Evidence of meeting #103 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was airports.
A video is available from Parliament.
Liberal
The Chair Liberal Wayne Easter
I call the meeting to order.
Today is really our first meeting with external witnesses on pre-budget consultations in advance of the 2018 budgets.
In the first hour and a half, we have six witnesses.
Welcome folks. I know that most of you have sent us briefs, and we certainly appreciate having received those briefs. We do know that a few things have changed since August.
We'll start with Mr. Beauregard, vice-president of regulatory affairs at the Aerospace Industries Association of Canada.
Mark Beauregard Vice-President, Regulatory Affairs, Aerospace Industries Association of Canada
Good afternoon. Thank you for the invitation to join you today.
My name is Mark Beauregard. I'm the vice-president of regulatory affairs at the Aerospace Industries Association of Canada. I'm a professional engineer and business person. I've spent over 30 years in the Canadian aerospace industry.
AIAC member companies manufacture aeronautical and space products, and they engage in aircraft maintenance, repair, and overhaul. We contribute over $28 billion to the economy each year, and help to employ well over 200,000 people. Over 80% of the aerospace industry's goods and services are exported, and much of this is for civil applications.
Our industry complies with a vast regime of safety standards and regulations designed to ensure that air travel remains safe, reliable, and sustainable. Canada has long been a leader in aviation regulations worldwide. Transport Canada's civil aviation branch, TCCA, is known worldwide as one of the big four regulatory bodies, along with the U.S. FAA, Europe's EASA, and Brazil's ANAC.
TCCA's certifications and approvals make it easier for Canadian manufacturers and service providers to do business in foreign jurisdictions, thereby increasing the sector's global competitiveness. A TCCA certification or approval with its worldwide recognition is the final and essential step in the innovation value stream for Canadian civil aviation products and services.
Recognizing the importance of the aerospace industry to the Canadian economy, the federal government, provincial governments, and municipalities have long invested directly and indirectly in the Canadian aerospace sector. The federal government's efforts to support innovation, through programs such as the innovation superclusters initiative, the strategic innovation fund, and the accelerated growth service, are highly welcomed by the industry, and numerous aerospace firms will benefit from these programs. However, these government investments are not optimized unless TCCA's certification and standards departments are adequately funded to provide timely certifications and approvals at the end of the innovation value stream.
Let me give you a few numbers to illustrate the scope of the problem.
Over the past 10 years, Canada's aerospace industry has grown substantially. Our economic impact has increased by approximately 31% in GDP terms. Productivity has increased by 39%, and R and D spending by 64%. Over the same period of time, the budget for Transport Canada's certification and standards branches has not increased at all. In fact in real terms, it has actually been reduced.
This inadequate funding is having a significant negative impact on TCCA's ability to support the industry's export competitiveness and on TCCA's global reputation. It has resulted in delays on certifications and approvals, it has created bottlenecks, and it is impeding the industry's ability to keep up with demand. The international aviation community, which includes foreign aviation authorities, has expressed concerns to us regarding TCCA's ability to maintain its regulatory leadership.
Transport Canada senior management and other Government of Canada departments have recognized the critical role of TCCA in the value stream, and have initiated various temporary measures to address the funding shortfall. That has been an encouraging start, but more needs to be done, and urgently.
Our recommendation to this committee and to the government is that budget 2018 establish additional, predictable, and stable funding for TCCA. We recommend that the budget for TCCA be increased by approximately $30 million over five years. This is indeed a modest amount, only $6 million a year, which will help to ensure that our $28-billion industry continues to bring products to market quickly and competitively. The budget increase should be used to hire much-needed and highly specialized certification staff, to increase focus on effectively negotiating bilateral airworthiness and maintenance agreements, and for the updating and modernization of TCCA's regulatory framework.
In conclusion, we urge you to review the current budget at TCCA, in particular with respect to the certification and standards branches. It would be really tragic if the innovation value stream, that governments fund to a large degree with industry, is dampened by inadequate funding at TCCA.
Thank you for your attention. I'm happy to answer any questions you may have.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mark.
We'll be turning then to John McKenna of the Air Transport Association of Canada, who is the president and chief executive officer.
John McKenna President and Chief Executive Officer, Air Transport Association of Canada
Good afternoon.
ATAC has represented Canada's commercial air transport industry since 1934. We have approximately 190 members engaged in commercial aviation operating in every region of Canada. We welcome the opportunity to comment on three budget issues of great concern to our industry, namely the sale of major Canadian airports, the CATSA financing and business model, and the new carbon tax coming into effect next year.
ATAC strongly opposes the sale of major Canadian airports. We firmly believe that the government's intent to sell off airports in order to raise billions to finance numerous non-aviation infrastructure projects is nearsighted, extremely detrimental to our industry, and will result in significantly increased costs to the airlines and their passengers.
Canada's major airports pay over $300 million annually in airport rent to the federal government. Compare that situation to American airports that are heavily subsidized by state and federal governments, and you will understand why our industry is struggling to remain competitive with our neighbours to the south.
Costs for carriers and their passengers will increase by hundreds of millions of dollars because investors would expect a reasonable return on up to $16.6 billion that the C.D. Howe Institute estimates the sale of larger airports would generate. A reasonable return of 5% would be in excess of $800 million annually, more than twice the unreasonable airport rent already being paid to the government. As rent would continue for those airports not sold, the total cost to our industry and its passengers is likely to nearly triple.
Furthermore, airports could see their surpluses simply yield higher returns on investments rather than reinvestments in services and infrastructure. In addition, if the investors are foreign, there's a good chance the profits would simply be expatriated.
To meet their investors appetite for even normal returns, airports would either have to cut services and investments or increase the fees significantly. Recent experiences in such projects, for example in Australia, have resulted in costs per passenger to increase by over 50% in the decade following airport privatization.
To add insult to injury, the government would impose a huge new burden on our industry and its passengers, while not reinvesting one penny of the billions generated back into aviation.
ATAC will fight against such a misguided measure in the hopes that the federal government will not jeopardize the long-term viability of the air transport industry for a one-time cash grab.
The funding and governance model of CATSA has always been a serious concern for our industry. For over 10 years, we've been asking the government why it found it acceptable that the air travellers security charge collects over $100 million more per year than is appropriated to CATSA. However, no answer has been forthcoming.
While the number of passengers grows every year, CATSA budgets have been lagging behind. With one of the highest air travellers security charges in the world, Canada is also the exception in that the government has shouldered the travelling public with 100% of airport security costs. In other jurisdictions, governments assume the bulk of the cost and only rely on the travelling public for a minor contribution.
The government is studying various business options for CATSA and seems to favour a Nav Canada type of model. The pitfall for applying a user-pay model to a security agency is that the governing body would have no decision-making power on the level of service, as that would remain the government's responsibility. Consequently, the administrators could be shouldered with new security measures overnight and be expected to fund them, with no questions asked.
We would support a model which would be a necessary adjustment on the status quo, where the government would work collaboratively with CATSA in policy applications and transform the air travellers security charge into a dedicated fee set by CATSA and adjusted to meet its changing needs.
This is supported by a report on aviation safety in Canada tabled in the House of Commons last May by the House Standing Committee on Transport, Infrastructure and Communities.
The carbon tax announced in the last budget is another blow to the competitiveness of our industry. Air carriers already pay $150 million a year in fuel excise tax on jet fuel. Will the fuel excise tax be replaced by the carbon tax or will this be an additional hit on our industry? The $10 per tonne announced for 2018 translates into 2.74¢ per litre. By 2022, this will have risen to 13.69¢ per litre. In the competitive world of international aviation, this is totally unreasonable.
I thank the committee for its time and I'd be happy to answer any questions.
Liberal
The Chair Liberal Wayne Easter
Thank you, John.
We're turning to Mr. Harford, the president of Beer Canada.
Luke Harford President, Beer Canada
Mr. Chairman and honourable members of the committee, thank you for the invitation to appear here this afternoon.
The government took one step forward and two back on domestic brewers this past year. Today I will ask the finance committee to recommend that the government point all its policies in a positive, growth-oriented direction aimed at helping brewers be more productive and more competitive.
Beer Canada is a national trade association with 50-plus members that combined operate 78 brewing facilities across 10 provinces and one territory. The supply and demand for beer, according to a 2013 Conference Board of Canada report, indicates that the demand for and supply of beer causes a chain of economic activity that supports more than 163,000 Canadian jobs and generates $5.8 billion in federal, provincial, and municipal tax dollars.
Canada has a real advantage in brewing beer. High-quality malting barley is an essential ingredient in beer, and we grow enough of it in Canada to supply the local brewing industry. We have local malting houses, local bottle shops, can manufacturers, and packaging manufacturers, and we even have five post-secondary institutions offering programs tailored to beer industry jobs. We also have locally grown hops re-emerging as a domestic supply source. Our country has all the agricultural and manufacturing assets needed to make great beer.
Beer has a very large domestic economic footprint. As a result, every dollar spent on beer in Canada generates more than a dollar—$1.12, in fact—in value-added economic activity. This is in addition to beer's tax multiplier effect.
It is in our country's national economic interest to have policies and laws that help domestic brewers compete and grow. The government took a helpful step forward in May of this year when a delegation of Canadian brewers, large and small, met with the Honourable Lawrence MacAulay to learn that the government was committed to modernizing the federal beer standard under the food and drug regulations. The express purpose of this modernization initiative is to ensure that brewers have the tools necessary to innovate and compete in today's marketplace. The Prime Minister set job creation and innovation in the ag sector as overarching goals for the Minister of Agriculture, and Canadian brewers are thankful that the government has taken action to help our industry.
In contrast, budget 2017 took two steps backward. It raised excise rates on beer with no warning and no transition time, and it introduced a mechanism designed to increase federal beer taxes every year with no trigger for review, no end point, and no parliamentary oversight.
Higher excise rates went into effect the day after the budget was tabled and added $12 million in costs to domestic brewers, but the bigger surprise was the mechanism that will automatically increase excise duty rates every year by the rate of inflation. This mechanism is set to kick in with the first annual increase on April 1, 2018. The finance committee can help the domestic brewing industry by recommending that this tax escalator mechanism be repealed before it takes effect.
As tax policy, increasing excise duty automatically every year is unfair to beer drinkers, too rigid to accommodate regional economic differences, and inappropriate given the challenges the beer industry faces today. On average, the tax on a case of beer already makes up 50% or more of the final retail price, depending on the brand. Per capita beer sales declined 10% between 2006 and 2016. Beer's share of the beverage alcohol market dropped 6.4 percentage points in dollar terms over this 10-year period. While Canadian brewers remain strong in their home market, their sales in volume terms have dropped by the equivalent of 8.3 million cases of 24 bottles since 2006.
If domestic brewers gained those sales back, it would generate $298 million in GDP and $117 million in additional tax dollars every year. Automatic annual tax increases are not going to help the domestic brewing industry gain back those sales.
Today, on behalf of the Canadian brewing industry, I'm asking that the committee recommend the repeal of the annual escalator mechanism now baked into the Excise Act as a result of budget 2017. If acted upon, this recommendation would be a positive signal to our industry that the government aims to be consistent in its policies and truly wants to help domestic brewers be more productive and competitive in the years ahead.
Thank you for your time this afternoon. I look forward to your questions.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Luke.
We'll turn to Mr. Gooch, president, Canadian Airports Council.
Daniel-Robert Gooch President, Canadian Airports Council
Mr. Chair, ladies and gentlemen, thank you for this invitation to appear before you today as part of your pre-budget consultations.
My name is Daniel-Robert Gooch, and I am President of the Canadian Airports Council.
Let me start by thanking you for supporting the CAC's 2017 budget submission. Canada's airports were pleased that progress was made, particularly on infrastructure funding for small national airport system, NAS, airports across Canada.
The Government of Canada's national trade and transportation corridors initiative allows all major airports to apply for funding. For several years, six small NAS airports were barred from applying for these funds. They can now finally access funds to improve safety at their airports. This change is welcome. Over the last 10 years, passenger numbers have grown from 101 million to 141 million at Canadian airports. We are already seeing a 6.3% increase this year.
This growth supports our economy and tourism and trade and 141,000 direct jobs in air transport. The efficient movement of goods and people is essential to the productivity and competitiveness of Canadians and businesses across the country. But the growth also means longer wait times at security screening at a number of airports as well as at our air borders.
When we appeared before you last year, we proposed that the Government of Canada undertake an in-depth reform of the country's security screening process, including the establishment of service standards for pre-boarding screening and a financial mechanism to allow a better response to a growing demand.
There are promising signs. Just under a year ago, Transport Minister Marc Garneau committed to looking at the Canadian Air Transport Security Authority governance model to make its funding nimbler to growing demand and accountable to service standards. We understand that changes to CATSA will be considered this fall, and this is a good step. Some airports believe the best approach would be to allow airports a greater role in the delivery of screening at airports, as is the case in many other parts of the globe.
For such a fundamental part of airport operations though, it is important we get this right and that government, CATSA, and airports work together on any structural changes that may be made. Finding a long-term solution is essential for passengers who deserve predictability and value for the air travellers security charge they pay. But in the meantime, CATSA needs to be sufficiently funded next year to support demand and allocating all revenue from the ATAC to CATSA screening is a good place to start.
CATSA's current target to process 85% of passengers in under 15 minutes means that about 10 million travellers are waiting anywhere from 16 minutes to an hour or longer. We do not believe this target is adequate. Moreover, airports tell us it is not even being consistently met today.
Airports are also spending millions of dollars to top up the service that travellers are already paying for. This undermines the goal of reducing the cost of air travel in Canada, as airports have to recover costs from users. Government also should restart its stalled investment in CATSA Plus lanes, which are improving the traveller experience where they have been installed so far.
We are also requesting resources for the Canada Border Services Agency to support growing air service demands and continued innovation. International arriving passengers are our fastest growing segment, with 10% growth so far this year outpacing last year's numbers. Working with CBSA, airports have invested millions of dollars in infrastructure to speed up and improve the traveller experience. The agency is at the forefront of keeping Canada safe in an increasingly complex, fast-changing world. CBSA supports international traffic and trade and has worked tremendously hard with airports this summer to manage a heavy flow of travellers.
Toronto Pearson continues to see record growth, and this summer was particularly challenging for them as CBSA simply did not have the resources to keep up. With customs halls jammed, passengers were routinely held on aircraft or outside customs halls, resulting in passenger delays that we're all working as an industry to avoid. In addition to its security role, of course, CBSA has an important impact on business, trade, and tourism in this country.
We're pleased to say that Canada is going in the right direction on this file. Better technologies and processes are constantly being developed and Canada is, and should continue to be, at the forefront on this. But we also need to reinforce resources for border control officers in the field who do important work.
Another area of concern for Minister Garneau is reducing the cost of air travel. Our submission includes two recommendations on cost. On the revenue side, the introduction of duty-free stores upon arrival from an international flight would provide an additional service to travellers and additional funds for airports to offset aeronautical charges to airlines. It's a service that's already in place in many other parts of the world.
On the cost side, airports last year paid $344 million in rent to the federal government, as my colleague described. As a tax on gross revenue, this rent impacts the way airports evaluate business opportunities with low-margin financial returns. We propose rent be eliminated for all airports with fewer than three million passengers and at least capped for larger airports to stop the upward trajectory.
In conclusion, I would like to thank you again for your support of the CAC's budget submission last year. Our recommendations this year will enable Canada's airports to improve the competitiveness and productivity of business in the country. They will also improve the traveller experience.
I'm pleased to answer any questions you may have.
Liberal
The Chair Liberal Wayne Easter
Thank you, Daniel.
I will turn to Mr. Brakel, the chief economist for the Canadian Chamber of Commerce.
Hendrik Brakel Chief Economist, Canadian Chamber of Commerce
Thank you, Mr. Chair.
The Canadian Chamber of Commerce provided a pre-budget submission with recommendations on productivity. However, the critical issue, really the only issue our members are worried about for budget 2018, is the finance department's proposed tax changes.
The Canadian Chamber of Commerce has been around for many years and we have never seen a reaction like this from our membership. On an almost daily basis we get phone calls and emails from members saying, “Why isn't the chamber doing more to oppose the tax change?” and “Why haven't you condemned the proposals more forcefully?” We think it's because the changes are so broad, so far-reaching, and with so many unintended consequences.
Ladies and gentlemen, there is not a restaurant or a farm in the country that does not have family members working there, and every single business in Canada has passive income, unless the business is on the brink of bankruptcy and has no cash whatsoever. It is as though the finance department crafted tax measures that would affect the maximum number of businesses in the most complicated manner, only to collect a modest amount of revenue.
Here is what we are really worried about. Small business owners generally invest their life savings in the business. They don't often have a separate retirement account. They accumulate the surplus of funds that can be used to get them through economic downturns or for capital investment. As one owner told us, “I keep most of the earnings in the company, because we're trying to grow, and in construction we go through tough cycles when business dries up“.
If the government hits investment income with a 73% effective tax rate, business owners won't have any incentive to keep surplus assets in the business. In fact, most will be better off taking their money out of the business. For us, this means fewer jobs, less investment, less of a cushion to make it through a downturn, and less productivity.
The Bank of Canada has a study from a couple of years ago called “Productivity in Canada: Does Firm Size Matter?” It indicated that half the productivity gap between manufacturing companies in the United States and Canada is because companies in Canada are smaller, and smaller companies invest less in capital and skills. A tax on passive income would lessen the amount of money they have to invest and would cause an even greater gap.
Next, imagine a venture capitalist who specializes in green technologies. That capitalist takes equity positions in risky start-up companies that are trying to commercialize environmental technologies, but some of those investments—in fact, many of those investments—could be considered passive income according to the definition, so the capitalist could be hit with a 60% or 70% tax on some of those investments.
Finally, imagine trying to explain all of this to a foreign investor. I would refer the committee to page 53 of the finance submission that talks about the apportionment method of taxing passive income where we allocate income into three pools, plus a pool for shareholder contributions in order to attribute varying after-tax rates. This is the simplest method, according to the document. The complexity is mind-boggling, and we're concerned that investors would go to the United States before they would get to the fourth paragraph.
The challenge we have is fewer jobs, less investment, less of a cushion to get us through an economic downturn, less venture capital, and less foreign investment. When business owners and the accounting firms point this out, the government says, “Oh no, that's not the intention; this is really targeted at high-income earners”, and we hear that. Whatever the intention may be, it has real consequences for small business and the Canadian economy. We would urge you to ask any accountant in the country.
Ladies and gentlemen, the Canadian Chamber of Commerce, as I said, has been around for many years and we have heard some ideas that are problematic, but we think this one is a doozy.
Thank you very much. I'll be happy to answer any questions.
Liberal
The Chair Liberal Wayne Easter
Thank you. We don't hear that “doozy” word around here very often. We hear it lots in P.E.I.
From the Canadian Vintners Association we have Mr. Paszkowski, president and CEO.
Dan Paszkowski President and Chief Executive Officer, Canadian Vintners Association
Thank you, Mr. Chair.
The Canadian Vintners Association, better known as the CVA, represents all-sized wineries operating in Canada and our members are responsible for more than 90% of the wine produced across this country. Over the past 30 years, industry leadership has elevated grape and wine quality to ensure survival in a highly competitive global marketplace. It has not been an easy road, and since the signing of the Canada-U.S. Free Trade Agreement, our wine sales market share has, in fact, dropped, from 49% to 32%. Despite this loss, we have grown and today we contribute $9 billion to the Canadian economy, support 37,000 jobs, contribute $1.7 billion in taxes, and attract four million tourist visits every year.
Canada is the second fastest growing wine market in the world, with wine consumption growing three times faster than the global average. Not only has per capita wine consumption in Canada grown by 27% over the past decade, but our sector has invested in 300 new grape wineries over the same period, growing VQA wine sales by 17.5 million litres, the value of which today contributes an additional $1.97 billion to the Canadian economy every year. These same premium wines have an economic impact of $90 per bottle, compared to $15.50 for every imported bottle of wine sold in Canada. The differential provides a real economic opportunity, especially given that the past decade has seen imports capture 70% of Canada's total wine sales growth.
Like other wine-producing countries, we know that the Canadian wine industry can make a larger contribution to the national economy, but we must first overcome challenges such as the removal of interprovincial barriers to trade, and the competitive forces of some of the largest wine producers in the world, which have benefited, and will benefit, from CETA, NAFTA, and possibly the TPP. These three agreements alone represent 90% of total wine volume imported into Canada, valued at over $2 billion—import, not retail value—representing approximately 400 million litres. It's important to clarify that these foreign imports are heavily supported by their governments. For example, the European Union's 2017 national wine envelope program funding is $1.83 billion. Further, the Journal of Wine Economics recently published that total EU wine sector support averaged $3.4 billion annually over the period 2007-12.
Budget 2017 sets a target of increasing agrifood exports to $75 billion annually by 2025. As such, it is timely for the federal government to support the Canadian wine industry's growth to take advantage of rapidly expanding sales opportunities, both across Canada and beyond our borders. Trade is not one-sided, and like our competition, the Canadian wine industry must be in a position to take full advantage of the opportunities that trade agreements, such as CETA, NAFTA, and possibly the TPP offer.
Our 2018 pre-budget submission puts forth three recommendations. First, it is important to reiterate that the recently legislated annual inflation indexation of the wine excise duty will negatively impact Canada's wine value chain. Recent CVA economic analysis has concluded that over the next five years excise duty indexation will, on average, raise an additional $8.45 million in annual excise revenues from affected Canadian wines. This will increase consumer price and reduce demand, resulting in an average annual national economic impact loss of $87 million through the value chain. The cumulative negative effect will climb as high as $110 million in 2023. To reverse this negative impact, the CVA recommends that the government review the excise duty structure on wine sold in Canada, including the legislated annual excise duty increase, with the goal of growing the Canadian wine industry and stimulating tax revenue.
Second, there is a real need to spur investment and innovation to facilitate the growth and expansion of Canadian wine businesses.
Mr. Chair, last December, this committee recommended that the federal government support innovation in the Canadian wine sector through improved operational and infrastructure investments. We agree with this recommendation and also support the government's recent introduction of the strategic innovation fund, which is now available to Canada's six highest growth sectors, including agrifood, providing the opportunity to deliver the growth potential offered by our wine industry innovation program recommendation, better known as WIIP.
Like the strategic innovation fund, WIIP has been designed to support growth, productivity, and competitiveness through improved operational and infrastructure investments. Our five-year WIIP proposal would benefit every winery in Canada and is estimated to provide a 38-fold return on the federal government's investment while supporting an additional $7-billion contribution to our sector's national economic impact.
Our final recommendation is focused on the application of the small business deduction. The problem facing many wineries is that the qualifying taxable capital test restricts access to the lower tax rate to the first $500,000 of eligible income, penalizing capital-intensive wineries with holdings of high-cost farmland, processing facilities, retail stores, restaurants, etc. Wineries with taxable capital valued below $10 million have access to the full benefit from this tax measure, while those with in excess of $15 million are ineligible.
While the costs to these typically small and medium-sized family businesses have increased annually, profit margins remain low and the taxable capital threshold levels have not been adjusted to inflation for 23 years, since the measure was introduced in July 1994. CVA recommends that the federal government exempt the qualifying taxable capital thresholds for agriculture and agrifood sectors, providing full access to this tax benefit. Any loss to the treasury would be used by industry to stimulate investment and help achieve the ambitious target of increasing agrifood exports to $75 billion annually by 2025.
Thank you.
Liberal
The Chair Liberal Wayne Easter
Thank you all for your presentations and for sticking pretty closely to the timelines.
Before we turn to the first questioner, I want to welcome Joël Lightbound to the finance committee. He is the newly appointed parliamentary secretary to the minister of finance, and he certainly comes in when there are no hot issues, so his timing is excellent.
Welcome, Joël.
Liberal
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair.
Thank you to the witnesses for coming today. We really appreciate it.
To the Canadian Chamber of Commerce, I have no doubt you will get a lot of questions today, so I'm going to focus my questions on the aerospace industry. My apologies; I'm not ignoring you, I just think that you'll be kept busy throughout the question period.
Pearson International Airport is right beside my riding. A lot of people in my riding work at Pearson International Airport. I really appreciated Mr. McKenna's comment that the government shouldn't be privatizing the airports, because cost per passenger will increase. My own personal research on the issue says that where airports in the world have been privatized, indeed, the cost per passenger has increased.
I want to get feedback from you, Daniel, as president of the Canadian Airports Council. You didn't bring this up, and I thought that was kind of unique.
President, Canadian Airports Council
There's a reason for that. Our airports have a variety of views on the file, so at the moment, we're not taking a position. Nothing concrete has been put forward, so there isn't anything to react to and that's why I didn't address it. Our airports have a variety of views and they are expressing those individually, which is absolutely appropriate.
Liberal
Raj Grewal Liberal Brampton East, ON
That's a really interesting position to take as an individual who represents all the airports.
Mr. McKenna, you mentioned in your submission that in Australia when an airport was privatized, the cost per passenger increased by 50% over a decade. Do you have other examples in the world where airports have been privatized and the cost per passenger has increased?
President and Chief Executive Officer, Air Transport Association of Canada
It was not a question of one airport; that was part of the privatization of many airports in Australia and that was the average it went up, 50%. We're actually studying that right now across the world. That one is the prime example, because that was done not too many years ago. We are addressing that, and I will be happy to supply you with that information later on.
Liberal
Raj Grewal Liberal Brampton East, ON
I would really appreciate it if you could send the committee that report. More importantly, also in your study—which is not to recommend that you should take this or not take this—are the corresponding labour issues around the airports. Pearson indirectly and directly employs, I think, 40,000 people in and around that area. It would be really interesting to know the impact of privatization on the employees of the airport who are directly or indirectly impacted by the economic corridor that's represented by specifically major airports like Pearson.
Both you gentlemen mentioned CATSA. CATSA funding is extremely important, especially for people who travel all the time. Every Monday morning when we go to Pearson Airport—and most of the people on this committee are probably NEXUS holders, so they're probably still in another line—we see the frustration because of how slow it is to get through security in Canada.
The recommendation is always about money, and money is a big part of it. Don't get me wrong—the more people you have, the faster they'll get through. Have you seen any other recommendations in terms of procedural changes that could make it more efficient?
President, Canadian Airports Council
Well, we have. CATSA Plus employs technology, but it's also procedural changes. There is some capital investment required, and CATSA has a plan to roll that out at the highest volume airports. Unfortunately, budget 2017 has stalled that, so it's only partially implemented in Toronto, Montreal, Calgary, and Vancouver, I believe, at the moment. For example, you're probably not seeing it at Toronto Pearson. I know they have it at the transborder connecting to the U.S. It's dramatically improving the traveller experience, and that's why it's one of the recommendations we have, that investment be restarted.
In a volume-based business, though—6.3% this year alone, a 10% increase in international travellers—efficiency and technology are going to do a lot, but you still need the bodies on the ground as well. It's a volume-based business; there's no way around it. We're innovating to do more with less, but the resources do need to keep up.
President and Chief Executive Officer, Air Transport Association of Canada
Also, if I may add, the service levels, the level of sensitivity, are not determined by CATSA. It gets its marching orders from the government, from Transport Canada, and it has to apply them. We go to other countries where, of course, how long they look at each piece of luggage is a lot shorter because they don't have the same standards. That also has an effect—it's not just a question of efficiency of operations but a level-of-service issue also. How much are we looking at each piece of luggage?
Liberal
Raj Grewal Liberal Brampton East, ON
Not that I'm telling you guys how to do your jobs, but something that I've seen, as a passenger, is the frustration that passengers aren't well informed of what can go through security and what cannot go through security, and that makes things a lot slower. In the NEXUS line, for example, having to tell passengers to take their laptop out of their carry-on. They should know that before they even get their NEXUS pass. People should be able to do a test on something like that. Why would they be given a NEXUS pass if they don't know the basics of trying to get through security in the first place? In international airports I've seen all over the airport virtual 3-D individuals saying things like “This is what you have to do before you go through security” before people even get into the security line, whereas we don't have that. Even while we're waiting in the lines in security, nobody's challenging passengers to take away their liquids, make sure they don't have anything over 100 millilitres, make sure their laptop's in a different bin, make sure to take off their shoes, etc. That would actually make it more efficient once people got to the line, as opposed to going to the line and having the person walk through the metal detector three times.
President, Canadian Airports Council
Correct. We did spend a lot of time working with CATSA on some of that stuff in terms of education, trying to improve processes, and that sort of thing. It's one of the reasons why CATSA Plus helps because, in terms of the process, you actually have four parallel stations, so four individuals are going up and putting their bins in; if you have one passenger who's slow, he or she is not slowing down the others. That's one of the reasons why it works so much better. Absolutely, travellers are at different sophistication levels, and that's a reality of life.
