TORONTO — The federal government unveiled new legislation on Tuesday that will spell out exactly what rights airline passengers have and ensure that people who purchase flight tickets cannot be forced off due to overbooking.
The proposed bill, tabled by Transportation Minister Marc Garneau, will also relax ownership requirements for Canadian air carriers and Canadian National Railway Co. (CN) and introduce new rules about joint ventures for airlines.
The legislation, which the government hopes to have in place by next year, covers a broad range of changes that has implications for airline passengers and Canada’s two major railways.
“Overall, we view the announcement as a mild negative for railroads and a neutral to possibly net positive for airlines,” said RCB Dominion Securities analyst Walter Spracklin in a note to clients Tuesday.
Air Canada, which saw its stock jump 4.95 per cent to $16.95 at close Tuesday, said in a statement it welcomes the passenger’s bill of rights, and that the proposed changes to foreign ownership and joint ventures should open the company up to new markets. WestJet also commended the development of the bill of rights and saw its stock rise 2.52 per cent to $22.36 at close.
Here are the five key things you need to know about the proposed legislation:
Passenger Bill of Rights
While the bill will set out standards when it comes to issues such as denied boarding, damaged baggage and tarmac delays, disgruntled passengers will have to wait to see exactly what the regulations will look like and what compensation they may be able to receive.
The Canadian Transportation Agency (CTA) — an independent regulator that sets out rules and resolves disputes relating to air, rail and marine transportation — has been tasked with creating those regulations. The CTA is expected to launch public consultations before submitting regulations.
However, one rule is certain. Garneau said at a press conference in Ottawa on Tuesday that anyone who purchases a ticket for a flight in Canada cannot be removed from a flight because of overbooking. This comes a month after video footage went viral showing a passenger being dragged off a United Airlines flight after he refused to leave his seat to accommodate crew members.
Last November, Garneau announced he would exempt Enerjet and Canada Jetlines Ltd. — two aspiring ultra-low-cost carriers — from a law that restricts foreigners from owning more than 25 per cent of a Canadian airline.
On Tuesday, Garneau proposed to relax the foreign ownership restrictions from 25 to 49 per cent, a move he said will provide carriers with greater access to capital. However, a single investor cannot hold more than 25 per cent of the voting interests of a Canadian carrier and international carriers cannot own more than 25 per cent of a Canadian carrier.
The proposed bill would allow the Minister of Transportation to weigh in on agreements between two or more airlines traveling to, from or within Canada where they co-ordinate on details of operations — including pricing, scheduling and routes. Previously, any joint ventures between airlines have to be analyzed through the lens of the Competition Act.
Air Canada said the new rules “should facilitate the opening up of new markets by Air Canada and its joint venture partners and accelerate projects that are currently under consideration.”
Under the new rules, the minister would have to decide whether the arrangement “raises significant considerations with respect to the public interest.”
Garneau said joint ventures are something Canadian airlines are interested in pursuing.
“It can offer the Canadian traveller more choices, potentially,” he said.
Canadian National Railway Co.
The proposed bill would also amend the CN Commercialization Act to increase the maximum voting shares that can be held by one person from 15 to 25 per cent, something Garneau called “the reasonable thing” to do.
The move could open the door for more investment from Bill Gates, who is currently CN’s biggest stakeholder with 13.3 per cent of the railway’s shares through his holding company and another 2.3 per cent through the Bill and Melinda Gates Foundation.
New changes for railroads
The government also introduced new measures for the railroad industry, including mandating the installation of inward facing cameras, and a new mechanism — long haul interswitching — to provide shippers across the country access to railway.
Both CN and Canadian Pacific Ltd. (CP) commended the transport minister’s push to install inward facing cameras.
“Having the ability to use this technology in a proactive manner will allow us to prevent incidents and improve rail safety,” said CP president and chief executive Keith Creel.
CP said it is still reviewing details of the legislation, and would not provide further comment about the bill.
In a note to clients, Spracklin said the interswitching measure will not lead to rampant shifts between CN and CP, but it may make it easier for U.S. rails to access Canadian regions.
“Our initial view is that long haul interswitching may have unintended consequences with respect to investment and will give U.S. railways access to the Canadian market at regulated rates — without reciprocity,” said Luc Jobin, CN president and chief executive officer, in a statement.
Financial Post, with files from Reuters.