The Canadian government, in a radical shift, said on Friday it was time to stop protecting national carrier Air Canada as it considers whether to lift foreign ownership restrictions on the country's airlines. "For nearly a quarter of a century, the federal government's air policies have been built on protecting what we have, rather than building something better, protecting against loss of service, against the loss of our national flag carrier," Transport Minister Jean Lapierre said in a speech. "The time for this approach is over. Now is the time to build an aggressive, forward-looking, market-driven framework that will help the industry compete regionally and globally." Lapierre seemed to keep nothing off the table, including a requirement for domestic airlines to be Canadian owned and controlled, extending trans-border services to third countries and allowing airlines to compete fully on price in these markets. "Is it time for us to relax the ownership restrictions? What about control? Is it time we allowed foreign carriers to provide services between points in Canada? If so, under what conditions?" he asked. "What about cabotage, that is, allowing US carriers to fly Canadians between points in Canada, and vice versa? Or should we try to go even further and integrate our air markets under a single set of rules?" Lapierre rebuffed suggestions that liberalizing the skies would threaten already badly served regions, saying competition with Air Canada has already decreased prices. "It's not by having less competition that we are going to help our economy," Lapierre told reporters after the speech. In recent years, domestic-based carriers like WestJet, CanJet and Jetsgo have ramped up services. Air Canada, which has just emerged from bankruptcy, said it had long favored raising foreign ownership limits in order to give it more access to capital, and it welcomed measures to liberalize the market as long as they were reciprocal. "We were surprised to see a characterization that suggests policies were designed to protect Air Canada, since the company has long advocated for greater liberalization on a reciprocal basis and would indeed welcome the minister going further on the basis of reciprocity," spokeswoman Laura Cooke said. Lapierre will ask a special parliamentary committee next week to review the critical transportation policies and said a report could come as early as next spring. At the same time, he defended the government's decision to approve a CAD$1.5 billion loan guarantee for Air Canada's order from Bombardier, saying guaranteed loans aren't given to Bombardier; they're given to clients. "I think this program will open doors to new carriers who might have had financial difficulties," he said. "I'm very excited by the idea that Canadian carriers that would buy Canadian planes would have access to financing, which could give birth to new regional carriers that will serve those regions." Prime Minister Paul Martin's government has been more oriented to the free market than that of fellow Liberal Jean Chretien, whom he replaced in December. Under Chretien, Transport Minister David Collenette had occasionally speculated about taking some liberalizing moves. He had always said he would do so only if Washington did the same, though he never strongly pushed the ideas in Canada or the United States. (Reuters)