Canada's new visa rule contradicts flight policy

As it denies additional Entitlement to Philippine Airlines

August 2, 2009

Vancouver- Canada recently lifted the transit visa with the hope of attracting new carriers and travelers to consider Canada's struggling airports adversely hit by global recession. Already, passenger traffic at Vancouver airport is down by 14.6%.

Nationals from the Philippines, Indonesia, Thailand and Taiwan traveling with Philippine Airlines, China Airlines and Cathay Pacific Airways were made eligible to participate on the exemption program.

Foreign travelers going through Vancouver International Airport en route to or from the U.S. will no longer need a Canadian transit visa, according to a government announcement this week.

"Removing the requirement for a Canadian transit visa will make Canadian airports more attractive for international travelers going to and from the United States," Immigration Minister Jason Kenney says. "This will help airports expand their business, which will in turn have a positive impact on the local economy."

However, Its new policy of enticing airlines to consider Canada as Transit point contradicts its close door policy on opening more its skies to Asian Carriers particularly Philippine Airlines which announced reduction of flights to the western gateway due to disagreements with lease payments on the use of Air Canada's entitlement.

Canada does not have an Open Skies agreement with any Asian country. Virtually all of the Canada‘s bilateral agreements with Asian countries are restrictive, limiting which airlines should be allowed to serve particular airport pairs, how many flights should be allowed and how airfares should be regulated.

Philippine Airlines was granted additional landing rights by the Canadian government at Vancouver airport in May 30, 2008 equivalent to only 6 days a week from the previous entitlement of 4 times a week. According to the Ministry of Transport, the new ASA will provide greater market access options for airlines from both countries but so far remains restrictive.

“We have been asking the Philippine government to negotiate with Canadian government for an additional entitlement of fourteen times a week since 2005 but only two were given to us” Jaime Bautista, PAL president said.

PAL currently flies to and from Canada with seven entitlements as it borrows one flight from Air Canada, which is not utilizing its entitlements. It flies to Vancouver daily while four flights has connections to Las Vegas in the United States. However, the borrowed entitlement will end this October.

Bautista said the additional flight entitlements should allow PAL to revive its operation in Chicago and New York on a four-three split while the other three will go to San Diego, California. But since they are not permitted by the DOT to introduced new route while the FAA downgrade is in effect they are constrained to stop at Vancouver.

ACA's current dispute with PAL appears to anchor on its use of the triple seven in November that is bigger than the current A340-300 which accommodates 264 seats. Apparently, ACA is negotiating for more from what PAL is presently paying for the right to use the B777 which seats 350.

Air Canada's objection to Philippine Airlines expansion in Vancouver is very well founded. While ACA only flies to Hong-Kong, its restraint is benefiting the airline from the current capacity shortage situation on the direct flight to Manila because they route many of Air Canada passengers to/from Manila either via Seoul with its code-share partner airline Asiana, which in turn is using the B747 on the route to the Philippines as compared to Korean and Philippine Airlines A330 service, or Hong-Kong on Cathay Pacific where they have interline agreement.

The 2008 Air Services Agreement with the Philippines list seat capacity as one of the negotiating points in the Confidential Annexes and changing capacity will definitely mixed up things from the present set-up says an Air Canada employee who does not want to be identified. According to the Ministry of Transport, PAL was hoping to fly to Canada twice daily in 2010.

Meanwhile, Canada's Ministry of Transport Policy Report on Bilateral Air Services Agreement in Asia-Pacific Region which was submitted in December 2008, suggest that Canada‘s current bilateral ASA's "do not serve the economic interest of Canada by imposing constraints on the growth of Canada‘s trade, investment, tourism, logistics, education and other related industries as well as constraining growth opportunities for the air transport sector itself."

"This economic costs imposed by the restrictive bilateral ASAs are especially high in British Columbia, where the economy depends heavily on trade, investment, tourism and the export of education services to Asian countries".

Analysis on Open Sky policy with the Philippines translates in the long run with a 24% reduction in fare and 39% increase of passenger volume within one year according to the report. Its flag carrier which has 6 triple seven on order has been very vocal to make Vancouver its hub in North America as it intends to open connecting routes to San Diego, New York and Chicago soon.

With the Canadian government re-considering open skies agreement with China, South Korea and the Philippines in 2010 leading to the Vancouver Winter Olympic games, PAL's expansion plan to North America remains to be seen as it announces further deferral on the delivery of its four long haul aircraft in 2013.

The Philippines have a significant economic and social ties to British Columbia. The total trade between Canada and Philippines reached $1.2 billion in 2007 ($458 million export and $765.7 million import). 30% of Canada‘s export to Philippines goes through BC. There has been steady increase in the number of travelers from Philippines to BC over the last decade reaching 35,883 in 2006.

The bulk of PAL's flights from the Philippines to Canada are booked by overseas Filipino workers. There are 80,000 Filipinos living in Vancouver. The load factor for the flights has been over 90 percent despite the global recession. Air Canada does not have any immediate plan to use its flight entitlements to open direct flights to Manila due to the shortage of long-haul aircraft.