Good morning, honourable Chair and members of the committee.
Good morning everyone.
My name is Ferio Pugliese. I am the senior vice-president of Air Canada Express and government relations.
First I want to thank you for giving us the opportunity to appear before you today.
I'm here before you today to discuss what we believe, if done right, to be one of the single most important changes to air transportation in Canada since the devolution of airports.
The proposal to create a new designated screening authority, DSA, to replace CATSA in Bill C-97, comes after years of industry and public requests to improve the system, based on thoughtful examination by airlines, airports and the travelling public. Transport Canada has been supportive of our work in this area, and we're pleased to see significant movement in this regard.
Before I dig deeper into the topic of the new screening authority, I'd like to share with you a bit of context about Air Canada.
Just over 10 years ago, coming off the verge of bankruptcy, Air Canada embarked on a vision to transform itself into a Canadian global champion. Last year, we served over 51 million passengers, a 65% increase since 2009. We now serve 220 destinations across six continents, having added 120 new routes in the last five years alone. Based on our growth, our three main Canadian hubs now rank in the world's top 50 most connected international cities. Aside from Canada, only the United States and China, the two largest markets for air service, have three or more cities in this select ranking. Air Canada remains committed to advancing this vision.
Recent economic impact studies by KPMG and InterVISTAS have identified our total economic output to be $47 billion, including a net impact of $21 billion to the GDP of Canada and over $1.9 billion in direct tax revenues to governments.
Our 36,000-member team, 6,000 of whom were hired only in the last three years, support this growth, and without these dedicated individuals we could not deliver our product to our customers. In total, our operations support 190,000 jobs across our country. Our commitment to serve communities and customers underscores our vested interest in ensuring that CATSA reform meets the needs of the industry, and most importantly the travelling public.
A new model is necessary to improve efficiencies and reduce wait times, delayed departures and missed connections for travellers. Current inefficiencies have resulted in lost economic opportunities and contributed to a worsening perception and inferior travel experience for customers travelling through and within Canada.
While this reform is welcomed, Air Canada cautions that in order to get it right, it must be done in a thoughtful, well-planned and fiscally responsible manner. We encourage the committee to take the time required to coordinate and have thoughtful consultation from all parties.
We're concerned by the provision that allows for the sale of CATSA assets to the new DSA and the impact it will have on the cost to travellers. We do not support having the balance sheet of a new entity that is burdened with long-term debt in the transfer of assets. It is suggested that these assets will be transferred at a negotiated value, of which the new entity will need to use operating revenues derived from rates, fees and charges to not only cover operating expenses but to also service its newly acquired significant debt.
The consequences are simple: increased cost of travel and reduced funding for necessary investments in technology, processes and practices. We have one opportunity to do this right, and the closest proxy we have to this is the government transfer of the air navigation system to NavCan back in 1996, which was done with adequate time and consultation. We suggest a similar approach with CATSA reform.
Finally, I wish to highlight and remind the committee that air transport is also undergoing the most active, dynamic period of regulatory reform since the early 1990s. Among other reforms, industry is currently working with government to finalize the air passenger protection regulations, APPR.
Government's timelines on this policy are simply not realistic, and quite frankly are irresponsible, for the following reasons: rushed implementation without consideration of operational realities leading to unintended consequences; policy based on flawed and inaccurate regulatory impact analysis statements; and, air travel, again, that will get more expensive and less accessible for Canadians.
Finally, our airline, along with others, is facing one of the most significant challenges the industry has faced since 9/11: the grounding of the Boeing 737 Max. As a result, resources are fully dedicated to managing schedules, preserving service and managing route suspensions. While our team has done an excellent job in recovering our operations, the strain on resources is significant, leaving little capacity to deal with other issues.
As well, a significant level of resources is needed as the airline prepares customers and operations for the eventual re-entry of service.
To top that, the industry is now being asked to embark on a significant CATSA reform at an expedited pace. To suggest that complex negotiations begin in short order is undermining not only to the industry, but to the travelling public, and will lead to inferior outcomes.
Before we embark on the next stages of CATSA reform, we implore you to consider the following recommendations: First, allow this industry to get past the Max grounding. Second, delay the implementation of the APPR to provide for more and much-needed consultation. Third, in the coming months, allow airports and carriers enough time to consider how to create an industry-leading screening authority that begins with the transfer of assets at a nominal value.
Air Canada supports this CATSA reform, done right, which means that consultation and careful consideration of legislation must take place. This cannot be done with the introduction of provisions in the budget omnibus bill where we have virtually no ability to make changes.