According to YYZnews, and from the Globe and Mail:
Ottawa warned airline deal may hit rivals
The Globe and Mail
(B1 - Business - Thur 10 May 2001) Keith McArthur
Air France is warning Ottawa to beware of Air Canada's proposed
partnership with Skyservice Airlines Inc., saying the deal could
"seriously undermine the survival of some airlines."
The proposed deal will hurt Air France because it has already led to
the demise of Roots Air, a Skyservice subsidiary. The French national
carrier was about to announce a deal with Roots Air to shuttle its
passengers on to their final destinations.
"Air Canada's latest move does nothing but raise more obstacles in the
way of our attempts to increase our presence and enhance competition
in the Canadian market," said Pascal Briodin, executive vice-president
for Air France Canada.
Last Thursday, the Montreal-based carrier announced that it was taking
an 85-per-cent stake in Skyservice. It will spin off a 35-per-cent
block to its investors, and retain a 50-per-cent voting share.
Roots Air was grounded over the weekend and will be transformed into a
This isn't the first time Air France has taken Air Canada to task over
its dominance in the market.
A year ago, Air France, British Airways PLC and Cathay Pacific Airways
Ltd. accused Air Canada of abusing its dominance by gouging them on
the prices it charges to connect passengers to secondary markets. At
the time, they indicated they may abandon the Canadian market.
Without Roots Air, Air France has little choice but to deal with Air
Canada when it needs to shuttle passengers on to secondary
Air France said that in addition to its corporate concerns, it is also
worried about the effects the deal will have on domestic carriers and
"Allowing Air Canada to acquire such a significant stake in Skyservice
Airlines . . . may seriously undermine the economic survival of some
"We are raising a very real issue that . . . requires the Competition
Bureau to exercise vigilance where Air Canada is concerned."
The deal has led to renewed calls on Ottawa to allow foreign airlines
to compete in Canada.
Konrad von Finkenstein, the federal Competition Commissioner, said the
government should allow 100-per-cent foreign-owned airlines in the
domestic market, so long as they use Canadian staff and do their
maintenance work here.
But that model has failed in Australia and would fail in Canada too,
according to Fred Lazar, a York University business professor.
"Open up the market tomorrow -- it's not going to make any difference.
You're not going to start seeing any U.S. carriers operating across
Canada . . . It's purely wishful thinking."
That's because foreign carriers will see that Canada isn't big enough
to support any new airlines, Mr. Lazar said.
Foreign investment in Canadian carriers is currently limited to a
25-per-cent voting stake.
Australia recently changed its rules to allow foreigners to set up
domestic airlines in that country. British billionaire Sir Richard
Branson took up the offer and set up Virgin Blue, a discount airline.
The ownership changes resulted in a price war that benefited consumers
on some routes.
But it is being blamed for the demise of Impulse Airlines, a small
domestic carrier. Mr. Lazar predicted that Virgin Blue will soon be
taken over by Qantas Airways -- bringing an end to the Australian
Mr. Lazar, who has done research for Air Canada in the past, said
Ottawa should raise foreign ownership limits to 49 per cent.
Very Interesting, although I personally do not agree with more then 15% Foreign ownership....