Transport Committee on Oct. 5th, 2006

[Michael Pepper]

There is an impact. We can't measure what the impact is, but it's obviously driving consumers directly to airlines, which is what they want, I guess.

But it's certainly not a level playing field. I mean, the travel agencies are there to serve the public as well.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Do you have any estimate of what it's costing your business?

[Michael Pepper]

We can't measure it because we don't know what it's going to be. I can tell you that the sales in Ontario have not gone down over the last several years. They've always climbed. But we don't know whether they could have climbed more, because a lot more people are travelling.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

I have to plead my ignorance here. Are there other provinces where you could do a comparison?

[Michael Pepper]

Quebec has all-in pricing, but Quebec and Ontario are the only two provinces that are subject to this.

There are only three regulated provinces as far as travel is concerned--B.C., Quebec, and Ontario.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

In terms of the information that's published by the American FAA on airline performance, is there a demand in Canada for us to be doing that at a similar level?

Mr. Janigan.

[Michael Janigan]

I think it goes back to the idea that we want a competitive market to exist. For a competitive market to exist, basically you have to have certain standards of information available about the product you're purchasing.

Primarily, the FAA publishes these kinds of statistics about airlines to better inform consumers, to better enable their choice, and to drive efficiency within the market itself. Minus this kind of information, effectively the only thing you're making a judgment on is the price and the date of travel. I don't think that's enough in an industry that has a variety of different parameters that travellers look to when they travel.

Collecting this information and making it publicly available will have the impact of improving airline performance as well as informing the customer and informing the department itself of trends in the industry.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Is the FAA material, the information they put out, the data, as extensive as you would want it to be, and is it readily available for that Internet shopper?

[Michael Janigan]

It is readily available on their Internet site. The critique I would make is that it could be better publicized on the web page, the home page itself. But it does describe in detail all of these different characteristics in terms of on-time arrivals, baggage complaints--the kinds of things the travelling public are interested in--and in many cases, the reasons for these associated with whether or not it was a problem involving airline safety or a problem involving a government alert and this sort of thing.

I think that's tremendously useful information. It also sensitizes customers into making better choices on their airlines and drives the market in the way we want to drive a competitive market--to better and more efficient performance, competing on more things than simply the price of a ticket.

[Joe Comartin, NDP, Windsor—Tecumseh, ON]

Is that information readily understandable? Sometimes you'll see this material published and it's so convoluted or complicated and presented in such ways that it really isn't understandable to the average consumer.

[Michael Janigan]

I have a monthly air travel consumer report from the FAA. It is rather dense in some respects; however, they do take the added step of attempting to publicize this information in a press release form or a more condensed form on other aspects of their website.

[Christiane Théberge]

If I may add something, this is the same type of information, or part of it, that we had in the annual report with the air travel commissioner. That was something we were able to point out to consumers when they were asking if this new airline or that airline was reliable.

We've seen new airlines recently appear on the market, and people are calling us to ask if they should fly with those airlines and if they're reliable. We can't answer that. We have no answer to that. At least we used to be able to tell them to take a look at the report, where they could find some information as to overbooking, baggage loss, the way the airlines treat consumers. That's not available any more, so we don't have a source of information to answer the questions.

[The Chair, Conservative, Merv Tweed]

Monsieur Blaney.

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

Thank you for being here. As you may have noticed yourselves, some people find we go too far and others that we are not going far enough. We are trying to collectively find a middle ground.

I would like to make a few comments and ask a few questions. First of all, your document is well written, quite succinct, readable, accessible, you make compelling arguments, and as my colleague mentioned, the comparison with other countries is interesting.

In reading your brief, it would seem that you are saying that Transport Canada already has a compensation fund for international chartered flights. Some people are wondering whether that will have a financial effect on airlines. Could that mean for instance that we may see an effect on the cost of flights because the money stays in transit for a period of time? If I have understood you correctly, you are in fact recommending broadening the scope of the Transportation Act section dealing with international chartered flights and to apply that to all flights. We can start with that question.

[Christiane Théberge]

Our recommendation does go in that direction, indeed. We do not believe that Air Transat, for instance, which is subject to these regulations for chartered flights, is being penalized because it has to put money aside. Travel agents have to do that in the three main provinces: Quebec, Ontario and British Columbia. They have to put their customers' money in trust until the service has been provided. It is a safety measure for consumers. Does that have repercussions? Perhaps we should compare their cash budget. We know that all airlines take money from their passengers. We have seen it happen with CanJet and Jetsgo. They use their passengers' money to pay for fuel. What can we say to that?

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

Actually, this recommendation may be even more relevant, as you mentioned, because many passengers are buying their tickets directly off the Internet, so that buffer no longer exists.

[Christiane Théberge]

It is also important to note that passengers who do not go through travel agents in provinces where there are compensation funds, such as in Ontario and in Quebec, for instance, and who reserve directly on an airline's Internet site are not compensated and are not protected by the fund. The compensation fund only compensates travel agency clients, those who go through travel agencies.

[Steven Blaney, Conservative, Lévis—Bellechasse, QC]

So if I understand correctly, transactions through travel agents fall under provincial jurisdiction, whereas Internet transactions come under federal jurisdiction. All right, in any event, I think that it is an interesting point, which is worthy of consideration and constructive in the context of our discussions on this bill.

With respect to advertising, I think your opinion is quite clear. If I have understood you correctly, under this bill, the Minister would be granted this authority, but you would like the legislation to provide clarity.

I will close with a comment. We have met with representatives from the Canadian Transportation Agency and we asked them the question. They told us that the air travel complaints Commissioner's report would be included in their annual report. So there would not be an additional report. You get the report and there is a section on complaints within it. I would imagine that they will have to carry out some advertising on that.

I have no further questions. I do not know if you have any additional comments to make.

[The Chair, Conservative, Merv Tweed]

Mr. Pepper.

[Michael Pepper]

Mr. Blaney, I want to clarify the issue of compensation funds.

The compensation funds—and I can talk to Ontario—are in place to protect consumers against the insolvency or bankruptcy of a travel agency. That's the primary reason why the compensation fund is there.

Travel agencies in the province of Ontario, and likewise in Quebec and B.C., are required to put consumers' moneys in trust, and they're not allowed to use those moneys for anything other than the travel services they were intended for—to pay for those travel services.

In Ontario we had to extend the compensation fund to cover airline failures, because there is no compensation fund for airline failures at the federal level. When Canada 3000 failed we had a real issue, because the legislation in Ontario held the receiver of the money jointly and severally responsible to reimburse the consumer in the event of a failure of the end supplier. So we extended the coverage to consumers in the event of an airline failure, and we did pay out money in the event of Canada 3000.

So neither Canada 3000 nor Jetsgo contributed money to the provincial compensation fund, and that's not fair. Why should the travel agencies finance airline failure? That's what we're really getting down to.

What we've suggested in this paper is that if there were much higher criteria at the federal level for the entry of airlines, particularly regarding working capital and what airlines can do with consumer advance payments, this would go a long way to eliminating the failures that have happened in the past with Canada 3000 and Jetsgo. They were not required to put moneys into trust, and they were able to use those moneys to pay for their operating expenses.

I want to clarify that issue, because this is what we're asking for: higher financial criteria and maybe make regulations for our compensation fund, if it's necessary.

[The Chair, Conservative, Merv Tweed]

Mr. Bell.

[Don Bell, Liberal, North Vancouver, BC]

Thank you. If there's enough time permitting, I'll share my time with my colleague.

You made the statement and say on page 6 of your report that

In the absence of taking any action to address the substantive deficiencies today such as a lack of financial performance criteria and service performance monitoring and the absence of any disclosure requirements on price advertising, the elimination of the airline complaints commissioner is, in a sense, like adding insult to injury.

On page 4 of your report, you make a caveat that you would take a wait-and-see approach, if those two areas were addressed. Basically number one is that the government applies the same financial rigour to all airlines to have the financial wherewithal. You are talking about the compensation packages, as the travel agents industry or the charter industry would have to do. Second is this issue of having data available on the financial fitness and service performance of the airlines.

Do I understand that those two prime issues would be your caveat?

[Christiane Théberge]

Plus the advertising.

[Don Bell, Liberal, North Vancouver, BC]

Plus the advertising and full disclosure, all-in advertising.

You talked about travel agencies and mentioned B.C., Ontario, and Quebec. My question is, on those compensation funds, do the airlines get paid up front?

[Michael Janigan]

Yes.