Canada Gazette, Part I, Volume 152, Number 51: Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations

December 22, 2018

Statutory authority

Canada Transportation Act

Sponsoring agency

Canadian Transportation Agency

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Air Transportation Regulations (ATR) were registered on December 31, 1987, pursuant to the National Transportation Act, 1987 (which was replaced in 1996 by the Canada Transportation Act [Act]). While there have been some amendments and additions made to the ATR over the years, there are areas that are in need of updating in order to reflect changes in the domestic and international aviation industry.

Amendments to the ATR are required to

1. Modernize air insurance provisions;
2. Amend charter provisions to reflect market realities;
3. Clarify code-sharing and wet-leasing activities and amend provisions to reduce burden;
4. Reduce burden on licensed operators; and
5. Address other housekeeping items.

Background

On May 26, 2016, the Canadian Transportation Agency (CTA) launched its Regulatory Modernization Initiative (RMI) to review and modernize the full suite of regulations it administers to keep pace with changes in business models, user expectations, and best practices in the regulatory field.

The RMI encompasses the following four phases: accessible transportation, air transportation, air passenger protection, and rail transportation. Updating the ATR is the main focus of the air transportation phase of the RMI.

The ATR set out the criteria that air carriers must meet regarding the carriage of passengers and/or cargo by air, with respect to the issuance of domestic and international licences, the operation of transborder and international charters, the information that licence holders shall include in their tariffs, the content of service schedules, and terms and conditions of carriage of persons with a disability.

The CTA undertook a "stock-taking" exercise, through which it identified areas of the ATR that could be modernized, clarified and streamlined. These issues, which are grouped here under five themes, were selected based on the analysis and expertise of officials. The CTA then launched consultations with industry and the public to seek views on how best to address these particular issues. Participants were also invited to suggest further ATR-related issues to be addressed. The CTA had also previously consulted on the proposals to reduce burden for licensed operators (No. 4) and address other housekeeping items (No. 5) in 2010. These proposals were published in the Canada Gazette, Part I, on April 2, 2011, and were the subject of a 30-day comment period.

1. Modernize air insurance provisions

(a) Minimum levels of insurance

The ATR require that carriers hold liability insurance in order to operate an international or domestic service. The minimum passenger and public liability insurance coverage requirements found in the ATR have remained unchanged at $300,000 for over 30 years and have been eroded by inflation. In most cases, industry insurance coverage standards have evolved beyond the minimum levels of coverage found in the ATR. In addition, the ATR minimum passenger and public liability insurance coverage requirements are not aligned with comparable jurisdictions (European Union and Australia). To ensure that there is better alignment and that Canadians are protected to the same degree as when the insurance requirements were first established, it would be necessary to update the minimum liability insurance requirements in the ATR.

(b) Alignment with the Montreal Convention

For international travel, limits of liability are subject to the Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention). The Montreal Convention establishes liability insurance coverage limits for injuries sustained by passengers during embarkation or disembarkation of the aircraft, while the wording of the ATR creates ambiguity as to whether insurance must cover embarkation and disembarkation. To eliminate this ambiguity and align with the Montreal Convention, the ATR must be changed to specify that carrier liability insurance must cover injuries sustained by passengers during embarkation and disembarkation.

(c) Exclusions

Chemical drift can result from aerial spreading, or spraying of pesticides, from an aircraft. The ATR currently include chemical drift on a list of incidents that can be excluded from a carrier's insurance coverage. However, given that aerial spreading is not an air service to which the Act or the ATR apply, it is unnecessary for the regulations to allow this exclusion.

The minimum public liability insurance requirements in the ATR cover all persons not on board the aircraft who are injured or killed, excluding the air carrier's employees, as employees are entitled to workers' compensation when working in the course of their duties. However, there could be a coverage gap for employees who are not acting in the course of their duties when involved in an accident not on board an aircraft. In these situations, employees may not be entitled to workers' compensation, and the current ATR minimum public liability insurance requirements would not cover them. Amending the ATR to remove this exclusion would provide public liability insurance coverage to employees who are not acting in the course of their duties and not on board an aircraft.

(d) Alignment of terms

Certain sections of the ATR refer to "third party liability insurance coverage," which is not a defined term in the regulations, whereas other sections refer to "public liability," which is a defined term and is interpreted as having the same meaning as "third party liability." To ensure clarity, consistent terminology should be adopted in the ATR.

(e) Insurance provisions related to aircraft with flight crew arrangements

The current ATR insurance provisions for arrangements where one air carrier (the contracting carrier) uses the aircraft and crew of another air carrier (the operating carrier) do not entirely align with the CTA's current policy and guidance in this area.

The ATR require that the contracting carrier hold liability insurance, either through its own insurance policy or by being named as an additional insured under the operating carrier's policy.

To ensure that, in these cases, all liability related to the operation of the flight is assumed by the operating carrier, the ATR require that when the contracting carrier is an additional insured under the operating carrier's policy, there must be a written agreement that the operating carrier will indemnify or hold harmless the contracting carrier for passenger and public liability.

To codify the CTA's current policy and guidance in this area, a further requirement would have to be added to the ATR to specify that additional insurance afforded to the contracting carrier must be primary and without right of contribution from any other insurance policy that may be held by the contracting air carrier. This requirement would formally prohibit the insurance coverage of the contracting air carrier from paying and help avoid confusion and protracted litigation regarding which insurance policy would apply.

2. Amend charter provisions to reflect market realities

(a) Charter types

Charter transportation is a service in which a flight is operated under a contract by an individual or by an entity that resells transportation. Charter flights are not offered or sold to individual passengers by an airline as part of a regular schedule. Part I of the ATR defines eight different charter types originating in Canada, some of which no longer exist and many of which appear to be out of sync with today's modern aviation industry. For example, Common Purpose charters for attendance of educational programs or events have not been used in decades. Taking into account today's market realities, whereby carriers have been evolving their service offerings and marketing on an ongoing basis, it could be more effective from a regulatory perspective to consolidate the list of charter types in the ATR based on whether they are for resaleable or non-resaleable passenger transportation originating in Canada, passenger transportation originating in a foreign country, or goods transportation, and remove mention of obsolete terms.

(b) Charter provisions

(i) Originating in Canada

A number of provisions regarding charters originating in Canada found in the ATR (such as minimum advance booking, tour packages, maximum number of points served, minimum stay, minimum price per seat and prohibition of one-way travel) were established in order to strictly regulate competition between international scheduled services provided by Canadian air carriers and charterers. In recent years, the international air transportation industry has evolved to a more liberalized environment that provides for a greater variety and number of services in the marketplace, which are not accounted for in the ATR. This has led to the CTA issuing several exemptions. ATR charter provisions would have to be made to reflect this gradual industry shift.

To better reflect the evolution of charter activities, the ATR could be updated to raise the limit placed on the number of aircraft charterers from one to three, for non-resaleable passenger charters. Doing so would provide greater flexibility for air carriers to market their products, while maintaining a distinction between charter and scheduled services.

The goods charter regime has also become more liberalized, with freight forwarders and other organizations tending to consolidate cargo shipments from several sources and obtaining payment for traffic carried at a toll per unit. Currently, the ATR does not allow for this type of operation and the CTA has issued a number of exemptions regarding this issue to reflect the fact that this has become a standard industry practice serving the needs of consumers. Adjusting the ATR to allow this type of operation would bring the regulation in line with current industry practices.

(ii) Originating in a foreign country

The current regulatory requirements for charters originating outside of Canada (charters originating in a foreign country) were established to create a regime in which the country of origin rules for charter traffic can be routinely accepted, consistent with international agreements and the CTA's jurisdiction. This was established to avoid the extraterritorial application of Canadian laws to transportation services arranged and sold in a foreign country. Currently, the ATR provides two distinct processes for the acceptance of charters originating in a foreign country: transborder charters (i.e. a one-way or return charter that originates in Canada and is operated between Canada and concludes in the United States) and charter flights originating in a foreign country (non U.S.). These two processes could be streamlined to focus on certain basic requirements common to both.

The CTA has also identified a number of ATR requirements for charters originating in a foreign country that should be removed in order to reflect market realities. For example, requirements such as minimum advance booking before each flight, the obligation for passengers to purchase return transportation, and a minimum period of stay in a foreign country prior to return were designed to steer the non-discretionary traveller to use scheduled services. In today's liberalized, open-skies environment, these constraints appear to no longer respond to the needs of the travelling public and impede the efficient operation of charter services without a true benefit for the operators of scheduled services.

(iii) Permit and notification filings

Replacing the existing ATR provisions requiring an application for and the receipt of a charter permit with a requirement to provide advance notification to the CTA at least two business days prior to each flight or the first of a series of flights would respond to changes in market practices regarding charters. This would retain the flow of information for regulatory oversight and monitoring, while reducing the administrative burden of a charter permit issuance process.

3. Clarify code-sharing and wet-leasing activities and amend provisions to reduce burden

(a) Distinguish code-sharing and wet-leasing

The ATR impose the same requirements on all arrangements under which a licensee proposes to provide a service by using all or part of an aircraft with flight crew provided by another person. This broad description captures commercial arrangements such as code-sharing ^{footnote 1} as well as wet-leasing ^{footnote 2}; however, it does not distinguish between the two.

(b) Amend approval requirements for code-sharing and wet-leasing

The ATR currently require that licensed air carriers seek prior approval from the CTA for code-sharing and wet-leasing arrangements, and submit their applications at least 45 days before the first flight. These provisions were introduced in 1996 and codified approval requirements that had existed since the 1980s. They reflect the expectation of the era that licensed carriers would provide the services, equipment, and facilities necessary for all their transportation services, operate those services under their own name and disclose the identity of the aircraft operator. The requirement also provided a means to verify that commercial relationships such as code-sharing were consistent with negotiated bilateral agreements.

Today, all but a few bilateral agreements now include code-sharing rights, and the industry's use of these arrangements has become a standard way of providing air services among licensed air carriers. To the extent that bilateral agreements allow for such arrangements, a simple notification of code-share agreement to the CTA would allow for continued oversight while lessening the burden imposed by the CTA's existing application and subsequent determination process. A change to the ATR language would be necessary to allow this process change for code-sharing arrangements.

The 2014 Wet-Lease Policy has made it clearer when applications involving longer-term wet-leasing arrangements between a Canadian carrier and a foreign company will and will not be approved. There is therefore less need today than there was in the past to undertake broad consultations on those applications. In addition, the CTA has shifted from paper to electronic submission of applications. These factors serve to reduce the minimum filing time for wet-leasing arrangements. For this reason, reducing the timeline set in the ATR for approving wet-lease applications would be justified.

Currently, the ATR specifies that two Canadian licensed air carriers that wish to enter into arrangements for either a domestic service or a service between Canada and the United States for the provision of aircraft with flight crew can do so without seeking the approval of the CTA.

Expanding this ATR provision to include arrangements for services between Canada and the United States when such service is operated by licensed air carriers that are either Canadian or U.S. carriers or both would ensure that the regulatory requirements on U.S. air carriers are not more burdensome than those imposed on Canadian air carriers, consistent with the Canada-United States Air Transport Agreement signed in 2007. Furthermore, this step could facilitate the introduction of more competitive air services for Canadian travellers.

4. Reduce burden for licensed operators

The CTA has identified several ATR requirements that are unduly burdensome and should be removed.

Currently, the ATR call for carriers licensed by the CTA to offer air services to make annual written declarations that they continue to have all of the qualifications needed to keep their licences valid. Removing this requirement would not result in the failure of licence holders to have all of the necessary qualifications. In addition, there are other existing provisions that ensure that licence holders continue to meet the requirements of the licence, such as section 82 of the Act, which requires licence holders to notify the CTA of changes that would affect their prescribed liability insurance coverage or their status as Canadians. Furthermore, the CTA would retain its powers to require carriers to provide this information during periodic air inspections or upon request.

Removing the requirement for licensees to meet the financial requirements when applying for a licence to operate a domestic air service using medium aircraft when they already hold a licence to operate a domestic air service using a large aircraft would support a reduction in regulatory burden, as licensees would not be required to meet the duplicative financial requirements found in the existing ATR.

Currently, if a licensee wishes to paint a name or logo on their aircraft, other than a name included on their licences, they must apply to the CTA for an exemption. Painting of an aircraft is a business decision, and the amendments to the ATR clearly state that the ATR is not contravened by advertising on the aircraft.

5. Other housekeeping items

A number of measures to address the following ATR housekeeping issues have been identified and are included in this regulatory proposal:

• Schedule XIII, which provides a form for service schedule filing advice, should be removed, as it is unnecessary and creates ambiguity. All information that carriers are required to submit in their filing is described in subsection 140(3) of the Regulations.
• The list of air services excluded from the application of Part 2 of the Act should be updated to remove from the list those that are already excluded through recent amendments to the Act and those that do not qualify as "air services" (i.e. those that are not for the transportation of goods, persons or both). These include rocket launching, parachute jumping services, glider tower services, aerial advertising services, aerial reconnaissance services, aerial spreading services, aerial sightseeing services, aerial weather-altering services, aerial survey services, and aerial firefighting services.
• Sections 21 to 39 of the proposed Regulations address changes to the schedule of the Canadian Transportation Agency Designated Provisions Regulations (DPR).
  • Consequential amendments should be made to the ATR-related components of the DPR to reflect the proposed changes to the ATR.
  • The CTA has identified eight provisions that had previously not been designated in the DPR, but should be to ensure consistency with other similar provisions. For example, the requirement that tariffs for international operations include terms and conditions of carriage on certain matters should be designated, consistent with the same requirement applicable to domestic tariffs.
  • The maximum amount payable for certain provisions of the Act and the ATR should be updated in order to better reflect the impact of non-compliance. For example, it is proposed that the maximum penalty for applying terms and conditions that are not set out in a tariff or for not publishing or making a tariff available to the public be increased from $10,000 to $25,000 for a corporation and from $2,000 to $5,000 for an individual.
• Certain regulatory language and format should be updated to conform to established standards (i.e. consistency between English and French regulatory texts, heading changes, removal of redundant and outdated text, and clarification of provisions and definitions).

Objectives

Canada's National Transportation Policy, as declared in section 5 of the Act, states that "a competitive, economic and efficient national transportation system that meets the highest practicable safety and security standards and contributes to a sustainable environment and makes the best use of all modes of transportation at the lowest total cost is essential to serve the needs of its users, advance the well-being of Canadians and enable competitiveness and economic growth in both urban and rural areas throughout Canada." The Act indicates that these objectives are met when

• (a) competition and market forces, both within and among the various modes of transportation, are the prime agents in providing viable and effective transportation services;
• (b) regulation and strategic public intervention are used to achieve economic, safety, security, environmental or social outcomes that cannot be achieved satisfactorily by competition and market forces and do not unduly favour, or reduce the inherent advantages of, any particular mode of transportation;
• (c) rates and conditions do not constitute an undue obstacle to the movement of traffic within Canada or to the export of goods from Canada;
• (d) the transportation system is accessible without undue obstacle to the mobility of persons, including persons with disabilities; and
• (e) governments and the private sector work together for an integrated transportation system.

In accordance with the National Transportation Policy, the intent of the proposed amendments to the ATR is to ensure that industry's regulatory obligations are clear, predictable and relevant to a range of existing and emerging business practices, that the demands associated with compliance are only as high as necessary to achieve the purposes of the regulations and that the efficient and effective identification and correction of instances of non-compliance is facilitated.

Modernizing the air insurance provisions would help advance the well-being of Canadian passengers travelling by air and the members of the Canadian public by ensuring that all Canadians are afforded access to the same level of passenger and public liability insurance coverage that was provided for when the current amounts were established.

Amending charter provisions found in the ATR would create a regulatory regime that would better reflect a more liberalized international charter industry. The international charter market has changed immensely and now provides a greater variety and number of services. The ATR have not adjusted to these new market forces, and it is expected that the proposed changes to the ATR would help to support a reduction of the regulatory burden and administrative costs to licensees, while continuing to provide sufficient regulation to ensure public policy objectives are met.

Clarifying code-sharing and wet-leasing activities and amending provisions to reduce the burden would support viable and effective transportation services by allowing for a clear understanding of what services are being provided. The move to notification for code-sharing arrangements and a reduction to the timeline for wet-lease applications would allow for timelier introduction of new air services and could benefit both air carriers and the travelling public.

Description

The proposed amendments were developed pursuant to the authority found in the Act; in the context of the current operating environment in the air industry; and by taking into consideration the views of, and the impacts on, domestic and international scheduled and non-scheduled licensed air carriers, insurance brokers and underwriters, and the travelling public.

1. Modernize air insurance provisions

• (a) Index the minimum passenger and public liability coverage to inflation [based on the Statistics Canada published consumer price index (CPI)], from May 1983 to the date the proposed amendments come into force, and update the indexed amount for inflation every five years. The proposed amendments would specify that the increase may be implemented over a two-year period.
• (b) State that the operation of an air service includes embarkation and disembarkation within the meaning of the Montreal Convention.
• (c) Require that the minimum passenger and public liability insurance requirements found in the ATR cover all persons not on board the aircraft who are injured or killed.
• (d) Remove the exclusion in the ATR in respect of chemical drift.
• (e) Amend the ATR to replace the term "public liability" with "third party liability" throughout the ATR.
• (f) Amend the ATR to require that the contracting air carrier be named as primary insured and without right of contribution from any other insurance policy that may be held by the contracting air carrier.

2. Amend charter provisions to reflect market realities

• (a) Amend the ATR so that four charter types (foreign originating passenger, passenger resaleable, passenger non-resaleable and goods charters) would remain.
• (b) Eliminate certain restrictions found in the ATR for charters originating in Canada. These provisions include elements such as minimum advance booking, tour packages, maximum number of points served, minimum stay, minimum price per seat and prohibition of one-way travel.
• (c) Update the ATR to remove the restriction for non-resaleable passenger charters that no more than one charterer be entitled to charter the aircraft and raise the limit to up to three charterers.
• (d) Amend the ATR to allow for goods charters originating in Canada to consolidate cargo shipments from several sources and to obtain payment for traffic carried at a toll per unit.
• (e) Amend the ATR so that all restrictions for foreign origin charters are removed from the ATR, with the exception of the requirements that air carriers have a licence to provide the non-scheduled charter service under the charter, that a charterer is in place, and that no traffic originating in Canada be transported without also meeting the requirements applicable to charters originating in Canada.
• f) Replace existing requirements for the application and receipt of a charter permit with an advance notification within two business days of each flight (except in the case of charter flights originating in Canada for which advance payment protection is presently required).

3. Clarify code-sharing and wet-leasing activities and amend provisions to reduce burden

• (a) Amend the ATR so that code-sharing and wet-leasing arrangements be distinguished using descriptions of the activity. This would make clear the difference between two very different commercial activities.
• (b) To the extent that bilateral agreements allow for such arrangements, amend the ATR to allow applicants for code-share arrangements to notify the CTA five business days prior to the first flight, when bilateral agreements allow for such arrangements.
• (c) Amend the ATR to reduce the timeline for wet-lease applications from 45 to 15 business days.
• (d) Extend permission to enter into provision of aircraft with flight crew arrangements without seeking CTA approval to include arrangements between two citizens of the United States who are both licensees, and also between a Canadian and a U.S. citizen who are both licensees, for air services between Canada and the United States.

4. Reduce burden for licensed operators

• (a) Amend the ATR to remove the requirement for licensees to file an annual declaration, as this would relieve the administrative burden on licensees.
• (b) Remove the requirement for domestic licensees to meet financial requirements when applying for a licence to operate a domestic air service using medium aircraft when they already hold a licence using large aircraft.
• (c) Remove the restriction regarding advertising on the aircraft for both domestic and international licensees.

5. Other housekeeping items

• (a) Update regulatory language and style to conform to established standards (i.e. consistency between English and French regulatory texts, heading changes, removal of redundant and outdated text, and clarification of provisions and definitions).
• (b) Update the ATR to enable the electronic filing of tariffs.
• (c) Make consequential amendments to the schedule of the DPR to reflect proposed ATR changes. Ensure alignment between provisions that are similar in nature by newly designating eight provisions under the DPR and increasing the maximum payable amounts for certain existing designated provisions.
• (d) Remove Schedule XIII (Filing Advice).
• (e) Amend the ATR to remove services that are already excluded through recent amendments to the Act or that do not qualify as air services (because they are not for the transportation of goods, persons or both), such as rocket launching, aerial advertising services, aerial reconnaissance services, aerial spreading services and aerial weather-altering services.
• (f) Amend the application section of Part V to reflect the changes being made to charter provisions through this regulatory proposal.
• (g) Remove references in Part V to sections of the ATR that are being repealed through this regulatory proposal.

"One-for-One" Rule

The regulatory proposal is considered an "OUT" under the "One-for-One" Rule because it is estimated that a total of $28,152 (annualized average in 2012 dollars over a 10-year period) in administrative burden costs would be saved for the airline industry once the amendments to the ATR are in effect. Calculations of the administrative burden costs are based on information provided by the airline industry.

It is expected that the proposed amendments to reduce burden for licensees would result in annualized average administrative cost savings of $28,152 (in 2012 constant dollars) for all sizes of businesses. The annualized average administrative cost savings per business would be $51 (in 2012 constant dollars).

Small business lens

The small business lens applies since the proposed amendments would impose additional costs on small businesses. Specifically, the proposed amendments would impact approximately 163 small federally licensed air carriers, and the estimated present value of total industry costs over the 10-year period would be approximately $1,755,888 (in 2012 dollars).

Additional costs to small businesses arise from direct compliance with the proposed changes to the minimum amount of passenger and public liability insurance provisions and the ensuing increase in insurance premiums. Part of the costs are offset by savings from lesser administrative burden on small businesses due to proposed changes to code-sharing arrangements. Currently, the majority of air carriers carry liability insurance far beyond the required level and are therefore already compliant with the proposed amendments. However, licensees operating small aircraft often maintain insurance levels that are close to the current minimum insurance coverage requirement.

Cost calculations are based on industry estimates obtained via consultation. The following assumptions were made:

• The number of employees applied to classify businesses by size, in accordance with Treasury Board Secretariat (TBS) specifications. ^{footnote 3}
• Businesses were grouped into two categories according to the TBS classifications of small and medium/large businesses per number of employees. Small businesses were considered businesses having fewer than 100 employees, while medium/large businesses were considered those having over 100 employees.
• A 3.1% growth in the industry is assumed (Transportation in Canada 2017).
• A 7% discount rate is applied for present value costs.
• The aircraft count for Canada is sourced from internal data from the CTA. It does not contain figures for aircraft covered by fleet insurance. These aircraft generally belong to large carriers that usually carry far in excess of the minimum insurance requirements. As a result, they are assumed to be unaffected by the change in regulation.
• Aircraft are judged on meeting the minimum passenger insurance based on seats insured, not seating capacity.
• There is no consideration for the risk profile of the carrier. All carriers are assumed to have a "neutral" risk profile.
• Costs have been estimated using the TBS cost calculator.
• All the results were expressed in 2012 dollar value.

Based on these assumptions and this information, the estimated annualized increase in total industry costs is $249,999 (in 2012 dollars) for all affected small businesses and the average cost per small business is $1,534 (in 2012 dollars).

The CTA proposes a flexible option by providing a two-year transitional implementation period following the coming into force of the amendment to allow licensees who are holding close to the minimum levels of insurance time to adapt to the proposed amendment.

	Flexible Option (Preferred Option)		Initial Option
Short description	Increase minimum insurance coverage on public and passenger liability effective 2020.		Increase minimum insurance coverage on public and passenger liability effective 2018.
Number of small businesses impacted	163		163
	Annualized Average ($2012)	Present Value ($2012)	Annualized Average ($2012)	Present Value ($2012)
Compliance costs (itemize if appropriate)	289,273	2,031,732	360,432	2,531,521
Administrative costs	(39,274)	(275,844)	(39,274)	(275,844)
Total costs (all small businesses)	249,999	1,755,888	320,708	2,255,677
Total costs per small business	1,534	10,772	1,968	13,839
Risk considerations	–		–

Consultation

On December 19, 2016, the CTA launched consultations on the modernization of the ATR. It issued a discussion paper that focused on key issues related to charters and advanced payment protection, licensing, monitoring and enforcement. In September 2017, the CTA provided stakeholders and the public with three additional discussion papers. The CTA discussion papers provided key contextual information and posed questions on how to address the identified issues. The CTA also held targeted consultation meetings with stakeholders.

At the conclusion of the consultations, the CTA had received 15 formal written submissions and held 12 bilateral meetings with stakeholders. The CTA also requested comments on its current suite of guides and tools as they relate to the air sector.

The consultations indicated that there is wide support for the vast majority of the proposed regulatory amendments. Stakeholders support simplifying and modernizing the ATR and indicated that any amendments should be responsive to the evolution of the business practices and avoid the imposition of an onerous administrative burden.

The CTA also held consultations on proposals to reduce burden and address other housekeeping items in 2010; these proposals were published in the Canada Gazette, Part I, on April 2, 2011.

Modernize air insurance provisions

Industry stakeholders felt that updating the minimum insurance coverage for inflation would be excessive and would not align with other jurisdictions. Given that many medium to large aircraft licensees already carry coverage in excess of the minimum requirements, the primary concern raised was the potential burden on small aircraft licensees, who maintain coverage at or close to the minimum coverage levels. Both consumer and industry stakeholders pointed out that travelling costs would likely increase as a result of the increased premiums.

The foregoing was taken into account when developing the regulatory proposal. The proposed option provides a two-year transitional implementation period following the coming into force of the amendment to allow smaller licensees time to adapt to the proposed amendment.

Amend charter provisions to reflect market realities

There was wide support from stakeholders regarding the elimination, modernization and streamlining of regulatory requirements related to charter provisions.

Clarify code-sharing and wet-leasing activities and amend provisions to reduce burden

While the majority of stakeholders support distinguishing code-sharing and wet-leasing activities in the ATR, one stakeholder was concerned that using unduly rigid definitions to distinguish between the two could hinder flexibility. In order to not narrowly define the nature of the activity and to allow the ATR to capture future business models, a principle-based approach was developed to capture these two very distinct activities.

Regarding the changes to the approval for code-sharing and wet-leasing activities, the majority of stakeholders supported the proposed amendments.

Reduce burden for licensed operators and other housekeeping items

Stakeholders were in agreement with the proposals to reduce licensee burden and address housekeeping issues when the CTA consulted them in 2010. Key industry stakeholders were given the opportunity to express their opinions and engage in the discussion with the CTA, and the discussions were reflected in the proposals. The amendments were published in the Canada Gazette, Part I, on April 2, 2011. This publication was followed by a 30-day comment period, and no comments regarding the nature of the proposed changes were received. The regulatory package did not receive recommendation for publication in the Canada Gazette, Part II, prior to the change in government and was withdrawn.

Rationale

Proceeding with the proposed changes to the ATR would update these Regulations and help ensure that they can keep pace with changes in business models, user expectations and best practices in the regulatory field.

The provisions related to charters, code-sharing, and wet-leasing would benefit the airline industry by aligning the ATR with current industry practices and reducing administrative burden. It would also benefit the Government by streamlining internal application processes.

These regulatory changes would primarily impact four parties: air carriers, insurance companies, the CTA, and air travellers in Canada.

• Air carriers bear the cost of increased premiums and the burden of complying with the increased minimum requirements in terms of both passenger liability and public liability insurance coverage. The increase is expected to have a more significant impact on small air operators. Air carriers would also benefit from the alignment of regulations with current industry practices and a reduced administrative burden.
• Insurance companies would generate more revenue from increased premiums related to higher minimum coverage requirements, but would also have more financial exposure in the event of an incident.
• The CTA would experience a shift in internal working dynamics associated with bringing regulations in line with current industry practices. The Government would also benefit from streamlined internal application processes.
• Air travellers in Canada would benefit from insurance and financial security in the event of an incident. Indexing minimum insurance requirements to inflation would reverse erosion of this coverage and ensure that Canadians would be protected to the same degree as when minimum coverage was implemented decades ago. The resulting increased premiums could also serve as an incentive to improve safety performance as a means of avoiding the higher premiums associated with higher-risk carriers.

Implementation, enforcement and service standards

The updated regulatory requirements would come into force as soon as they are registered under the Statutory Instruments Act, with a two-year transition period for the new insurance levels. The CTA would update relevant guidance material and forms accordingly. These include guidance and forms related to air licensing for Canadian and foreign applicants, and applications for wet-leasing, code-sharing and the wide range of charter arrangements.

This proposal to update regulatory requirements would not change any compliance requirements or mechanisms to enforce the ATR. The CTA would continue to assess and approve applications and notifications required from carriers under the ATR, monitor compliance through inspections and investigations, and enforce compliance through corrective action orders and fines.

The DPR set out provisions of the ATR that should not be contravened. A contravention of one of these designated provisions is considered a violation of the Act and can be subject to a monetary penalty. The CTA may impose fines where a carrier has been found guilty of an offence as a result of contravening the ATR.

Certain ATR changes would allow the CTA to streamline its internal processes. For example, replacing charter permit applications with advance notification would mean that approval by senior officials and CTA members would not be necessary.

Contact

Caitlin Hurcomb
Team Leader
Regulatory Affairs Division
Analysis and Outreach Branch
Canadian Transportation Agency
15 Eddy Street, 19th Floor
Gatineau, Quebec
K1A 0N9
Telephone: 819-997-6667
Email: Caitlin.Hurcomb@otc-cta.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to subsection 60(1), section 61, subsections 69(1), 71(1), 73(1) and 74(1), section 86 ^{footnote a} and subsection 177(1) ^{footnote b} of the Canada Transportation Act ^{footnote c}, proposes to make the annexed Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations.

Interested persons may make representations concerning the proposed Regulations within 60 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Caitlin Hurcomb, Team Lead, Regulatory Affairs, Canadian Transportation Agency, 15 Eddy Street, Room 1919, Gatineau, Quebec K1A 0N9 (Tel.: 819-997-6667; email: Caitlin.Hurcomb@otc-cta.gc.ca).

Ottawa, December 13, 2018

Jurica Čapkun
Assistant Clerk of the Privy Council

Regulations Amending the Air Transportation Regulations and the Canadian Transportation Agency Designated Provisions Regulations

Air Transportation Regulations

1 (1) The definitions ABC/ITC, advance booking charter or ABC, Canadian charter carrier licensee, common purpose charter or CPC, courier service, CPC educational program, CPC event, door-to-door transportation, entity charter, fifth freedom, fourth freedom, inclusive tour or tour, inclusive tour charter or ITC, inclusive tour price, price per seat, public liability, third freedom, tour features, tour operator, transborder goods charter or TGC, transborder passenger charter or TPC, transborder passenger non-resaleable charter or TPNC, transborder United States charter or TUSC, transportation, United States charter carrier licensee and United States charterer in section 2 of the Air Transportation Regulations ^{footnote 4} are repealed.

(2) Section 2 of the Regulations is amended by adding the following in alphabetical order:

charter flight means a flight operated according to a charter contract for one-way or round-trip transportation of passengers or goods. (vol affrété)

goods charter or GC means a charter flight or series of charter flights that originates in or is destined to Canada and that is operated according to one or more charter contracts or arrangements to carry goods. (vol affrété de marchandises ou VAM)

passenger foreign origin charter or PFOC means a charter flight or series of charter flights that originates in a foreign country and is destined to a point in Canada and that is operated according to one or more charter contracts or arrangements for the transportation of passengers. (vol affrété de passagers en provenance de l'étranger ou VAPPE)

passenger non-resaleable charter or PNC means a charter flight or series of charter flights that originates in Canada and is destined to a point in another country, that is operated according to one or more charter contracts or arrangements and that engages an aircraft on which the passenger seating capacity is not for resale to the public. (vol affrété de passagers non revendable ou VAPNR)

passenger resaleable charter or PRC means a charter flight or series of charter flights that originates in Canada and is destined to a point in another country, that is operated according to one or more charter contracts or arrangements and that engages an aircraft on which the passenger seating capacity is chartered for resale to the public. (vol affrété de passagers revendable ou VAPR)

third party liability means legal liability of an air carrier, arising from the air carrier's operation, ownership or possession of an aircraft, for

• (a) injury to or death of persons other than the air carrier's passengers or air crew; and
• (b) damage to property other than property in the air carrier's charge. (responsabilité à l'égard des tiers)

2 Paragraphs 3(1)(a) to (g), (l), (n) and (o) of the Regulations are repealed.

3 (1) Paragraph 7(1)(a) of the Regulations is replaced by the following:

• (a) liability insurance covering injuries sustained by passengers while on board the aircraft engaged in the service or while embarking or disembarking the aircraft or death of passengers in an amount that is not less than the amount determined by multiplying $300,000 by the number of passenger seats on board the aircraft engaged in the service; and

(2) Paragraphs 7(1)(a) and (b) of the Regulations are replaced by the following:

• (a) liability insurance covering injuries sustained by passengers while on board the aircraft engaged in the service or while embarking or disembarking the aircraft or death of passengers in an amount that is not less than the amount determined by multiplying $595,000 by the number of passenger seats on board the aircraft engaged in the service; and
• (b) third party liability insurance in an amount that is not less than
  • (i) $1,985,000, where the MCTOW of the aircraft engaged in the service is not greater than 3,402 kg,
  • (ii) $3,970,000 where the MCTOW of the aircraft engaged in the service is greater than 3,402 kg but not greater than 8,165 kg, and
  • (iii) where the MCTOW of the aircraft engaged in the service is greater than 8,165 kg, an initial amount of $3,970,000 plus an amount, determined by multiplying $655 by the number of kilograms, rounded to the nearest whole number, by which the MCTOW of the aircraft exceeds 8,165 kg.

(3) Paragraph 7(3)(b) of the Regulations is repealed.

4 The Regulations are amended by adding the following after section 7:

7.1 (1) The amount set out in paragraph 7(1)(a) by which the number of passenger seats on board the aircraft is multiplied is adjusted on every 5th anniversary of the date on which this section comes into force according to the following formula rounded to the nearest $5,000:

A (B ⁄ C)

where

• A is $595,000;
• B is the Consumer Price Index for the calendar year before the year in which the adjustment is made; and
• C is the Consumer Price Index for 2017.

(2) The amount of money set out in subparagraph 7(1)(b)(i) is adjusted on every 5th anniversary of the day on which this section comes into force according to the following formula rounded to the nearest $5,000:

A (B ⁄ C)

where

• A is $1,985,000;
• B is the Consumer Price Index for the calendar year before the year in which the adjustment is made; and
• C is the Consumer Price Index for 2017.

(3) The amount of money set out in subparagraph 7(1)(b)(ii) is adjusted on every 5th anniversary of the day on which this section comes into force according to the following formula rounded to the nearest $5,000:

A (B ⁄ C)

where

• A is $3,970,000;
• B is the Consumer Price Index for the calendar year before the year in which the adjustment is made; and
• C is the Consumer Price Index for 2017.

(4) The initial amount of money set out in subparagraph 7(1)(b)(iii) is adjusted on every 5th anniversary of the day on which this section comes into force according to the following formula rounded to the nearest $5,000:

A (B ⁄ C)

where

• A is $3,970,000;
• B is the Consumer Price Index for the calendar year before the year in which the adjustment is made; and
• C is the Consumer Price Index for 2017.

(5) The amount of money set out in subparagraph 7(1)(b)(iii) by which the number of kilograms of the MCTOW of the aircraft that exceeds 8,165 kg is multiplied is adjusted on every 5th anniversary of the date on which this section comes into force according to the following formula rounded off to the nearest $5,000:

A (B ⁄ C)

where

• A is $655;
• B is the Consumer Price Index for the calendar year before the year in which the adjustment is made; and
• C is the Consumer Price Index for 2017.

7.2 For the purposes of section 7.1,

• (a) a reference to the Consumer Price Index for any 12-month period means the average of the Consumer Price Index for Canada as published by Statistics Canada under the authority of the Statistics Act for each month in that 12-month period;
• (b) if at any time the Consumer Price Index for Canada is adjusted to reflect a new time basis, a corresponding adjustment is to be made in the Consumer Price Index for any 12-month period that is used for the purpose of calculating the amounts under section 7.1; and
• (c) if at any time the Consumer Price Index for Canada is adjusted to reflect a new content basis, that adjustment does not affect the operation of section 7.1.

5 Subsection 8.1(3) of the Regulations is replaced by the following:

(3) The financial requirements set out in subsection (2) do not apply to an applicant for a licence to operate an air service using medium aircraft if, at the date of issuance or reinstatement of the licence, the applicant operates one of the following air services:

• (a) in the case of an application for a domestic licence, a service using medium or large aircraft under a scheduled or a non-scheduled international licence or large aircraft under a domestic licence; or
• (b) in the case of an application for a scheduled or a non-scheduled international licence, a service using medium or large aircraft under a scheduled or a non-scheduled international licence or medium or large aircraft under a domestic licence.

(4) The financial requirements set out in subsection (2) do not apply to an applicant for a licence to operate an air service using large aircraft if, at the date of issuance or reinstatement of the licence, the applicant operates one of the following air services:

• (a) in the case of an application for a domestic licence, a service using large aircraft under a scheduled or a non-scheduled international licence; or
• (b) in the case of an application for a scheduled or a non-scheduled international licence, a service using large aircraft under a scheduled or a non-scheduled international licence or large aircraft under a domestic licence.

6 (1) Subsection 8.2(2) of the Regulations is replaced by the following:

(2) The licensee and the person who provides all or part of an aircraft with flight crew shall apply to the Agency for the approval at least 15 business days before the first proposed flight.

(2) The portion of subsection 8.2(4) of the Regulations before paragraph (a) is replaced by the following:

(4) The licensee shall maintain liability insurance covering injuries sustained by passengers or the death of passengers and third party liability insurance coverage for an air service for which another person provides all or part of an aircraft with flight crew, at least in the amounts set out in section 7,

(3) Paragraph 8.2(4)(b) of the Regulations is replaced by the following:

• (b) subject to subsection (5), by being named as an additional insured under the policy of the other person and that policy must be primary and without right of contribution from any other insurance policy held by the licensee.

(4) Subsection 8.2(5) of the Regulations is replaced by the following:

(5) Where the licensee is named as an additional insured under the policy of the person who is providing all or part of an aircraft with flight crew, there must be a written agreement between the licensee and the person to the effect that, for all flights for which the person provides all or part of an aircraft with flight crew, the person will hold the licensee harmless from, and indemnify the licensee for, all passenger and third party liabilities while passengers or cargo transported under contract with the licensee are under the control of the person.

7 (1) Paragraph 8.3(1)(a) of the Regulations is replaced by the following:

• (a) the proposed air service is a service between Canada and the United States and both the licensee and the person who is providing all or part of the aircraft with flight crew hold a licence to operate the proposed service;
• (a.1) the proposed air service is a domestic service and the person who is providing all or part of the aircraft with flight crew holds a licence to operate the proposed service; or

(2) Paragraph 8.3(1)(b) of the Regulations is replaced by the following:

• (b) the proposed air service is an international service and a temporary and unforeseen circumstance has transpired within 72 hours before the planned departure time of a flight or the first flight of a series of flights that has forced the use of all or part of an aircraft, with flight crew, provided by another person for a period of not more than one week, and the licensee has notified the Agency of the flight or the first flight of a series of flights in accordance with subsection (2).

(3) Subsection 8.3(1) is amended by adding "or" at the end of paragraph (b) and by adding the following after paragraph (b):

• (c) the proposed air service is an international service to be provided through a commercial arrangement, including code-sharing, both the licensee and the person providing part or all of the aircraft with flight crew participate in the marketing of the service, the licensee has notified the Agency of the flight or the first flight of a series of flights in accordance with subsection (3) and the Agency has acknowledged receipt of the notification.

(4) Section 8.3 of the Regulations is amended by adding the following after subsection (2):

(3) The notification referred to in paragraph (1)(c) shall be given at least five business days before the proposed flight or the first flight of a series of proposed flights and shall contain

• (a) the name of the licensee;
• (b) a description of the arrangement;
• (c) in respect of the proposed air service,
  • (i) a statement that the appropriate licence, Canadian aviation document and the liability insurance coverage referred to in subsection 8.2(4) are in effect and that the liability insurance coverage is available for inspection by the Agency on request, and
  • (ii) the name of the operator of the aircraft;
• (d) the type of aircraft to be provided;
• (e) the points to be served;
• (f) the frequency of the service;
• (g) the period covered by the proposed air service;
• (h) the reasons why the use of a commercial arrangement is necessary.

8 Subsection 10(2) of the Regulations is repealed.

9 Subsection 15(3) of the Regulations is repealed.

10 Section 16 of the Regulations is repealed.

11 Section 18 of the Regulations is renumbered as subsection 18(1) and is amended by adding the following:

(2) The condition set out in paragraph (1)(c) does not apply to advertising put on the exterior of the aircraft.

12 Section 20 of the Regulations is replaced by the following:

20 Every licensee who holds a non-scheduled international licence may operate a charter, other than a PNC, with a person who obtains payment for the transportation of passengers and goods at a toll per unit.

13 Parts III and IV of the Regulations are replaced by the following:

PART III

International Charters

DIVISION I

General Provisions

Operation of Charter

21 Subject to this Part, no air carrier shall operate a charter unless the Agency has issued a charter permit to the air carrier, or the air carrier has been deemed to have been issued a charter permit, in respect of that charter.

22 (1) A licensee must operate a charter referred to in this Part in accordance with

• (a) the Act and these Regulations;
• (b) any terms and conditions of the non-scheduled international licence pursuant to which the charter is operated;
• (c) in the case where a charter permit is issued, any conditions of the charter permit; and
• (d) any international agreement, convention or arrangement respecting civil aviation to which Canada is a party.

(2) When determining whether the operation of a charter is contrary to any of the requirements set out in subsection (1), international reciprocity in matters of air transportation shall be taken into consideration.

Powers of the Agency

23 (1) If the licensee does not meet the requirements

• (a) with respect to an application for a charter permit that are set out in sections 28 and 35, the Agency may deny the application; and
• (b) with respect to a request for a charter authorization that are set out in subsection 38(1), the Agency may deny the request.

(2) If the operation of a charter is contrary to any of the conditions of the charter permit or any of the requirements set out in subsection 22(1), the Agency may

• (a) cancel a charter permit;
• (b) cancel a small carrier charter permit that is deemed to have been issued; and
• (c) cancel a charter authorization and may refuse to reissue any other charter authorization for a period not exceeding 12 months after the date of cancellation.

(3) If the operation of a charter is contrary to any of the requirements set out in subsection 22(1), where the provisions of this Division do not otherwise require the licensee who is operating the charter to obtain prior approval, the Agency shall require, by notice in writing, the licensee to obtain a charter permit.

(4) If the operation of a charter pursuant to a charter authorization is contrary to any of the requirements set out in subsection 22(1), the Agency shall require, by notice in writing, the licensee who is operating the charter to obtain a charter permit in accordance with section 35 in which case the charter authorization is automatically cancelled.

Direct Sales to the Public

24 No licensee shall act as a charterer in respect of a charter that originates in Canada or sell any seat or any part of the space dedicated to passengers or goods on a charter that originates in Canada directly to the public.

Carriage of Goods — Passenger Charters

25 Where a part of the bellyhold or main deck of an aircraft is not required for use pursuant to a PRC or PNC charter contract, a licensee may charter that part of the bellyhold or main deck for the carriage of goods if the goods are carried

• (a) in that part of the bellyhold or main deck of the aircraft that is not required for use pursuant to the charter contract;
• (b) pursuant to another charter contract that is in respect of only that part of the bellyhold or main deck of the aircraft; and
• (c) between the points served for the purpose of enplaning or deplaning passengers.

Unused Space on Aircraft

26 A licensee may, on an aircraft that is to be used for a charter flight, utilize any unused space on the aircraft for the transport of the licensee's own goods and personnel and the goods and personnel of another licensee if the licensee has the prior concurrence of the charterer.

Small Carrier Charter Permit

27 A licensee that proposes to operate a charter that originates in Canada or the United States with aircraft having an MCTOW of 15,900 kg or less is deemed to have been issued a small carrier charter permit by the Agency for that purpose if the licensee meets the requirements set out in subsection 22(1).

Charter Permit

28 If the Agency requires a licensee to obtain a charter permit under subsection 23(3), the licensee shall provide the Agency with a written application for a charter permit at least two working days before the proposed flight or the first flight of a series of flights that contains the following information:

• (a) the name, address, email address and telephone number of each charterer;
• (b) every airport of enplanement or point of departure and every airport of deplanement or point of destination of the charter flight and any other airport proposed to be used by the licensee;
• (c) the dates and times of departure and arrival of each charter flight;
• (d) the aircraft type, the passenger seating capacity of the aircraft and the nature, quantity and total weight of goods to be carried for each charter flight; and
• (e) any other information that the Agency considers necessary to process the charter permit application.

Notice and Post Facto Reporting

29 The following licensees that propose to operate a charter do not have to obtain a charter permit in accordance with this Part if they provide the Agency with a written notice at least two working days before the proposed charter flight or the first flight of a series of charter flights that contains the information set out in paragraphs 28(a) to (d):

• (a) a licensee that proposes to operate a PNC that is destined to a country other than the United States with aircraft having an MCTOW greater than 15,900 kg; and
• (b) a licensee that proposes to operate a PFOC that is destined to Canada other than a PFOC that originates in the United States.

30 The following licensees do not have to obtain a charter permit prior to operating a charter if they provide the Agency with a written report respecting the charter flights that were operated during the previous month within 30 days after the end of that month and that contains the information set out in paragraphs 28(a) to (d):

• (a) a licensee that operates a PNC or a GC that is destined to, or originates in, the United States with aircraft having an MCTOW greater than 15,900 kg; and
• (b) a licensee that operates a PFOC that is destined to Canada and originates in the United States with aircraft having an MCTOW greater than 15,900 kg.

Records and Inspection

31 (1) A licensee that operated a charter flight or series of charter flights shall keep evidence that the licensee has complied with the requirements of each of their charter permits including

• (a) in the case of a PRC, records respecting any advance payments received by the licensee; and
• (b) flight coupons or equivalent information in another format.

(2) The licensee shall keep the evidence for a period of one year after the date of departure of the last charter flight authorized by each charter permit.

32 A licensee shall, immediately on the request of the Agency, permit the Agency to inspect, or submit to the Agency for inspection, the evidence referred to in section 31.

Co-mingling

33 When a licensee operates a PNC that originates in Canada and is destined to a country other than the United States, the licensee shall charter with no more than 3 charterers, of which one or more may be foreign-origin charterers.

Flexible Return — Passengers

34 If a charterer has one or more charter contracts with a licensee, a passenger transported on an outbound portion under one charter contract may be returned to the passenger's point of origin under the same charter contract or under any of the other charter contracts between the charterer and the licensee.

DIVISION II

Passenger Resalable Charters

Charter Permit

35 (1) A licensee that proposes to operate a PRC or series of PRCs shall apply in writing to the Agency for a charter permit to operate the PRC or series of PRCs as soon as possible after the licensee and the charterer have signed or amended the charter contract but not less than 15 days and not more than one year before the date of the proposed PRC or, in the case of a series of PRCs, the date of the first of those charters.

(2) The application shall include

• (a) a copy of every signed and dated charter contract and any amendments made to those contracts relating to the PRC or series of PRCs;
• (b) a financial guarantee respecting the PRC or series of PRCs that is provided by a Canadian financial institution; and
• (c) a signed and witnessed statement by each charterer that certifies that the charterer is in possession of
  • (i) a copy of the financial guarantee and any amendments made to the financial guarantee; and
  • (ii) if the financial guarantee is a letter of credit, the original of the letter of credit and any amendments made to the letter of credit.

(3) The charter contract referred to in subsection (1) shall specify the following:

• (a) the aircraft type and passenger seating capacity for each charter flight;
• (b) the maximum number of seats allocated for passengers originating in Canada on each charter flight;
• (c) every airport of enplanement or point of departure and every airport of deplanement or point of destination of each charter flight;
• (d) the dates and times of departure and arrival at every point of each charter flight;
• (e) the routing of each charter flight including technical stops, if any;
• (f) the name, address, email address and telephone number of each charterer; and
• (g) the total charter price to be paid by each charterer to the licensee and the amounts of the advance payments, and the dates on which the advance payments are to be made, on the page of the charter contract that bears the signatures of both the licensee and the charterer.

(4) The charter contract referred to in subsection (1) shall include a statement by the licensee and charterer on the page of the charter contract that bears the signatures of both the licensee and the charterer stating that

• (a) the licensee will not accept any advance payment prior to the charterer having in its possession the original of a letter of credit and any amendments made to it or, in the case of any other financial guarantee, a copy of the financial guarantee and any amendments made to it; and
• (b) the financial guarantee fully protects any advance payments that the licensee receives.

(5) The dates of advance payments specified in paragraph (3)(g) shall be at least seven days before the date of each charter and shall be in accordance with the licensee's tariff in effect on the date that the charter contract is signed.

(6) Every financial guarantee referred to in paragraph (2)(b) shall specify

• (a) that any amount to which a charterer is entitled, under the charter contract, for a PRC that is not performed, be fully and promptly refunded by the Canadian financial institution that provided the financial guarantee;
• (b) that any amount refunded in accordance with paragraph (a) be deposited in a trust account in the name and for the benefit of the charterer;
• (c) that any money withdrawn from the trust account be used only for the payment of replacement air transportation or refunds to the proposed users of the PRC, either directly or through the appropriate travel agent or provincial authority;
• (d) that the financial guarantee may not be terminated or amended unless at least 45 days notice is given to the Agency by one of the parties to the financial guarantee; and
• (e) the name of the province under the laws of which the financial guarantee is to be governed and construed.

(7) The financial guarantee referred to in paragraph (2)(b) shall fully protect any advance payment in respect of the PRC or series of PRCs from the time the advance payment is received by the licensee.

(8) Notwithstanding paragraph (6)(d), a financial guarantee may be terminated or amended on less than 45 days' notice where the approval of the Agency is obtained, which approval shall be given if

• (a) the licensee files with the Agency an agreement that is signed by the parties to the financial guarantee and terminates or amends the financial guarantee on less than 45 days' notice; and
• (b) the advance payments received by the licensee will continue to be protected despite the termination or amendment.

36 The Agency shall issue a charter permit to a licensee to operate a PRC or series of PRCs if the licensee has met the requirements set out in section 35.

37 (1) Subject to section 38, no licensee shall operate a PRC or series of PRCs that use aircraft having an MCTOW greater than 15,900 kg unless the licensee

• (a) obtains a charter permit;
• (b) subject to subsection (2), notifies the Agency in writing of any amendment to the charter contract after the issuance of the charter permit by submitting to the Agency a copy of the amended charter contract at least three working days before the amendment takes effect and obtains an amended charter permit from the Agency;
• (c) files without delay with the Agency any amendment to the financial guarantee; and
• (d) notifies the Agency in writing of the cancellation of any charter flight set out in the charter contract and specifies the number of the charter permit issued.

(2) Paragraph (1)(b) does not apply to a licensee if

• (a) the licensee notifies the Agency in writing of any amendment to the charter contract prior to the departure of the charter flight and the amendment
  • (i) relates to the aircraft type used and results in a decrease in or in no change to the passenger seating capacity of the aircraft used for the charter flight, or
  • (ii) relates to the date of the charter flight, if it will be operated not more than three days before or after the original date set out in the charter contract; or
• (b) the amendment to the charter contract results in an increase in the passenger seating capacity of the aircraft used for the charter flight due to a change in the aircraft type used for the charter flight or due to any other change and the licensee submits to the Agency a copy of the amended charter contract at least three working days before the amendment takes effect.

Charter Authorization

38 (1) On request, the Agency shall issue a charter authorization to a licensee, that is valid for a period of up to one year, to operate a PRC or series of PRCs without the requirement to obtain a charter permit for the PRC or series of PRCs if the licensee

• (a) holds a financial guarantee that specifies the information required by subsection 35(6) and that meets the requirements of subsection 35(7) and files a copy of the financial guarantee with the Agency;
• (b) files with the Agency a signed and witnessed statement by each charterer that certifies that the charterer is in possession of
  • (i) a copy of the financial guarantee and any amendments made to the financial guarantee; and
  • (ii) if the financial guarantee is a letter of credit, the original of the letter of credit and any amendments made to the letter of credit;
• (c) files with the Agency proof that verifiable monitoring, compliance and disclosure systems situated in Canada have been instituted to enable the licensee, during the period of validity of the charter authorization, to ensure that
  • (i) the level of protection specified in the financial guarantee is such that all advance payments are fully protected at all times, and
  • (ii) all provisions of the financial guarantee are fully complied with.

(2) The monitoring, compliance and disclosure systems shall not be modified in any way during the period of validity of the charter authorization without the prior written approval of the Agency, which approval shall be given if the requirements set out in subparagraphs (1)(c)(i) and (ii) continue to be met.

(3) During the period of validity of the charter authorization,

• (a) the licensee shall include in every charter contract, which is in force during that period, the information and statement required under subsections 35(3) and (4);
• (b) the licensee shall, in respect of a charter contract referred to in paragraph (a), specify on the page of the charter contract that bears the signatures of both the licensee and the charterer that a charter authorization has been issued by the Agency and the period of the validity of the charter authorization;
• (c) the licensee shall provide each charterer with
  • (i) a copy of the financial guarantee and any amendments made to the financial guarantee in addition to signed documentation that establishes that the advance payments received by the licensee for each charter or series of charters are protected, or
  • (ii) if the financial guarantee is a letter of credit, the original of the letter of credit and any amendments made to the letter of credit;
• (d) the provisions of subsection 35(8) and paragraph 37(1)(c) shall apply;
• (e) the licensee shall file with the Agency a copy of all financial guarantees, other than the financial guarantees referred to in paragraph (1)(a), subsection 35(8) and paragraph 37(1)(c), prior to any advance payments being received from the charterer; and
• (f) the licensee shall, upon filing with the Agency a copy of a financial guarantee pursuant to paragraph (e), file evidence with the Agency that
  • (i) the charterer has been provided with the financial guarantee in accordance with paragraph (c), and
  • (ii) the level of protection specified in the financial guarantee is such that all advance payments are fully protected at all times.

39 (1) The licensee shall submit to the Agency in writing, within 30 days after the end of each month, a report respecting the PRC or series of PRCs that was operated with aircraft having an MCTOW greater than 15,900 kg pursuant to a charter authorization during the previous month, that sets out

• (a) the aircraft type and number of available seats for each charter flight;
• (b) every airport of enplanement or point of departure and every airport of deplanement or point of destination of each charter flight;
• (c) the dates of departure and arrival of each charter flight; and
• (d) for each charter flight, the number of Canadian-origin passengers and the number of foreign-origin passengers.

(2) At the request of the Agency, the licensee shall file with the Agency any additional information that the Agency considers necessary to determine if the licensee has fully complied with requirements set out in subsections 38(2) and (3).

14 Section 108 of the Regulations is replaced by the following:

108 This Division applies to any air carrier that operates an international service including an air carrier that operates a non-scheduled international service that picks up Canadian-origin passengers and goods but does not apply to an air carrier that operates a non-scheduled international service that only picks up foreign-origin passengers and goods.

15 Paragraph 115(1)(b) of the Regulations is replaced by the following:

• (b) where the tariff or amendment is filed at least one working day before it comes into force to publish tolls for an additional aircraft to be used in, or to cancel tolls respecting an aircraft to be withdrawn from, a non-scheduled international service, other than a service that is operated at a toll per unit of traffic; or

16 Subsection 120(1) of the Regulations is replaced by the following:

120 (1) Tariffs may be filed with the Agency in paper or electronic form.

17 Division III of Part V of the Regulations is repealed.

18 (1) The Regulations are amended by replacing "public liability" with "third party liability" in the following provisions:

• (a) the heading before item 1 of Schedule I;
• (b) items 1 and 2 of Schedule I; and
• (c) the table of Schedule I.
  

(2) Item 3 of Schedule I to the Regulations is amended by replacing "Public" with "Third Party".

19 Schedule II to the Regulations is repealed.

20 Schedule XIII to the Regulations is repealed.

Canadian Transportation Agency Designated Provisions Regulations

21 The portion of items 4 to 5 of the schedule to the Canadian Transportation Agency Designated Provisions Regulations ^{footnote 5} in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum amount Payable – Individual ($)
4	25,000	5,000
4.1	25,000	5,000
5	10,000	2,000

22 Item 6 of the schedule to the Regulations is repealed.

23 The portion of item 7 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum amount Payable – Individual ($)
7	25,000	5,000

24 The schedule to the Regulations is amended by adding the following after item 20:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
20.1	Subparagraph 8.1(2)(a)(vi)	25,000	5,000
20.2	Subparagraph 8.1(2)(a)(vii)	25,000	5,000

25 The portion of item 21 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
21	25,000	5,000

26 The schedule to the Regulations is amended by adding the following after item 22:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
22.1	Subsection 8.2(5)	25,000	5,000

27 Item 24 of the schedule to the Regulations is replaced by the following:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
24	Subsection 8.3(3)	10,000	2,000

28 The schedule to the Regulations is amended by adding the following after item 25:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
25.1	Subsection 8.5(3)	10,000	2,000

29 Item 26 of the schedule to the Regulations is repealed.

30 The portion of item 27 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum amount Payable – Individual ($)
27	10,000	2,000

31 The schedule to the Regulations is amended by adding the following after item 27:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
27.1	Subsection 14(1.1)	10,000	2,000

32 Item 28 of the schedule to the Regulations is repealed.

33 The portion of items 29 to 31 of the schedule to the Regulations in column 1 is replaced by the following:

Item	Column 1 Provision, Requirement or Condition
29	Paragraph 18(1)(a)
30	Paragraph 18(1)(b)
31	Paragraph 18(1)(c)

34 Items 33 to 72 of the schedule to the Regulations are replaced by the following:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
33	Section 21	25,000	5,000
34	Paragraph 22(1)(c)	25,000	5,000
35	Section 24	10,000	2,000
36	Subsection 31(1)	10,000	2,000
37	Subsection 31(2)	10,000	2,000
38	Section 32	10,000	2,000
39	Section 33	10,000	2,000
40	Subsection 35(7)	25,000	5,000
41	Paragraph 37(1)(a)	25,000	5,000
42	Paragraph 37(1)(b)	25,000	5,000
43	Paragraph 37(1)(c)	25,000	5,000
44	Paragraph 37(1)(d)	5,000	1,000
45	Subsection 38(2)	25,000	5,000
46	Paragraph 38(3)(a)	5,000	1,000
47	Paragraph 38(3)(b)	5,000	1,000
48	Paragraph 38(3)(c)	25,000	5,000
49	Paragraph 38(3)(e)	25,000	5,000
50	Paragraph 38(3)(f)	5,000	1,000
51	Subsection 39(1)	5,000	1,000
52	Subsection 39(2)	10,000	2,000

35 The portion of items 73 to 78 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
73	5,000	1,000
74	5,000	1,000
75	5,000	1,000
76	25,000	5,000
77	5,000	1,000
78	5,000	1,000

36 The portion of item 82 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
82	25,000	5,000

37 The portion of items 84 to 85.1 of the schedule to the Regulations in columns 2 and 3 is replaced by the following:

Item	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
84	25,000	5,000
84.1	25,000	5,000
85	10,000	2,000
85.1	25,000	5,000

38 The schedule to the Regulations is amended by adding the following after item 85.1:

Item	Column 1 Provision, Requirement or Condition	Column 2 Maximum Amount Payable – Corporation ($)	Column 3 Maximum Amount Payable – Individual ($)
85.2	Paragraph 122(a)	5,000	1,000
85.3	Paragraph 122(b)	5,000	1,000
85.4	Paragraph 122(c)	25,000	5,000

39 Items 89 to 96 of the schedule to the Regulations are repealed.

Coming into Force

40 (1) Subject to subsection (2), these Regulations come into force on the day on which they are registered under section 6 of the Statutory Instruments Act.

(2) Subsection 3(2) and section 4 come into force on the second anniversary of the day on which these Regulations are registered under section 6 of the Statutory Instruments Act.