Transport Committee on Sept. 22nd, 2016

[The Vice-Chair, Conservative, Luc Berthold]

Your turn, Mr. Fraser.

[Sean Fraser, Liberal, Central Nova, NS]

Thanks very much.

I have a quick question about the role of small airports. I think there are maybe six or so key small airports and they skew towards the Atlantic region. They don't currently have access to federal infrastructure money. I'm curious as to what your thoughts may be on federal investments in these smaller airports as part of the larger national transportation system in order to grow the Canadian economy.

[David Emerson]

In the report we have emphasized the importance of the small airports capital fund, or whatever it's called. There is a fund in Transport Canada for investing in small airports, and we have recommended a significant increase in those funds.

Our priority would have been more remote communities, because in a lot of southern Canada, if I can call it that, you tend to get a proliferation of small airports, and that starts to run into issues of viability. In B.C. you have Kelowna, Penticton, and Kamloops, which all have their own little airports, and they're all trying to feed in to YVR in an efficient way to get on to a main line. I know in Atlantic Canada you have a similar situation.

I hate to be hard-hearted about it, but I think the Government of Canada has to make some choices about where they put the investments.

[Sean Fraser, Liberal, Central Nova, NS]

Mr. Chair, I think we're probably close to the end of the time. I believe Mr. Sikand had a quick question.

[The Vice-Chair, Conservative, Luc Berthold]

It's your round, so you decide.

[Gagan Sikand, Liberal, Mississauga—Streetsville, ON]

Seeing as international trade is so important to our GDP, I just want to get your opinion on foreign ownership of our transportation system or foreign ownership in general.

[David Emerson]

Our recommendations in the report in the air sector, for example, were to increase the foreign ownership limit from 25% to 49%. That's not different from the Wilson report back in 2008.

The restrictions on foreign ownership are particularly onerous for start-up carriers. We've noted in the report that Canada has not really had an ultra-low-cost carrier. What we heard from our consultations is that for an ultra-low-cost carrier to start up in Canada, it needs to get financing. It's very difficult to get enough financing to start a low-cost carrier if you're not a publicly traded company in Canada. We said we need to allow these start-ups access to foreign capital to make sure that over time Canada does get a more competitive air sector through the ultra low-cost route.

[The Vice-Chair, Conservative, Luc Berthold]

Thank you very much, Mr. Emerson.

I now give the floor to Kelly Block, for five minutes.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

The question that I have is a follow-up to the one you just answered, as well as a comment that Mr. Hardie made in terms of how to get capital funding moving in Canada.

As was just noted, European investors want to come to Canada to invest in a new airline, but this government is blocking their entry. Your report recommends raising the foreign ownership threshold to 49%, and one can imagine that after 18 months of going across the country and putting time and effort into the study that you've done, you understand in making the recommendation that it makes sense.

What signal does government send to foreign investors and capital when they take so long to make a decision that is time-sensitive like this?

[David Emerson]

Well, it's not that different from the time it takes to get major project decisions, which in Canada is starting to be clocked in decades now instead of months and years. I think we have a major problem nationally in terms of attracting major investments and in recognizing that when private sector companies embark on a plan to make an investment and seek an approval, they actually have to tie up their balance sheet, sometimes with billions of dollars of committed money, not knowing when or whether they'll get approval to do it. It's an issue that does not call for less diligence; it just calls for a more efficient, more robust, and rigorous process to get from start to finish.

I want to make one further comment before I leave you. Canada has been gradually opening up air service agreements with other countries and other air carriers, but we're not doing it fast enough. A good example, and Dianne will relate to this, is Emirates. Emirates Airlines has wanted to increase their frequencies into Canada. We've rejected them, as a country, and there's bad blood now with the carriers and the country as a result of that decision. What has happened is that Emirates is now hubbing out of Seattle. You have Air Canada and WestJet flying people by the droves down to Seattle to get on an Emirates flight so they can gateway through Dubai.

It's total craziness, and it's happening elsewhere. We can shut the door to these increases in air services, but the travelling public will find a way, and these carriers will find a way to have the travelling public accommodated. In our air service agreements we need to become much more attuned to the needs of the Canadian economy and the Canadian consumer and a little less afraid of our dominant domestic carriers. They should be part of the puzzle, but they shouldn't be driving the train—or the plane.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

One could well imagine that, as I've said, an 18-month study, with the analysis your panel did on this very issue, might be enough given the fact that it's now 10 months, I think, since the report was made public. It's almost a year since the government was given the report. I'm not sure what other analysis is needing to take place in order to approve this request by Jetlines, but the CEO of Jetlines has said that unless an exemption order is granted and a clear timeline provided by the minister in the coming weeks, the opportunity will simply be lost. You made your point on that very well.

I'd like to go back to the MRE, Mr. Al-Katib, and follow up on some of your comments. How much do you think grain shipping rates would increase if the MRE were removed?

[Murad Al-Katib]

The only thing I can say is that without a much bigger study on that, I can't give you an exact number. If we look at grain rates today, per revenue mile they are lagging behind other commodities. I think the figure is somewhere in the range of 12% to 17% lagging behind other rates.

I think ultimately we cannot assume that the MRE comes off and automatically rates go up that 17%. I think efficient commercial operations will grant an ability of shippers to negotiate. The potash industry, with which you're very familiar being from Saskatchewan, is actually an industry that we recognized in the report as being probably a model of true efficiency in terms of infrastructure that's been set up and infrastructure that has been well suited to rail movements.

Very close to or maybe even within your constituency, at Delisle, Saskatchewan, our company, AGT Food, is currently building a rail consolidation centre to be able to take traffic from your constituency into a consolidation centre, build very long unit trains, and move into the port of Prince Rupert and into Thunder Bay with Canadian National Railway. Efficient, collaborative infrastructure moves can help to offset some of that cost uncertainty that may come from an MRE change.

That being said, we were very clear—

[The Vice-Chair, Conservative, Luc Berthold]

Mr. Al-Katib, unfortunately I have to interrupt you. Your time is up.

Your turn, Mr. Aubin.

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

Thank you, Mr. Chair.

I will try to come full circle by asking a more general question.

Actually, when you look at the report as a whole and you see the number of recommendations it contains, you perhaps tend to be a tad pessimistic. I am going to ask you a multiple-choice question.

If you had to rank the Canadian model in terms of infrastructure management, would you say that we are in the top three, the top five, the top 10, or that we are not in the top anything at all?

As a follow-up question, I’d like to ask you which countries we should compare ourselves to if we are not leaders in the area ourselves.

[David Emerson]

Actually, you will find that there are institutionally done rankings of Canada's place in terms of transportation logistics, and we have fallen. I don't remember the precise ranking, but I think we have fallen somewhere from 14th to 16th in the world in terms of the quality of our transportation system and infrastructure. Don't quote me on it; it is in the report.

I think Australia and the U.K. are doing a pretty good job, certainly in terms of having a national transportation strategy, a national projects pipeline, and a system for attracting private and institutional investment into their transportation system.

We have mature assets, such as some of our airports—Vancouver, Toronto, Montreal. Those airports are worth billions of dollars, and at the moment the governance structure is kind of a community authority. It doesn't use government money, but it has unlimited power to levy an airport improvement fee on passengers. The public has no say in the matter, and they are not governed by the CTA.

I think that private institutional investors would put billions into the hands of the government, which could then be invested in infrastructure we don't have, and allow those facilities to be run under a regulated private sector model. You would have a more disciplined governance arrangement in terms of better clarity, allocation of capital at these airports, and so on.

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

Thank you.

Do you want to add anything, Mr. Al-Katib?

[The Vice-Chair, Conservative, Luc Berthold]

You can do it in 15 seconds.

[Murad Al-Katib]

When we look at Australia and other places, let's not forget that we have a harsh climate and big geography. I think we are doing very well as a country.

[The Vice-Chair, Conservative, Luc Berthold]

Congratulations on your 15 seconds, Mr. Al-Katib. You gave us a good answer quickly.

Time flies, but if the committee members wish, we could have a last round. The comments by the officials from each parliamentary group would be around two minutes. If you agree, we could do that and ask Mr. Emerson one final question.

As I see that you agree, we’ll start with Ms. Block.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

I want to go back to a couple of comments. The first was made by Mr. Emerson, that a re-mandated CTA is extremely important. Mr. Katib, you observed that the CTA functions in a reactive way. I wonder if either of you could comment. On a practical level, how would the CTA determine which cases to investigate, or what work to do, unless it was reacting to issues that arise within the system?

[David Emerson]

I will give you a quick answer.

[Murad Al-Katib]

The level of reaction we are talking about is that today, an actual complaint has to trigger the investigation. I think that once you start to get interactions and you have the ability to investigate ex parte, you could identify systemic issues and tackle them before they become a problem, which is where we were in 2013.

You asked whether 2013 was a failure or extraordinary circumstances. I think it was extraordinary circumstances: huge crop, bad weather. I think we recovered relatively well.

[David Emerson]

I would just say that a re-mandated CTA would have a much more comprehensive capacity and an information base to understand the workings of the system and identify problems and bottlenecks before they become a crisis.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

[The Vice-Chair, Conservative, Luc Berthold]

Thank you very much.

I will now give the floor to Mr. Hardie.