... 6 III. TAXES AND FEES............................................................................................... 9 a. Introduction ................................................................................................................................ 9 b. A Closer Look ............................................................................................................................. 11 c. Airport Rent .............................................................................................................................. 17 d. Airport Improvement Fees and Infrastructure Funding ........................................................... 20 e. Air Travellers Security Charge ................................................................................................... 22 f. Taxes on Aviation Fuel .............................................................................................................. 24 g. Payments in Lieu of Taxes ......................................................................................................... 25 h. Other Taxes and Fees and the Need for a Global Benchmark Exercise .................................... 26 IV. BUILDING GLOBAL HUBS AND DEVELOPING STRONG AIRPORT INFRASTRUCTURE .. 28 a. Introduction .............................................................................................................................. 28 b. Building Successful Hubs ........................................................................................................... 30 c. Canada’s Blue Sky Policy ........................................................................................................... 32 d. Facilitation Requirements ......................................................................................................... 41 e. Increasing Connectivity ............................................................................................................. 45 f. Cargo Transiting Canada ........................................................................................................... 48 g. Governance Structure ............................................................................................................... 49 h. Airport Authorities .................................................................................................................... 50 V. AN EFFICIENT REGULATORY SYSTEM ................................................................. 55 a. Introduction .............................................................................................................................. 55 b. The Mandate of the Canadian Transportation Agency ............................................................. 55 i. Simplifying the Conditions and Tariff Document .............................................................. 59 ii. Domestic and International Conditions of Carriage ......................................................... 59 iii. Statutory Filing Requirements .......................................................................................... 60 c. Transport Canada’s Role in Developing Regulations ................................................................ 61 i. Wet Leasing ....................................................................................................................... 63 ii. Joint Ventures ................................................................................................................... 64 d. A Simplified Regulatory Process................................................................................................ 65 i. Computer Reservation Systems ........................................................................................ 66 ii. Passenger Data ................................................................................................................. 67 iii. Canadian Aviation Regulation Advisory Council – Rulemaking Procedures ..................... 68 iv. Exemptions to Regulations ............................................................................................... 69 v. Inconsistent Interpretation and Application of Regulations and Standards .................... 69 1 vi. Canadian Aviation Regulations vs. Occupational Health and Safety Regulations ............... 70 vii. Safety Management System ............................................................................................. 71 viii. Aviation Documentation ................................................................................................... 72 e. Regulatory Alignment with Other Jurisdictions ........................................................................ 73 i. Customs Act (AMPS/Penalty structure) ............................................................................ 73 ii. Facilitation (Automation/Passenger data) ........................................................................ 74 iii. Flight Data Monitoring ...................................................................................................... 75 iv. Aligning Safety Protocols .................................................................................................. 76 v. Redispatch and No Alternate Instrument Flight Rules ..................................................... 77 vi. Land and Hold Short Operations....................................................................................... 78 vii. Fair Competition ............................................................................................................... 79 viii. Foreign Ownership in Canadian Airlines ........................................................................... 80 ix. Maintenance Certification Requirements ........................................................................ 81 x. Aircraft Noise .................................................................................................................... 82 xi. Aviation Bio-fuel ............................................................................................................... 83 xii. Waste Management ......................................................................................................... 84 f. Costs Imposed on Airlines ......................................................................................................... 85 i. Air Canada Public Participation Act .................................................................................. 85 ii. Official Languages Act ....................................................................................................... 86 iii. In-Flight Security Officer Program .................................................................................... 89 iv. Inadmissible Passengers ................................................................................................... 90 VI. CONCLUSION .................................................................................................. 93 VII. RECOMMENDATIONS ....................................................................................... 94 2 I. EXECUTIVE SUMMARY 1. The inaugural flight from Air Canada’s predecessor Trans-Canada Air Lines took place on September 1, 1937. The 50-minute flight aboard a Lockheed L-10A carried two passengers and mail between Vancouver and Seattle. By 1964, Trans-Canada Airlines had grown to become Canada's national airline, eventually changing its name to Air Canada. 2. In 1989, the Government of Canada completed Air Canada’s privatization, and the deregulation of the air industry continued in the following decades. Today, Air Canada competes with other airlines both domestically and globally. 3. Air Canada welcomes the review of the Canada Transportation Act by the Government of Canada and the panel led by the Honourable David L. Emerson. The path the Government sets with its transportation legislation and policy has the potential to spark economic growth in Canada by removing artificial barriers that are currently preventing the entire Canadian aviation industry – our airlines, our airports, their suppliers and the Canadian travelling public – from reaching its full potential in communities across our great country. 4. For far too many years, governments of all levels in Canada have treated the aviation industry as a revenue source instead of a catalyst for growing the economy and creating jobs. The government’s regulatory view of the industry has been too narrow and does not fully acknowledge the important role the country’s industry could play on a global scale, as well as the economic potential associated with this role. 5. Canadian transportation policy must look beyond domestic needs, and look at how we can compete against our global competitors. Governments around the world have chosen to support their aviation industries by setting the right policy to create global “hubs” and powerful national carriers with which international passengers, cargo and revenue flow. 6. Unlike Transport Canada, the United States’ Department of Transportation, including the Federal Aviation Administration, has a mandate to develop policies and strategic objectives that