Canada, U.S. to Discuss Air-Travel Imbalance : Airlines: A proposed ‘open skies’ policy between the two nations would free up landing rights and allow access to now-restricted markets.

U.S. and Canadian negotiators today begin talks on liberalizing air-travel schedules between the two countries, correcting imbalances that have plagued travelers and frustrated airline executives for more than a decade.

Airline landing rights between the United States and Canada are governed by a treaty written in 1966 and revised in 1974. During the past 17 years, the rules have become so outmoded that American and Canadian travelers routinely run into difficulty as they fly to a number of major cities.

A traveler in Dallas, for example, can’t fly directly to Vancouver, the major Canadian growth center and a tourism jumping-off point. And a frozen Northerner in St. John’s, Newfoundland, can’t hop on a plane and head for Florida sunshine without stopping and changing planes somewhere in between.

“I flew from Washington to Ottawa (the Canadian capital) recently, and I had the pleasure of spending more time in the Syracuse airport than I did in the air,” complained Canadian Transport Minister Douglas Lewis in a recent speech here. “Now, does that make sense for a continent that prides itself on efficiency?”

There have been unsuccessful attempts since 1974 to update the existing landing rights agreement. Even today’s talks have provoked strong criticism on both sides of the border. A new agreement is not expected to take shape for months.

The contention arises because more than mere scheduling and convenience are at stake. The Canadian government, which believes that its airlines are operating at a serious disadvantage under the existing agreement, wants to achieve a broader liberalization of bilateral air travel, a concept dubbed “open skies.”

While the goal of “open skies” isn’t clearly defined, Canadian officials see it as a way of helping Canadian carriers gain a bigger share of the fast-growing U.S. travel market. They have said they generally hope to bargain about such matters as pricing, computer reservation systems, existing immigration “pre-clearance” procedures and the controversial possibility of “cabotage.”

In pre-clearance, travelers headed from Canada to America can clear U.S. immigration at major Canadian airports before boarding flights. Travelers like this because it speeds them through busy U.S. airports. But Canadian officials argue that pre-clearance gives U.S. airlines unfair advantage because passengers unencumbered by U.S. immigration lines tend to speed their connections even more by choosing U.S. carriers over Canadian ones.

In cabotage--by far the touchiest issue in both countries--a foreign carrier is permitted to fly another country’s domestic routes. If Canada were granted cabotage in the United States, for instance, Air Canada might be allowed to fly from Toronto to Chicago, pick up passengers, then continue to Los Angeles. Under current rules, Air Canada can go only as far as Chicago; passengers flying to other U.S. cities must connect to U.S. airlines.

Cabotage is anathema to unions, politicians and some airlines. U.S. opponents fear that if it is extended to Canada, then the United States will have a hard time refusing other foreign carriers. British Airways has been pushing for American cabotage.

In Canada, meanwhile, opponents of cabotage fear giant U.S. carriers will start flying among Canadian cities and underpricing Canadian competition, perhaps ultimately forcing them out of business.

The scenario is not utterly far-fetched, because big U.S. carriers do achieve significant economies of scale over their Canadian counterparts. Canadian Airlines International, Canada’s second-largest carrier, has calculated that Canadian carriers pay, on average, about 9 cents more per liter of jet fuel than American airlines because of higher taxes and an inability to get big, U.S.-style volume discounts. Canadian airlines also have higher interest and labor costs.

“Complete ‘open skies’ would be devastating to the Canadian airline industry,” warns Paul Karos, an airline analyst at First Boston Corp.

The air-travel market between the United States and Canada is said to be the world’s largest such bilateral market. Each year, about 13 million passengers fly between the two, generating about $2 billion in revenues.

“Open skies” advocates argue that, if the old landing-rights restrictions were lifted, this market would grow more. Transport Minister Lewis said passenger traffic between Canada and Asia grew by 16% per year in the 1980s, but travel between America and Canada grew 2.3% per year. “I would argue that is largely due to the restrictiveness of the current bilateral agreement,” Lewis said.

BORDER CROSSINGS Here are pairs of major American and Canadian cities with limited airline service between them.

Neither nonstop nor direct service

Toronto-New Orleans. Connect through Chicago.

Toronto-Denver. Connect through Dallas, Chicago or Cincinnati.

Vancouver-New York. Connect through Chicago or Montreal.

Toronto-St. Louis. Connect through Chicago, Philadelphia, Cleveland or Pittsburgh.

Montreal-New Orleans. Connect through Detroit, Miami, New York or Chicago.

Direct service only

Toronto-Atlanta. Stopover in Cincinnati.

Ottawa-Washington. Stopover in Pittsburgh, Philadelphia, Cleveland or Rochester.