Transport Committee on April 30th, 2019

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Laroche.

We move on to questioning for five minutes each.

Mr. Liepert.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Thank you all for being here today. In five minutes, it's going to be very difficult to start asking questions of such an imposing panel. At the end of the day, we will be attempting to have everything that was discussed this morning boiled down to a couple of things that we need to consider from a recommendation standpoint. I know that certainly towards the end of the presentation, we had several more detailed recommendations.

If I heard all of you correctly this morning, there is no argument or debate or resistance to what the government is attempting to do. It's about timing. It's about costs and how it's going to be structured, and what the cost will be ultimately to the passengers, many of whom are sitting around this table.

I'd like to see if that is the essence of what we are talking about here today. It's not a question of disagreeing with the idea. It's a question of how we are proceeding to try to get this done quickly and ultimately to the detriment, in all likelihood, of the air traveller.

Can one or a couple of you comment on whether or not that is the essence of what we're talking about here today?

[Mark Laroche]

The airports agree with the legislation to proceed. We understand there's an aggressive timeline, but the legislation does not have a transfer date. The minister will decide on a transfer date when he consults with industry.

We are certainly in favour of this legislation going through. It will address a lot of issues we've been working through. When the time comes for the transfer date, if we're sufficiently ahead, we will proceed. If not, we will get this right as we negotiate once this new DSA is set up.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

I will get Mr. Bergamini to comment on that as well.

[Massimo Bergamini]

We are not wedded to a model. We are wedded to outcomes, which is a world-class airport passenger security screening system. We are looking toward that.

The process the government has laid out for us from our perspective falls short of what is required to achieve that goal.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

If I understand it correctly, these Crown corporation assets and what have you are going to be slid over to the not-for-profit. Instead of already having absorbed those costs—the traveller has already absorbed those costs—the government is now almost going to start to charge all over again for it.

As airlines, have you run any numbers to say what this cost to the consumer is going to be on average?

[Ferio Pugliese]

We haven't run specific numbers on this because we don't know exactly what those transfer costs are. We've heard everything from the realm of asset transfer in the $500 million to $800 million range, so we're in the process of doing that.

We have run cost assessments on all the other factors that are in front of airlines today, which shouldn't be ignored in all of this. This is part of our concern with this bill coming forward at this time. It's being layered on in addition to carbon tax accessibility, the passenger bill of rights, and now we have this.

Each one of those that I just described has inherent costs built into it. Our assessments to the industry alone on just those ones I mentioned, not including CATSA, brings the industry north of $1 billion.

[Ron Liepert, Conservative, Calgary Signal Hill, AB]

Again, the fact that it's buried in a budget bill causes us a lot of grief to try to get our arms around it. I guess as an airline industry it would make more sense to have something that's more of a stand-alone, that you can have the time to analyze the particular legislation and then move forward.

[The Chair, Liberal, Judy Sgro]

You have time for a very short answer.

[Massimo Bergamini]

That's exactly what happened with Nav Canada.

[The Chair, Liberal, Judy Sgro]

Thank you.

We'll move on to Mr. Badawey.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you folks for being here this afternoon.

Mr. Pugliese, with respect to the industry itself, how is business with the airlines right now?

[Ferio Pugliese]

Things are fine aside from what's going on with the Boeing Max, if you're reading the press, but outside of that we're continuing to move people.

[Vance Badawey, Liberal, Niagara Centre, ON]

Okay.

Mr. Bergamini, earlier you made the comment that passenger rights are not ready for prime time. Can you dig a bit deeper into what you meant by that?

[Massimo Bergamini]

To Transport Canada's credit and to the minister's credit, we know efforts are under way to address some of the more glaring problems that had been identified after publication of the draft regs in December, but that leads us to where we are today.

The final regulations have not been published yet. They are highly prescriptive. They will require significant system changes and investments on the part of air carriers.

I will give you one example with respect to training. We're looking at having to train 20,000 to 30,000 employees in Canada alone to be able to implement and be responsive to the prescriptive requirements of the regulations.

To expect that we can do that by July 1 is just not credible.

[The Chair, Liberal, Judy Sgro]

I believe Mr. Gooch is trying to add something to that.

[Daniel-Robert Gooch]

Thank you.

We're seeing tremendous growth of airports. It was about 6% nationwide and even higher in some segments over the last year. If you go back several years, it's very strong growth year over year.

I also want to speak to an earlier question on the cost of the service. The reality is we haven't yet seen CATSA's financial situation. The transparency into the organization up until now has been quite limited. It is our understanding that one of the next tasks we will have at hand is for airports and airlines to get access to the data on the operation today on the cost of various service levels and the options for setting rates to fund the service.

There's not a lot of insight right now, but we expect to get that very shortly.

[Vance Badawey, Liberal, Niagara Centre, ON]

That's a perfect segue into my next two questions with respect to CATSA. Of course, with the current situation CATSA is rather in a box: they're in one line of work. With that said, the expectation is that the new entity will have additional business opportunities not just within the box that CATSA's been in traditionally, but with what they may be involved in in the future as an organization.

The statement from Air Canada noted as irresponsible “[r]ushed implementation without consideration of operational realities leading to unintended consequences”. Mr. Liepert asked a question about the process, and we're hearing support of the process for the sale to a new entity. With that said, would it not be understood clearly that, once the sale is complete, a process would in fact then follow to recognize many of the realities of what you're all talking about?

It's not in fact a rush to implementation. A sale may be going through in the short term, but in fact it's going to be a process wherein much of what CATSA was in terms of its operating capital—and of course, any financing of their debt, operating or capital—the new entity is going to be able to recognize. They're going to recognize, in fact, first what their capital is now going to be on their balance sheet; second, what debt has to be financed as their operational vis-à-vis their capital debt, old and possibly new; and then lastly, the opportunities that might present themselves to add more revenue, as an entity that can get into more business opportunities than CATSA could at one time, being in that small box.

Would you not agree with that?

[Daniel-Robert Gooch]

Certainly the new organization, as the legislation is envisioning it, seems to be set up to be a bit more flexible than CATSA would be, but as you heard from my colleagues, we want to clarify some of that.

My colleague from Ottawa is chairing the committee. I'm sure he has some additional comments.

[Mark Laroche]

Yes.

The process can go fairly quickly. We basically have to set up an organization that is well run right now, and the asset's being concentrated in Transport Canada makes that less complex. Once we agree with the bylaws and the articles of incorporation, the new board will be named and will have the standards to meet and report on.

It's not necessarily that complex. Right now we have to get access to CATSA data. The government is putting up a data room, and we're going to be able to model all these operations.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We move on to Mr. Aubin.

[Robert Aubin, NDP, Trois-Rivières, QC]

Thank you, Madam Chair.

I thank all of the witnesses for being here.

Honestly, perhaps I should have reread the Emerson report before our meeting. However, it is undoubtedly familiar to you, since this is your daily work. If memory serves—correct me if I am mistaken—the Emerson report does abundantly refer to CATSA, but it never suggests abolishing CATSA and replacing it with a differently structured organization.

Am I mistaken in saying that?

[Mark Laroche]

In the report, Mr. Emerson proposed that CATSA become a new entity that would also be the regulatory authority and entrusted with enforcing the law. The government did not follow up on that recommendation. In fact, we don't support it because we did not think that would be the proper governance.

Transport Canada will ensure that the rules are being followed and the new organization will see to their execution. That is what the government is proposing at this time, and we support that.

[Robert Aubin, NDP, Trois-Rivières, QC]

In that regard, I agree completely. I would also have disagreed totally if the regulatory responsibility were removed from Transport Canada. However, if we give the means...

Earlier, Mr. Hankinson spoke about standards. If I am not mistaken, if we compare our performance to the standards of our international competitors, we always talk about screening time. Are there any other shortcomings that would be solved by this transformation, or are we seeking strictly to do things faster, for reasons we can certainly understand?

When we compare ourselves internationally, is our only problem to reduce the screening times at the security screening points?

[Mark Laroche]

That is a good question.

We want to be more reactive and proactive in putting in place solutions to ensure better security. The prime objective is security. The point is not to speed, but we think that we are capable of...