Transport Committee on Sept. 14th, 2017

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Walker.

We go to the National Airlines Council of Canada and Mr. Bergamini.

Welcome.

[Massimo Bergamini, President and Chief Executive Officer, National Airlines Council of Canada]

Good afternoon, Madam Chair, members of the committee.

My name is Massimo Bergamini, and I am President and CEO of the National Airlines Council of Canada.

I want to thank you for the opportunity to appear today to provide my organization's perspective on Bill C-49.

But before I begin, allow me to say a few words about our organization and industry.

The National Airlines Council of Canada was created in 2008 by Canada's four largest airlines—Air Canada, Air Transat, Westjet and Jazz Aviation—to advocate for policies, regulations and legislation that foster a safe and competitive air transportation system.

Collectively, our members carry over 92% of Canada's domestic air traffic, and 65% of its international air traffic. They employ over 50,000 Canadians directly, and contribute to an additional 400,000-plus jobs in related sectors such as aerospace and tourism. According to the Conference Board of Canada, in 2012 our industry contributed almost $35 billion to Canada's GDP. Those are significant statistics that speak to the role that a strong, competitive aviation industry plays in ensuring Canada's economic prosperity.

More to the point of our discussion, commercial aviation has become the only practical way for millions of Canadians to travel to be with family, for work, or simply to explore our vast country, and travel they do. According to Statistics Canada, the total number of passengers emplaned and deplaned in Canada increased by some 30% between 2008 and 2016. There's no doubt that the era of elite jet-setters is long past.

Our members alone were involved in over 71 million passenger movements last year. As people now book flights as readily as they drive cars, air travel is becoming the domain of the middle class, not the 1%. For Canadians, flying is now part of daily life. It's the lifeblood of an open, diverse, and geographically dispersed society.

In our country the freedom to travel is considered a given. Air transport has become an essential link between people and communities. To quote the Emerson report:

Not only does air travel provide access and labour mobility to urban, rural, and remote locations in Canada, but airports and air carriers act as economic engines for communities and for the country as a whole....

This is why a competitive commercial air industry is so important. That is why this bill is so important, and that is why getting it right is also so important.

Unfortunately, we think the government's approach falls somewhat short of that mark.

The Emerson report recognized the complex interconnections that make up the travel experience and that contribute to our industry's global competitiveness. It proposed a three-pronged approach to addressing the major components of a competitive airline industry: cost, access, and the user experience. Bill C-49 addresses only one, the user experience.

For the government to lead with Bill C-49, absent economic measures to address the public cost structure issue, from our perspective, risks creating further economic imbalances that may eventually hurt those the bill is meant to protect.

To be clear, while we find that some aspects of the bill require clarification—you will find our recommendations in the technical annex to my remarks—we do not take issue with the bill or in any way oppose its adoption.

We are, however, concerned that the government's approach amounts to putting the cart before the horse.

Putting in place an economic penalty system as the framework for dealing with service issues, without addressing public cost structure at the same time, runs the risk of negatively affecting the industry and, ultimately, passengers.

As Mr. Lavin of IATA pointed out earlier, the international experience on this matter is instructive and should be noted.

As I said at the time of the bill’s tabling last May:

Our organization and members share and support Minister Garneau's commitment to ensuring that all air passengers have the best air travel experience possible and look forward to working with him and with the Canadian Transportation Agency to this end.

However, we also recognize that the air travel experience doesn't start with check-in and end with baggage pickup, and it doesn’t happen in an economic or systems vacuum.

There are a lot of moving parts in getting a passenger to destination. It involves the coordinated efforts of hundreds of dedicated people working in airlines, airports, air traffic control, air security, and border services. Every trip takes place within a complex web of systems, regulations, and costs. Each piece contributes to the outcome, and each must be considered when trying to improve service to passengers. There is no doubt that, sometimes in this complex system, capacity is stretched by unforeseen circumstances, mistakes are made, flights are delayed, luggage is lost, and connections are missed.

In 2016, there were some 2,800 passenger complaints made to the Canadian Transportation Agency, or about eight per day. Of these, 560 were either withdrawn or were outside of the agency’s mandate. Of the remaining complaints, 97% were resolved through facilitation. That is to say, the airline was informed of the complaint and reached a mutually satisfactory agreement with the guest without further agency involvement. Less than 1% went to adjudication.

Far be it from me to minimize the significance of these complaints, or the inconvenience that passengers experienced, but it is important to place those numbers in the context of a system that moves over 350,000 passengers per day, every day.

Clarifying and codifying the rights of passengers, as Bill C-49 does, is a positive measure, and it will lead to more certainty in the marketplace. Of that, there is no doubt. We are disappointed, however, that this measure was not introduced in conjunction with concrete steps to address the uncompetitive public cost structure faced by our industry or the systems bottlenecks caused by underfunding of air security and border screening.

The Emerson report recognized how mounting fees and charges, as well as delays in security screening, affect travellers and the efficiency of the industry. It recommended phasing out airport rents, reforming the user-pay policy for air transport, and putting in place regulated performance standards for security screening. Unfortunately, absent any provisions in the government’s five-year fiscal framework for additional spending in this area, Bill C-49 alone will do nothing to address the cost pressures on our airline industry or the systems bottlenecks outside of its control.

September is when the leaves start changing in Ottawa and when Parliament resumes sitting. It is also when budget deliberations get under way in earnest within government. It is our hope that when your committee has completed its study of this bill and is ready to return it to the House, you include a recommendation that the government begin taking immediate steps to implement the competitiveness provisions of the Emerson report in next year’s federal fiscal framework. Implementing the Emerson report recommendations on the air industry’s public cost structure as well as on eliminating passenger screening bottlenecks in parallel with the provisions of Bill C-49 would be a true game-changer for airlines, airports, travellers, and ultimately the country.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, sir.

Going on to questions, we have Ms. Block.

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

Thanks very much, Madam Chair.

I want to thank all of you for joining us today. I'll get right to my questions, since six minutes goes by pretty quickly.

We know that Bill C-49 is the result of consultations in response to the Emerson panel's review of the Canada Transportation Act, which was expedited by the previous government back in 2014. As was referred to by many of our witnesses, while they appreciate some of the things in Bill C-49, it misses the mark in many ways.

One of the things that I would like to pick up on would be the measures you've just identified that were in the Emerson report but are missing here. I would ask you to comment further on that. Were you consulted during the time when this bill was being contemplated? Were there measures you recommended to Minister Garneau to be included in Bill C-49?

[Massimo Bergamini]

With respect to consultations, yes, on Bill C-49 but also on the industry cost structure. We've had discussions with the government, and not only with the current government but with previous governments. This has been a long-standing issue, of course.

The basic problem is not so much with a willingness and a general commitment on the part of Minister Garneau. Minister Garneau has told us, as I believe he has indicated to this committee, that he is looking at a phased approach. We note, however, that in November, when he unveiled his vision 2030 plan, the minister indicated that he was working towards a set of regulated performance standards for CATSA.

I can tell you that on budget day we were waiting very impatiently for the budget to be tabled so we could see what changes were actually introduced with respect to performance standards, which is a key element of the solution. Of course, performance standards without funding are meaningless. As you can imagine, we were disappointed. The budget was silent in that area.

The issue is not so much that there hasn't been consultation or there haven't been commitments. The issue is that there are competing political priorities that require the allocation of scarce dollars by this government and by all governments.

This is really fundamentally what we're saying: if you go with this as your first step, you run the risk of people saying, “Check, done, and we can move on to something else.” We believe it is fundamentally important to look at the complexity of the system and take an ecosystem or holistic approach to dealing with it, and that requires funding.

Thank you.

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

Would anyone else like to add anything?

[George Petsikas, Senior Director, Government and Industry Affairs, Transat A.T. Inc., Air Transat]

That's fine.

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

Okay. We'll move from the holistic approach that you were hoping for or asking for to drill down into some of the measures that have been raised as problematic.

In your view, is it in the consumer's best interests to have the Minister of Transport, rather than the Competition Bureau, determine whether joint ventures should be approved or blocked? I'll throw that out to any one of you.

[George Petsikas]

We'll start since we've made it pretty clear that it's something that concerns us.

As we indicated in our opening statement, we are trying to be realists here. We know how the world is evolving. These joint ventures are out there, not only in Canada but in the United States and Europe, and they offer a lot of potential advantages for travellers in terms of enhanced connectivity, more destinations, etc. However, when we look at it in the Canadian context, we have to look at our specific circumstances here.

We are a small market in Canada. We have one airline in particular that is interested in these sorts of joint ventures and in these provisions that would effectively indemnify that joint venture, protect it from the scrutiny, if you will, or active enforcement of competition law by transferring that power to the minister. We know who that airline is. They're a member of a joint venture right now, which, according to our numbers, out of 30 transatlantic markets in 2016, controlled over 35% market share. That's those three major members: Air Canada, Lufthansa, and United. This is in and out of Canada.

In several of those markets, that figure exceeded 40%, and in two of them over 80%, and one 90%, Switzerland. These are extraordinary market shares, and as such, when you take that reality, and all of a sudden you propose to curtail the ability of the commissioner of competition to look at the ultimate consumer interests here, how this is being deployed, and whether or not it may not be in the long-term interests of the Canadian consumer, that's why we're ringing the bell here and we're saying hold on. Yes, the minister has a role to play. Yes, there are public interest considerations that must be looked at: job creation, connectivity, and trade and commerce. This is all good, and I think our colleagues from WestJet talked about connectivity yesterday.

However, it's not at any cost. What has happened here is that the pendulum, as we said in our opening remarks, has swung too much towards the ability of the minister, in terms of a politicized process, to make this decision without necessarily having a meaningful input on the part of the competition commissioner, and a transparent input at that.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We go on to Mr. Sikand.

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

Thank you, Madam Chair.

My question is going to be directed towards Air Transat.

I was on a flight once from California that had to declare an emergency landing in Arizona because the air conditioning stopped working. It got so hot in there that the pilots couldn't operate the plane anymore. I can attest to how unbearable that situation is.

When I hear of passengers stuck on a plane for over six hours, I can tell you unequivocally that it's not acceptable, especially if they have to call 911 to get water. This isn't a forum to do an investigation or talk about tariffs, so I'm going to just ask you the same question I asked the other air carriers, and that's whether you understand why passengers are frustrated with the level of service they sometimes receive from your airline and why they may feel powerless or lacking rights?

[George Petsikas]

Thank you, Mr. Sikand, for that question.

First and foremost, we'll state the obvious. This was an extremely unfortunate incident. We obviously regretted what happened there. We are a proud airline with 30 years of service to Canada and Canadians. We have won numerous international awards for our service. This is not the way we wanted things to turn out. We have apologized to our passengers. We are working actively and transparently with the CTA public inquiry into this matter. As you know, they held public hearings a few weeks ago, and we told our version of events there. I don't want to repeat that right now because, obviously, it's all on the record, and I don't think it adds anything more to the discussion here.

What I can say is this. If we are to look at anything in terms of a silver lining from this awful situation that took place, it's that it's a cautionary tale. You heard, I believe, our colleagues at Air Canada and WestJet yesterday talk about a holistic, system-wide approach to ensuring that these sorts of things are avoided in the future.

One thing that you have to understand it this. Just putting out an obligation, a penalty, or a fine and saying that, if you don't disembark your passengers after certain hours, you're going to pay this amount of money, would not have helped those passengers that evening, I can assure you that, because we don't need a financial incentive or threat to do what we're doing. Our crews want to get those people where they're going as quickly and as safely as possible.

What happened here was a system that broke down in terms of communications in terms of central coordination. When an airplane is at 35,000 feet going 600 miles an hour, the captain and his crew are basically in control of the situation, with air traffic control, of course. Once that airplane full of people lands on a piece of pavement at an airport, it's a whole different ecosphere. Now we're talking about all sorts of intermediaries and service providers running all over the place. Usually that works well in normal circumstances. I call it the symphony when the plane pulls up to the gate and the trucks come in, the fuellers and the baggage handlers. But when things go wrong, like they did in Toronto, and the whole thing is in complete meltdown, then we need a plan. We need somebody to conduct that symphony right now. We respectfully suggest that it should be the airport.

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

I'm going to just jump in with having heard you say that you need a plan, because I'm short on time.

I can recognize that's not the norm. I used to take Air Transat to England when I was studying there, all the time.

Because of situations like that, we have introduced amendments in Bill C-49. I'd like to know how Air Transat is going to move with regard to the implementation of Bill C-49.

[George Petsikas]

We're going to work with you. We're going to work with the CTA in the regulatory process. We will abide by what the ultimate verdict is in terms of the regulation.

The devil is in the details, if you don't mind that expression. Clearly, we're working with enabling legislation here. As long as the high-level principles are agreed to, we'll work with the CTA to come up with a balanced framework that improves the customer experience.

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

Okay.

I think I'm going to give you an opportunity to discuss joint ventures. Could you reiterate some of your remarks that you mentioned?

[George Petsikas]

I was with a bunch of American lawyers this morning at the American Bar Association's air and space law forum in Montreal before I drove here. They had a panel on competition law, and aviation and concentration, and their market in the U.S.

It is absolutely a given that if anybody asks for immunity from the application of antitrust laws in the U.S., airline joint ventures—as they've done there—at a minimum, the government has to ensure that they have a comprehensive open skies policy to make sure that the joint venture is being disciplined, if you will, through market forces, competition, and thus the consumer is provided another level of protection.

That's not necessarily the case here in Canada. Canada has some great open agreements with many countries, but we also have restricted agreements with many network competitors that can compete with the JV here in Canada; that is, Atlantic plus, plus.

If you get immunity from competition law, and at the same time you get protection from vigorous competition that's supposed to protect the consumer, well, you just had your cake and your chocolate chip cookies and your ice cream, and you got to eat it. We're suggesting that's not what public policy should be about.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll move on to Monsieur Aubin.

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

Thank you, Madam Chair.

Welcome to you all, and thank you for joining us.

My first questions also go to the officials from Air Transat. Perhaps they had not finished their answer. My question is along the same lines.

In the United States, there is an immunization process for certain companies. I do not know whether Bill C-49 mentions harmonization, but perhaps you could list for us, in as clear and simple language as possible, what are the points of convergence and divergence from the immunization process that Bill C-49 is trying to establish.

[Bernard Bussières]

Thank you, sir.

My answer will be quite practical.

Just now, we said that when joint ventures work together to share routes and establish prices, it's a de facto merger. According to the Competition Act and the Canada Transportation Act, it is currently a merger. The current legislation has a process on mergers.

We have attached to our brief an opinion from a former commissioner of the Competition Bureau, Konrad von Finckenstein, who is very well known and respected. He took the time to analyze the proposed provisions on mergers. If joint ventures were subject to those provisions, the concerns would be addressed. The process would then be transparent. Rationales could be submitted and a report could be prepared. So everyone would be able to comment. It would allow companies like ours, or anyone else, such as consumers, to have their say so that any negative consequences for them could be determined.

That is the aspect we are trying to highlight. We are asking you to make some amendments, which basically already appear in existing legislation.

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

Thank you. It is much clearer already. We understand each other better now.

Something that is very clear in the mind of every customer and every airline passenger is the idea of competition. Perhaps we all have a slightly different definition of competition, but we know full well that, basically, it should be good for our wallets.

As a passenger on your airline, or on any other airline, why should I be worried about the current measures?

[George Petsikas]

As I mentioned just now, in Canada, we are in a situation with one major player with major market shares, I might even call them market strongholds, that may be considerably supported by the proposals in the bill, were the Minister of Transport to agree to immunize that player against the enforcement of the Competition Act. As a result, we would end up with a dominant player that could potentially exercise undue influence on the prices in the market, not at all what a competitive market is supposed to be. Transat is interested in a competitive market. Transat competes with the company we are talking about, Air Canada and its partners in joint ventures.

You may say that it is in my interest to be negative about what those companies want to do, and about the expansion of the network, but that is not the case at all. We are interested in doing what we have been doing for 30 years, that is, to provide consumers with a service at an attractive price and a choice of travel destinations. For us to do so, the market has to be structured to be competitive.

This is a process of giving a player who is already dominant the ability to strengthen that dominance and therefore to shut out competitors like Transat and prevent them from offering consumers better prices and better choices. That is a goal that everyone wants to reach. But what is happening here is a threat to that goal.

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

Thank you.

Now I would like to talk to the CAA representative.

When I first saw your association's name on the witness list, I thought about my CAA card. I was wondering what the connection was between your association and our study, until I remembered that you are one of the biggest travel agents.

You said that Bill C-49 could be an obstacle for the air passenger bill of rights if there were not an efficient transition from the principles in the bill to specific regulations. We will see what happens in the coming months.

If I am not mistaken, you also said that some things are missing in the bill of rights or in the focus it is being given. As I see it, when we analyze a bill, it is just as important to analyze what may have been forgotten as what it contains. Could you tell me what is missing in these major principles that will form the basis of the future bill of rights?

[Jeff Walker]

To us, the key piece missing from the bill is the implementation measures that will be provided for people in various circumstances when they run into a problem with an airline. We're not necessarily convinced that those pieces have to be put into the bill. We want to make sure, though, that the Canadian Transportation Authority has enough, if you will, licence or latitude to put appropriate measures in place and to adjust them over time.

Concerning some of the points made down the table here, some provisions that could be put in place might end up being too onerous or might not work properly. Any of us at this table understand that if you try to change legislation because one small line item about baggage handling is not properly written, you could be looking at 10 years, whereas if you give the CTA the licence to make necessary adjustments over time—with ministerial oversight, obviously—we're going to be much more able to put a system in place that is consistent for everyone and as adjustable as we need it to be over time to make it right.

That's what's missing, but I'm not necessarily suggesting making a change, other than to make it such that the CTA has the right.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Walker.

We go on to Mr. Hardie.

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

Thank you, Madam Chair.

Mr. Walker, you may be aware of the situation with the Thivakaran family from Toronto. They were the ones who showed up at an airport, were denied entry with their family even though there was space on the plane, were told to come back the following day, and then they were charged again for tickets because they had booked through a travel agency instead of directly with the airline. This to me is a symptom of the old “point in the other direction”.

May we have your comments on this?