Thank you very much, Madam Chair.
Members of the committee, on behalf of Aéroports de Montréal I want to thank you for the opportunity to discuss Canada's international trade plan and air transport agreements.
Appropriate bilateral air transport agreements are of considerable importance, and not just to airlines and airports but to all Canadians. This is because they help to create economic opportunities and ensure our competitiveness in an increasingly globalized environment. By facilitating air access to new markets, both for products and for people, they have a direct impact on trade, commerce, tourism, and jobs.
Because they provide opportunities for Canadian airlines and airports to grow and compete internationally, I think it's fair to say that our industry generally favours the government's efforts to seek further liberalization in this area under its blue sky policy.
You have already heard from several industry representatives in this regard, so my comments will focus on Aéroports de Montréal's specific views and concerns.
ADM is the local airport authority responsible for the management, operation, and development of Montréal-Pierre Elliot Trudeau and Montréal-Mirabel international airports under the terms of a long-term lease signed with Transport Canada in 1992. A very important aspect of our mission is to contribute to the economic growth of our local communities. As such, we have undertaken to develop our two airport complexes to their full potential based on their respective strengths and our three main business focuses: passenger traffic, cargo, and industrial development.
Airports such as Montreal-Trudeau and Mirabel provide essential infrastructure to support regional, social, and economic growth. That is why it's so important to have appropriate conditions in place, such as bilateral air arrangements, to allow them to thrive and fulfill their important role in air transportation.
The opening up of air access between Canada and many regions of the world that has occurred over the past decade has clearly benefited our airports, but there are still several issues that are impeding our growth.
Traffic at Montreal-Trudeau, which totalled more than 14.8 million passengers in 2014, has been growing almost continuously since 2004, averaging 4.6% per year, placing us third or fourth among Canadian airports. Over the past decade we have been able to increase the number of international destinations served by direct flights to 75 from 30. Today we rank second among Canadian airports in terms of international traffic and number of international destinations.
We recognize that Montreal-Trudeau will not likely be a major global air transportation hub in the near future due to the relative size of our market and local economy. In addition, the proximity of well-established major hubs in Toronto and New York is a further impediment. Nevertheless, our aim is to be an active, secondary hub between North America and Europe, and especially French-speaking countries. We're also targeting specific destinations in other areas where there is sufficient or growing demand.
Accordingly, we have a dedicated team fully committed to developing our network to the greatest extent by attracting new carriers and launching new connections. We've made considerable headway, with some 30 different carriers flying to over 130 destinations around the globe. But there is still the perception among certain groups that Montreal is underserved. However, a recent study commissioned by ADM on our air service compared with other North American cities of similar size shows that Montreal ranks fairly well.
Our airlines have recently added or expanded service to a number of destinations, facilitated in some cases by new bilateral air agreements. Last year we welcomed two new carriers that are part of the Star Alliance: Turkish Airlines to Istanbul and Copa Airlines to Panama City. We also welcomed a small independent carrier, Syphax, to service Tunis in North Africa. These three new carriers are able to come to Montreal thanks to the liberalization of air transport agreements for these countries. We'd like to thank the Government of Canada for making it possible. With their large networks, they will significantly improve Montreal's connections to several regions of the world, including Eastern Europe, North Africa, the Middle East, Central Asia, and Latin America.
For a number of years we have been working hard to establish a direct connection to Beijing in order to access the vast Chinese market. A major development occurred last November when Air Canada and Air China signed a memorandum of understanding aimed at increasing air service between our two countries. As a result, and thanks to the existing air transport agreement, we now expect the inaugural flight to take place sometime between June and September of this year.
In some cases, relatively low passenger traffic for some destinations is an impediment. We hope that the advent of the Boeing 787 Dreamliner, with its smaller capacity, very long range, and economical operating cost, will increase the viability of serving some distant destinations.
Continued air transportation liberalization will assist us in our growth efforts. Non-major hubs, such as Montreal-Trudeau, have more to gain, since when rights are limited, carriers tend to favour major hubs, such as Toronto Pearson. However, we believe that liberalization should not be pursued at any cost. It is in Canada's interest to ensure that there is adequate reciprocity offered by the other country and that the rules are applied fairly and equitably. Generally speaking, we feel bilateral air arrangements should be approached much like free trade negotiations, where the broader economic interests of both countries are taken into account, and where such factors as mutual benefits and a willingness to reciprocate are emphasized.
This has not always been the case, as demonstrated by the rise of certain Gulf carriers in recent years and the emergence of major Middle Eastern hubs, to the detriment of airports elsewhere in the world. Some Gulf carriers, such as Emirates, have been criticized for taking advantage of unfair government subsidies and overly generous air agreements offered by some countries to significantly expand their market position. This has facilitated the establishment of major international air hubs in the region, which are taking away business from hubs in Europe and North America, with little to offer in return. We're particularly concerned about this because it could serve to significantly erode European destinations that are critical to the services we offer in Montreal.
This situation is resulting in an uneven playing field and provides a cautionary tale for granting unlimited air service access under open skies policies, at least in certain cases. That being said, we enjoy an excellent relationship with Qatar Airways,currently serving Doha three times a week. It offers high-quality service and a first-class network.
Again, I believe an open skies approach is appropriate when it's part of a broader free trade arrangement. It is then part of a wider arrangement that offers true benefits for both countries, encompassing commerce, trade, and labour, to name a few, and not simply air market access. However, we don't always need an open skies agreement. Allow me to suggest that it would be advisable in some cases to proceed in steps, initially with three flights a week, then four, and eventually seven flights, which offer the desirable threshold in terms of service profitability. It may not always be clear whether providing certain carriers with unlimited access to Canada will provide reciprocal benefits.
ln other cases, there is justification for freer air trade agreements, and these would certainly benefit secondary hubs, such as Montreal-Trudeau. An example could be with Turkey, which is a destination of considerable interest for Canadians, not just for tourism but also for business. We are currently limited to three flights a week to Istanbul, and there is certainly room for added frequency between Montreal and Turkey.
The same is true for Panama. Last year, Copa began serving the Montreal-Panama market with four flights a week, after several years of negotiations over air rights. Panama is a growing and highly desirable destination in itself, but the Montreal-Panama route also dramatically improves our connectivity throughout Latin America, given Copa's highly developed network in this region.
Further liberalization could also be desirable for certain destinations or countries that are not currently served by Air Canada or other Canadian carriers, such as Algeria, or where a Canadian carrier has shown an interest in expanding its service. ln addition, one could argue that destinations such as Japan, Singapore, and Russia, while quite distant, may be needlessly limited in terms of air rights.
As the government considers further air agreement liberalization, we urge it to take these factors into consideration and ensure a level playing field. Fairness, equity, mutual benefits, and reciprocity should be stressed in every case, so that Canada and Canadians can truly emerge as winners.
While we're addressing the impediments to building traffic to and through our airports, we would be remiss in not discussing the constraints in traffic growth imposed by the treatment of visas. We are long overdue for a substantial revision of our policies and processes regarding the issuance of visas.
ln conclusion, I'd like to call on the government once again to review and lighten Canada's aviation tax regime, which is among the highest of any nation in the developed world, and it is negatively affecting our global competitiveness.
The rent paid by airports to the federal government since our system was transferred to a not-for-profit administrator such as ADM exceeds the book value of the assets at the time of transfer yet rent continues to be imposed on airports at over $300 million a year. We believe we are being unfairly used as a cash cow.
At the same time, our customers face security charges, fuel excise taxes, sales taxes, border service cost recovery fees, and airport improvement fees that place us at a distinct disadvantage, especially to subsidized U.S. border airports. This is reflected by the huge number of Canadians travelling to U.S. border airports to catch a flight.
We need a level playing field in this regard for our airports to thrive and deliver our full share of economic benefits to Canadians.
Thank you for giving me this opportunity, and I look forward to addressing your questions.
