Evidence of meeting #111 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was competition.
A recording is available from Parliament.
12:20 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you, Mr. Badawey.
Next we have Mr. Strahl.
The floor is yours. You have five minutes, please.
12:20 p.m.
Conservative
Mark Strahl Conservative Chilliwack—Hope, BC
Thank you, Mr. Chair.
I want to get into the differences in taxes and fees between Canadian fares and American fares. We do have competition in my neck of the woods in British Columbia. I live in Chilliwack, which is about half an hour from the Abbotsford airport and about 45 minutes, or an hour tops, from the Bellingham airport.
We have seen some analysis that says the flight price in Canada includes 43% in taxes compared with 15% in the U.S. When talking about airport rents, the federal government collected in 2022-23 $419 million in airport rents, an increase of 42.5% in just 10 years. As of May 1, tomorrow, travellers in Canada will pay $9.94 for a domestic flight and $34.42 for an international flight on security fees. The same fee in the United States is less than $15.30.
Maybe I'll go to you, Professor Moore. You referenced the Abbotsford airport, which is the closest international airport to me. Do you think the federal government cares that millions of Canadians every year are choosing to fly out of Bellingham, Sea-Tac, Billings, Great Falls and Buffalo? They're making the choice that Canadian air travel is unaffordable. If you're taking a family of four to Disneyland for maybe a once-in-a-lifetime trip, or if you're doing recreational travel, I can tell you that all my constituents who do that travel are not just examining WestJet and Air Canada. They're also examining Vancouver International Airport versus Seattle-Tacoma.
Can you talk about whether this is quantified? Does the government monitor that? Do you think they particularly care if Canadians fly out of U.S. markets instead of Canadian ones?
12:25 p.m.
Associate Professor, McGill University, As an Individual
It's not difficult to monitor. Plattsburgh is an hour and a quarter from Montreal. I went down to do a PBS interview last week. The sign at Plattsburgh says, “Montreal's U.S. Airport”. They're not subtle about it. PBS is interested in Montreal, because there are four million people, a million of them anglophones, versus upstate New York. They know where the market is.
At one level, it's not as fast for Canadians to go to Plattsburgh, but if you live on the south shore of Montreal, it's almost as fast to go to Plattsburgh if you have Nexus than it is to go to Trudeau on a certain day. That's overstating it, but I see the same thing with my brother who lives in Abbotsford, who goes down to the U.S. to save money.
At one level, that's helping Canadians, so we like that. It's providing jobs in the U.S., not Canada, and the government is aware of that, but it has chosen a certain approach that helps a lot of Canadian families. I'm trying to remember geography class, but I would say that the majority of Canadians live within a short distance of the U.S. I can think of Montreal, and when I lived in Toronto, we'd go down to Buffalo. It's a little further. If you live in Hamilton or Niagara Falls, flying out of Buffalo is not difficult to do. I've done it. Montreal, Toronto and Vancouver, our biggest cities, all have....
Now, for Edmonton it's more of a challenge. I agree. It's a long drive. But it is something that a lot of Canadians benefit from. The government is aware of it. They've chosen that path. I can't entirely disagree that Canadians get a good bargain out of it.
12:25 p.m.
Conservative
Mark Strahl Conservative Chilliwack—Hope, BC
We've talked a bit here about the user-pay model. Some of the panellists have gotten behind it and said that the users should pay, certainly when it comes to recreational travel. We've just done a study on HFR, high-frequency rail, where the analysis is that the government should pay for all of the infrastructure and subsidize the travel for a portion of the population that does not include any western Canadians, for instance.
Is there a logical discrepancy here? I would argue that air travel is more accessible to more Canadians than high-frequency rail will ever be. Why do you think there is such a difference in approach? The government is saying that if you're flying, you pay the full freight, but if you're taking a train, they'll subsidize you to the tune of hundreds of dollars per passenger.
12:25 p.m.
Associate Professor, McGill University, As an Individual
There is an environmental element of it as well. Very clearly in France if you have trains that go to a destination—I believe it's two hours—you can't fly. This environmental aspect of it has really been taken on board around the world, when we think about it.
However, we can look at parts of the U.S., and Europe and so on, where they have great trains, and I think we're rightly jealous.
You're right that it's Toronto, Montreal, Ottawa, particularly, and maybe Edmonton and Calgary, but it's limited in northern B.C., for example, for our friend Taylor here. It's just not going to happen in our lifetime.
12:25 p.m.
Associate Professor, McGill University, As an Individual
I'm older. I'm sorry. That was an old-person comment, so my lifetime is shorter than yours, sir.
12:25 p.m.
Voices
Oh, oh!
12:25 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Professor Moore.
Thank you, Mr. Strahl.
Next we have Ms. Murray.
Ms. Murray, the floor is yours. You have five minutes, please.
April 30th, 2024 / 12:25 p.m.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Thank you.
This is a very interesting discussion. It's not like there is a silver-bullet answer here. There might be a user-pay versus government-subsidized...which seems very complex.
One question I have is this. If there were to be subsidies for remote and necessary travel—Îles de la Madeleine was given as an example—what would be the logical order of government to subsidize that travel? Would it necessarily be federal, even if it's federally regulated air travel, or would it be more logically provincial, territorial, or even local?
If anybody wants to weigh in on that, I'm interested.
12:30 p.m.
Faculty Lecturer and Program Coordinator, Aviation Leadership, School of Continuing Studies, McGill University, As an Individual
I'll jump in on that one to start the ball rolling.
When we talk about the way we look at services in Canada, if there is one part of the population in Canada that really is getting the short end of the stick when it comes to air services, it's the north. The north has been served by carriers that are subsidized by various levels of provincial governments over the years, and the first nations themselves are subsidizing some of that traffic.
However, it is very expensive to fly in northern Canada, and we need specialized pieces of equipment, specialized pilots to fly in that part of the world. If we consider that we need to invest in the future of our country—and the north is very much a part of this country—I would say that the backstop should be the federal government.
The first level of support should come from the provincial governments. They know best. They know the communities that need it, and they've built and supported the infrastructure in those communities. There should be decisions made based on provincial government needs, but there should be a corresponding backstop by the federal government when it comes to funding required to support those services.
12:30 p.m.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Thank you. That's interesting.
I'm thinking about this project of pulling all the players together to address systemic challenges and correlating that within national supply chain integration discussions. Even though I've heard there isn't a model for our air travel experience and costs, given Canada's unique factors, where we could say to do it like they're doing it there, is there a model for the complicated initiative of pulling all the players together to smooth out the system? Is there some jurisdiction that's done that, so we don't have to reinvent the wheel?
12:30 p.m.
Faculty Lecturer and Program Coordinator, Aviation Leadership, School of Continuing Studies, McGill University, As an Individual
I think our friends in the northern Scandinavian countries have done a pretty good job of looking to try to coordinate among the different levels of government. The level of aviation support in those communities.... If you really want to have a look at how they've done it, it's an interesting model. Would it be applicable in Canada? I don't know.
There are, of course, learnings. Let's understand how they've done it. Understand that they went through some trials and tribulations in getting their model right. Is it the perfect model? Of course not. Is it better than Canada's? I don't know. I haven't drilled down to that point, but it works.
There are services provided in the northern parts of Scandinavian countries that have a certain level of funding, probably from the state or regional governments. It works. There are some learnings there.
We shouldn't shy away from taking on the initiative in Canada and really trying to develop a Canadian solution. We've been in this business for a long time. We've been flying to the north for decades. We know what some of the issues are. We know what it's going to take to make these things work. We just have a lack of will, direction or intestinal fortitude—for lack of a better term—to make something happen.
The north is waiting. We need to get off our collective butts and get the north operating in a way that makes it a lot more effective than it is today.
12:30 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Gradek.
Thank you, Ms. Murray.
Mr. Barsalou‑Duval, you have the floor for two and a half minutes.
12:35 p.m.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
Thank you, Mr. Chair.
I really like the direction the discussion about regional air travel is taking. We would probably agree that the user-pay principle does not work in the regions.
Mr. Ebrahimi, if that model were to be reviewed, what would you suggest?
What specific costs would have to be covered some other way?
12:35 p.m.
Director and Professor, Université du Québec à Montréal, International Aeronautics and Civil Aviation Observatory
I have been working on this for a number of years and I agree with what my colleague Mr. Gradek said.
The problem with this model is that air travel is considered a goal in terms of regional development. I think that is misguided. In the Scandinavian model, that dynamic is actually reversed. In Scandinavian countries, air travel is considered a driver of regional development and regional development is considered essential, both economically and for tourism. They found that involving local stakeholders in regional development creates demand.
In Quebec, we have lovely regions, but the tourism infrastructure is lacking. If you land at a regional airport, you will not find car rentals, hotels and so forth. The tourism potential is not fully developed.
In Denmark, on the other hand, regional airports have been built even in very remote regions in northern Denmark, and economic activity has been created around those airports. So the demand was created. In Norway, industrial zones were developed around regional airports, with the participation of local stakeholders. Companies were encouraged to set up shop near those airports. That proximity boosted the airport's activities and stimulated the economy. So they created demand, including from business people who travel from those regions to the big cities.
Once the demand has been created, whether from tourism or industry, companies set up shop and projects develop, making regional economic activity permanent. That is the approach we should take. Unfortunately, people think the problem will be solved if an airline is established. That has never been the case.
12:35 p.m.
Liberal
12:35 p.m.
Liberal
The Chair Liberal Peter Schiefke
Next, we have Mr. Bachrach.
The floors is yours for two and a half minutes, sir.
12:35 p.m.
NDP
Taylor Bachrach NDP Skeena—Bulkley Valley, BC
I'd like to take another crack at this question about rural airports and smaller regional centres.
Mr. Moore noted that most of the Canadian population lives within a few kilometres of the U.S. border. We live a short distance from the U.S. border too. It's just the other U.S. border in southeast Alaska, and really, the issue, I think, is that a lot of people feel that the big airline is gouging consumers. There's basically zero competition and they're able to charge whatever they feel people will be willing to pay. When it's essential travel and people have to get to a larger centre—for a medical appointment, say—they're willing to pay whatever it takes to get there.
Short of doing what Quebec has done—and maybe some other jurisdictions—where they subsidize the cost of those flights, what other policy options are available to government to ensure airlines are charging a fair price? I think everyone accepts that there are costs to running an airline and that a company like Air Canada deserves to make a profit, but it feels like what's being paid in some cases is exorbitant. Are there any other policy options that can ensure fairness for consumers?
I'll start with Mr. Moore since he's right here beside me, and then, if I have time and the chair allows, I'll turn to other witnesses.
12:35 p.m.
Associate Professor, McGill University, As an Individual
I just came back from Morocco. One thing that struck us was the government's role in creating clusters. They created a hub, which we stayed at, to bring families to very nice hotels. They created that and they're bringing flights there, so they're creating a reason to be there.
Whether it be tourism—you have a beautiful part of the country—or industry, such as mining as we see in Labrador City, there's that sense that there's some reason to go there. I've been up there to visit the mine.
It means that there will be greater volumes, and you're more apt to get a better number of flights and better prices. That's a medium- to long-term policy that we should think about. What is it that would take people to remote parts of Quebec? That's where I'm from, and it's enormously beautiful there. Let's build that infrastructure that someone pointed at.
That's one thing, but I think there are other things as well that we could do beyond that. That's a medium- to long-term thing that I just saw in Morocco and really comes to mind as something that we could think about, which we're doing some of, but we could do more.
12:40 p.m.
NDP
12:40 p.m.
Faculty Lecturer and Program Coordinator, Aviation Leadership, School of Continuing Studies, McGill University, As an Individual
Yes, I do.
As I mentioned, I've been around this business for a few decades. I remember the days of regulation. I remember the days of price control. I remember the days in which you established a direct relationship between the cost of flying passengers from point A to point B and the price you charged passengers from point A to point B. In the day, Transport or the CTA or its precursors validated any attempt by the carrier to raise its prices over and above the cost of doing business.
We got away from the regulatory model because we felt that we should let the market decide how airlines should behave from a pricing perspective and let the market decide how prices should work. In my opinion, we've let the marketplace evolve over the last 50 years, and we're saying, “What's the relationship between price and cost?” We can't find it.
The price is what the market will bear, as you mentioned. Yes, you're paying big bucks coming out of non-competitive markets. How do we fix it? Can we fix it? Should we fix it?
12:40 p.m.
Liberal
The Chair Liberal Peter Schiefke
Thank you, Professor.
Thank you, Mr. Bachrach.
Mr. Williams, once again, the floor is yours for five minutes.
12:40 p.m.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
Thank you, Mr. Chair.
Professor Moore, when you were giving your intro, you were talking about how this is a problem that is the government's fault.