EU and Canada Approve Transatlantic Agreement

canada240 is reporting that the European Union has approved a new air agreement with Canada that it hopes will bolster competition and air travel, and pave the way for even greater liberalization of the airspace across the Atlantic.

Efforts to raise foreign ownership limits, however, are not expected to be ready in time for the deal's signing, despite Parliament passing the necessary amendments to the Canadian Transportation Act earlier this month.

The first phase of the air pact will allow European carriers to fly to Canada from any airport in their 27-nation bloc, and vice versa. It will replace a patchwork of bilateral agreements that were deemed to violate the EU's efforts to establish itself as a single market by its high court.

Officials drafted the new pact in December, and the first phase is expected to be signed and implemented on May 6 in Brussels.

The move follows a similar arrangement between the EU and the United States, and has been lauded by Air Canada, WestJet Airlines Ltd. and Air Transat.

The EU expects the deal to increase the number of travelers across the Atlantic by nearly 40 percent within a "few years," create 1,000 new jobs and generate about $120-million in economic activity. Roughly nine million travelers flew between Canada and the EU in 2007, making it the second-largest market, behind the United States.

The new deal comes as carriers around the globe struggle with declining demand and the worst revenue environment for 50 years, according to the International Air Transport Association, which last week increased its forecast loss for the industry to $4.7-billion for 2009.

The EU air agreement eventually aims to raise foreign ownership limits on Canadian carriers, allowing the establishment of foreign-owned domestic airlines in each other's markets—so-called right of establishment airlines—and to allow for airlines to carry passengers on to a third destination after landing in each other's market, which is currently forbidden.

Parliament passed an amendment earlier this month as part of its budget package that will raise the foreign-ownership cap on Canadian carriers to 49 percent from 25 percent. But Transport Canada has said that the regulatory framework will not be in place to do so by the May signing.

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