Transport Committee on May 7th, 2024

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

That's perfect.

A number of witnesses have also told us that Transport Canada collects taxes from airports and airlines.

Can you provide the committee with more details on these taxes?

What are these taxes and when do you collect them?

[Craig Hutton]

In terms of some of the fees that a carrier may face, they can include Nav Canada fees, an airport improvement fee and an air travellers security charge. All these fees are charged either at the airport level, such as an airport improvement fee, or through an entity like Nav Canada to make sure the provision of navigation services is supported. There's also an air travellers security charge, which supports the security screening of passengers.

Depending on the type of service, there are a number of different fees that could come into play. What those fees might be could also change based on the route that an air carrier may be flying—international, domestic or even local.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

I just want a clarification. People pay fees for certain services, or they pay taxes, to the City of Montreal or when they buy something at a store, for example.

When you talk about fees, are you talking about taxes, or is there a difference between the two?

How were the costs determined?

How often are these taxes or fees collected?

[Craig Hutton]

As I mentioned, the landscape for some of the fees, whether they're charged at the local level or at the federal level, can be quite complex.

Let me just run through an example of some of the fees that are charged. There are government fees and taxes, rent and the air transport security cost. Rent is in recognition of the fact that an airport is operating on federal lands and is a federal asset, so there's a return to the government as a result of the use of that asset.

In terms of airport improvement fees, those would be charged more at the local level. The formula for an airport improvement fee is set at the federal level. It's there to help address where that fee could be charged.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

My time is up.

Can you give us a bit more of a detailed list?

I want to ask you one last question that I'd like you to answer in writing. We've been told that the U.S. airlines are not coming to Canada because of taxes or fees. Could you tell us if that is the case and, if not, explain to us why the U.S. airlines haven't set up shop in Canada?

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Iacono.

Mr. Barsalou‑Duval, you have the floor for two and a half minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

Mr. Hutton, I told you earlier that, in my opinion, regional air transportation should be considered an essential service, particularly in regions far from major urban centres. Those regions need these services for travel. However, I didn't hear you talk about that.

So I'd like to know if, in your opinion, or at least in the government's opinion, regional air transportation is essential.

[Craig Hutton]

In terms of the service to remote communities, I have spent a fair amount of time both in northern Quebec and in Nunavut flying to various destinations. I know how important air services are to those remote communities in providing not only cargo and medical services, but also connectedness between communities.

It's a very important service that is provided. It's one of the reasons why, when Canadian North and First Air proposed a merger, the government took steps to ensure that as the merger proceeded, it was subject to a number of conditions, with a view to ensuring service to various communities at a price point that was not onerous and wouldn't outstrip the cost to provide those services. At the same time, that ensured a viable merger.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you for that.

From what I understand, in your opinion, this is a very important service. However, I didn't hear the word “essential”. You probably know that when people say a service is essential, they imply that the government must commit to ensuring that it's provided.

I must admit that I'm very disappointed in your testimony. I'm not angry at you; I'm angry at the government that sent you. I get the feeling that we haven't learned much from you today.

I think the reason we haven't learned much is that Mr. Minister didn't want to appear because there was nothing to say and nothing to announce. You were sent in to skate around the issues, and you're stuck answering parliamentarians' questions but you don't have much to say.

I find that sad, because there are real problems in the regions. You tell us that the minister is interested in air transportation challenges, and then you say that he's working on accessible transportation for people with disabilities. That's an important issue, but I think the regional air transportation problem is a major one. We're going to be doing a study on that shortly.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Barsalou‑Duval.

Next we have Mr. Bachrach.

Mr. Bachrach, the floor is yours for two and a half minutes.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

I have two quick questions, and I'm hoping I can fit both of them in.

First, in the next panel, we're going to hear from Dr. Lukács about ways of measuring competition in the sector, and I'm wondering if Transport Canada quantifies the level of competition present in the air sector in Canada.

[Craig Hutton]

As we look at competition in the sector, having KPIs or measurement tools is very important. Over the period of the recovery, one of the things we were closely watching was efficiency, particularly with the traveller, who was feeling the impacts of a difficult recovery period, with a 280% increase in passenger volumes—

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I have only two and a half minutes. I'm wondering if you could share with us which KPIs or measurement tools Transport Canada uses to measure competition.

[Craig Hutton]

One of the measures we look at closely is on-time performance. That is a measurement of the efficiency of the system.

In our work, we've seen remarkable recovery on delays and cancellations—

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

That's not a measurement of competition, is it?

[Craig Hutton]

It is in terms of the efficiency of the operations within the sector. If you didn't have a competitive system, you would see perhaps one carrier or two with performance issues that were difficult to improve. With the competitive pressure of others within the system, you see that both from an OTP perspective.... We're still seeing some delays within the sector, but we have seen a recovery on measures like cancellation.

We also look at the competitiveness impact index developed by ICAO, which has a number of pillars in it. We measure our sector compared to the pillars ICAO has set out. There are five pillars in total.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Could you table with the committee your quantification, using that methodology, of Canada's competitiveness in the air sector over time?

[Craig Hutton]

I'd be happy to provide the committee with the ICAO competitiveness index and provide the information we look at when we're making determinations about the health of the sector.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Hutton and Mr. Bachrach.

Next we have Mr. Strahl.

Mr. Strahl, the floor is yours. You have four minutes, sir.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you, Mr. Chair.

My questions will go to the officials, because they are the only ones here. Minister Rodriguez has decided not to attend despite his invitation. I wish I were asking these questions of the minister, but he didn't believe this was a priority for his schedule.

Does the Government of Canada believe that airline competition is too high, too low or just right?

[Craig Hutton]

That's an important question about our perception of the industry.

I think we're still not at a stage where we see a stabilization of the marketplace. We've been encouraged by the number of entrants in the marketplace. We're encouraged by expansion plans, like the ones we've seen from Porter Airlines, for example, and by ongoing operations from ultra-low-cost carriers. In terms of the equilibrium and where we are, we're encouraged by announcements like the one by Flair Airlines today about its two new routes—St. John's to Toronto and St. John's to Kitchener-Waterloo.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

I take it you believe that things are just fine.

We're discouraged that Lynx Air is leaving and that eight low-cost carriers have left the marketplace in the last 20 years. It's why we're having this discussion.

We have heard from carriers that federally regulated entities charge Canadian consumers about $160 per ticket, which is before any airline profits or costs are factored in. Does the Government of Canada believe that $160 per round-trip ticket is too high, too low or just right?

[Craig Hutton]

That is an important question on affordability.

As I mentioned in my earlier response, the user-pay system is a feature of the Canadian air system and an important feature so that taxpayers more broadly aren't saddled with the costs of running our air system.

I would say, to the member's question specifically on the cost of fees, that it depends on the route we're speaking about in Canada. It's hard to provide a generalization of the fees, but I would still say the majority of the ticket price represents the actual cost of the service for the airline.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

The government seems to be okay with $160 per ticket, having allowed Nav Canada to raise their fees 30%, having increased CATSA fees by 30% and having increased airport rents by 42% over the last decade. My question is this: Does the Government of Canada measure the number of Canadians who are seeking lower prices in the United States? If so, does the government care that we're losing millions of passengers every year to cross-border travel as people cross the border to use airlines and airports based in the United States as opposed to Canada due to our high-fee system?

[Craig Hutton]

I would say a couple of things on cross-border travel. One is that passengers may be choosing that for a number of reasons. There could be proximity reasons. There could be destination choices.