Canada's air transport industry faces some pressing policy issues, including airport charging, but with a new government not arriving until February, what happens in the meantime?

Paul Martin is not due to replace Jean Chr‚tien as Canada's prime minister until February, but signs are growing that aviation policy is already in limbo amid rumours that the government might accept an earlier changeover. Transport minister David Collenette, who expects to lose his portfolio, is already urging the next government to address a number of issues.

Heading that list is the government's airport rent policy. It has inflamed a major row at Toronto's Pearson airport, Canada's biggest hub. The airport and airlines are engaging in a war of words over a planned 28% boost in landing fees next year on top of a 29% rise this year. A C$4.4 billion ($3.4 billion) capital improvement programme is driving much of Toronto's increase, but the rent issue is part of the debate. Collenette has failed to convince his government to scale back rent collection - C$214 million this year, but projected to hit C$500 million a year by 2010. The finance minister insists that the government needs this revenue.

Another fiscal issue involves export credits for Bombardier regional jet sales. With Air Canada planning an initial order of up to 43 new regional jets worth about C$1.3 billion, Bombardier is encouraging the government to find ways to finance a deal that can compete with Brazil's Embraer. WestJet is considering its own regional jet order, so it will want whatever concession Ottawa makes for Air Canada.

Both Air Canada and Russia's Aeroflot hope their respective governments can resolve an airspace spat long before February. The dispute, stemming from Air Canada's new flights to India, has provoked reciprocal bans that force both carriers to divert polar flights to avoid each other's airspace.

Longer-range issues include Canada's role in the US-Europe talks over a transatlantic open skies accord, deregulation of computer reservation systems and the volatile question of foreign ownership limits in Canadian airlines. At a recent conference in Toronto, Canadian Don Carty, former head of American Airlines, urged Ottawa to abandon its foreign ownership rules and allow Air Canada to merge with a US carrier.

Air Canada has sidestepped the issue for now by selecting a firm owned by Victor Li, a naturalised Canadian citizen, as its new equity investor. Li is buying 31% of Air Canada's shares for C$650 million, and will fill five seats on the airline's new 11-member board.

Son of a powerful Hong Kong tycoon, Li has held dual Canadian-Chinese citizenship for 20 years. This may be enough to satisfy Canada's law, but the issue could resurface in the future. Collenette had consistently dismissed calls to lift the foreign cap, but no-one knows what the next transport minister will say.

Source: Airline Business