International Trade Committee on Feb. 23rd, 2015

[The Vice-Chair, Liberal, Chrystia Freeland]

Colleagues, can we begin? I think we have a quorum now.

Pursuant to Standing Order 108(2), the study of the positive effects—and maybe not only positive effects—of the global markets action plan.

I'm delighted that we have such excellent witnesses speaking to us today. We're going to start with Andy Gibbons who is the director of government relations for WestJet.

Thanks for being here, Mr. Gibbons. We'll give you ten minutes to begin and then we'll ask you many brilliant and inspired questions.

[Andy Gibbons, Director, Government Relations, WestJet Airlines Ltd.]

Great. I'll try to give you brilliant and inspired answers, if I can.

Thank you very much, Madam Chair. I appreciate the opportunity and the invitation to speak with you today.

At WestJet we welcome the interests of this committee, any committee, and parliamentarians, of course, in the future of commercial aviation in Canada, an incredible driver of jobs and economic growth. These hearings on the government's global markets action plan and the success of these strategies is timely, given some of the exciting developments at WestJet and the ways in which we are bringing these agreements to life.

The international side of our business is less known than our domestic accomplishments, so I apologize in advance if you feel inundated by statistics.

Bilateral air agreements are helping to create jobs, expand the critical travel and tourism sector, and connect the world to Canada and Canadians to the world. Bringing these agreements to life is the work of strong, entrepreneurial, domestic carriers, and I'll be outlining how we are doing that and the multiple ways in which Canadians are benefiting.

This Friday we'll be celebrating our birthday. At 19 years of age, WestJet and all WestJetters are very proud of our accomplishments and our growth on the ground and in the air: from five destinations and three aircraft in 1996, to 19.7 million guests on our aircraft in 2014. There's a lot to be proud of.

Unfortunately, like on most birthdays, we have to take a bit of a look backwards, but this is a good story. In 2006, we began our international service to Nassau, Bahamas, and since then we've grown significantly. In 2015, we'll have over eight million seats on flights outside Canada: 5.5 million to and from the United States, which you've heard is our largest market for international travel, and 2.5 million to and from other international points. That equals 36,000 flights to and from the United States, about 100 a day in 2015, and 16,000 to and from international points. To put this in perspective, in 2005, 98% of our overall capacity was used on domestic service. In 2015, 30% of our capacity will be deployed on non-domestic routes. The international proportion of our business is expanding and will continue to expand.

These are some quick highlights over the last year on the issue of international travel and WestJet.

In 2014 we saw the very successful launch of our first transatlantic service to Dublin, Ireland, in part made possible as a result of the Canada-EU agreement. This was, and is, one of the most successful services in the history of WestJet. It's over 98% sold, linking St. John's directly to Europe.

Building on that success, we announced that we would begin service between Halifax and Glasgow, U.K. this May, and the resumption of our seasonal service to Dublin. We're proud of our partnership with the Halifax airport, and you'll be hearing from Jerry Staples after me.

Over the course of 2014, we continued to grow our airline partnerships, which is the cornerstone of our approach to international connectivity at the moment, adding 13 interline relationships and two new coach air partnerships with China Airlines and Qantas, to bring us to 35 agreements in total, and I'll come back to this.

In July 2014, we announced our intention to begin flying our own wide-body aircraft for the first time. We selected the Boeing 767-300 for that role and expect to deploy them on routes between Alberta and Hawaii late this year, and in 2016, we look forward to using these aircraft to expand our network into additional overseas markets.

Our growth and investments aren't just a good corporate story for WestJet; they're an excellent economic story for the country. Here are a few examples of how our growth is driving other critical sectors.

We're the only commercial carrier in Canada to do all its heavy maintenance in Canada. You've heard how important these jobs are to Kelowna and Kelowna Flightcraft, the largest private employer in the region. We're proud of that partnership and the jobs we're bringing to that region and also to Windsor, Ontario.

We have a conditional purchase of 45 Bombardier Q400 aircraft manufactured in Toronto. We currently have a firm order of 30 and options for an additional 15. These are some of the highest skilled manufacturing jobs in Ontario, and we're proud of that partnership.

But as important as where those aircraft are made is where they're going to be flying, and that is the story of WestJet Encore. WestJet Encore is designed to service small and medium-sized communities in Canada that either had no service or were being served by one carrier for many decades. The results of WestJet Encore to date have been incredible, to say the least, and I'll get into that, but it's relevant to this committee and your study because of something we call “beyond the gateway access”.

A lot of these communities have only had a single carrier to chose from in connecting internationally.

Here is the story of WestJet Encore. WestJet always had a fleet of 737 narrow-body jets, but this brings us into a different type of aircraft. All of those communities we could not serve profitably with jets we can now serve with Bombardier turboprops. A good example is Fredericton, New Brunswick. We launched service in April with twice-a-day service to Toronto. We're very excited about that. Fredericton was the largest urban area of the country that we had yet to serve, so we're very proud that this is coming up in April. That's just one example.

The demand and lobbying from communities has been overwhelming because communities understand that international access, and lower fares, and competition are key to their economic growth. What this basically means is that international visitors want affordable access to more than the CN Tower and Canada Place. They want to go to Nanaimo, or Brandon, or Fredericton, or Gander. Increased choice and competition in the regional market is going to extend the benefits of bilateral agreements beyond the important hub airports, and we are already beginning to see that.

To break it down a little bit further—back to the statistics I told you about—there are 32 cities in Canada that only have international connectivity with Air Canada Star Alliance, there are 12 cities in Canada that have connectivity offered by multiple carriers, and there are 17 cities in Canada that have international connectivity offered by Air Canada and WestJet combined.

The key point here is that 25% of the total in Canada, were it not for WestJet, if not for us and our alliance partners, would be international monopoly markets for Air Canada. As we expand, other cities will move from the Air Canada Star Alliance monopoly category into the competitive category, and those include Fredericton, Penticton, Gander, and Sydney in 2014 and 2015 alone.

I think you get the point I'm trying to make here, which is that the biggest key to realizing the potential that any agreement creates are strong, profitable, and entrepreneurial airlines. From a bilateral perspective, code-share services are an integral part of our tool kit for growing and sustaining new markets. In any open sky type of agreement, code-share rights are generally unrestricted and provide carriers on both sides ready access to the third and fourth freedom markets by placing their code on any carriers operating between the two countries.

Code-share, as you've heard, is an important economic contributor and is far less risky and more cost effective than launching own-aircraft services, and thus is an easy way to develop a presence in both contracting party countries.

The blue sky policy and the push for open skies agreements in much of the Caribbean has been instrumental in WestJet's success in this region, and we are eternally grateful for those efforts for both own-aircraft and code-share expansion of rights. With the addition of our first wide-body aircraft, we seek to repeat the same successful formula, and bring in lower fares and more choices for air travellers for countries within the continental EU, as well as access to markets in South America and Asia.

The markets that are of great interest to the chief negotiator for further expansion are also on our priority list, and again, our thanks for these efforts to grow access to these important markets.

The Canadian government has been very supportive of our efforts to expand internationally, and continues to accept input in terms of establishing priorities and addressing “doing business” issues within existing agreements.

While there is some capacity not being used, good points have been made about how these agreements are forward looking, and they are negotiated every year, which implies that room for growth must be built in. Furthermore, material access issues like slot constraints sometimes means the unused capacity may not be due to a lack of desire by a carrier, but rather the physical limitation on the ability to exercise those rights.

Overall, Mr. Christie and his team, and Mr. Rioux and his team should be congratulated for their work, and they are supported by WestJetters.

We are encouraged by some of the discussion by this committee over the last few weeks around the policy environment that encourages strong carriers. To this end, the appointment of David Emerson to chair the Canada Transportation Act Review Panel is both well-received and timely for our sector. Our own submission to the panel has recommended that Canada's aviation cost structure both be recognized and be made the number one priority. Tackling this issue, as indicated by the Council of Chief Executives and others, is the single most important recommendation this committee can make with respect to ensuring that bilateral air agreements are providing the strongest economic benefit possible to Canadians.

As you've heard today and over the last few weeks, commercial aviation in Canada is not a stagnant sector. The competition is fierce, as it should be. We welcome the panel's report later in 2015.

I would be happy to take questions from the committee.

Thank you very much.

[The Vice-Chair, Liberal, Chrystia Freeland]

Thank you very much, Mr. Gibbons. You were exactly on time. You and your team did an excellent job.

[Andy Gibbons]

You mean it was on the button?

[The Vice-Chair, Liberal, Chrystia Freeland]

You were three seconds over. That's pretty impressive.

We have one more witness. We are now going to hear from Mr. Mike Darch of the Consider Canada City Alliance. He's joining us by video conference from Miami, which I'm sure is much warmer than here.

Thank you very much for joining us, Mr. Darch.

[Mike Darch, President, Consider Canada City Alliance]

Thank you for taking the time to listen today and for making the arrangements to allow me to appear by video conference. I left Ottawa yesterday, and the weather was a little different there.

I'll give you a quick background of who the Consider Canada City Alliance is. We are a collaborative organization of 11 of the economic development organizations from municipalities across Canada. Our members are Halifax, Quebec, Montreal, Ottawa, Toronto, the Waterloo region, London, Winnipeg, Saskatoon, Calgary, and Vancouver. We account for approximately 52% of Canada's population, approximately 54.5% of its GDP, and in the last five years approximately 68% of Canada's GDP growth.

Our primary focus is to collaborate, to attract foreign investment to Canada and to our member cities, to share best practices among ourselves to improve our productivity and effectiveness, and to work with partners to improve the attractiveness of Canada as a location for foreign direct investment. As an organization we started informally in 2007. In 2012, a little less than three years ago, we incorporated as a not-for-profit organization.

For the functioning of our organization and our members, the global markets action plan is of critical importance. First, it clearly indicates Canada's geographic priorities for foreign direct investment and trade as well as the priorities among industrial sectors. Canada is and always has been a trading nation. It highlights the importance of foreign direct investment and trade to the Canadian economy.

Of great importance is that it clearly indicates to the international market the commitment of the federal government to the furthering of foreign trade and investment. It helps our individual members to develop their strategies and ensure that they are in concert with federal objectives, and it provides a clear indication of where and how federal resources will be deployed.

I know you're interested in what has been achieved. First, I think of most importance for our members is that it has allowed them to focus on specific industrial sectors and specific geographic areas. Municipal organizations such as our members are rather at the bottom of the totem pole. Resources are very scarce, and they have to focus their efforts.

We believe there is an increasingly effective one-two punch whereby the federal government presents the value of the policies and the business environment that has been created in Canada, and then our members follow up with the specific opportunities for investors and indications of how those investors can be integrated into our individual cities.

Over the past two years there has been a tremendous increase in the working relationship between our organization and its members and Foreign Affairs, Invest in Canada, and the Trade Commissioner Service. We're increasingly integrating our action, including activities, communications, and messaging. As I mentioned, we're making better and better use of the scarce resources of our members. As of this summer we had a trade commissioner attached to our organization, who now works with us and our 11 members directly linking the Trade Commissioner Service to our members. At our semi-annual meeting held in Ottawa in February, it was made clear that one thing that has occurred is the increasing professionalism and sophistication of all parties in the pursuit of foreign investment and trade.

To look at some specific examples, we strongly support Canada's increasing efforts to increase trade and investment agreements around the world.

In March 2014 we were in Japan and Taiwan getting ready for the Trans-Pacific Partnership. In the fall, we were in Europe for the second time in advance of CETA coming into law. We have taken the stance that it's best to be well prepared for when these agreements are finally approved rather than sit back and wait for their approval, and then try to go out and take advantage of them.

In March we will have our fourth mission to China, and it follows on the 2012 complementary study done with China as well as a recent visit by the Prime Minister to China.

We also do smaller missions. For example, this mission I am on is in support of an investment conference. It's going to be held in advance of the Pan American Games. We are visiting Miami for that seminar, and business meetings are tomorrow, and then we are going on to Sao Paulo and Goryeo.

In California later this week we'll be at the Game Developers Conference with seven of our cities, in conjunction with the federal government, again looking at further trade and investment in the gaming area.

Some of our members participated in the recent trade mission to South Korea following up on the agreement of that trade and investment agreement, and two of our members were at the APEC summit in Beijing. Although we were part of the Canadian delegation, both our members were invited by their Chinese partner, one being Guangzhou and the other being Beijing.

We've integrated our messaging to ensure the federal government messaging is embodied into our messaging and to improve the messaging, at the federal level, of the advantages of our individual member cities. We are now in the process of integrating the event calendars across the world with our own members to ensure we take maximum advantage of a scheduled activity.

Here are two recent examples of the advantage of the activity. At our semi-annual meeting in Ottawa, we had presentations by Immigration on changes to immigration laws as well as to foreign temporary worker programs. This was as a result of having seen a similar presentation that was given by web to the Trade Commissioner Service. Last week our members were part of the webinar on the value proposition for clinical trials in Canada that was given to the Trade Commissioner Service.

We now have increasing access to all of the tools available to the Trade Commissioner Service by using the trade commissioner who has been embedded with us.

I think in summary the global markets action plan has presented a clear indication of Canada's direction with respect to trade and investment and better enabled our members to take advantage of that.

I will briefly comment on the importance of the air transport agreements, and in that I will support many of the comments made by Mr. Gibbons. First of all, as I mentioned before, Canada is a trading nation. It relies on foreign investment, and we operate in a global environment. Furthermore, most of the investment that's coming into our cities is in the innovation sectors, and hence the high value-added sector. It's therefore key that we are able to move people and goods around the world fairly easily and fairly cost competitively. It is key to us that access is available around the world so we fully support the increase of air transport agreements by Canada, and I would say every one of our members works very closely with the airport authority in their particular region.

With that, I will end my comments and wait for questions.

Thank you.

[The Vice-Chair, Liberal, Chrystia Freeland]

Thank you very much, Mr. Darch, for a really interesting presentation, exactly on time.

On a personal note, thank you for not lording it over us too much with the excellent weather I'm sure you're going to enjoy later this afternoon.

We'll now go to questions, gentlemen. Your first questions will come from Ms. Laurin Liu, please.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you, Ms. Chairperson.

I want to start by asking a question about the Canadian Air Transport Security Authority Act, and more specifically about the airports that are recognized under the act. We know that currently the act hasn't been updated for about a decade or so, and a few dozen airports in Canada have actually asked to be accredited under the act. Among other airports, there is the airport of Sherbrooke.

Mr. Gibbons, you also mentioned the importance of the fact that airports really bring economic benefit to a region, and the importance of airports to regional development. Would you have an opinion on whether or not this list of accredited airports should be expanded?

[Andy Gibbons]

These airports and these communities understand how critical it is to have a WestJet Encore service to serve their communities. The extent to which our expansion and our growth should mirror which airports and which facilities get those services or not is a difficult public policy one, just by virtue of the nature of aviation and our commercial decisions.

I think the overall point is that, yes, those types of services, such as CATSA and others, we need. We need the government to keep up with our growth and our investment and to make sure that those services are there, and that are paid for; we have a user-pay principle in our sector.

Aside from that, I can't really go much further into specific airports. Of course it shouldn't be a barrier to growth. We have to grow regional access in this country, in cities like Sherbrooke and others. It's something that we definitely have to look at. To whatever degree we can partner with and assist Transport Canada in working out which communities should have it, we're happy to assist with that.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Mr. Darch, would you like to comment on that as well?

[Mike Darch]

Certainly from the point of view of ease of access, it's critical. WestJet wasn't around when I started flying, but I'm a million mile flyer on Air Canada. I've done a lot of travel over the years. Travel now is certainly no fun. From the point of view of ease of access, ease of going through security, and so on....

I think basically we're law-abiding people. I think frequent traveller programs and programs for pre-cleared travellers are critical. I strongly support the growth throughout Canada of those types of services to make travel easier for the frequent traveller and the secure traveller.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Mr. Darch, I think you might also have an opinion on something that other witnesses have talked about in committee—namely, mass public transit linkages to airports. Is it something that you're concerned about, and would you have any recommendations to give to committee on this topic?

[Mike Darch]

Well, I'm currently in Miami, and I won't discuss the weather, but I will discuss the traffic. Trying to get from the airport to downtown Miami is absolutely terrible. There is essentially no mass transit here in Miami. Depending on the time of day, it is very difficult. My understanding is that we adjusted our schedule going into Sao Paulo based solely on the problem of getting from the airport to downtown.

Again, I strongly support, as I think it would be a definite advantage for Canada, having mass transit links between our airport facilities and the principal commercial and residential areas in our cities.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Mr. Gibbons, would you have any comments on that same subject?

[Andy Gibbons]

We try to stay away from those types of questions, to be honest. Our slice of the equation is that our guests are charged airport improvement fees. We have some of the best airports in the world in terms of infrastructure, which is self-funded and user-pay. We're kind of proud of that work.

I don't think we want to enter into a debate on Union Pearson Express and how much it should cost and those other issues. I think we'll leave those to others.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I'd like to leave my last two minutes to my colleague, Mr. Toone.

[Philip Toone, NDP, Gaspésie—Îles-de-la-Madeleine, QC]

Thank you.

First of, congratulations, Mr. Darch, on being a million mile elite member of Air Canada. All my sentiments go to you for having to submit yourself to a million miles with Air Canada. I know that sometimes it can be quite a challenge.

I want to wish WestJet a happy birthday, I think that's great. When I lived out in western Canada I had a lot of opportunities to use WestJet and I think the model is one that is very viable and one that should be repeated in the rest of this country.

I have a question, though, regarding the expansion that you've experienced in the smaller markets. There are a lot of difficulties when it comes to security in the smaller markets and you did mention the question of user-pay, that we have a user-pay model in Canada. It's fairly unusual that there would be a user-pay model to pay for security. Have you had any clients from WestJet speak to this point? Is there any pushback on that front? Is that something this government should be addressing?

[Andy Gibbons]

It's not particularly clear what you're asking.

[Philip Toone, NDP, Gaspésie—Îles-de-la-Madeleine, QC]

I'm asking about the additional fees that clients have to pay when they wish to use your services. The tickets include an awful lot of fees, including a supplementary fee for higher gas prices, which is questionable in the current market but what have you. I want to specifically look at the user fees that are included for security services, which is unusual. Canada's very unusual—

[Andy Gibbons]

Yes. It is.

[Philip Toone, NDP, Gaspésie—Îles-de-la-Madeleine, QC]

—in that sense and I wonder what your opinion is of that?

[Andy Gibbons]

We would echo the sentiment—

[The Vice-Chair, Liberal, Chrystia Freeland]

Okay. Mr. Gibbons, you have about 30 seconds to answer

[Andy Gibbons]

Our views are consistent with the other stakeholders you've heard on the air travellers security charge. We'd like full transparency on the fees collected and we'd like to have it specifically applied to screening services. Then there's the service element in terms of the CATSA. It's no longer just a convenience issue for Canadians, it's an economic issue. When you're making a choice as a consumer whether to fly out of Bellingham or YVR, a 30-minute CATSA lineup can make a difference in your decision tree. We're working to repatriate those guests, so everyone sort of has to get on the same page about this and make it a priority. It is an economic issue, not necessarily a service issue anymore.

[The Vice-Chair, Liberal, Chrystia Freeland]

Okay.

Thank you very much.

Now we will hear from Mr. Mike Allen, please.