Industry Committee on June 17th, 2008

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

My question is about the layoffs that were announced today at Air Canada. Normally at this time of year we're heading into peak season in the airlines. Normally April, May, and June are a hiring period, and the summer months are the busiest months of the year, when airlines, certainly, and other related industries make their money.

How significant is the announcement today of a layoff of 2,000 Air Canada workers, and is that creating shock waves in the tourism industry in Canada?

[Randy Williams]

Certainly the announcement is reflective of the tone of our competitive report in that we're on the verge of a crisis. It's just one signal that this report is right on the mark.

Be aware, though, that the Air Canada announcement is for this fourth quarter and the first quarter of next year. This summer there won't be any change in the staffing because it is a peak season for tourism. Those changes are for six to nine months from now.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

[Jim Facette]

Mr. Chair, if I might add, it is symbolic of an important message going forward. There are some things that business cannot control. The price of fuel now consumes about 33% of Air Canada's costs. I think it's more than labour.

What's important is that in times like this, regulators like the federal government need to do whatever they can to give as much wiggle room as possible to enable the industries to compete. You can't solve all the problems, but you can do some small things to help them go a long way. I think that's what the CEO of Air Canada said this morning. Fuel is a big part of it. I've heard him speak before on this. It is a big deal going forward in this fourth quarter and the first quarter of next year. They don't know what the numbers are going to be in terms of their volumes, but there are some things that can and should be done to help them going forward.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

It must be a period of a lot of uncertainty for the companies involved, but also for the people who work in these industries. Of course, a year ago no one was predicting the extent of the spike in oil and gas prices. It's something our committee is going to be studying over the summer period.

But if we are in a scenario where oil prices remain, maybe not permanently high, but high for the foreseeable future, are there structural changes that you believe are necessary to avoid this kind of crisis that appears to be looming? You have made specific tax recommendations and trade recommendations, but this is a very important sector of our economy. Is it one that perhaps Canada has taken for granted because we have so many natural attractions, and maybe we haven't really seen it for the important economic engine it ought to be?

[Randy Williams]

For once I think our industry is ahead of the curve here. We have provided the government with seven strategic areas that will soften the blow and mitigate the challenges we have going forward with fuel, the Canadian dollar, and so on. Our recommendations result from a year-and-a-half consultation process that involved the most senior in our industry, including the heads of hotel companies, airline companies, railway companies, and so on. So the government now has our recommendations on what needs to be done. Some of them are public sector policy changes, some involve tax changes, some are private sector changes, and some are both.

This report was initiated because we saw two years ago that these single-off occurrences like SARS, 9/11, fuel prices, and the war in Iraq were always used to blame why we weren't doing well. Finally we said, listen, there must be something beyond this, because once this one-off issue is behind us we're still not growing to the level we should be, so what are the structural issues? They're described in this report. So those are our recommendations, from a collective industry.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Nash.

We'll go to Mr. Eyking, please.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chair.

Michele, you alluded to some of the strategic markets you're looking at. The industry is growing, and there's no disputing the product we have here in Canada from coast to coast to coast. But then you start finding out the numbers. I think I heard correctly that Las Vegas spends just as much on promoting as Canada does; and Australia, with just over two-thirds of the GDP of Canada, is spending way more than we are in promotion and marketing.

So I guess my question is twofold. Is there new clientele out there? Should we be changing our marketing? Do we need more money for marketing, not just from government but from the stakeholders out there--whether it's the bed and breakfasts seeing the relevance of putting a few more dollars into the pot, etc.?

It seems that the provinces all have their own different strategies, and a lot of them are chasing the same dollar. So on the marketing side, if there were more money available from all the stakeholders, would we be able to do better marketing? Should we be looking at marketing Canada differently in this century--maybe from the green side? The whole thing is a different product than we've been marketing before.

[Steve Allan]

Let me take a stab at that.

I was appointed chairman of the CTC just over three months ago and was unfamiliar at that time with their marketing approach and the effectiveness of the organization. Certainly these past three months have proven to me that what we have in Canada is a very effective and state-of-the-art marketing arm for tourism in Canada, and really, too, into our international markets.

Our budget in 2002 was $100 million, and that has been gradually reduced to the point now where it's $75 million. I personally believe that if there was an addition to the budget, it would be spent effectively. We have very sophisticated mechanisms for focusing on certain markets and how much can be invested in a specific market, and then an assessment as to how effective a particular program has been.

So I do believe that if there is an increase in the budget, it can be spent effectively.

The other thing I have noted since my appointment is how effective the CTC is in working in partnership with the provincial marketing agencies. There is consensus--and I think the TIAC report mentioned this--that it is important for everybody to be working under one Canada banner, particularly in our international markets. I think we do that fairly effectively. It could be more effective, but that's something we can't force. We do the best we can to convince our partners that we are effective when we go into international markets.

In terms of product, the TIAC report addresses that, I think, under the banner of animation. It's certainly something that I think we need to address as well. I personally believe that if we create the right climate in Canada for tourism, and if we address issues such as air access and the kinds of things that the other fellows are addressing today, that will create a climate for further investment in Canada from industry as well.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Williams, you have about a minute to comment.

[Randy Williams]

Our report alludes to the fact that we need more money in emerging markets. The CTC addresses nine countries, as Michelle and Steve talked about earlier. That's great, and they're doing a good job in those nine markets. Seven of them are growing. Japan and the United States are problems. But there are markets with a growing middle class that is starting to go outbound that we're not even into yet. We have to create awareness of Canada in those markets or we'll never be visited. There are other countries, as Christopher was saying earlier, that are eating our lunch in those markets.

We have no money. We just have enough to barely service the nine markets we're in. We have no money, and neither do the provinces, to go into these other markets, such as Brazil, India, China, and so on. If China ever opened up, where would we take the dollars from the market there, let alone the airlift?

So that's a big challenge for us. I would say directly that I know the industry wants the CTC to be in those emerging markets, but I understand they don't have the dollars right now. If we had the dollars, we'd love to be in them.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Monsieur Arthur.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Chairman.

Good afternoon, Ms. McKenzie.

Last weekend in Quebec City, over 200,000 people took part in one of the most spectacular air shows in North America. For the first time in aviation history, teams comprising over three countries simultaneously performed in aerobatics shows. The extraordinary success of the event was made possible by the cooperation of a number of partners, particularly Aéroport de Québec.

What effort did the Canadian Tourism Commission make to promote the event in the New England market, which is such a good one, to publicize the event? New England is less than a five-hour drive away from Quebec City.

[Michele McKenzie]

We work very closely with marketing partners in Quebec, both at the City of Quebec and at the City of Montreal. The Province of Quebec is very invested with us.

In terms of our focus in New England, we're primarily in the Boston market. Our marketing in that market would include reference to the types of international events that are going on, and this year in particular we're featuring those events happening in Quebec as part of the 400th anniversary.

We've been doing a lot of—

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

I understand your answer to mean that you meant to do things, but you didn't do anything about this event.

[Michele McKenzie]

No, I said that we are marketing. We did market that event as part of our overall campaign, working with our partners in Quebec, yes, and in New England, primarily in the Boston area.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

So if I were a reader of The Boston Globe, I would have seen things related to that event some time in advance so that I could plan a visit to Quebec City. Did you do anything concrete about that, or are you just thinking that maybe it was done?

[Michele McKenzie]

We do not place individual ads for Canadian events independently. We work with the events in those areas. In the case of this air show, we were working very closely to get media stories as well, not just paid advertising.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Did you get any results, any concrete things, in the New England newspapers? It was a tremendous event. Everybody was quite proud of it, and anybody who discovered it by accident was very happy to be there.

[Michele McKenzie]

I certainly can get you information on what media coverage we helped generate on that event, yes.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Okay.

Mr. Williams, tour operators out of Japan tell us that their market to Canada is stagnating because of the bottleneck in the number of seats on Air Canada between Japan and Canada. Could you tell me if that is right? What can we do to convince this quasi-American company to serve Canada better?

[Randy Williams]

The Japanese market certainly has been affected by the number of seats available. The flights from Japan have been running at close to capacity. As we said earlier, we need more lift, more capacity, out of all the Asia-Pacific countries.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Why don't we get more seats on Air Canada from Japan? Their planes are full; they don't add any service. What's going on?

[Randy Williams]

I can't answer that question. Maybe that's best directed to Air Canada. They have so many aircraft in service, and they will allocate them to the most profitable routes. I'm sure we'd expect that of any company, and I'm sure their shareholders are looking to them to put them on the most profitable routes. They just don't have enough aircraft. That's why we need more open skies agreements with other countries. Then we can get other air carriers to also service markets.

[The Chair, Conservative, James Rajotte]

Monsieur Arthur, Mr. Facette wanted to respond.