Government Loosens Air Canada's Maintenance Requirements

  • Changes will allow airline to move centers in three provinces
  • Minister hints he'll also re-examine foreign ownership cap

Prime Minister Justin Trudeau’s government is loosening the legal shackles on Air Canada by easing its maintenance requirements after the country’s biggest carrier agreed to buy jets from struggling manufacturer Bombardier Inc.

The changes introduced Thursday by Transport Minister Marc Garneau would alter the Air Canada Public Participation Act, a set of rules imposed when the former Crown corporation first went public three decades ago. The changes will allow Air Canada to move its maintenance centers within three provinces and change employment levels.

The government is not granting other changes previously sought by the airline in a bid to level its playing field, such as to rules that require its headquarters to be kept in Montreal and operating under the Official Languages Act. Foreign ownership limits also won’t be changed, for now.

“It is important for the Government of Canada to allow air carriers equal opportunities to compete in an evolving air sector. The changes introduced today are based on a balanced approach that will support job creation in aerospace across the country,” Garneau said in a written statement, which called the changes a modernization of the existing law.

Garneau’s decision to change the act “ring-fences and eliminates what could potentially have been a major risk factor for Air Canada,” Chris Murray, an AltaCorp Capital analyst in Toronto, said in a telephone interview. “This is a good way to eliminate what has been an issue for several years. The nature of what maintenance means has evolved over the past two decades since the act was originally written.”

Changing Times

Air Canada welcomed the “greater flexibility” Garneau’s bill provides the company, saying it is studying the proposed amendments and will make submissions to the minister after completing its review.

“Our airline industry today is very different from what it was in the 1980s, with greater domestic competition, many more foreign carriers and maintenance dynamics that have dramatically changed on a global basis,” Chief Executive Officer Calin Rovinescu said in a statement.

Air Canada “is a private sector company, owned by private sector interests, which operates in a highly competitive global industry that has undergone dramatic transformation over the past three decades,” the CEO said. “No other airline in Canada is subject to restrictions such as those imposed on Air Canada.”

Bombardier Order

Quebec agreed last month to drop a lawsuit against Air Canada over the company’s obligation to keep some of its heavy maintenance work in the province following the 2012 bankruptcy of former unit Aveos Fleet Performance Inc. The settlement was announced the day the carrier disclosed a letter of intent to buy at least 45 of Bombardier’s C Series jets and open an aircraft-maintenance “center of excellence” in Quebec starting in 2019.

Weeks after the C Series order, Air Canada agreed to settle a separate dispute with the Government of Manitoba. Under the terms of agreement, Air Canada will create a 150-employee aircraft maintenance center in the province starting in 2017 ”with the possibility of further expansion and job creation in the future.”

Garneau’s statement Thursday acknowledges the series of events, saying that the C Series purchase, aircraft maintenance deal and end of litigation “created an appropriate context to modernize the Act.” The changes to maintenance requirements must still be approved by Parliament.

Foreign Ownership

Air Canada must still overcome a legal challenge from Quebec’s largest union, which is seeking an injunction to force the company to conduct all of its heavy maintenance in the country. Quebec’s deal with the carrier doesn’t absolve Air Canada from the obligation to respect the Public Participation Act, the Quebec Federation of Labour said March 11.

Canada will probably examine raising foreign-ownership limits on the country’s airlines at a later date, Garneau told reporters outside the Ottawa legislature Thursday. While foreign owners are currently limited to a 25 percent stake, increasing the cap to at least 49 percent may foster competition in a nation “dominated” by WestJet Airlines Ltd. and Air Canada, according to a government-funded study released last month.

“There are a lot of people to consult and there are pros and cons to these things,” Garneau said. “It’s not something that one makes a decision about very quickly.”

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