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

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Clarke.

You may now ask your question, Mr. Lévesque.

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

Thank you, Mr. Chair.

Since the question was asked inadvertently, could you give me a quick answer to the question I asked earlier, Mr. Frappier?

[Jasmin Frappier]

Could you repeat your question, Mr. Lévesque?

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

If we consider the current prices under the Food Mail Program, keeping in mind all the products eliminated from the list on October 3, is the Food Mail Program still a better way of transporting goods than Nutrition North, if we compare the lists of food products to be shipped?

[Jasmin Frappier]

I think that, based on the current delivery schedules, the Food Mail Program is much better developed and makes it possible to deliver food to all communities.

For instance, the delivery schedules allow for equality in the delivery of food to all retailers. Currently, all the retailers that are not located in a community receive their purchases on the same day, according to the type of product shipped out. Everyone is equal under the program. All retailers are equal and benefit from the same product freshness, since the food is delivered at the same time. In addition, they all pay the same transportation rates.

The new program will take away from this equality.

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

Thank you.

Mr. Mercredi, good afternoon.

I don't know if you're related to Ovide. I knew Ovide Mercredi very well.

I'm looking at the information you provided, and you're saying that the cost of groceries is very high. I understand! If you're bringing in food from La Ronge directly by plane... The prices they are charging you... You are 500 km away from La Ronge. However, you are saying that you would be better off bringing in food from Saskatoon, which is 1,000 km away by air. According to what Mr. Brouillard said earlier, the flight time and the distance covered are both factors that raise the costs.

If food was sent from Saskatoon, for instance, and delivered to Fort Smith—the distance between the two locations is 200 km—through Canada Post, which solicits bids and awards contracts to the lowest bidders based on certain criteria of freshness and delivery time guarantees, would you feel that your interests were better protected and that you would be in a position to get better rates?

[Darryl McDonald]

Right now, I think the practice that Northern Store has is that fresh products are shipped by winter road or seasonal road from La Ronge or elsewhere. The majority of the food comes from Winnipeg under the Northern Store concept. Then everything is delivered to Stoney Rapids. Any other produce or products that may be perishable will be flown from Stoney Rapids to Fond du Lac. That's the standard practice in the winter--and sometimes in the summer.

Under the Arctic Co-op, just to clarify, under that concept, the point of entry is Saskatoon. Based on their model, we haven't brought Arctic Co-op in yet. We're in discussions and looking at that model to see if we can, because it would be a community-owned business. Normally the shareholders would be the community members, whereas Northern Store just funnels $3 million to $7 million a year out of the community and we don't get anything back from that.

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

Thank you.

Mr. Ballingall, given your capacity to provide services, I still don't understand why you didn't place a bid with Canada Post to be one of its main transporters, and not a secondary transporter, a subcontractor of a large company.

Your company is perhaps as large as First Air, but did you comply with the Canada Post instructions and specifications when you placed a bid for a transportation contract with that body?

[James Ballingall]

Mr. Lévesque, as I said earlier on, we were subcontracted by Canadian North to deliver the final product to all the communities in the north. You need a substantial infrastructure in place: warehousing and a transportation network. We didn't have that at the time, so we just provided an aircraft, based on a model similar to what I'm talking about today. Using a cross-utilized asset, you can offer a much lower unit cost.

The objective there was to lower the unit cost, the per pound cost, of moving product from the south to Iqaluit and/or Rankin Inlet, so we bid in cooperation with another carrier the last time.

[The Chair, Conservative, Bruce Stanton]

Thank you.

Thank you, Mr. Lévesque.

All right. Now we'll go to Mr. Payne, and then I don't have any others.

Mr. Bevington, did you want another question as well? Okay. We'll go to Mr. Payne. He'll be followed by Mr. Bevington.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Mr. Chairman. My question is through you to our witnesses here.

There are a couple of points I probably should have made earlier on in terms of the Nutrition North Canada program. As the health minister indicated, it's the health of the first nations people she was really concerned with. There are obesity and diabetes and those kinds of issues, particularly because of the fact that you can get pop a lot cheaper than you can get milk--and I won't use any particular brand name. I was totally shocked to hear this. I just found it totally unbelievable that pop could be brought in more cheaply than milk could, which is obviously a nutritious food versus the pop.

The other comment I'd like to make is on the subsidy rates, which we know are going to be out on December 1. That is for air freight, so we're going to see those subsidy rates on the nutritious foods, the fresh foods that are needed for the north. As I understand it right now, the products that are not going to be subsidized are already on the website. That's why we've seen differences in terms of coffee and diapers and a few other things.

I'd just like to go back to what my colleague was talking about.

Mr. McDonald, I think you talked about the $3 million to $7 million, was it, that was leaving the community? If in fact you did have a warehouse there, would it potentially keep that money in the community?

[Darryl McDonald]

Yes. I believe under the Arctic Co-op model, the income that we get from that would continue to revolve within that whole Arctic Co-op concept.

[LaVar Payne, Conservative, Medicine Hat, AB]

So what would that do for the community, then?

[Darryl McDonald]

There might be more access to better-quality foods rather than the spoiled food from other retail, which exists right now.

[LaVar Payne, Conservative, Medicine Hat, AB]

So certainly that would be very beneficial to your people there.

I guess in terms of the other foods or the other products and some of the canned goods that are going to be shipped, those will no longer have subsidies. I wonder if somebody could tell me--maybe Ben--about what happens with those foods. You talked about Old Crow being a community of only 400 people, I think?

[Ben Ryan]

Yes. Old Crow is a community of 400 people. The interesting situation there is that they just recently had an election and half the votes came from Whitehorse, in fact, so we're sort of concluding that there is a ration of one to one for residents of Old Crow and their relatives in Whitehorse.

There are two different streams by which the perishable foods--versus non-perishables--can get to Old Crow at an affordable cost. For perishables, as we've identified, it would be far cheaper for us to fly them, with the subsidy residing with us so that customers could find the cheapest and most competitive grocer available. It's very similar to the model that James is suggesting, in which you provide a direct link from the competitive market to the village.

But in the case of Northern Store, our dry goods rate, not even food mail, is actually cheaper than the food mail type B rate that currently exists, so they can actually get non-perishable goods up there at a very competitive rate given our current cost structures. Actually, that's probably the case with a lot of airlines. That's probably why you see the disparity with things like Coke being so cheap. It's because they can be shipped in bulk and they can be stored for long periods of time and shipped under favourable conditions. When you bring in those economies of scale, the airline can reduce the cost you charge.

So for the non-perishables in our case, they will probably continue to flow primarily with Northern Store shipping them just as dry goods at the preferable rate we've given them.

[LaVar Payne, Conservative, Medicine Hat, AB]

Okay. So you said that it's highly unlikely there would be any competition into Old Crow?

[Ben Ryan]

It's highly unlikely. The market itself is not lucrative enough. Furthermore, I would challenge you to find a northern carrier who can say that their cost structure is comparable to southern carriers of similar size. Our cost structure is low, such that it's very hard for other carriers, other than a southern carrier with a bigger aircraft, to come in. But the market's not lucrative enough that you would ever....

[The Chair, Conservative, Bruce Stanton]

Thank you very much, Mr. Payne.

I also thank you for correcting the record that the eligible food list is indeed available; it's the rates on a per community basis that will be published on December 1. Thank you for that.

Just as a note for the record, Mr. Ryan, Old Crow is the one community in the coverage area here that has neither the sea-lift capability nor the winter roads, and that's why it's in this unique situation for the Yukon.

We're going to go to Mr. Bevington for five minutes, and I think he will ask our last question.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

I can see that we're really not going to understand the full impacts of this program until a couple of years into its use. By opening it up to this competition, I think you're going to see many, many things fall out of it, and whether they're going to be good or bad is very difficult to determine at this juncture.

At the same time, there needs to be some surety for the airline industry to deal with this. I'm recognizing that more and more as the discussion goes on here, Mr. Chair.

I understand where you're coming from, Mr. Ballingall, but your ability to provide service other than to major centres is completely limited, so whatever you brought to Iqaluit would then have to be carried by First Air or by another carrier to the smaller communities. You'd have a two-transportation hub there. With First Air, would that mean you would double up the cost of transportation?

Rather than First Air flying out of Val-d'Or directly and continuing to the smaller communities with their own carriers, by having two carriers, as you're proposing, would the total transport bill be higher?

[James Ballingall]

Under the existing food mail program today, approximately 70% of the food mail that goes to Iqaluit is destined for Iqaluit; the other 30% goes up island, whether it's to ACL or Northern Store. Both carriers, Canadian North and First Air, have large infrastructure in place in Iqaluit.

With our model of cross-utilizing an aircraft to get the bulk of the product into Iqaluit, we would provide both of them with substantial or significant cost savings. They wouldn't have to go out and acquire a big asset like a 767. We already have it and it sits all day. That airplane sits all day and does nothing, but 100% of the cost is covered on the nighttime courier. So we are presenting an option to save them a lot of money by cross-utilizing that aircraft during daytime hours; otherwise, it wouldn't be doing anything. We can give them significant savings.

[Dennis Bevington, NDP, Western Arctic, NT]

You have good reliability, but you're flying on southern routes. Having been through Rankin Inlet a number of times in my life and having been stuck there, and knowing the difficulty of flying sometimes, where would food mail fit in your priorities in comparison with your nighttime flying?

How would you ensure that you would be able to make...? If you have a commitment for your plane at night and you can only use it in the day for food mail, how is that going to work out when, in many cases, you have problems with weather? It could be in the morning; it could be in the afternoon. The weather situation there would make your scheduling very difficult.

[James Ballingall]

I'm very familiar with it, but because we only sell time, we have a number of spare assets. We call them “hot spares”, with pilots sitting in the cockpit ready to go should there be a mechanical failure somewhere. We would do the same thing with weather, so we do have backup assets available for that exact example you're talking about.

[The Chair, Conservative, Bruce Stanton]

You have one minute and a half.

[Dennis Bevington, NDP, Western Arctic, NT]

Okay. I have just one other item for Chief Mercredi.

Could you perhaps describe how important country food is to your community? Because that's certainly something that we've heard tell of within this program, that we want to see the increase of, and I certainly support that in most northern communities. Maybe you can just describe how important that is to your community.