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HomePolicy Articles Article Summary

Towards open skies for airlines in Canada

Economic Note by Pierre Jeanniot

According to Pierre J. Jeanniot, the Canadian government is considering greater liberalization in the country’s airline industry in line with the current international trend toward open markets in aviation. The author outlines briefly the benefits already derived from the bilateral “Open Skies” agreement Canada signed with the United States in 1995. These benefits included growth in trans-border passenger traffic, greater flexibility in fares and flight frequencies, increased trade of merchandise by air, and improved efficiency.

The federal government is considering “cabotage,” the possibility of allowing foreign airlines to operate between Canadian cities and raising the limit of foreign ownership of Canadian airlines. As Jeanniot explains, raising the foreign ownership limit would give Canadian carriers access to a broader capital market, which would help stabilize the industry. New competitors could enter the market and smaller carriers could expand more easily. Canadian carriers could invest in other airlines and expand into new markets. It would also push the price of flying downward. The author presents airline industry liberalization in the European Union as an example of the benefits.

Jeanniot presents options he considers viable for the Canadian context: 1) create an integrated aviation market within NAFTA; and 2) negotiate with the European Union. In his view, any such integration would be similar to what happened in the European Union: carriers in the three countries would have the same rights in each of these countries, giving them total freedom of “domestic” operation. Under an initial agreement foreign ownership would increase from 25 percent to 49 percent. Limited cabotage could be introduced as an extension of existing services. The other option is for Canada to take the initiative and propose an agreement with the European Union regarding the transatlantic air travel market. Jeanniot says Canada should take every opportunity available to negotiate “Open Skies” agreements with any country that already has similar agreements with the United States. Canada can position itself strategically to maximize the social and economic benefits arising from current trends in globalization of aviation markets.

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Policy Publication Details

Author(s): Pierre Jeanniot;
Publisher: Montreal Economic Institute [ Visit Website ]
Year Published: 2005; Publisher Type: Research Institute
Publicly Available: Yes Research Focus: International; National;
Registration Required: No Language: English French
Payment Required: No Publication Format: Adobe PDF, Hard Copy

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Keywords / Tags:

airline industry liberalization; open markets in aviation; Canada; United States; European Union; transborder passenger traffic; cabotage; foreign ownership in airlines; transatlantic air travel market; aviation market globalization;