Message from the Past Chair
By Madeleine C. Ménard, NAV Canada, Ottawa
Welcome to the first edition of the Air and Space Law Section newsletter, Altitudes. I hope you will find it interesting and useful.

Up in the air – A review of class proceedings involving air carriers
By Joe Fiorante, Camp Fiorante Matthews Mogerman, Vancouver
Class action legislation has been in place in Quebec now for more than three decades and for more than a decade in many of the common law provinces.

A new vector for U.S. space policy
By Indra Heed Hornsby, MacDonald, Dettwiler and Associates Ltd., Vancouver
President Obama released his "National Space Policy of the United States of America" in June 2012, a 14-page policy statement defining the objectives for the U.S. and its lead space agency NASA, as well as other key government space actors such as the Department of Defense.

Turning the Cape Town Convention into a reality: the status of Cape Town in Canada
By Auriol Marasco, Blake Cassels & Graydon LLP, Toronto
In 2004, Canada became a signatory to the Cape Town Convention on International Interests in Mobile Equipment (and the Protocol on Matters Specific to Aircraft Equipment.

Aviation law: Reflections from a veteran practitioner
By Donald H Bunker, McGill University Faculty of Law
On the occasion of my seventieth year, it is propitious that I should be asked to make this short presentation which caused me to reflect a little more deeply than I might have otherwise done.

Air passengers bill of rights - Lost in Canada, found in the U.S.
By Kenneth N. Burnett, Miller Thomson LLP, Toronto
In 2009, Mr. Malaway, an MP, introduced a Private Members' Bill C310 entitled "An Act Respecting the Rights of Air Passengers."

CBA response to Transportation Safety Board Regulations amendments
By Gaylene Schellenberg, Canadian Bar Association
In November 2011, the Canadian Bar Association's National Air and Space Law Section, with the Maritime Law and Administrative Law Sections, responded to Transportation Safety Board amendments tabled in September 2011.

Message from the Past Chair

By Madeleine C. Ménard

Welcome to the first edition of the Air and Space Law Section newsletter, Altitudes. I hope you will find it interesting and useful. We tried in this first issue to introduce topics of a wide appeal and of recent interest. We have included articles from renowned practitioners on the matters of passenger space travel, class actions, the Cape Town Convention and Passenger Rights.

The Air and Space Law Section is one of the smallest Sections of the Canadian Bar Association representing practitioners in the fields of both aviation and space law across the country. Our goals include the opportunity for Canadian lawyers to network with their peers and to provide and share information pertinent to their practice across the membership of the Canadian Bar Association. In order to grow, we need and welcome your participation. Please let the members of the Executive know your views on Air and Space law matters of interest to you. We want to hear from you.

Aviation and even space travel are fields of interest not only to aviation lawyers but also to the public at large as more and more ordinary and not so ordinary people fly and some even travel into space. All are touched by the ramifications of legal cases and changes in the law of aviation and space law.

The Section has developed relationships with other institutions for the benefit of Section members. You will notice in the new Section webpage to be released shortly links to the Air and Space Law Institute of McGill University, the Department of Transport, the American Bar Association and the Aviation Lawyers Association of Australia and New Zealand. We will also periodically post articles on the Section webpage.

The Section is looking at putting forward balanced and well thought out positions highlighting our concerns with proposed legislation and discussion papers. The practice of air and space law involves a multitude of issues, specialties and interests, and the Section includes those who represent private practitioners in the field of aviation litigation, air navigation services in-house, Department of Justice Counsel and those who otherwise work in the field of air and space law.

We have recently held a successful online professional development program pertaining to Transportation Safety Board issues titled Trouble in paradise: Access to Transportation Safety Board Evidence in Civil Law Suits: The Pursuit of Forbidden Fruit. The Section plans on organizing further programs in the next year and would welcome suggestions on topics to be discussed, particularly at the Canadian Legal Conference in Vancouver in August of 2012. We would like to personally thank Sarah McKenzie of the Canadian Bar Association, all members of the Section Executive and participants for their enthusiastic and able assistance in this program.

My term as Chair of the Section ended on August 31, 2011, and my successor, Indra Hornsby of Vancouver, is committed to carrying on with this newsletter for members.

Please stop by our Section website and if you have comments, questions, suggestions, and/or articles, please send them along to either Kenneth Burnett, Joe Fiorante or Indra Hornsby.

Stay tuned for further editions of Altitudes!

Madeleine C. Ménard is counsel at NAV Canada in Ottawa. She is the immediate Past Chair of the National Air and Space Law Section (2010-2011).

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Up in the air – A review of class proceedings involving air carriers

By Joe Fiorante

Class action legislation has been in place in Quebec now for more than three decades and for more than a decade in many of the common law provinces. While at first glance, claims against air carriers would be appear to be fertile ground for class action proceedings with a readily identifiable group of claimants in similar, if not identical, relationships with the carrier, the experience to date has been that class actions against air carriers have been few and far between. Our survey found only a small number of cases which had proceeded to certification hearings, contested or otherwise. These cases arose from a wide variety of circumstances including accidents (Air Transat Flight 236 ¹ and Air France 358 ²), an emergency landing (Plourde³), flight delay (Walton⁴), airline bumping (Koo⁵) and claims of price fixing of air cargo rates (Nutech Brands⁶). In another case, (Naval Torres⁷) all claims at common law asserted against a carrier for exposure to second smoke during the course of an international flight were struck on a pre-certification motion.

More surprising perhaps than the small number of cases is the fact that certification was achieved in only 50% of the cases. A review of these cases reveals a number of important practice points:

Class actions can be a defendant’s friend

While the practice seems to have emerged in other fields of law that defendants will automatically resist certification of a proposed class action, the same has not been true in aviation cases arising from accidents. Perhaps because of the prior experience of their counsel and insurers in handling mass claims arising from air crashes, the carriers in the two case accident cases, Air Transat and Air France, consented to certification and supported the use of class proceedings to aggregate claims into a judicially supervised mechanism to facilitate settlement. These cases illustrate one key advantage of class proceedings for both plaintiffs and defendants – reduced claims handling and claims resolution costs. In Air Transat, the court approved a total settlement of $7,650,000 for claims brought on behalf of 291 passengers who suffered various degrees of injuries when an Air Transat aircraft ran out of fuel over the Atlantic and crashed landed on an airstrip on the Azore Islands. The claims were valued using a court approved streamlined assessment procedure which cut the costs of claims assessment and management to a fraction of the costs that would have been incurred had the claims been resolved through the traditional claims adjuster/litigation model. In the end result, passengers received more than 80% of the total settlement after deduction of legal fees, case expenses and the costs of administration.

Read the fine print – The terms of the Warsaw and Montreal Convention matter!

The fine print on boarding passes and e-tickets often contain notices advising that the flight may be subject to the provisions of international conventions – usually, the Warsaw Convention or the Montreal Convention. Where they apply, the Conventions provide the exclusive law to determine carrier liability and pre-empt the application of domestic law. Hence, careful attention to the application of the Conventions is required in the framing of a class proceeding.

In both Air Transat and Air France, the claims against the carriers were centred on common issues arising under the Warsaw and Montreal Conventions. In contrast, certification was denied in Plourde, Naval Torres, and Walton, among other grounds, on the basis that the plaintiffs had failed to plead a cause of action recognized under the applicable Convention. In Plourde and Walton, the plaintiffs advanced personal injury claims, which the courts considered did not meet the definition of a compensable bodily injury under Article 17 of the Warsaw or Montreal Convention. Article 17 of the two Conventions is virtually identical and provides that the carrier is liable for bodily injury sustained in an accident.

In Plourde, claims were brought for personal injuries suffered by passengers when Skyservice Flight 5G from Montreal to Cancun Mexico caught fire and was forced to carry out an emergency, but successful, landing in Florida. Both the trial court and the Quebec Court of Appeal held that the claims being advanced for the passengers were in essence claims for pure psychological harm, unaccompanied by any form of physical injury, and were therefore not compensable under Article 17 of the Montreal Convention. In Walton, the Saskatchewan Court of Queen’s Bench held that a passenger’s claim for being confined to an aircraft in uncomfortable conditions during a ground delay could not be construed as a claim for bodily injury within the meaning of the Montreal Convention:

It must be established that a passenger sustained a “bodily injury”. In this case, there is absolutely no evidence of a “bodily injury” in any of the materials filed by the applicant, including the amended statement of claim and affidavit material.

In Naval-Torres, the Ontario Court of Justice held that all common law claims for breach of contract and negligence arising from exposure to second hand smoke during the course of a flight should be struck as the Warsaw Convention provided the exclusive remedy to a passenger who allegedly sustained a bodily injury in the course of an international flight to which the Convention applied.

More recently, in Maggisano v. Skyservice Airlines Inc., 2010 ONSC 6203, the Ontario Superior Court certified a class proceeding, by consent, for bodily injury claims under the Montreal Convention for passengers involved in a hard landing of Skyservice Flight 560 at Punta Cana in the Dominican Republic.

Commonality, commonality, commonality

A core requirement of all class proceedings legislation in Canada is that there be a readily definable class of claimants with a high degree of commonality in their legal claims. The pitfalls associated with an overly broad definition of class are illustrated by the Koo case. In Koo, the plaintiff sought to certify a class action against Canadian Airlines on behalf of passengers who were involuntarily denied boarding or “bumped” from flights. While commonality is at core of a class proceeding, the plaintiff in Koo did not confine the claim to claims of all passengers bumped from a certain flight on a given but rather sought to certify the case on behalf of all passengers who had been denied boarding by Canadian Airlines over a six year period. As a result, the Court concluded that the proposed action did not meet the requirement of raising issues which common to the defined class. The court held it would be necessary to distinguish those claims governed by the Warsaw Convention as opposed to domestic law. In addition, the court noted that if the contract between the passenger and the carrier could properly be interpreted as requiring the carrier to transport the passenger to the agreed destination with reasonable dispatch, the cases would have to be decided on the basis of the circumstances relating to each instance of bumping:

If the ticket contract is construed to obligate Canadian to use its best efforts to transport its passengers with reasonable dispatch, then a determination of whether Canadian breached that obligation in any individual case requires an examination of several factors including the reason boarding was denied, the purpose of travel, the distance to be travelled, the destination, the originally scheduled arrival time, the actual arrival time, and what alternative transportation was available and offered.

In contrast, in Picard v. Air Canada, 2011 QCCS 5186, the Quebec Superior Court, approved a class proceeding against Air Canada on the issue of whether Air Canada’s standard form tariff discriminates against handicapped and obese passengers.

Looking ahead

Despite the small number of class proceedings to date involving air carriers, it is likely that class proceedings will continue to play a significant role in the resolution of passenger claims arising from accidents and contract disputes as the settlement mechanisms available in class proceedings provide distinct advantages to both plaintiffs and defendants over conventional litigation. In contract cases, it is likely that any claims brought in the future will be narrow in scope and will focus on the interpretation of standard form, uniform provisions.

¹Joe Fiorante is a partner with Camp Fiorante Matthews Mogerman in Vancouver and a former Chair of the Air and Space Law Section.
Nunes v. Air Transat A.T. Inc., 2005 CanLII 21681 (ON S.C.)
²Abdulrahim v. Air France, 2009 CanLII 72086 (ON S.C.)
³Plourde c. Service aérien FBO Inc. (Skyservice), 2007 QCCA 739
⁴Walton v. MyTravel Canada Holdings Inc., 2006 SKQB 231, [2006] S.J. No. 373
⁵Koo v. Canadian Airlines International Ltd., 2000 BCSC 281
⁶Nutech Brands Inc. v. Air Canada, 2009 CanLII 7095 (ON S.C.)
⁷Naval-Torres v. Northwest Airlines Inc., 1998 CanLII 14916 (ON S.C.)

Joe Fiorante practices at Camp Fiorante Matthews Mogerman in Vancouver. He is an Executive Member of the National Air and Space Law Section.

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A new vector for U.S. space policy

By Indra Heed Hornsby

In contrast to the U.S.-centric, security-focused space policy of the Bush administration, the administration of U.S. President Barack Obama has a renewed emphasis on international cooperation. In addition, it has formulated new directives including a greater emphasis on the development of commercial space activities which have traditionally been the responsibility of government. The resulting potential is to take the U.S. space program and the space programs of its international partners, such as Canada, on a new and exciting vector.

As many U.S. presidents do in their first term of office, President Obama released his "National Space Policy of the United States of America" in June 2012, a 14-page policy statement defining the objectives for the U.S. and its lead space agency NASA, as well as other key government space actors such as the Department of Defense. The document lays out the terms of policy, and also the programmatic, and funding priorities. The essence of the Obama administration's space policy places a renewed emphasis on international cooperation, the need for transparency and openness, and on commercial sector participation in civil space activities. In general, these are all welcomed positions for the U.S.'s international space partners who in the recent past have had to deal with a very U.S. centric and national security focus when it came to working with the American space program. The space policy goes on to provide main principles, goals, intersector guidelines, and sector guidelines across the spectrum of current and planned activities in space.

A contentious decision made shortly before the release of the document was the Obama administration's cancellation of NASA's Constellation Program and its updated use of Apollo-era technology. Constellation consisted of the Ares 1 launch vehicle and the Orion crew capsule, which were picked by the Bush administration as the replacement systems for the NASA space shuttle fleet set to retire in 2011. However, this decision proved to be controversial for the administration so two main elements of Constellation have been re-tasked as an exploration crew capsule called the Orion Multipurpose Crew Vehicle ("MPCV"), and a new Space Launch System ("SLS") consisting of a heavy-lift space vehicle reminiscent of the Saturn 5 rocket.

The ground-breaking policy directive that the Obama administration has introduced is the development of commercial space transportation capability. Washington lawmakers were asked to approve a multi-million dollar/multi-year budget requests for the Commercial Crew Development program ("CCDev"). While the MPCV and SLS are traditional NASA government procurement programs, the CCDev program is creating an exciting new vector – instead of procuring technology for government operation, NASA would fund U.S. commercial companies such as Sierra Nevada Corporation and Space-X to develop commercial space transportation systems. NASA would then buy "space services" from these companies to ferry supplies and astronauts to the International Space Station ("ISS") – ending NASA's long-time role of being the transportation provider to the ISS and low earth orbit via the space shuttle. The result – NASA arguably saves money by not developing a new government operated orbital transportation system and can instead focus its budget on space exploration activities using MPCV and SLS to go the moon, asteroids, and beyond – and private enterprise enters the space services market and a new orbital economy is born.

The spirited discussions, debates and editorials continue on this policy change in Washington and at a global level, as most are anxious to see what President Obama's new space plan will actually mean in terms of programs and dollars, and whether new and innovative technology is truly better than space heritage that has taken man to the moon. What should not be lost in the discourse however, is the significant potential for the international space partners of the U.S., such as Canada. Through its highly regarded tandem of the Canadian Space Agency and the Canadian space industry - this new space policy may offer an exceptional opportunity for Canadians to participate in new space activities with the policy's renewed international focus and now with the possibility of working with both government and commercial capabilities – for that, at least, it may be time to seize the moment - Ad Astra!

Indra Heed Hornsby is counsel at MacDonald, Dettwiler and Associates Ltd (MDA) in Vancouver.

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Turning the Cape Town Convention into a reality: The status of Cape Town in Canada

By Auriol Marasco

I. Implementing Cape Town

In 2004, Canada became a signatory to the Cape Town Convention on International Interests in Mobile Equipment (the “Treaty”) and the Protocol on Matters Specific to Aircraft Equipment (the “Protocol”, together with the Treaty, the “CTC”). The concept behind the CTC is to harmonize national laws with the principles underlying asset-based financing for mobile equipment, such as aircraft objects. In order to achieve this goal, the CTC was drafted to address the following four key areas: 1) creation of an “international interest”, 2) priority rules, 3) default remedies, and 4) conflicts of law.

After becoming a signatory, Canada passed the International Interests in Mobile Equipment (aircraft equipment) Act (the “CTC Act”) in 2005. Unfortunately, the momentum of the CTC was lost and only certain sections of the CTC Act were proclaimed into force.  Despite the Federal Government’s hesitation in ratifying the CTC, the Provincial Governments support the CTC. In preparation for the proclamation of the CTC Act, the majority of Canadian provinces and territories have already passed the required provincial implementing legislation, including British Columbia, Ontario, Nova Scotia, Quebec, Alberta, Saskatchewan, Newfoundland and the Northwest Territories. As of January 2008, it was confirmed that there were no foreseeable reasons why similar pieces of legislation could not be achieved among the remaining provinces and territories.

II. On the path to implementation

Notwithstanding that the Canadian aviation industry cannot fully take advantage of the CTC, on September 28, 2005 the Federal Government amended certain provisions of the Bankruptcy and Insolvency Act (Canada) (“BIA”), Wage Earner Protection Program Act (Canada) (“WEPA”) and the Companies’ Creditors Arrangement Act (Canada) (“CCAA” and, collectively with the BIA and WEPA, the “Bankruptcy Statutes”), Canada’s insolvency statutes, to provide Canadian airlines with the rights and protections similar to both the  U.S. Code chapter 1110 and Alternative A¹. While such amendments have benefitted creditors, these protections do not entirely mirror those that are available under the CTC. Further, such amendments created some untended inconsistencies between the CTC Act and the Bankruptcy Statutes. In 2008 and 2009, amendments to the Bankruptcy Statutes came into force in an attempt to correct some of these inconsistencies. These latest round of amendments related to unpaid suppliers’ rights, critical suppliers, interim financing, sale of assets and aircraft objects were proclaimed. A brief overview of some of the amendments that have occurred are as follows:

(i) Unpaid suppliers: Under the BIA, an unpaid supplier now has 15 days after the purchaser becomes bankrupt or is placed in receivership to demand repossession of goods supplied within 30 days of the bankruptcy or receivership. Given the nature of this provision, it is unlikely that an aircraft lessor/financier would be able to benefit from it.

(ii) Critical suppliers: Under the CCAA, where a supplier is critical to the company’s continuing operation, a court can declare such supplier to be a “critical supplier”. Once deemed as such, the supplier could be ordered to continue to supply on terms that the court considers appropriate.  Such a supplier would gain a super priority over other secured creditors.  Although this amendment may currently apply to aircraft lessors and financiers in Canada,  it is believed that  the CTC Act, once fully proclaimed, will take priority over the CCAA to allow a supplier of aircraft objects to refrain from continuing to supply its goods.

(iii) Aircraft objects: Provisions enacted by the CTC Act in 2005 were drafted specifically to avoid some of the technical problems associated with qualifying for U.S. Code chapter 1110 protections. In general, if the lease or loan is to an entity in Canada for aircraft or engines which meet the CTC Act test, the benefits of these provisions will be available. The 2009 amendments simply enacted some clean-up revisions to conform treatment under the CCAA to the BIA.

Unfortunately, some of the clean-up revisions seem to be incorrect. Before amended, these provisions of the CCAA applied to secured parties, lessors and conditional sellers of aircraft objects. The amended sections of the BIA, however, now only refer to secured parties and lessors. It is suspected that when the two statutes were harmonized, the reference to conditional sellers was inadvertently deleted from the CCAA instead of being added to the BIA. It is hoped that once the CTC is ratified it will rectify the omission of conditional sellers from these BIA and CCAA provisions.

III. Future of Cape Town

While the Federal Government has made some progress in ratifying the CTC, such progress has been slow and potentially detrimental to the Canadian aviation industry. The Government has now indicated that more amendments will be required prior to fully implementing the CTC. In particular, the Federal Government has indicated that the following four potential conflicts will need to be resolved:

(i) Bankruptcy Statutes

Although the Bankruptcy Statutes were previously amended (on a retroactive basis so as to cover pre-existing transactions) to effectively mirror Alternative A, the Federal Government is now concerned that actually making the Alternative A declaration under the CTC could create inconsistencies due to duplication in the statutes. In addition to addressing these potential amendments, certain other reforms to the Bankruptcy Statutes will be necessary to clean up some minor technical inconsistencies that resulted from the previous piece meal amendments to the Bankruptcy Statutes.

(ii) Authority for Alternative A

Another contentious issue is whether the CTC Act authorizes the Federal Government to implement Alternative A. Section 4(1) of the CTC Act, as currently drafted, states that the CTC has the force of law when the CTC, by its terms, is in force in Canada.  The CTC Act then proceeds to carve out certain articles from the CTC, including Alternative A. As such, the CTC Act could be interpreted as the legislature’s intent to preclude the applicability of Alternative A in Canada because of the corresponding amendments to the Bankruptcy Statues. Given Canada’s involvement in the drafting of the CTC, however, this argument is fairly weak.

(iii) Aeronautics Act

The Federal Government seems to be particularly concerned with adopting any provisions in respect of the irrevocable deregistration and export request authorization (“IDERA”). The concern in permitting the IDERA is that it would lead to an automatic deregistration (i) without Transport Canada Aviation (“TCA”) verifying that TCA had the legal authority to deregister; and (ii) without the consent of the “registered owner”. This, however, is not the intent behind the IDERA. Instead, an IDERA is filed with the consent of the “registered owner” and simply provides for deregistration by TCA on a non-discretionary basis, assuming that the CTC’s criteria are met. In practical terms, once a “registered owner” asks for a deregistration, regardless of who is presenting the IDERA to TCA, TCA would be required to process the registration. Currently, TCA processes all deregistration requests from the “registered owner” on a non-discretionary basis and, as such, it is unclear what amendments are needed.

(iv) Export Act

The last major issue that the Canadian Government has identified is the potential for conflicts to arise between the CTC and the Export and Import Permits Act (Canada) (the “Export Act”). Canada has taken a very cautious approach to IDERAs and have interpreted them to require TCA to permit the export of an aircraft to a particular jurisdiction in violation of the Export Act. Neither the IDERA nor the CTC, however, in any way obligate TCA to permit the export of the aircraft to any particular jurisdiction. In fact, the form of IDERA provided by the CTC does not even reference a specific country of import. As such, the IDERA provisions, as currently contained in the CTC, abide by the Export Act.

Canada plays a substantial role in the international aviation industry. It has positioned itself as both a manufacturing powerhouse and as a headquarters for international civil aviation. Adding to Canada’s international recognition are the two most important international organizations in civil aviation: the International Civil Aviation Organization (ICAO) and the International Air Transport Association (IATA). As the home of the world’s premier aviation international organizations, Canada must remain on the forefront of policy innovation. Harmonization between domestic and international aviation policy, through the CTC, is necessary for Canada to sustain its frontline position in this highly competitive sector. The CTC provides a legal solution for aircraft financing that has been sought after for decades. The Federal Government’s piecemeal action has been frustrating for the Canadian industry. Fortunately, the signing of the new ASU² has further highlighted the Canadian industry’s need for CTC ratification. This is because the majority of Canada's airlines finance a large portion of their fleets using export credit financing and, since the new ASU has increased advance and premium rates, Canadian airlines will need access to the CTC discounts in order to stay competitive. The Government has recognized the impact of the new ASU and the need for the CTC and, as such, has reconfirmed its commitment to ratify the CTC. It is the Canadian aviation industry’s hope that aforementioned amendments, if necessary, can be accomplished by mid-2012, with a view to ratifying the Convention late next year.

¹ Alternative A is an option under the CTC which provides robust protection for creditors. After a prescribed waiting period or, if earlier, the date on which the creditor otherwise would be entitled to possession of the aircraft, the airline must give possession of the aircraft to the creditor. A debtor may retain possession only if it cures all defaults and agrees to perform all future contractual obligations. During the waiting period, the debtor is obliged to preserve the aircraft object and maintain it and its value. These remedies cannot be prevented, delayed, or modified by a court without the creditor’s consent. Alternative A is considered to be one of the greatest benefits of the CTC.
² The ASU is the OECD framework agreement among aircraft manufacturing states covering state export credit financing support for large and regional aircraft.

Auriol Marasco practices in the Toronto office of Blake Cassels & Graydon LLP.

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Aviation law: Reflections from a veteran practitioner

By Donald H Bunker

On the occasion of my seventieth year, it is propitious that I should be asked to make this short presentation which caused me to reflect a little more deeply than I might have otherwise done. It is incredible to grasp that I actually joined the law firm of Howard, Cate, Ogilvy, Bishop, Cope, Porteous and Hansard (now Ogilvy Renault), over forty-seven years ago where I remained as part of the fabric for thirty-two years as a paralegal, student, lawyer and partner. Time does go by quickly! These were the best years of my life and I shall be forever proud of my association with that firm. One of Ogilvy’s great attributes was the freedom they gave their members to develop. My initial sojourn into the litigation, commercial and corporate groups gave me a solid foundation for my ultimate aerospace finance activities. Without Ogilvy’s flexibility, I could never have developed my practice while and at the same time maintaining my relationships with the Institute of Air and Space Law at McGill and the Concordia International MBA Program. While the Concordia Program ended last year, I am still on the law faculty at McGill and play an active role at the International Air Transport Association (IATA) where I have been teaching aviation finance for about twenty years. The combination of practical professional activity together with academia has served as a pleasant balance in my life.

Eventually however, I discovered that evolution requires that one should change situations every thirty-two years! So with the encouragement of Emirates Airlines of Dubai, my wife and I moved to the United Arab Emirates where I set up a small law practice to principally service Emirates at the beginning of their successful and impressive quest to become one of the most dynamic and profitable airlines in the world. Our firm Donald H. Bunker and Associates has grown to five lawyers practicing aviation law exclusively and we proudly represent ourselves as being “the only exclusive aviation law firm between the Euphrates and the Ganges rivers”! As we continue to represent clients throughout the world, our main activities center on Emirates, the Federal Government of the U.A.E. and numerous other aviation enterprises in the Middle East. As we continue to grow and enjoy a respected presence in the aviation market, I am continually aware that in our sixteenth year I am halfway to having to change jobs again according to the thirty-two year rule!

In the past few years, I have often been asked if I intend to continue in the aviation industry for much longer. My response is that aviation is not a job for me; it is a way of life! Aviation affects everyone. It is part of our culture and vital to our existence. It is arguably the largest industry in the world and continues to grow at over 5% per year. Boeing has recently predicted a demand for 30,900 new commercial aircraft over the next 20 years, representing $3.6 trillion. Indeed as this presentation is being written it was announced at the Farnborough Air Show that Emirates has just ordered 30 more Boeing 777-300ER Aircraft (following an order for 32 additional Airbus A380s at the Berlin Airshow in June valued at $11.5 billion), GECAS a mix of 100 Airbus and Boeing aircraft and ACG, a large lessor, 50 Airbus A320 aircraft. Together Airbus and Boeing secured orders for a total of 237 aircraft worth $28 billion. I have been following Boeing’s predictions closely for thirty years and found them to be consistently accurate. The industry is exciting and dynamic and for as long as I can effectively contribute I have a strong desire to participate.

However, while the industry as a whole is strong, one cannot be faulted for being at least a little skeptical about the future of the airline sector. There is no doubt that the sector has been badly mauled since 9/11. Indeed, airlines lost approximately $40 billion in the five years following 9/11 wiping out all the accumulated profits of the sector since 1945, approximately $11 billion in 2009, and IATA has predicted a tentative break even or slight profit for 2010.

One might wonder why such a vibrant and essential industry constantly loses money. From discussions with many participants and having made my own analysis, I have created a list of potential causes as follows. I have tried to list them in descending order but except for the first two, they are only approximate:

1. Bad Management
2. Undue Governmental Influence and Interference:
   1. political appointments of unqualified bureaucrats;
   2. political route structures;
   3. inappropriate use of airline assets;
   4. absurd and politically driven environmental laws; and
   5. draconian bankruptcy laws (i.e. Chapter 11 and Sect. 263 of the U.S. Code);
3. Irresponsible Union Activity
   (Unholy Alliance between Governments and Unions);
4. Business Cycles;
5. Taxation;
6. Unforeseen events (e.g. 9/11; oil spills; wars etc.); and
7. Corruption.

Space does not permit any elaboration of the foregoing, but if anyone is ever interested, there is food for a very lively discussion with respect thereto. I have had many over the years.

Given the foregoing one might ask “can the industry survive?” I suggest that it is not the survival of the industry that is of concern, but “who in the industry will survive?”

Indeed, the door is wide open for energetic and intelligent young talent to get their teeth into a challenging career. Notwithstanding my foregoing comments, the industry is packed with brilliant, intelligent and hardworking people. The villains are in the minority and must and will be replaced. I foresee that many changes will be made in answer to the challenges, some of which are:

1. Continued privatizations. Where such are not immediately financially or politically possible, commercialization is a viable alternative;
2. Further development of Alliances and Code Sharing;
3. Merger of small national carriers into the operations of global carriers. A 60% load factor is no longer viable;
4. The Bilateral System is gradually being diminished and will eventually disappear. A more liberal regime will emerge moving towards “open skies”;
5. Financing methods will change; Tax based financing disappeared ten years ago, and asset based financing will be next to go;
6. Airlines will take on a new role and structure:
   1. Banks and other financial institutions will play a new role in aircraft financing based on traditional banking credit rules including emphasis on:
      • The composition of the borrower’s board of directors;
      • Shareholders and management;
      • The borrower’s track record;
      • Financial ratios;
      • Profitability;
      • Business plan; and
      • Adequate security to support the credit;
   2. Equipment leasing companies will take on an even more prominent role; and
   3. Airlines will simply be operators leaving the marketing to marketing companies and maintenance to maintenance companies.

Aviation is a complicated and esoteric business, and has no appetite for amateurs!

Donald H. Bunker is a member of the faculty at the McGill University Faculty of Law.

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Air passengers' bill of rights - Lost in Canada, found in the U.S.

By Kenneth N. Burnett

Lost In Canada

In 2009, Mr. Malaway, an MP, introduced a Private Members' Bill C310 entitled "An Act Respecting the Rights of Air Passengers." The purpose of the proposed Bill was to place obligations on air carriers to provide compensation and other assistance to passengers in certain cases where a flight was delayed or cancelled, where boarding was denied and where an aircraft had remained on the ground for a period of more than one hour in an airport. It also required air carriers to disclose all relevant information to the public regarding the pricing of flights (including taxes) and to keep passengers informed regarding any misplaced baggage and any developments in respect of their flight that could have significant impact on their travel plans.

In November of 2009, the National Air & Space Law Section made a submission to Parliament with the recommendation that the proposed Bill C310 not be enacted. As part of its submission the Canadian Bar Association:

• questioned the need for appropriateness of these regulations to be imposed on the industry and the need for consumer protection regulation that would only be applicable to transportation by air.
• opposed the imposition of fixed rather than maximum penalties and the admission of any due diligence defences.
• opposed the requirement for payment of fixed compensation in the absence of any assurance of comparable or any damages.
• questioned the practicality and even the possibility of compliance, despite best efforts, for operations in Northern and remote areas of Canada.
• stated that there was no evidence that that the Canadian Transportation Agency was failing in its mandate regarding consumers.

Bill C310 died on the order paper. On June 15, 2010, Bill C541 was introduced attempting essentially to do the same thing as C310. Bill C541 never got beyond first reading before the 2011 session of Parliament ended.

Postscript: Since this article was prepared, on December 15, 2011, the Government of Canada decided to proceed with regulations requiring Canadian air carriers to include in their advertised prices all costs to the carrier of providing the service and to indicate in their advertisements all fees, charges and taxes related to the service that are collected by the carrier on behalf of other persons. Order in Council P.C. 2011-1679 was issued bringing into force Sections 86.1 and 86.2 of the Canada Transportation Act, as enacted by section 27 of An Act to amend the Canada Transportation Act and the Railway Safety Act and to make consequential amendments to other Acts, chapter 19 (2007). The Canadian Transportation Agency has now been given the mandate to commence drafting regulations, including consultations with stakeholders. This process is expected to take approximately one year.

Found in the US

The US is introducing sweeping new passenger protection rules which will have an impact on foreign and domestic carriers, travel agents and passengers. Effective August 23, 2011 new consumer protection rules for airline passengers established by the U.S. Department of Transportation went into effect, the purpose of which is to make flying more convenient and hassle-free for air travelers nationwide. Some significant features of the new rules are:

• establishes a hard four-hour time limit on tarmac delays for all international flights at U.S. airports. It also extends the three-hour tarmac delay limit for domestic flights, currently in place only at large-hub and medium-hub airports, to flights at small-hub and non-hub airports as well. All carriers subject to the tarmac rule will be required to report lengthy tarmac delays to DOT. In all cases, exceptions to the time limits are allowed only for safety, security or air traffic control-related reasons
• carriers must ensure that passengers stuck on the tarmac are provided adequate food and water after two hours, as well as working lavatories and any necessary medical treatment. 
• The amount passengers are eligible to be compensated in the event they are involuntarily bumped from an oversold flight is doubled. Previously, bumped passengers were entitled to cash compensation equal to the one-way value of their tickets, up to $400, if the airline was able to get them to their destination within a short period of time (within 1 to 2 hours of their originally scheduled arrival time for domestic flights and 1 to 4 hours for international flights). If they were delayed for a lengthy period of time (more than two hours after their originally scheduled arrival time for domestic flights and 4 hours for international flights), they were entitled to double the one-way price of their tickets, up to $800. Under the new rule, bumped passengers subject to short delays will receive compensation equal to double the one-way price of their tickets, up to $650, while those subject to longer delays would receive payments of four times the one-way value of their tickets, up to $1,300. Inflation adjustments will be made to those compensation limits every two years.
• airlines must now prominently disclose all optional fees on their websites, including but not limited to fees for baggage, meals, cancelling or changing reservations, or advanced or upgraded seating. (there is an issue applying consumer protection rules to foreign carriers who do not operate in the United States)
• travel agents must disclose carriers they won't sell, incentive payments and preferential displays,
• airlines must refund baggage fees if bags are lost (in addition to their obligations to compensate passengers for reasonable expenses for loss, damage or delay in the carriage of passenger baggage)

Additional measures under the new rule will take effect January 24, 2012, including:

• Requiring all taxes and fees to be included in advertised fares.
• Banning post-purchase price increases.
• Allowing passengers to hold a reservation without payment, or to cancel it without penalty, for 24 hours after the reservation is made, if the reservation is made one week or more prior to a flight's departure date.
• Requiring disclosure of baggage fees when passengers book a flight.
• Requiring that the same baggage allowances and fees apply throughout a passenger's journey.
• Requiring disclosure of baggage fee information on e-ticket confirmations.
• Requiring prompt notification of delays of over 30 minutes, as well as cancellations and diversions.

The final rule, proposed rule and comments are available online, docket DOT-OST-2010-0140.

Kenneth N. Burnett practises at Miller Thomson LLP in Toronto.

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CBA response to Transportation Safety Board Regulations amendments

By Gaylene Schellenberg

In November 2011, the Canadian Bar Association's National Air and Space Law Section, with the Maritime Law and Administrative Law Sections, responded to Transportation Safety Board Regulations (tabled in September 2011).

Section members dealing with the Transportation Safety Board (TSB) with respect to ongoing transportation accident investigations reported significant difficulty with the process, and especially the inability to access key factual information required for various legal purposes, including civil litigation. They noted that the TSB often seems resistant to lawyers' involvement in the process and commented that aviation and marine accidents generally have widespread legal ramifications mandating the involvement of counsel. However, in many cases, the TSB has exclusive control over the factual information lawyers require to effectively advise their clients.

The Transportation Safety Board Act permits the TSB to invite a person to attend an investigation as an observer if, "in the opinion of the Board, the person has a direct interest in the subject-matter of the investigation and will contribute to achieving the Board's objective." Historically, this has been interpreted to exclude representatives of victims of an aviation or marine accident and their families from observer status, as they are not considered to be parties with direct interest (PDIs). The Sections recommended that the proposed regulations be amended to:

1. incorporate an express provision requiring the TSB to keep victims informed of the progress of an investigation, including factual updates;
2. clarify that a PDI has the right to nominate a representative/technical adviser to act as its observer;
3. require the TSB to take all reasonable steps to ensure that PDIs are invited to attend any phase of the investigation, including disassembly and laboratory analysis, that could result in the loss or destruction of evidence;
4. limit the prohibition on communications by observers to matters relating to analysis by the TSB, and only until such time as a final report has been published;
5. differentiate between observers and appointed technical advisers; and
6. incorporate the CADORS Manual regarding reportable aviation occurrences.

The Sections commented that changes to the regulations relating to the right to have a person attend at an interview along with the person being interviewed will impact the right to counsel, and so is also of significant concern to the CBA.

Members' experience suggests no significant problems because of counsel interrupting or interfering with interviews, or improperly impeding the process in any way by their presence. Further, Section members did not accept that witnesses are intimidated by having counsel of their own choice present at an interview, and suggested the relevant proposal is an unwarranted attempt to limit the role of counsel during a TSB interview. The regulation may well be subject to challenges based on procedural fairness, denial of natural justice and the Charter. The Sections concluded that the proposed regulation should be deleted so the TSB is not entitled to deny the attendance of counsel, limit the role of counsel in advising a client during the interview, or limit counsels' ability to object to inappropriate lines of questioning.

Please refer to the full text of the letter, available online.

Gaylene Schellenberg is a lawyer in the Legislation and Law Reform Department at the CBA in Ottawa.

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JANUARY 2012

Editors:
Kenneth Burnett
E-Publications Editor:
Rose Steele
Production:
Rose Steele
Staff Liaison:
Corinna Robitaille

Contributors:
Donald H Bunker
Kenneth N. Burnett
Joe Fiorante
Indra Heed Hornsby
Auriol Marasco
Madeleine C. Ménard
Gaylene Schellenberg

Published by the Canadian Bar Association's National Air and Space Law Section.

The views expressed in the articles contained herein are solely the views of the authors, and do not necessarily represent the views of the Canadian Bar Association.

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