US embassy cable - 05OTTAWA1374

UNCLAS OTTAWA 001374 
 
SIPDIS 
 
STATE FOR WHA/CAN - ALAN HOLST, EB/TRA - JON BYERLY 
 
STATE PASS USTR FOR SAGE CHANDLER 
 
TRANSPORTATION FOR OST/IA (EDDIE CARAZO, MARY STREET, SUSAN 
MCDERMOTT) 
 
COMMERCE FOR 4320/MAC/WH/ONIA (BASTIAN, WORD) 
 
FAA FOR LEEANN HART 
 
TSA FOR SUSAN WILLIAMS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAIR, EINV, CA, Transportation 
SUBJECT: Members of Transport Committee appear hostile to 
liberalization 
 
REF:  2004 Ottawa 3144 
 
1. On May 4 Canada's Commissioner of Competition, Sheridan 
Scott, addressed the House of Commons Standing Committee on 
Transport as part of that Committee's on-going examination 
into the liberalization of civil aviation in Canada.  Emboff 
was surprised at the extent to which MPs on the committee 
opposed liberalizing the aviation industry. 
 
2. Scott was responding to reference questions posed to the 
Competition Bureau by Transport Minister Lapierre.  The 
Bureau endorsed and presented the case for competition. 
Scott noted that the Competition Bureau supports the 
elimination of all ownership restrictions, with a good first 
step being to raise the current 25% limit on foreign 
ownership to 49%.  The Competition Bureau also supports 
"rights of establishment," i.e. allowing carriers to be 
established within Canada by foreign investors, as well as 
reciprocal Cabotage.  Scott said that the current air 
services agreement with the USA has led to important 
benefits and substantial growth.  At a minimum, she said, 
the GOC should seek "a U.S.-style open skies agreement 
including cargo co-terminalization."  Competition Bureau 
support for liberalization is not new; these policy 
prescriptions have been a consistent message from the 
Competition Bureau since 1999. 
 
3. MP's from all four parties responded with more or less 
hostile questions, and none seemed persuaded by the 
witnesses' replies. Indeed it appeared that foes of 
liberalization had won the day on shaping the MP's opinions 
on the matter. Conservative Jim Gouk asked "Can you protect 
us from another Jetsgo experience?  How will you stop 
airlines from selling tickets below cost right before they 
cease operating?" The Bloc Quebecois MP Caroline St-Hilaire 
and New Democrat Bev Desjarlais were concerned about 
potential loss of service from smaller cities and towns and 
also, asked how liberalization would help airlines that are 
already in financial difficulty.  Liberal Raymond Bonin 
posed the question "What's so wrong with having a dominant 
player?", and added, without irony "It's good for 
consumers." 
 
4. Comment: The Committee MP's apparent disdain for 
liberalization may not matter in the larger scheme of things 
since political pundits prognosticate that this Parliament 
has only about 2 weeks left to live before an election is 
called.  If an election is called, this session of 
Parliament ends, all legislation before Parliament dies, and 
all Committees disband (and no air liberalization report 
will be produced).  Nevertheless, we found the level of 
skepticism surprising; the next Transport Minister may have 
his work cut out for him persuading MPs of the virtues of 
open skies. End Comment. 
 
Dickson