Higher Foreign Ownership Levels In Canada?

Thu Oct 25, 2001 11:37 pm

This morning's Globe and Mail is reporting that Transport Minister David Collenette is removing the 15% domestic single-investor ownership limit on Air Canada. The limit was established in the legislation which led to the airline's 1989 privatisation.

The Globe's editorial board is going one step further. In an editorial titled A more available airline, the newspaper is suggesting that Canada follow the Australian example and raise the limit on foreign ownership to 49%, from the current 25%.

And why not allow outright foreign ownership? Some might raise the issue of foreign carriers buying AC to strip away its assets, such as its New York and Heathrow landing slots, and transfer them to the parent company. But that can be solved by an anti-asset-stripping clause in the legislation.

Others might say that a foreign owner might not be interested in serving smaller markets, preferring to stick to trunk routes between Vancouver, Calgary, Toronto and Montréal. But Westjet, which is in the business to make a profit just like any foreign investor would be, seems to be doing well serving small markets like Grande Prairie and Comox. And did Air Canada, in its days as a Crown Corporation assumedly in business to serve the public interest, ever fly to long-overlooked markets like Hamilton or Red Deer?

Air Canada's CEO, Robert Milton, is a Boston-born American. His predecessors, Lamar Durrett and Hollis Harris, were also Americans residing in Canada (although Durrett has reportedly applied for Canadian citizenship). Canada 3000's Angus Kinnear is a transplanted Briton. And the late Canadian Airlines was itself subject to a degree of control by American Airlines' parent company, AMR Corporation, that circumvented foreign ownership legislation and only became public knowledge during the Milton v. Schwartz takeover battle in late '99.

So, why not end the Canada's-airlines-for-Canadians charade and open the door to foreign ownership?

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