Transport Committee on Dec. 8th, 2020

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Mr. Streiner, the chair of the CTA, appeared at our committee. I know that you watched his testimony. I asked him a question about the air transportation regulations and his interpretation of their implications for refunds in situations outside the airlines' control, particularly section 122 of the regulations, which states that “Every tariff shall contain...the terms and conditions of carriage, clearly stating the air carrier's policy in respect of at least the following matters". Then it lists “refunds for services purchased but not used”.

I know that you are familiar with this passage, but it clearly indicates that it must be either within the air carrier's control or otherwise.

His response was essentially that these regulations state that the tariff shall address those issues, but that refunds are not necessarily required. I assume that you have a different interpretation. Could you share why you disagree with him?

[Dr. Gábor Lukács]

Mr. Chair, the regulations have to be read as a whole. Section 122 of the air transportation regulations is not a stand-alone provision. It has to be read in conjunction with section 111, which also requires terms and conditions to be just and reasonable.

In the past 60 years, the Canadian Transportation Agency confirmed correctly that those provisions that require provisions about refunds in the tariff have to be read in conjunction with the requirements that those provisions be reasonable. “Reasonable” here means requiring airlines to, at the very least, refund passengers for flights that were cancelled, regardless of the reason for the cancellation. To have a provision about refunds for any reason, but then those provisions say, “no refunds”, would defeat the purpose of the law. It would not make any sense.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Lukács. Thank you, Mr. Chair.

We also heard from Mr. Streiner about the fact that, in his opinion, the gaps in the air passenger protection regulations that the pandemic has exposed were not anticipated in advance and could not have been foreseen. We've heard similar testimony from other witnesses.

Do you think this is a fair assessment?

[Dr. Gábor Lukács]

It is not a fair assessment at all.

First of all, when it comes to the issue of refunds, there are no gaps. The APPR is indeed poorly drafted, but it is not a complete code. For example, the APPR does not say that passengers are entitled to a seat in the cabin, but the APPR's silence does not mean the airline can transport passengers in the cargo bay. The situation is similar with respect to refunds.

With respect to this specific issue, it is simply not well drafted. The fundamental right of passengers to a refund should have been incorporated in the APPR for simple clarity purposes, which would have spared the public this issue. We cautioned the agency about it in our 52-page report. We cautioned the agency about it during our consultation. Unfortunately, the agency did not listen. The government did not listen.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Mr. Lukács, when Minister Garneau appeared before the committee, he expressed concerns about the financial difficulties faced by the major airlines. His concern, specifically—and we've heard similar concerns from Mr. El-Khoury—was that if the government were to force the airlines to provide the refunds, certain airlines that are facing financial difficulties might go bankrupt.

Is this really a fair assessment of the airlines' ability to pay these refunds? What have you learned in your research?

[Dr. Gábor Lukács]

Based on the publicly available information, that is not a fair assessment. With respect to Air Canada, which has public financial data, that would not be true. The best evidence of the serious doubts about the veracity of those statements is that none of the airlines have filed for any kind of bankruptcy protection or insolvency, or any kind of proceeding that would signal that they are in financial distress.

Even if they were in financial distress, it does not mean that they can pick and choose which creditors they are paying first. Passengers' money and airfares paid in advance is often money held in trust. Quite possibly those would be secured creditors, or other rules may apply to their rights that they may precede other creditors.

That is what bankruptcy courts are for—to make sure that those decisions are made fairly. If there is a risk of bankruptcy, it is not for the government to decide which creditors, whether it is passengers or banks, will be first in the line.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Lukács and Mr. Bachrach.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

[The Chair, Liberal, Vance Badawey]

You're welcome.

Now we're going to the second round. The second round will have five minutes each for Mr. Kram from the Conservatives and Mr. Rogers from the Liberals, and two and a half minutes each for Mr. Barsalou-Duval of the Bloc and Mr. Bachrach of the NDP.

Mr. Kram, you have the floor for five minutes.

[Michael Kram, Conservative, Regina—Wascana, SK]

Thank you very much, Mr. Chair.

My questions are for Mr. Sparling of Air North. I will confess that I've never been to Yukon Territory, but I hear it's beautiful. It's definitely on my bucket list of places to visit some day. I suspect that there may be other members of the committee who have never been to that region of the country either.

First of all, I was wondering if you could give the committee a better idea of what it means to the people of Yukon Territory to have their own regional airline to service their communities and meet their needs.

[Joseph Sparling]

Well, in terms of airline economics, you've likely all heard people describing airlines as often running in a hub and spoke system. In a typical hub and spoke system, the cash tends to flow from the spoke to the hub.

In the case of Yukon, by making Yukon our hub, when Yukoners buy their travel locally their travel dollars stay in Yukon to support the local economy, and when visitors come to Yukon, their travel dollars flow into Yukon to support the local economy.

I don't know how familiar you are with territorial economics, but it costs about a billion and a half dollars a year to run the territory. We only generate $200 million to $300 million ourselves. The rest comes courtesy of southern taxpayers.

There's a lot of interest in making territories—our territory in particular—more self-sufficient, and by creating our own airline in Yukon, I think we've taken a big step in that direction. We have indigenous ownership with a 49% stake by the Vuntut Gwitchin First Nation.

One of the clauses in all of the Yukon first nation land claims settlements is a commitment by both the federal and the territorial governments to take steps to help first nations participate in the territorial economy. I think the investment in Air North north by the Vuntut Gwitchin was one of the first such investments made by a Yukon first nation. I think it's generally regarded as perhaps a great template of just how first nations can participate in the territorial economy.

[Michael Kram, Conservative, Regina—Wascana, SK]

Very good.

Last month, various news outlets reported that Nav Canada was planning to shut down air traffic control towers at several airports across the country, including at the Erik Nielsen Whitehorse International Airport. As a major tenant of that airport, can you explain to the committee how the loss of the air traffic control tower at the airport in Whitehorse would affect your operations both at present and as air traffic increases as we come out of the pandemic?

[Joseph Sparling]

Firstly, as an industry, we sympathize with Nav Canada's problems. They're just like the rest of us. They're trying to keep their expenses from getting too far ahead of their revenues. Nav Canada has proposed a 30% rate increase to airlines. As an industry, we've come back to them and said they should look at cutting costs before they look at increasing rates.

As a Whitehorse-based operator, we have to be a little careful about criticizing every area in which they choose to cut costs. Having said that, there are some peculiarities with Whitehorse. We are a non-radar environment. That's probably the most significant differentiator between our control tower and other control towers. I think that if we were in a radar environment, if we had low-level radar, the safety considerations would be far less.

We've reached out. Nav Canada hasn't made a plan to formally close the tower. It's something they're considering. We've come back to them and are saying, “Look, without radar, there are some safety considerations.” We've asked if they could not look at perhaps reducing hours, reducing staffing or doing something else to save money instead.

[Michael Kram, Conservative, Regina—Wascana, SK]

Mr. Sparling, you were quoted in a news article about the closure of the air traffic control tower in Whitehorse. The November 26 edition of the Whitehorse Star reported that you had participated in some of the discussions with Nav Canada. Can you tell us if you've had any further discussions with Nav Canada on this topic since November 26?

[Joseph Sparling]

They reached out to us for feedback. We provided them with feedback. Whether it was before or after November 26, I can't remember.

[The Chair, Liberal, Vance Badawey]

It's your question, Mr. Kram.

[Michael Kram, Conservative, Regina—Wascana, SK]

Yes. I was wondering if you could just speak a little bit more about the ownership structure of your airport and how it's particularly beneficial to making the north and Yukon Territory self-sufficient.

[Joseph Sparling]

I'm sorry. Are you talking about the airport or the airline?

[Michael Kram, Conservative, Regina—Wascana, SK]

The airline.

[Joseph Sparling]

Employment.... With 1,500 local Yukon shareholders, that's between 1 in 15 and 1 in 20 Yukoners who has an equity stake in the airline. Our shareholders are our customers. When we hold our annual general meeting in our hangar, we get better than 10% of our shareholders showing up. I don't think General Motors does that well. Our shareholders are a very engaged and interested group of people.

The question of refunds came up. I'm surprised nobody's asked me. We live in a small community. We don't sell the middle seat on our flights, and we do give refunds to passengers who need them, but in our market, people are going to travel. Only about 15% of our cancellations have resulted in refund requests. We are very lucky in that most people are happy to accept vouchers or credit for future travel.

The big guys, the international carriers, have been hammered by a drop in demand. I sympathize with them. They're trying to stay afloat. We have it relatively easier here in that northerners have to travel. People travel back and forth for medical reasons. There's good cargo flow on our regional routes. Old Crow doesn't have a road, so all of the groceries, building materials, consumer goods, absolutely everything that goes into that community has to be flown in. There is, with or without a pandemic, a somewhat stable level of demand for air service. It's just not what it was this time last year.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Sparling. Thank you, Mr. Kram.

Next, for the Liberals, we have Mr. Rogers. Churence, the floor is yours for five minutes.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Thanks, Mr. Chair.

First of all, let me welcome all of the different groups today. The witnesses and their presentations are very interesting. I'm sure we've heard from many groups, and individuals especially, who are lobbying for cash refunds of course. Rightly or wrongly, the airlines argue that such activities, as were referenced earlier, could cause them to fail—which would be something we certainly wouldn't want—and that they're not legally obligated to offer refunds for some of the tickets they've sold without insurance and that kind of thing.

I want to ask Mr. Jack and Mr. Lawford to comment maybe. In a situation or a scenario where the courts confirm that given the circumstances, the airlines did in fact have the right to offer vouchers in lieu of cash reimbursements, what would you advocate for at that point? For instance, should vouchers be valid for longer than two years? I'd like for Mr. Jack, Mr. Lawford, or both, to comment on that, please.

[Ian Jack]

Sure. If I were a politician, I might say that I don't like to comment on hypotheticals, Mr. Chair, but I will go ahead and answer the question.

Under the circumstances, we have a government that has publicly stated that it will get refunds for people, and also that there is financial assistance on the table for the industry. In our case at least, our first thought is not about the outcome of a court case; it's about the outcome of a negotiation that is said to be under way, and that we hope will finish as soon as possible. As we noted in our remarks, some people have been out-of-pocket now for six, seven or eight months already, multiple thousands of dollars.

I would say that other jurisdictions have got on with this and got it done. Those would be the U.S., the EU—several European jurisdictions. Their governments have gotten together with their carriers and ensured that passengers have, at least in some circumstances and far more broadly than in Canada, gotten their money back. It is more than possible to do this. We just think that both the government and the carriers need to get on with it.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

Mr. Lawford, yes, if you could, please respond.

[John Lawford]

If I may, Mr. Chair.