Airline ownership rules may ease
Cooke.
Canadian air carriers have long lobbied for changes to the Canada Transportation Act, which limits foreign ownership of an airline’s voting shares to 25 per cent. But when Ottawa resisted amending the act during Air Canada’s bankruptcy protection, airline companies learned to bend like pretzels to try to increase foreign investment without breaking the rules. When Air Canada emerged from bankruptcy protection, almost 80 per cent of the shares of ACE Aviations Holdings Inc., which owns Air Canada, were held by foreigners as a result of the debt-to-equity conversion during Air Canada’s restructuring. But foreign voting shares were still limited to 25 per cent.
Lapierre’s announcement comes too late for Transat A. T., shareholders of which recently approved a new class of variablevoting shares, modelled after ACE’s, to allow more nonCanadians to invest in the company without exceeding the legal limits. The non- Canadian votes will be diluted if necessary to ensure that they never wield more than 25 per cent of Transat’s total votes. The other class of stock for Canadians will continue to have one vote per share.
“ It’s sort of a non- event for us,” said Philippe Sureau, president of distribution for Transat. “ A year ago, I would say, it was appropriate, because foreign ownership in Transat was hitting the ceiling. It would have prevented us from going through the aggravation” of creating variablevoting shares.
WestJet recently announced it will ask its shareholders in June to approve the creation of two new classes of shares to replace the common shares, following Air Canada’s and Transat’s lead. WestJet officials could not be reached for comment yesterday.
Lapierre also said he wants to expand on the 1995 Open Skies pact with the United States that increased transborder crossings. The airline industry is pushing for cabotage, which would open up the American market for Canadian airlines at the same time as opening up the Canadian market for American companies. But it’s doubtful Lapierre would go that far.
“ We’re going to proceed very prudently. The Americans haven’t made their wants known yet. Right now, it’s exploratory. We’ll see what the Americans want; then we’ll put our things on the table. But I’m not going to negotiation publicly.” And the Greater Toronto Airports Authority got a cold wakeup call when Lapierre said categorically he would not revisit the issue of airport rent. The authority, which runs the Toronto area’s Pearson International Airport, said new rules introduced by Lapierre in May hurt Toronto while aiding airports across the country. Under the new program, Pearson’s rent will hover between $ 145 million and $ 160 million for the next five to seven years, while the rest of the country’s airports see dramatic rent reductions. Pearson benefits, however, because, under the old structure, the rent was supposed to nearly triple over 20 years.
“ I think it’s a pretty good deal for them for long term because most of their financing is long term,” Lapierre said “ Obviously, it’s never enough. They can be my guest and go talk to the minister of finance, but I’ve given everything I had on this one and I’m not going to revisit it.”
Pearson officials say its unfair for Toronto to pay 63 per cent of all the airport rent paid to Ottawa, while handling 33 per cent of the air traffic. The officials say they’ll continue to lobby Ottawa for change.
“ We are continuing our campaign,” said authority president John Kaldeway. “ By and large, the Toronto- area members of parliament agree with us. Toronto was not treated fairly.”
Toronto has the support of the smaller airports across the country, said Reg Milley, president of Edmonton International Airport.
“ The majority of us have gone to the minister and the deputy minister about the Toronto situation,” Milley said. “ What happens in Toronto affects the rest of us across the country. It is the biggest airport. We all connect into Toronto. The more we can do to help them reduce costs, the better off it’s going to be for the entire industry.”