Canada to ease airline joint-venture and ownership rules, bolster passenger rights

MONTREAL/OTTAWA (Reuters) - The Canadian government unveiled new rules that could help carriers form joint ventures and attract foreign investment, while bolstering passenger rights on Tuesday, lifting shares of airline stocks.

The Honourable Marc Garneau, Minister of Transport, speaks to the media while he and his cabinet take part in a two-day Liberal retreat in Calgary, Alberta, Canada January 24, 2017. REUTERS/Chris Bolin

Transport Minister Marc Garneau said he would consider approving joint ventures that allow two or more carriers to coordinate items like scheduling and pricing on certain routes, and confirmed plans announced last November to relax international ownership restrictions on Canadian air carriers, lifting investment limits to 49 percent from 25 percent.

Air Canada stock rose 5 percent, hitting a 10-year high of C$17.04 in midday trading, while shares of smaller rival WestJet Airlines Ltd were up 2 percent.

Canada aims to have the rules in place by 2018.

Air Canada said in a statement the rules would improve its access to “international investors and global capital markets,” while the joint venture changes could open new markets “and accelerate projects that are currently under consideration.”

Air Canada has recently said it is on track to complete a joint venture with Air China Ltd.

The regulatory change would give Garneau a say in the approval of airline joint ventures which are now only subject to review under the Competition Act. The change, which would take the public good into consideration, increases the odds of joint ventures being approved, RBC analyst Walter Spracklin wrote in a note.

“This should be a positive for both (airlines) as they seek to grow and expand their respective networks into new markets,” he wrote.

Spracklin also said the rules, which give major hubs like Toronto the option of buying extra services to expedite passenger screening, could boost demand for travel through Canada, a positive for airlines.

Both Air Canada and WestJet both said they welcomed new legislation that would establish clear rights for passengers.

The regulations, expected since 2016, would prevent overbooking incidents like the recent case of a United Airlines passenger being dragged off a plane in Chicago.

The rules would apply to all carriers flying in and out of Canada, and ensure ticketed passengers will not be forced off a plane because of overbooking.

“Such incidents will not be tolerated in Canada,” Garneau told reporters in Ottawa.

Garneau said the independent Canadian Transportation Agency would draw up the rules, which would create clear standards of treatment for cases like lost baggage and lengthy delays on the tarmac, while ensuring fair compensation for passengers who voluntarily give up their seats.

Reporting by Allison Lampert in Montreal and Leah Schnurr in Ottawa; Editing by Jonathan Oatis and Lisa Shumaker