Emirates: A Perspective on Issues in Canadian Aviation

Abstract

Over the past two decades, countries around the world have reformed antiquated restrictions on international air service and adopted Open Skies or similar policies that have allowed markets to function, competition to flourish, fares to drop, jobs to be created and thousands of new routes to be opened. While the overall global trend has been towards opening markets to promote competition, in some cases flag carriers have successfully lobbied their governments to limit foreign competition. These flag carriers have often ignored the best interests of consumers and the overall economic well-being of their countries. Air Canada is among this group and its position has been supported by Fred Lazar, Associate Professor of Economics, Schulich School of Business, York University, Toronto. Lazar argues that Canada's denial of Emirates' requests for further access is legitimate and suggested the benefits of more Emirates services would be outweighed by negative factors, which included false accusations that Emirates might receive subsidies and might be guilty of capacity dumping in certain markets. Ignoring the pro-consumer, pro-competition, and pro-growth benefits achieved through liberalized bilateral air services agreements (ASAs), Lazar instead calls for a multilateral system that, in practice, would restrict the airline industry with heavy government regulation and invite litigation over questions of subsidies, state aids, and 'unfair' competition. These views are out of line with the increasingly interconnected global economy and would stymie Canada's economic growth. Emirates supports the reform of bilateral ASAs to achieve full market access and safeguard competition, including protections against subsidies and other practices that deny airlines a fair and equal opportunity to compete. Emirates is prepared to work toward liberalization on a multilateral basis but, given the absence of international consensus to do so, opposes efforts to delay bilateral liberalization pending the realization of a global accord. A robust debate to define subsidies is appropriate. However, such a discussion should be factual, transparent, and focus on the entire industry, including Air Canada, not on myths about a handful of air carriers promulgated by vested interests. Progress that benefits consumers, communities, and broader national economic interests will not be achieved by Lazar's model of an over-managed, over-regulated, protect-the-incumbents multilateral regime. Lazar's support for protectionist policies that favour Air Canada are no surprise given his past professional ties as advisor to ACE Aviation Holdings, the parent company to Air Canada, a fact that goes strangely unmentioned in his article. With Canada's falling competitiveness in global tourism and the increased leakage of Canadian passengers choosing to fly from US airports due to lower prices, Emirates believes increasing services would have an immediate and positive effect on the Canadian economy.