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* Watchdog warns of more accidents if changes not made
* 70 pct of aviation firms not checked in 2010-11
* Government orders action be taken to address report
By David Ljunggren
OTTAWA, April 3 (Reuters) - Canada's system for monitoring airline safety has major flaws that could result in more accidents unless improvements are made, the government's spending watchdog said on Tuesday.
Auditor General Michael Ferguson said that although the transport department's regulations call for aviation companies to be inspected every year, about 70 percent of them were not investigated in the 2010-11 fiscal year.
"Transport Canada is not adequately managing the risks associated with its civil aviation oversight," he said.
"The significant weaknesses that need to be addressed involve how the department plans, conducts, and reports on its surveillance activities," he wrote in a report.
There are more than 34,000 aircraft in Canada and a total of more than 5,000 air carriers, maintenance firms, airports and aerodromes. In 2010 more than 75 million passengers flew with the borders of Canada, the world's second largest country.
In 2009 and 2010, the total number of accidents was the lowest recorded in a 10-year span in Canada. The last serious accident occurred last August when a First Air jet crashed in the northern Arctic, killing 12 people.
Ferguson said that the International Civil Aviation Organization has forecast that the current volume of air traffic in North America could more than double by 2025.
"If nothing else changes, this increase in volume could lead to more accidents. The department recognizes that it will have to do more just to keep the accident rate per revenue-generating passenger mile traveled in Canada at current levels," he said.
Transport Minister Denis Lebel, while noting Canada's good safety record, said he had ordered his department to address the problems identified in the report.
"The department is continuously looking for ways to make the skies safer for all Canadians and agrees that there is still more that can be done to improve its administration of oversight activities," he said in a statement.
Canada moved to a new system of surveillance in 2008 that shifted the focus away from inspecting aircraft and more toward ensuring airlines were able to comply with safety rules.
This means Transport Canada has had to work out which airlines might be more at risk. Ferguson, though, found that the department was missing key information for most large air carriers, maintenance organizations and large airports.
"The problem is particularly acute with aviation companies and large airports that were not inspected in the previous year," he said.
"Without complete and reliable risk profiles to conduct risk assessments, the department may not inspect the aviation companies that present the highest risks to aviation safety."
In 2010-11, the department only examined 67 percent of the operations it had itself identified as higher risk.
Ferguson also found that Transport Canada overestimated the time inspectors had to carry out surveillance work and did not have accurate records of what the inspectors were doing.
"In the absence of such information, it is difficult for the department to develop realistic surveillance plans," he said.