(The following article by David Ljunggren was published by Reuters.)
OTTAWA — Canada on Tuesday announced plans to tighten its grip on airlines and railway companies and said its new rules would ensure consumers benefit from as much competition as possible.
Unveiling a broad new transport strategy, Transport Minister David Collenette said the government would introduce legislation forcing domestic airlines to accept passengers with tickets issued by other companies.
He also promised a review process that would let Ottawa block mergers between either of Canada’s two national rail companies — No. 1 Canadian National Railway Co. and Canadian Pacific Railway Co — and their U.S. counterparts.
The announcement prompted howls of protest from industry groups concerned at what they saw as government efforts to regulate the transport sector.
“This legislation just totally misses the main issue,” Cliff Mackay, president of the Air Transport Association of Canada, said in a statement that accused Ottawa of tinkering with regulation and ignoring problems caused by rising costs.
“We have been begging the government to address the threats which are looming over the industry, and instead we’re getting more power for bureaucrats to micro-manage the sector.”
Collenette said the transport system should remain largely market driven, with Ottawa intervening only as a last resort, and he promised concrete steps to preserve and improve competition in the transportation sector.
Under the proposals, Air Canada, the country’s dominant carrier, and low-cost rival WestJet Airlines Ltd. would have to accept passengers with tickets issued by any other carrier in Canada, a practice called interlining.
Air Canada, the world’s No. 11 carrier, reserved judgement on Collenette’s overall strategies, but blasted the interlining proposal, saying it would amount to a step back in the regulation of Canada’s airline sector.
“Interlining was an old business model, at a time when the industry is adopting a simpler, more efficient low cost and low fare model,” Air Canada spokeswoman Isabelle Arthur told Reuters.
Arthur said low-fare carriers such as WestJet and Air Canada’s Tango service do not have interlining because that would add to costs.
“They do not offer interline privileges because this allows for faster aircraft turnaround times, it reduces baggage and passenger handling costs,” she said.
Air Canada already has some interlining agreements, which allow which smaller carriers to take advantage of larger airlines’ networks. But WestJet has chosen not to have them.
“This means the big guys can’t block the little guys from selling through tickets on the larger carriers’ networks,” said Collenette. If there was an impasse, the federal Canadian Transportation Agency (CTA) would adjudicate.
Asked whether a small carrier could apply to the CTA to force a rival to accept an interlining deal, Collenette said: “This does open up that possibility…I would assume that as they (WestJet) become more of a national carrier they will have to accommodate…the needs of other carriers.”
WestJet officials were not immediately available for comment.
The strategy document made clear that Ottawa would not contemplate raising the maximum foreign ownership stake in Canadian airlines to 49 percent from the current 25 percent.
Collenette said Ottawa was introducing a review process for the rail sector because it wanted the same blocking powers as those in the United States, where regulators barred a proposed merger between Canadian National and U.S.-based Burlington Northern Santa Fe railroad in 2000.
“This allows the government of Canada the authority to say ‘Yes’ or ‘No’…I foresee further consolidation (in the rail industry) in the future,” he said.
Collenette also said he would try to boost the fortunes of national passenger rail carrier VIA Rail by giving it a special federal statute that would make it easier for the corporation to raise money on capital markets to pay for improvements.
The Railway Association of Canada said its members were “very concerned about signs of re-regulatory measures being proposed.” The Shipping Federation of Canada accused Collenette of ignoring the needs of marine transport.
(With additional reporting by Randall Palmer in Ottawa)