May 23, 2018 / 7:52 PM / in 3 months

Canada approves broad reforms to freight rail, airlines

MONTREAL/WINNIPEG, Manitoba (Reuters) - Canada on Wednesday approved broad air and freight reforms that will spell out passengers’ rights on planes, mandate the use of voice and video recorders in rail locomotives, while providing more options for shippers with limited transportation choices.

The government announced plans last year to modernize the country’s Transportation Act, which would ensure ticketed passengers could not be hauled off overbooked flights, following incidents like the high-profile case of a United Airlines [UALCO.UL] passenger being dragged off a plane in Chicago in 2017.

The law would apply to all carriers flying in and out of Canada.

Reforms are also intended to help grains and other crops move more quickly to market after transport problems impacted both Canadian National Railway Co (CN) and smaller rival Canadian Pacific Railway Ltd (CP) during the winter. Rural storage sites brimmed with grain as farmers waited for trains in the second big backlog in five years.

Railways said tardy service was due to harsh winter conditions and a need for more locomotives and staff. The backlog crimped cash flow for farmers and generated shipping penalties for grain exporters in the world’s largest exporting country of canola and rapeseed.

Grain industry officials said the new law will help balance the relationship between farmers and railways, by allowing shippers to seek penalties against railways for poor service and giving a new remedy to shippers that only have access to service from either CN or CP.

Shippers will be allowed to make greater use of inter-switching, a system of transferring cars from one railway’s line to the line of another, that grain sellers say adds needed rail competition.

The law will also include for the first time soybeans — a fast-expanding crop — in the federal government’s complex system of calculating limits on revenues that railways can earn hauling crops.

That system will also change to give CN and CP incentive to upgrade their grain fleets, with each railroad now given credit for its own capital investments.

“It was really a disincentive (previously) for railroads to invest in grain cars,” CN’s Chief Financial Officer Ghislain Houle told an investment conference on Wednesday. “That now fixes it.”

CN’s interim CEO has previously said the company would get 1,000 new hopper cars for 2019 and 2020, if the law was changed.

Cereals Canada President Cam Dahl said in a statement the legislation would “provide for better commercial accountability in the grain transportation system.”

Reporting by Allison Lampert in Montreal and Rod Nickel in Winnipeg; Additional reporting by Leah Schnurr in Ottawa; Editing by Sandra Maler

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