Canada’s deal with the European Union applies to the carriage of both passengers and cargo and is based on a loosening of Canadian restrictions on foreign ownership and comes at a time that Canada’s leading carrier, Air Canada, struggles withfinancial turmoil.

Specifically the agreement initially provides airlines “unlimited freedoms to operate direct services between any point in Canada and the 27-country EU trading bloc.”

Additional carrier rights take effect once Canada has taken the steps necessary to enable European investors to own up to 49 per cent of a Canadian carriers’ voting equity, up from 25 per cent currently. The Canadian government has already introduced such a proposal.

At a third stage, once both sides enable investors to set up and control new airlines in each others’ markets, passenger airlines will be able to fly onward to third countries.

The final stage will come once both sides complete steps to allow the full ownership and control of their carriers by the others’ nationals, and would provide carriers “full rights to operate between, within and beyond both markets, including between points in the territory of the other party,” a set of rights known as cabotage, or eighth freedom rights.

The agreement also allows new “commercial arrangements,” including codeshare partnerships, and includes cooperation on “consumer interests,” air traffic control, access to airport facilities and environmental issues.

Previously, Canada had inconsistent and restrictive agreements with some EU member states, and no pacts whatsoever with eight.

More than half of Canada’s overseas tourists hail from Europe and the EU also is Canada’s second biggest trading partner after the US, with some C$84.2 billion (US$77.5 billion) in imports/ exports.

Th e European Union cited a 2007 European Commission study that found an “open aviation area” between EU and Canada in the first year would generate half a million passengers, as much as €72 million in economic benefits and 1,000 new jobs.

“Of the 40 European passenger air carriers capable of serving Canada today, fewer than half currently do so,” said Canadian Airports Council (CAC) president and CEO Jim Facette.

“Attracting just a fraction of the remaining air carriers would translate into big business for Canada’s airports, a boon for consumers and tremendous economic benefi ts for the community through increased trade and tourism.”

Meanwhile, the Association of European Airlines (AEA) secretary general Ulrich Schulte-Strathaus said the EU-Canada deal would “shine a spotlight on the negotiations with the US. Th e US call their agreement with the EU ‘Open Skies,’ but the deal with Canada will redefi ne what Open Skies really should be,” he said.

US labour groups and some lawmakers oppose cabotage and meaningfully higher foreign ownership caps, two primary European demands for second-stage Open Skies. Newly elected President Barack Obama has previously stated he will keep foreign ownership limited to a minority share and will keep cabotage rules as they currently are written.