Madam Chairwoman and honourable members, I appreciate the opportunity to appear before this committee as it considers Bill C-49.
My name is Doug Lavin, and I am the vice-president for member and external relations for North America for the International Air Transport Association, or IATA.
IATA is a Canadian corporation created by a special act of the Canadian Parliament, representing the interests of 275 airlines in more than 117 countries around the world, including Air Canada, Air Transat, Cargojet, and WestJet. As such, IATA has a significant interest in the proceedings of this committee on Bill C-49.
I have submitted my written comments on Bill C-49 for your consideration in advance of today's hearing, but I'd like to take my time this afternoon to highlight several points included in that submission.
First, it is important to note that a key recommendation of the 2016 Canada Transportation Act review was to reduce the high level of government taxes and fees on Canadian air transportation because of their significant negative impact on both airlines and passengers. Specifically, the CTA review recommended a phasing out of airport rent, a reform of the user-pay policy to prevent the government from collecting taxes in excess of its investment in services and infrastructure, and a reduction in the air traveller security charge.
In announcing the government's transportation policy, Minister Garneau promised a reduction of what he characterized as a “litany of fees and charges” on air travel. In fact, this morning he mentioned that he had travelled the country in preparation for Bill C-49, and the number one issue he heard about was the high cost of air travel.
IATA was therefore disappointed that Bill C-49 fails to address any of these cost issues—no call for a reduction in rent, taxes, or fees.
To be fair, Minister Garneau has promised to address these cost issues in phase two of the government's vision for the future of Canadian transportation. We look forward to supporting Minister Garneau and his team in this second phase.
I believe my airline and trade association colleagues who have testified before you yesterday and this afternoon are better equipped than I am to address the issues of airline ownership, joint ventures, and CATSA cost recovery set forth in Bill C-49. I'd like to focus my remarks on Bill C-49's call for the Canadian Transportation Agency and Transport Canada to develop enhanced air passenger protection regulations.
IATA is currently working with approximately 70 governments that have either implemented or are considering implementing air passenger rights regulations. As you would expect, some governments have done a better job than others in this regard. We have seen two primary approaches to these passenger rights regimes.
The first approach is that government steps in and dictates how airlines should treat their passengers. This model is best seen in the approach taken by the United States and the European Union, where regulations impose stiff fines if airlines do not meet government-imposed requirements as to how passengers should be treated in the case of delay, cancellation, or lost baggage.
For the most part, these fines are punitive in nature, as they go beyond the cost of the delay or cancellation to the air passenger. We see a number of challenges to this approach.
First, it is difficult to define in regulatory terms exactly how to treat passengers in any given circumstance. Each irregular operation presents a different set of facts that are difficult to anticipate, much less to regulate. In Europe, for example, the courts stepped in to interpret the intent of the European passenger rights regulations, which more often than not resulted in contradictory interpretations and confusion on the part of airlines and passengers alike.
Second, the most well-intentioned government regulators can sometimes do more harm than good when attempting to protect passenger interests. For example, in the United States the rule against lengthy tarmac delays has resulted in increased flight cancellations, which often prove to be more inconvenient to passengers than the tarmac delay itself.
In 1987, Canada deregulated the commercial airline industry based on the belief that the free market, rather than government regulation, would produce better results for airline passengers. There is little evidence to suggest that this assumption was incorrect then or now. We know that rare tarmac delays or lost luggage occasionally cause inconvenience for air passengers. However, the answer is not always government second-guessing airlines when the competitive market, and more recently social media, already provides them with all the incentives they need to treat their customers as well as possible.
While Europe and the U.S. passenger rights approach have been copied by some governments, other countries have taken a second approach that I believe this committee and Canadian regulators should consider.
Under this approach, governments do not impose strict passenger rights rules with accompanied fines or penalties. Instead, they put measures in place to ensure that air passengers are fully aware of their rights before they purchase their ticket, leaving it up to passengers to decide what level of service they're willing to pay for.
Australia is a good example of this approach. In addition to adopting a broad consumer rights law covering all industries, the government has worked with the airlines to develop customer charters that outline each passenger's service commitments and complete handling procedures. China and Singapore have also chosen this focus on transparency rather than imposing punitive measures, and have seen positive results in terms of on-time performance, lower cancellations, and lower airfares
It is interesting to note that last year, the Canadian Transportation Agency took a step in that direction when it requested and received voluntary commitments by Canadian carriers to publish their tariffs and contracts of carriage in clear language on their respective websites.
Bill C-49 seeks to combine both approaches to this passenger rights issue. On the one hand, it requires airlines to make terms and conditions of carriage readily available to passengers in clear and concise language. IATA supports this transparency. Bill C-49 goes on to direct CTA and Transport Canada to develop regulations with minimum standards and compensation for passengers during irregular operations. IATA has significant concerns regarding this approach, particularly if the fines are prescriptive in nature.
If Bill C-49 remains as is and CTA and Transport Canada follow the U.S. and EU approach, we urge these regulators to follow several principles to promote clear and fair regulation. These include guarding against unintended consequences and including provisions to fix them when they arise, as well as ensuring that the benefits outweigh the costs of regulation. Compensation should be equivalent to the cost of lost time and property to passengers and not be punitive. We need to ensure that any customer service requirements apply to all parts of the air transportation ecosystem rather than just airlines, and that fines are only imposed on actions within the airline's control. Finally, passenger rights rules should not be extraterritorial in nature.
Thank you for your consideration. I look forward to answering your questions.