Transport Committee on Oct. 5th, 2006

[Fred Gaspar]

Yes, but not necessarily for the consumer. They take the view of those carriers who distribute their tickets through provincially regulated travel agencies or tour operators and see a tremendous efficiency in their operating costs by having one set of rules as to how these things are marketed, as opposed to having to market them under the Quebec law, the B.C. law, the Nova Scotia law. It's more from that perspective.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I think it's fair to say that generally consumers would like to have that clarity and that standard right across the country, in order to understand the playing field and understand what their costs are not only for the actual ticket itself, but as is increasingly happening, for the on-board travel fees that people are required to pay to get something to eat, to have a blanket, to have a pillow, to watch television. That's an increasing, creeping aspect of air travel that folks like me, from British Columbia, experience. I travel in economy most of the time, and that's what we have to put up with. Do we have enough money to buy a sandwich on board for a five-hour flight, and sometimes an eight-hour flight if it's through Toronto?

It would seem to me that the air industry would support having that clarity for people to know what the actual cost is, in the same way that when you go to a grocery store and you pick up that item, you know what the cost is going to be, plus the tax.

[Fred Gaspar]

That makes a lot of sense. I would encourage you, however, to look at it from the other perspective as well. As long as we're talking about the consumers' interests, isn't it in the consumers' interest to know exactly who is getting their dollars and exactly what service they're providing in return?

Our concern isn't so much how this rule might be applied today, because frankly we're quite confident that there isn't a need for it today and that the minister probably wouldn't impose it. Our concern is about the potential for future abuse. We don't want to get to a situation, and I don't think you would want to get to a situation, whereby government says, geez, we're collecting a heck of a lot of money through this security charge and it's making us look bad; let's make the airlines bury it in their base advertising. We think it's only fair for our passengers to know who's getting their dollars.

If I may, to conclude, you borrowed the example of the grocery store and that it's fair to say that when you buy a bottle of water, you know exactly what the cost is. But let's imagine an environment where the regulation around the grocery store was such that it was charged a separate fee for the monitoring the Canada Food Inspection Agency does of the quality of those products. Let's assume it was charged a separate fee for occasional security checks that police do at night, as applies in the air industry. In those cases I bet you the grocery stores would want to recoup some of those costs that it was charged.

We are an industry that is charged by multiple layers of government for the services provided “purposeful”. We just think it's important for our passengers to know what those costs are.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I don't want to put words in your mouth, but what I hear you saying is that it's not the principle of having regulation around airfares, so that everyone is working from the same framework and can compare apples to apples. That's not the issue. The issue is more you're concerned about where the regulation would go and that the regulation might not include some of the additional fees that are put on by airports, so that companies would have to eat those fees.

[Fred Gaspar]

I don't mean to sound difficult, but that isn't entirely true. It's more that we are not commenting on the earlier matter because there isn't unanimity within our organization. Because there's a variety of opinions, we don't propose to comment on the broad principle. However, we do just raise as a general concern that this not lead us down the path whereby governments wish to bury fees and charges that they are responsible for in our marketing exercises. We think that's the public policy goal that should be protected here.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Okay, I understand your comments then.

I'd like to go on to the issue of the air travel complaints commissioner. You did talk about WestJet's share of the market, but overall, of all the routes that are represented by your organization, how many of them are only serviced by one national carrier?

[Fred Gaspar]

Unfortunately I don't have those figures.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

My point is that yes, there are a number of main destinations, Vancouver being one of them, where there's a very competitive marketplace, but this country is vast, and many smaller cities in this country are only served by one national carrier. Given that, would it not be a good idea to have an air travel complaints commissioner who can work in those areas where people don't have options? If the airline is not meeting their need, it's not as if they can go somewhere else or they can travel by road six hours to get to another city that's served by another airline.

[Fred Gaspar]

Yes, but the thing to bear in mind is in those cases where there is a single provider on a route, that provider isn't there because it's mandated to be there. It is a free market here in domestic services, as in all other services, and a carrier is serving the market because it thinks it can do it in a profitable way. Therefore, I don't think it makes a lot of sense to suggest that in the case of complaints a government body can best address those issues.

What would best serve the residents of that small town? I would suggest to you that it would be a healthy and competitive aviation sector, particularly when it comes to small regional carriers. And I think they're the ones that are primarily interested in these cost issues related to airport rents, fuel excise taxes, and security charge, because they're trying to deliver low-cost targeted regional services, but they have to pay the same price, their share, as everybody else does. And if we provided real cost relief, you might actually see more competition, which is the more sustainable way to improve level of services in those kinds of communities.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

How much time do I have? I ran out.

[The Chair, Conservative, Merv Tweed]

Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

Thank you, Mr. Gaspar, for appearing before us, and thank you for making time earlier to meet with me personally. It's very helpful.

I'd like to follow up on Mr. Julian's comments and questions. I am a little puzzled still why the whole issue of disclosure and how airfares are advertised is such a big issue for you. Quite frankly, I get frustrated myself when I see airfares advertised and then you get a disclaimer at the end that you can't even understand because they read it so quickly, which is typical for many industries, including the automobile industry. I think there's a general mood in the public that more disclosure and more forthright disclosure is good. I think politicians are finally understanding that as well, and I'm not sure you're going to make that a hill to die on for your industry.

[Fred Gaspar]

No, because we agree with disclosure. As a matter of fact, that's the standard we follow.

Going back to the $99 example, when you buy a ticket online from any one of our member carriers' websites, you will see, before you hit the final submit button, the breakdown figures, of $99 plus the $10 or $12 NavCanada--

[Ed Fast, Conservative, Abbotsford, BC]

Understood.

[Fred Gaspar]

Our disclosure is there. We're not trying to hide anything. We just want to make sure that government doesn't try to hide, right?

[Ed Fast, Conservative, Abbotsford, BC]

No, no, it's how the disclosure is done that I think is as much the concern.

The advertising that you see in newspapers highlights the base price. A lot of people, when making comparisons, will try to compare the prices they see highlighted in bold in newspapers. I, of course, do most of my bookings on the Internet, and there you're absolutely correct. But if it were one price, including all costs and taxes, it would still be difficult for the government to hide additional costs, because you still have the ability to disclose that. There's nothing preventing you from providing further details on costs.

I think the public wants just an easy way to understand what the bottom line is for them.

[Fred Gaspar]

Maybe I didn't characterize it fairly, but I think this is why....

If parliamentarians ultimately decide that this is really important, you're right, it's not a hill we're going to die on. It's not that big a deal. Our perspective is just that, at the end of the day, this really doesn't do anything to do address the real needs of consumers. If you agree with me that what people really want is the right mix on the service and price equation--they want safety and they want efficiency in their travel experience--then you have to ask yourself, “Does this measure do anything about that?” It doesn't.

We take the perspective that we don't think it makes a lot of sense, but if you want to do it, that's fine; we've got nothing to hide. We just take the view that it's pretty ineffectual relative to what's important.

[Ed Fast, Conservative, Abbotsford, BC]

Let me focus on something that's probably a little more important to you, and that's the whole issue of mergers and acquisitions, and the role that the minister and the agency will now play whenever there is, let's say, proposed acquisitions.

You have serious concerns about it. Canadians, of course, have serious concerns, but it's on the other end, which is that Canada should exercise sovereignty, in some cases perhaps more sovereignty. We should ensure some basic level of Canadian ownership in Canadian industries, including the airline industry.

I'd like you to explain a little bit more why you objected as strongly as you did earlier to that portion, I believe clause 13 of the bill.

[Fred Gaspar]

This is a power that the airline sector has been subject to since 2000. If I understand this legislation correctly, originally Bill C-26 proposed to extend it to other modes as well.

Our opposition to it, again, just comes back to that principle of trying to look at the customer's perspective: “What does this do to help lower the cost of travel, help improve the efficiency of my travel, and offer me choice?” Nothing.

Certainly I apologize if I made it sound like it's a much more dramatic measure than it probably is. In terms of the practical effect to our industry since 2000, it's had a minimal one. Taking the big-picture view, I would encourage parliamentarians, as part of their broader deliberations, to consider that in an industry that is very capital-intensive, with a lot of money to do start-up and to just keep the day-to-day operations going, it is very low-yield on the revenue side. Does it make a lot of sense to create a climate that sends out a message that limits the investment potential in this sector? If you're trying to improve service, if ostensibly you're trying to improve levels of competition, this doesn't do that; it has the opposite effect.

Certainly your concerns about foreign ownership are very legitimate public policy considerations, which we don't propose to comment on. We just say that if you keep the interests of the passenger at the forefront of your considerations, it might give you a different perspective.

[Ed Fast, Conservative, Abbotsford, BC]

So what you're saying is that cost and service will suffer as a result of the CTA and the minister having a role to play in mergers and acquisitions.

[Fred Gaspar]

No, what I said is that the investment climate will suffer. It does send out a message that the investment climate for commercial aviation in Canada is more restrictive than it otherwise is in other jurisdictions. Is that a message we want to send out?

In terms of what the ultimate impact is going to be on cost and service, I'm certainly not an economist or a prognosticator, and I can't presume to know.

[Ed Fast, Conservative, Abbotsford, BC]

You will notice from the bill itself that the actual involvement of the minister and the agency in a merger or acquisition process doesn't mean that we're going to prohibit that from happening, and a company or purchaser that was subject to this has the ability to come forward and say why it's in the national interest to approve this. If in fact cost and service are a critical component of that, I would expect the minister and the agency would give full consideration.

[Fred Gaspar]

I completely agree with your characterization; I think you're right, and, again, this is not a hill I'm prepared to die on, such as it is.

[Ed Fast, Conservative, Abbotsford, BC]

I'm pleased to hear that.

[Fred Gaspar]

I'm just saying it doesn't really do anything for the real needs of the consumer today.