A new “Passenger Bill of Rights” and other potential legislative changes affecting the Canadian airline industry

Bill C-49, the Transportation Modernization Act (the “Act”), had its 2nd reading in the House of Commons on June 19, 2017.  The Act consists of a package of amendments to the Canada Transportation Act, S.C. 1996, c. 10, as well as other pieces of legislation. However, its main focus is on the introduction of a new airline passenger bill of rights.  Other key amendments include a wider definition of “Canadian” to allow for an increase in foreign investment in air service providers, as well as provisions to promote joint ventures between air service providers while ensuring healthy competition in the industry.  Transport Canada has stated that the purpose of the legislation is to ensure a better experience for travellers while promoting transparency, system efficiency, and fairness.

Passenger Bill of Rights

Section 19 of the Act will amend the Canada Transportation Act by requiring that the Canadian Transportation Agency (“CTA”) make regulations relating to flights to, from, and within Canada.  The focus of this section is on imposing obligations on carriers to establish a compensation regime for passengers in the event of flight delay, flight cancellation, or denial of boarding.  The regulations will set out minimum standards for treatment of passengers where the inconvenience is within the carrier’s control, required for safety purposes, or due to natural phenomena or security events.  The regulations will require that all terms and conditions as well as information regarding passenger right of recourse be made available and comprehensible to passengers.

In addition, the CTA will make regulations regarding minimum compensation for lost or damaged baggage, in circumstances where the Montreal Convention or other international treaties do not apply.  The CTA must also facilitate safe transport of children aged 14 years or under by guaranteeing priority for seat changes to ensure proximity to guardians and parents, as well as provide assistance and information to passengers in the event of a tarmac delay.  Furthermore, the Minister will be able to issue directions to the CTA to establish regulations respecting any obligation of a carrier towards passengers.

The Act will also require the addition of provisions to the Canada Transportation Act to stipulate that a complaint to the CTA against a carrier concerning any obligation prescribed by the new regulations may only be filed by a person adversely affected.  Such a provision ensures that the CTA has the ability to streamline the legitimate complaints of passengers whose rights have been directly affected.

While the Act sets out the areas in which the CTA must regulate, it does not provide any specifics of what the regulations will entail.  The CTA will be consulting with industry groups, consumer rights organizations and the public and following these consultations, the regulations will be drafted to be approved by the Governor in Council.

Ownership Requirements

The Act also requires amendments to allow for an increase in foreign ownership for commercial air carriers to meet the definition of “Canadian” under Part II of the Act. The Canada Transportation Act currently defines a “Canadian” corporation as one that is controlled in fact by Canadians and where at least 75% of the voting interests are owned and controlled by Canadians. The Act amends the definition of “Canadian” to lower the threshold to allow for up to 49% of voting interests to be owned and controlled by non-Canadians, so long as no more than 25% of the voting interests are owned directly or indirectly by any single non-Canadian, or one or more non-Canadians authorized to provide an air service in any jurisdiction.  These new requirements would allow for larger foreign investment and provide more competition and choice for travellers in the Canadian air transportation sector.

Joint Ventures

The Act will also create a system of review for arrangements between two or more air service providers, as well as consequential amendments to the Competition Act, Air Canada Public Participation Act, and several other pieces of legislation.

In the event of an arrangement, a notice of a proposed arrangement shall be provided by the air service providers involved to the Minister of Transport (the “Minister”) as well as the Commissioner of Competition (the “Commissioner”), and will include information required under guidelines to be developed through consultation between the Minister and Competition Bureau.

The Commissioner will report to the Minister and all parties within 120 days regarding any competition concerns that may arise from the proposed arrangement.  The parties will also be able to propose amendments to the arrangements which must be authorized by the Minister after consultation with the Commissioner.  Furthermore, the Act makes it an indictable offense if a party proceeds with the arrangement without authorization, or is not in compliance with the terms and conditions imposed by the Minister or Commissioner, with prescribed punishments of imprisonment for up to 5 years or a fine of up to $10,000,000.

These provisions will allow for more flexibility air carriers to coordinate their business and services, creating new opportunities for Canadian travellers while ensuring that competition-based concerns are given appropriate consideration.

Next Steps

The government is aiming to have the legislation in force by 2018.