UPDATE 2-Canada and try to boost competition and cut fares to allow more foreign investment in airlines

MONTREAL, Nov 3 (Reuters) – Canada will lift the limit for foreign investment in Canadian airlines to 49 percent from 25 percent to try to boost competition and cut fares, Transport Minister Marc Garneau said on Thursday.

Consumer advocates have long complained that high fares and airport fees make Canada a comparatively expensive country for air travel.

Garneau emphasized that no foreign individual or single group of international investors could own over  25 percent of a Canadian airline.

He said in a speech on the future of transportation policy,”We will set the conditions for lower fares and increased competition by changing the rules on ownership in Canada’s passenger airline industry” .

He said the move would allow for the creation of new, low-cost airlines.

Air Canada, the country’s largest carrier, was not immediately available for comment.

Lifting the investment threshold was one of the main recommendations in a review of transportation laws that Garneau received in February.

A transportation analyst said the announcement might be might be somewhat negative to Air Canada and rival carrier WestJet because of possible competition from upstart rivals.

Because of high operating costs in Canada, though, loosening regulations on foreign investment would not necessarily create a flood of competitors, said the analyst, who requested anonymity because he was not authorized to talk to the media.

“Their ability to establish sustainable business plans is very challenging,” he said.

Porter Airlines Chief Executive Officer Robert Deluce said the measures would have little impact because his privately held company had solid finances.

“For any (people) who are out there starting a new airline, it maybe gives them more opportunities,” he said on the sidelines of the event where Garneau spoke. “It’s a good positive step forwards.”

Garneau said that although the new rules were not yet in place he would allow two smaller airlines, Canada Jetlines and Enerjet, to seek additional foreign investment immediately.

Ottawa will introduce legislation next year to address the cap on revenue that Canadian National Railway Co and Canadian Pacific Railway Ltd earn hauling western grain, he said.

And in the wake of an oil-by-rail disaster that killed 47 people in Quebec in 2013, the government plans to oblige railways to install video and audio recorders in the cabs of locomotives.

 

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