Transport Committee on Oct. 5th, 2006

[Marie-Hélène Beaulieu]

I am referring to the institutions which issue credit cards.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

So there are good institutions and bad institutions. You did not say so, but—

[Marie-Hélène Beaulieu]

No, I did not.

[Christiane Théberge]

Mr. Lussier, we often hear about private insurance. People say that it's always possible to buy private insurance. In fact, Option consommateurs— Marie-Hélène can talk about this—conducted a study on the subject. There are three insurance companies which sell insurance in case a carrier goes bankrupt, or a travel wholesaler or a travel agency, but the cost for this type of insurance is prohibitive. I don't remember how much it was, but it was completely unaffordable.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Can you give us some percentages?

[The Chair, Conservative, Merv Tweed]

Could I ask that maybe you could cover that off in another question? We have to move on to the next questioner.

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Just so there is no misunderstanding, the bill is not suggesting any federal compensation fund. It is more a hypothetical question from Mr. Lussier. Is that correct?

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Yes.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you. I just wanted to make sure of that.

[The Chair, Conservative, Merv Tweed]

It's a sign of confidence in the lawyer that you are, Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Let me say first of all, with respect to your request that there should be legislation setting out exactly what has to be included in the fares, that if you look at the actual bill itself, at clause 27, it provides the minister with very broad discretion as to what he can do with the fares. Those of us who have been involved in the legal industry over the years understand that ministers typically like to reserve unto themselves a lot of discretion so that they can meet some of the changing needs of the industry. They can absorb some of the changes that happen with technology.

I did note that you voiced some skepticism about whether we were going to actually implement regulations that would actually bring into effect the kinds of rules you'd like to see. My guess is the minister will go ahead with that. Obviously, you have seen the other side suggesting that this is definitely the wrong approach to take. Our legislation says no. We believe there does need to be some regulation of how the airfares are advertised.

That's just a bit of an assurance to you. I think you are going to see that we're not just putting in reference to regulations to try to look good. You will see some action on that.

With respect to a more fundamental comment that was made by Mr. Pepper, you had suggested that the government should exercise more financial oversight over the operations of start-up airlines. I'm curious, because this would probably set a significant precedent in Canada: are you aware of any other industries or businesses where government actually sets minimum working capital requirements?

[Michael Pepper]

Certainly with the travel agencies, which at the provincial level--

[Ed Fast, Conservative, Abbotsford, BC]

That's at the provincial level. Perhaps banking.

[Michael Pepper]

--are required to have it.

What other industries—I might ask you a question to respond to your question—allow consumer moneys to be used to pay for operating expenses? When you buy a pair of shoes, you get your pair of shoes. You don't give the supplier the money three months ahead and expect them to deliver it down the road. You want to receive your services there and then.

The airline industry is an industry where the services are not provided until a long time, in a lot of cases, after the money has been received. That's our cause for concern. If you look at the recent history of the two carriers that have failed, they both used consumer moneys that were intended for something else as advance payments and they generated that by seat sales, quite openly in the face of everybody. And we knew what they were doing with that money.

That's why I'm suggesting that there needs to be a precedent set here that there must be some minimum financial criteria in place so that doesn't happen again. It drags down the whole industry, and the bigger players too. It drags everybody down because those carriers come in, they lower the prices, and everybody has to match.

[Ed Fast, Conservative, Abbotsford, BC]

You know, you get that in virtually any industry, retail or otherwise.

[Michael Pepper]

But you won't see those retail industries using those consumer moneys to gamble with; that is what's happening.

[Ed Fast, Conservative, Abbotsford, BC]

Have you ever bought anything on eBay?

[Michael Pepper]

No.

[Ed Fast, Conservative, Abbotsford, BC]

There you go. You have the same situation there.

[Michael Janigan]

The consequences of failure in the airline industry I think have far more repercussions than in any other business. I agree with a lot of what Mr. Gaspar said, but one of the things I disagree with is that we want to be treated like any other business. Well, I'm sorry, airlines are not like any other business. They are not like shoe stores and delicatessens. They do have the same obligation to try to meet their operating expenses from revenues, but they are an important public service in a nation that in many respects depends on airlines.

What we would like is an approach that recognizes that it's an important public service. There is imperfect competition in different areas. There is competition in certain city pairs that's not in others. It represents circumstances of incredible vulnerability to consumers in different circumstances of airline travel, particularly with the recent emphasis on public safety on aircraft and in airports.

We need an approach that allows customers to buy their ticket, knowing that at least their investment in their ticket is safe, that if the airline doesn't fly, they will be compensated; that the government is ensuring that the airlines are meeting standards, not only in safety but in financial performance and in other kinds of service, in our posting service performance criteria that allow them to judge what kind of airline they want to fly on.

[The Chair, Conservative, Merv Tweed]

If I may, I'll give the last question to Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Thanks, Mr. Chairman.

Maybe it's a request because we're running out of time, but I'm wondering if it's possible to get more information from you on a couple of fronts.

First of all, is it possible to get an estimated amount of money that's been lost by the Canadian consuming public over the last thirty years as a result of airline failures? For example, do I recall correctly that when Canadian Airlines was petering out, it also left thousands of travellers high and dry? Is it possible to get that amount of money quantified so we have an estimate? Have I got that right?

[Michael Pepper]

I don't think Canadian Airlines' failure caused any consumer losses, because it was rolled into Air Canada.

[David McGuinty, Liberal, Ottawa South, ON]

Okay.

Secondly, is it possible to get the position of the ATAC equivalent in the United States and Europe, and any kind of comparative data from the European Union on compensation funds?

Then linked to compensation funds--it goes back to the debate that my colleagues Monsieur Lussier and Monsieur Carrier had--it's extremely confusing for an average citizen if they lose a ticket. They don't know whether they're going to be compensated as first payer from their credit card. They don't know if they're going to be compensated as first payer from a compensation fund, if it exists, or under an insurance policy, a high-paid premium they've signed up for at the airport before getting on the airline. They have no idea. They have no idea where to begin, for the average consumer who's buying that once-a-year trip to Cuba or to visit the grandchildren in Calgary.

Is it possible to get some information on how that, in practice, has been happening? First payee, who is treated as first payer?

[Michael Pepper]

Yes, I can provide that information to you.