Transport Committee on Sept. 14th, 2017

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

How?

[Douglas Lavin]

They accommodate passengers by putting them on a later flight. They accommodate passengers by giving them hotel accommodations when appropriate. There are all different things airlines do to accommodate their passengers, and again, their track records show that.

I'm not familiar with the exact situations. Certainly you have airlines that have testified to you before me and will after me, so those issues should be directed specifically to them on specific circumstances.

My point is that in 1987, your predecessors agreed to deregulate the industry, because they said that the private sector and the market mechanisms would do a better job, and there's no evidence that this is not the case.

[Ken Hardie, Liberal, Fleetwood—Port Kells, BC]

I would disagree, in some cases, sir.

I want to talk about service to the north, because that is critical, and leaving the burden of that solely on the free enterprise system and market forces has led to extraordinary prices to get around there. I've been pricing some of that out, and it is quite steep. Obviously, those folks find it very difficult to get in and get out.

Is there a solution to that? Does it mean some sort of government subsidy to lower that cost, or are there other things that could happen, Mr. Priestley?

[Glenn Priestley]

We've got an area darn near half the size of Canada with the population of Kingston, if we go from latitude 55° north, which is the true north. It is a problem. It is a concern. How do the operators handle it? All of our airplanes are combi—we can move the wall, so that we can take more. There's always freight to go north. Sometimes there are not that many people, so we can move the wall within an hour to take more cargo if we have it that day. On occasion, sometimes, we reach a situation where we can't do that and some people get left behind.

I can't address your question on cost today. It's economics. It's just very expensive in the north. Our concern with the CTA is because of some of the other modernization initiatives, such as accessibility issues and insurance that they're looking at being empowered under the Canada Transportation Act. They are only going to make the costs higher.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Priestley.

Go ahead, Mr. Chong.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Madam Chair.

I have a question for Mr. McKenna concerning joint ventures. I know Mr. Lavin declined to comment on it.

Mr. McKenna, do you have an opinion on these joint ventures that airlines have proposed in the past, such as the joint venture between Air Canada and United Airlines that was struck in 2011?

[John McKenna]

Actually, we're still studying that matter and we don't have comments to make at this point. I'm sure you'll be hearing from other airlines later today that have comments on that, and I look forward to hearing their comments also.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Mr. Priestley, do you have any opinions on that?

[Glenn Priestley]

No.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

All right.

Madam Chair, I don't have any more questions.

[The Chair, Liberal, Judy Sgro]

That's wonderful. Sorry, I didn't mean it disrespectfully.

Go ahead, Mr. Badawey.

[Vance Badawey, Liberal, Niagara Centre, ON]

I'm fine.

[The Chair, Liberal, Judy Sgro]

Mr. Badawey is fine.

Go ahead, Mr. Godin.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Madam Chair.

My first question is for Mr. Lavin.

In your opening remarks, you said you hope airport fees will be reduced. That is important to you. You said that the minister has not included this in the first phase of Bill C-49. It is unfortunate that this bill does not go far enough.

Do you think measures could be included in this bill to reduce airport fees while also respecting the passenger bill of rights and passengers' wish for a better travel experience?

[Douglas Lavin]

I guess I'm hesitant to second guess whether Bill C-49 could accommodate that. I think that's more your business than mine. All I can say is that the rents in particular have been a concern of the airline industry. For any airline that flies here, rents have been a significant barrier to, for example, Toronto or Vancouver becoming the global hubs that they would like to be. If you look at it, they've collected $58 billion so far and expect to collect $12 billion more in the future. We just find that is not competitive with the rest of the world. We are hopeful that, if you could accommodate that, certainly on the passenger rights side—I've stated our position quite clearly—I anticipate that we will work closely.

We have great respect for CTA and Transport Canada and hope that whatever they come up with post-Bill C-49 is reasonable. But the number one priority of the airlines and the passengers is the high cost of travelling in Canada.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

I would like to continue along this line of questioning.

You can identify certain fees that are perhaps excessive—if I may use that word—and that could be limited, reduced or eliminated. Can you say which fees, in your total bill, you would eliminate if you were in the minister's shoes?

I am asking you to do some role playing this afternoon.

[Douglas Lavin]

Certainly, the rent is a big issue. The air traveller security charge is one of the highest in the world. The fact that you have user-pay plus, plus, plus here, whereby the government itself is not making the investment that it needs on security, and in fact puts it on the back of the passengers, even exceeding the services that are provided. The estimates in terms of.... As I said earlier, the baseline tickets globally are 64% lower now than they were in 1996 in real dollars. In Canada, that's not the case. I don't have that figure. It may be 64% at the base, but the fees associated with it—which are up to 50% to 60% of that base fare for taxes and fees—are the main barrier to a successful and vibrant commercial airline industry in Canada.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you.

As to reducing fees, you have offered some potential ideas and they are duly noted.

Returning to the customer experience, rather than imposing a fine or serious consequence on the company, you suggest that passengers should be informed. You would like us to follow the example of Australia and China as regards transparency. Do you honestly believe that approach could have a positive effect on the experience of Canadian customers?

[Douglas Lavin]

Our experience in Australia, China, and other places, is lower ticket prices, lower delays, and lower cancellations by this approach.

If I can have just one minute I think it's important to recognize here that Canadians have passenger rights now. First of all, Canada is a signatory to the Montreal Convention, which put a maximum in terms of how much they are compensated for lost baggage and for cancellations. You already have those.

Secondly, the CTA—as Mr. McKenna mentioned—has their process. More than 95% of those complaints are resolved between the airline and the passenger. It is 95%. I think this transparency we're talking about in Bill C-49, absent the fees, would make the most sense.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

I have one final, quick question.

Are you in favour of the status quo or do you think Bill C-49 will improve the customer experience?

[Douglas Lavin]

I am concerned that it won't improve the customer experience because it will take away competition at the service level by harmonizing across as to the standards. I also feel that unintended consequences are very dangerous across that and it will increase prices. The only place that airlines can go with those increased costs is to pass them on to passengers.

Thank you.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Mr. Lavin.

Thank you, Madam Chair.

[The Chair, Liberal, Judy Sgro]

Monsieur Aubin.

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

Thank you, Madam Chair.

I would like to talk to Mr. McKenna for a few minutes.

You made some recommendations for future regulations, which are unfortunately not included in Bill C-49. I hope the Canadian Transportation Agency has heard you and that we can resume this discussion one day.

You also mentioned foreign ownership. In your opinion, there is no evidence that increasing foreign ownership would lead to the creation of low-cost airlines or to price cuts by current airlines.

I was surprised when you said that there is no reciprocity. I would ask you to elaborate on what you mean by that. Are you saying that we should have included such agreements in free trade accords, such as the one with the European Union? Is it on a case-by-case basis such that, for instance, a British investor could not invest in a Canadian company unless Canadian investors could also invest in Great Britain?

[John McKenna]

That is exactly what I meant.

Reciprocity means that we are given a right if we also give that right to foreign investors. So if Americans wanted to invest in Canada, would we have the right, by virtue of reciprocity, to invest in an American airline up to 49% or 25% per investor, as the case may be? That is the question we are raising.

This could indeed be included in a free trade agreement on a national basis, and not necessarily between companies.