In what is likely to be a controversial move, the Canadian government plans to increase state aid to its domestic aerospace industry.

An announcement is expected this year and will be the first sign Ottawa is paying attention to repeated calls by Bombardier to increase aid to the sector. Bombardier has come under heavy criticism from several corners, including opposition members of parliament, for being one of the biggest recipients of government aid over the past 20 years, including tax credits, research and development funds and loan guarantees to purchasers of its aircraft.

The Canadian industry employs about 79,000 workers. Bombardier says it needs Ottawa to pump in one-third of the C$2.5 billion ($2 billion) development costs for its planned 110- to 135-seat aircraft or it will be forced to manufacture them elsewhere. Meanwhile, Canada and Brazil are to resume talks in mid-October over the sensitive issue of subsidies to Bombardier and Embraer respectively.

The countries have been negotiating since early 2003, but have not met formally since August. Both have taken their complaints about claimed subsidies provided to the other to the World Trade Organisation several times. Neither has launched trade retaliation, although they have the right to do so.

* Air Canada's emergence from bankruptcy protection has prompted the Canadian minister of transport to ask his department to prepare a "green paper" on the liberalisation of air travel with the USA, to be presented to the cabinet this month. Air Canada emerged from bankruptcy protection on 30 September and analysts say the carrier is in a good position to compete against US rivals, many of which are struggling financially.

Canada and the USA reached an open skies agreement a decade ago, but did not provide for cabotage. The minister is also open to the idea of lifting foreign ownership restrictions on Canadian airlines and reducing the fees airports have to pay to Ottawa.


Source: Flight International