Canadian business aviation hits turbulent times
Oct. 11, 2011, Toronto - Canadian business aviation leaders are fuming over new government rules that, they say, produce precisely the opposite result of the flexibility and efficiency that corporate aircraft are supposed to deliver.
October 11, 2011 By The Financial Post
The ruling Conservatives – normally staunch advocates of private enterprise – earlier this year reversed a decade-old policy of loosening Ottawa’s involvement in aviation. Under that regime, a previous Liberal government transferred control of many airports to local authorities, set up an autonomous agency to handle air traffic control, and allowed the business aviation industry itself to decide whether a company or individual could operate an aircraft.
The new policy, implemented in April, has again put issuing private operator certificates, known as POCs, in the hands of the federal transport department. “We’ve gone full circle,” says Sam Barone, president of the Canadian Business Aviation Association (CBAA), which previously issued the POCs.
Mr Barone and others claim that operators now have to wait up to four months for their certificates, and that some are so fed up that they plan to register their aircraft across the border in the US. The government doesn’t have “either the understanding or the manpower”, says John Hopkinson, chief executive of Alberta-based John Hopkinson & Associates, the country’s biggest aircraft broker.
Mr Barone adds that “the regulatory framework may be so burdensome that it negates the benefits of business aviation”.
The association estimates that 1,000-1,100 aircraft are used for business purposes in Canada, the second highest number for any country after the US. (Transport Canada says that only about 600 aircraft are registered for business use.)
Several companies operate planes as big as Bombardier’s CRJ regional jets, seating 70-90 passengers, and the 76-seat Q400 turboprop, using them to ferry workers to remote mines and oil and gas fields. Pratt & Whitney, the aircraft engine maker with a big factory in Montreal, is among a handful of companies that operate regular services between their Canadian operations and US head offices.
Three companies dominate Canada’s charter and aircraft management market: Skyservice and Chartright, both based in Toronto; and Execaire, a subsidiary of IMP, an industrial group headquartered in Halifax, Nova Scotia.
Adam Keller, Chartright’s chief executive, says that his company’s business has rebounded sharply from the 2008-09 recession, surging by 25 per cent a year. John Hopkinson & Associates was sufficiently confident of the business outlook this summer that it bought 25 seven-passenger Cessna Citation jets.
“We thought we’d sell them at a rate of one a month,” Mr Hopkinson says. Yet, by mid-September, he had already taken orders for seven of the aircraft.
“We have a stronger economy and that generates more requirements,” Mr Hopkinson explains, citing in particular an upsurge in traffic to Fort McMurray, centre of Alberta’s oil sands industry. Furthermore, he said, east-west traffic across Canada has returned to almost pre-recession levels.
The strong Canadian dollar and low prices for used aircraft have helped pull in buyers. According to Mr Keller, a plane with a price tag of C$13m in 2005-06, when the Canadian dollar was worth less than 80 US cents, can now be picked up for C$4m-5m (including depreciation). The Canadian dollar has traded as high as US$1.06 this year, but retreated below parity as the global economic outlook darkened in September.
“I don’t think we’re actually tied to the economy,” Mr Keller says, adding that “every time they pat someone down at an airport my business goes up”.
Not everyone is quite so sanguine. Kirk Rowe, CEO of Execaire, the number-three charter operator, says: “I think we’re in turbulent times. It’s a very challenging industry.”
Mr Rowe draws a distinction between what he describes as the “ultra-rich”, who continue to buy large aircraft such as Bombardier’s Challenger 604 and the Gulfstream V, and the merely “moderately rich” who are more likely to cut back in tough times.
Execaire’s large aircraft charters and management business have grown over the past 18 months. “Everything else is bumpy,” Mr Rowe says.
Meanwhile, the government has no plans to revert to the old system of the industry issuing its own POCs. “Building on existing resources and experience, and with the support of the CBAA throughout the transition period, Transport Canada is confident in its ability to deliver the POC programme,” the department says. It plans to publish new draft regulations later this year and in 2012.
As Mr Barone sees it, the decision to end self-regulation was at least partly caused by pressure from opposition parties, which held a majority on the relevant parliamentary committee during the years when the Conservatives formed a minority government. Although the Tories won an outright majority in elections this spring, other factors also appear to be at play.
The industry’s reputation took a knock after high-profile crashes between 2007 and 2009. Two of the accidents, in Alberta and British Columbia, took a heavy toll on the senior management of an Edmonton-based family-owned engineering company.
The third crash involved a Bombardier Global Express jet landing in high winds near a golf resort in Nova Scotia. No one was seriously injured, but the incident attracted considerable publicity because the founder of Canada’s biggest coffee-shop chain, also the aircraft owner, was on board.
Explaining its new stance, the transport department says it is “committed to developing a strengthened POC programme and service standards that allow the business aviation community to operate effectively and efficiently while respecting our accountability to the Canadian public”.