Indigenous and Northern Affairs Committee on Nov. 22nd, 2010

[Ben Ryan]

I have a comment as well.

In the case of the Yukon, we actually feel that it will be more of a case where small retailers might catch on. We are a little suspicious that some of the larger retailers in the Yukon may be a bit disinterested in the food mail program.

But in any event, you've brought up concerns that retailers may not pass on the savings they could incur in terms of subsidies directly to the customer. This is one of the concerns that the Vuntut Gwitchin First Nation of Old Crow have addressed. From their perspective, they note that the premium charged on groceries that arrive via the retail channel currently is a lot larger than that on groceries that arrive on our aircraft using the food mail subsidy, and I think a lot of that has to do with our cost structure.

We feel that one of the advantages of having the subsidy stay at the transportation level in our case is that we are a transparent organization and consumers in Old Crow can see where the costs are coming from. What I mean by that is that if we were to increase prices, it's very easy for them to see that it's happening, because the groceries are being purchased directly from Whitehorse for prices that are observable and our rates are public. Our relationship with the community of Old Crow is very strong, so they will have tons of bargaining power to voice their opinions. My father goes to the town meetings in Old Crow, so it's very hard for us to hide such a scenario.

So in our case, we feel that we can provide better prices and also some transparency. That is what the communities are ultimately looking for, because it's very hard for people in Old Crow to understand how groceries coming from Winnipeg get to Old Crow and where the costs come in. That's one of the points we have.

[The Chair, Conservative, Bruce Stanton]

Thank you. Ms. Neville.

We now move to Mr. Lévesque, for seven minutes, and then to Mr. Bevington.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Thank you, Mr. Chair.

Mr. Ryan, I had the opportunity to meet the president of your company. He is your father, I believe. Are you the only company flying cargo into Old Crow from Whitehorse?

[Ben Ryan]

Thank you for your question.

Yes, we are the only company. Old Crow is an isolated community of 400 people, so we are the only carrier, and we don't really foresee the market being big enough for another carrier.

The Vuntut Gwitchin First Nation are huge stakeholders in our firm, though, at 48%, and we've been in the Old Crow market for over 30 years. As I say, we're the only carrier there, but our relationship with them is such that it's far from what you would consider a conventional monopoly.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Hence your interest in keeping Whitehorse as an entry point; it lets you get fresher food by shipping it directly to the village of Old Crow, getting quality products at more affordable prices. Thank you for your answer.

Mr. Ballingall, Canada Post operates by invitation to tender. Have you ever submitted a bid, or do you intend to submit a bid to Canada Post for transportation under the Food Mail program?

[James Ballingall]

Cargojet was subcontracted by Canadian North on the previous bid, but as you know, Canadian North was unsuccessful in getting that. We were subcontracted to lease one of our heavy lift aircraft to fly product from Val-d'Or to Iqaluit.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Unfortunately, I have not had the opportunity to meet the Cargojet representatives at Val-d'Or.

What makes you say that you could offer a better price under the Nutrition North program, compared to what you could offer under the Food Mail program?

[James Ballingall]

I didn't say that it would be a better price; I said the business model in the south works very well. Those assets are paid for, so the costs we can provide--subcontract to other carriers--would be economically beneficial to them. The assets we employ down south are already 100% paid for. If you take that asset and employ it during the day when it's doing nothing else, the price we could get them would be very advantageous.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Mr. Frappier, explain to me why the city of Val-d'Or was chosen as an entry point for the Food Mail program.

[Jasmin Frappier]

The northernmost 10,000 ft. runway is in Val-d'Or. When this all started, INAC's logic was always to go to the end of the road. We have two bases, one in Val-d'Or and one in La Grande Rivière, which really is at the end of the road. The runway there is 6,500 feet long.

Another point to consider is the distance between Val-d'Or and La Grande Rivière. INAC has considered it. Truckers can get from Val-d'Or directly, without having to sleep. They have logbooks…They can do the trip in one go. A trucker leaving Val-d'Or at 5:00 p.m. will get to Grande Rivière at 6:00 a.m. the next morning. If he left from the south, he could not do that because he would have to sleep for eight hours.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Tell me why the 10,000 ft. runway in Val-d'Or is so important, compared to other places.

[Jasmin Frappier]

The runway is 10,000 feet long. So any carrier can land at Val-d'Or. The runway is very well maintained. No other is farther north. Given the shorter distance, shipping food between Iqaluit and Kuujjuaq costs less.

But no company has wanted to have an aircraft permanently based at Val-d'Or, as they do in Yellowknife or La Grande Rivière. If an aircraft was based at Val-d'Or, there would be no costs from the south. I am not sure whether you understand my point.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

I understand it very well. If people from the party in power do not understand, I am sure that they will ask you serious questions about it.

Given your experience in providing services to northern communities, can you tell me if the new Nutrition North program could end up being less expensive than the current Food Mail program, accepting that we do not know all the implications yet?

[Jasmin Frappier]

It is hard for me to tell you whether it is going to be less expensive, but I do know that, unfortunately, northerners are going to lose out in three ways. If I may, I will explain how. Perishables will deteriorate in quality and freshness because the air carrier will no longer be under any obligation to have storage facilities. And products will no longer have to be checked for quality under the new program.

As I explained earlier, the bargaining power that the larger retailers have will allow them to negotiate better cargo rates but, above all, better delivery days during the week, for which they will have exclusive rights. In my opinion, it is inevitable that, in the short or medium term, a number of small retailers will have to close their doors. At that point, I see consumer prices going up.

Then, in my experience, I would say that there will be fewer flights and that could have a dramatic effect on some communities. It may seem a little illogical, but I believe the number of passenger flights will decrease. Let me explain. More companies shipping cargo could reduce the number of “combo” flights, the ones carrying both passengers and cargo. Let's say a competitor ships a full load of cargo to certain communities each week. The carrier that has the contract at the moment sees that delivery as a guaranteed basic revenue. With no cargo, just a few passengers…

[The Chair, Conservative, Bruce Stanton]

Thank you, sir.

[Jasmin Frappier]

Just one more sentence, Mr. Chair.

[The Chair, Conservative, Bruce Stanton]

Go ahead.

[Jasmin Frappier]

…in some cases, the service could no longer be profitable and could be cancelled.

[The Chair, Conservative, Bruce Stanton]

Thank you.

Thank you, Mr. Lévesque.

Now we'll go to Mr. Bevington for seven minutes, who will be followed by Mr. Payne.

[Dennis Bevington, NDP, Western Arctic, NT]

Thanks, Mr. Chair.

I thank all the witnesses for coming here today.

This is for Chief Napoleon Mercredi or Darryl McDonald. How do you characterize how your community came to understand the changes in this program? How have you felt about the consultation that has taken place so far on this?

[Chief Napoleon Mercredi]

I'll start and Darryl can help me.

I know that there has been a subsidized food program for a long, long time, but we have never noticed any difference. If you look at it price-wise, I know that it was subsidized, but I agree with the gentleman there. What he said was right. He said that only some people who benefit, like the retailers or the airlines.

We're supposed to have nutritious food subsidized, but right now in Fond du Lac, in the middle of Canada, we're paying $19 for four litres of milk. That's a ridiculous price, if you can get it subsidized like that, so you know, therefore, that somebody is making the money. At the same time that the air freight is being done, I know that I can buy four litres of milk in Saskatoon for about $3.50. By the time I'm 400 miles north, I'm paying $19. We do have a very big concern. There have to be changes.

I'd like to thank the committee for inviting us to have our little bit of input on this. I hope it works out for the better, because our prices are rising. We don't have any roads. If I buy my groceries in Saskatoon and have to pay freight if I'm going to send something up, if it's not subsidized, then I have to pay $1 a pound to get it flown from Saskatoon to Fond du Lac. That's very costly, especially when you live on a reserve where there's a high unemployment rate and stuff like that.

I think this committee should take a serious look at some communities that are affected by this.

[Darryl McDonald]

Could you repeat the question again?

[Dennis Bevington, NDP, Western Arctic, NT]

I really want to know about your knowledge of the program and the changes to the program that have taken place so far. Are you satisfied with your understanding of how this program is going to work?

[Darryl McDonald]

Initially, what I understood growing up in the community, from a younger age.... As the chief mentioned, we have low-income families. At the time, when it was run through Canada Post, if you knew of the program, you took advantage of it as long as you were employed. But if you lived on a fixed income, you had no access. I don't know how you would even learn about it. From my perspective, as far as consultation goes, or an overview, what the community of Fond du Lac knows about the program is limited.

I've just recently found out that the food program was out of La Ronge, Saskatchewan, as a main point for our region. Everything is shipped by mail. If you have fresh produce sent through there, by the time it gets to Fond du Lac, it's either frozen or spoiled.

For this program, we're just learning about it now, or for a couple of months, and learning about what's being proposed. Is it several years now, a couple of years, that it has been in the process of being reviewed?

I think it is a good change, but how we can come to a happy medium is still a factor, for our community anyway. Whether we have an airline company for our region as well that services freight.... Individuals have also mentioned that they are knowledgeable about how the freighting system and passenger airlines work. We have competition now with our own company in Fond du Lac with regard to the aviation. So the costs will eventually go higher again, because you have two service delivery people, and then there is the option of whether our community members will go or whether even the local companies will be forcing themselves to lessen cost for freight.

As far as knowledge goes, I think it's slowly coming out. We're glad that we've been invited here to this session through Mr. Clarke's office.

If there are any other questions, we're here.

[Dennis Bevington, NDP, Western Arctic, NT]

I live in a place called Fort Smith, which is a little bit further north than you, but certainly for Uranium City, which is on the north side of Lake Athabasca, I think it's the closest road link. The retailers in Fort Smith will experience people actually chartering planes to fly in there to pick up groceries in that community, because the cost is better there to actually do that.

Now, under this food mail program, that type of entrepreneurial effort on the part of the community might well be possible if these carriers and retailers get themselves registered for the subsidy. The flexibility required by so many different communities is something that I think you might want to give some more evidence on, maybe when you have another chance during this session, or to me.