MONTREAL - Emirate Airlines' desire to expand service to Canada, high government taxes and fees all threaten Montreal's ability to become a major international hub, says the chief executive of Air Canada.

Calin Rovinescu told the city's business leaders Monday that while Trudeau Airport will never overtake Toronto's Pearson, it has the potential for more traffic.

Last year, a total of 12.8 million passengers flew through the Montreal airport, including six million with Air Canada. Since 2004, Air Canada's (TSX:AC.B) traffic through the city has grown by 25 per cent, while its capacity has increased by more than 18 per cent.

While Trudeau Airport's growth largely hinges on the state of the economy, channelling connecting traffic will be the key driver of the airport's importance as a hub, Rovinescu said.

That could be threatened if Dubai-based Emirate Airlines is able to "dump its excess capacity" into Canada and siphon passengers who make connections here.

"The growth of airports such as Montreal that rely on connecting traffic would be stunted," Rovinescu told the Canadian Club of Montreal.

"Rather than hubs, they would shrink to stubs at the end of a spoke leading only to Dubai."

The speech marked the second time in a week that Rovinescu has taken on the Middle Eastern airline for its expansion efforts in Canada.

Another impediment to Montreal's competitiveness as a hub is direct and indirect taxes, he added.

Air Canada pays about $1,000 more on average to land an Airbus A320 in Montreal, about twice what it costs the airline's U.S. peers to fly into major American airports.

The result is higher ticket prices and a disadvantage for Canadian carriers.

"The imbalance is significant and over time this will be one of the main drivers determining which cities we will help develop as meaningful hubs and where we invest our scarce resources," Rovinescu said.

One-third of Air Canada passengers who fly through the airport begin their flights elsewhere. Air Canada's membership in the Star Alliance should help improve that number. For example, the recent addition of Brussels Airlines to the alliance will increase traffic to Africa.

Rovinescu said improving Montreal's standing as a hub requires better transit connections to the downtown.

Its current service puts Canada's second-largest city a long way behind other gateways, including Vancouver with its new Skytrain service.

He said all three levels of government need to commit to improving the transit connection in order for Montreal's airport to achieve its full potential.

"If a case can be made for funding the (Formula 1 auto racing) Grand Prix and the consequential several days of economic benefits, an even stronger case can be made for funding rapid transit access and real infrastructure development for the airport," he said.

Rovinescu said Air Canada is in a marathon to improve its corporate culture, cut costs and restore profitability.

Air Canada and its 26,000 employees have made progress, but more remains to be done to allow the former Crown corporation to complete its transformation, he added.

On the Toronto Stock Exchange, Air Canada shares fell four cents, or 2.33 per cent to $1.68 in afternoon trading.

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