Transport Committee on Feb. 2nd, 2021

[Yani Gagnon]

Thank you for the question. I will yield the floor to my colleague, Mr. Roberts, on this matter.

[Julian Roberts, President and Chief Executive Officer, Pascan inc.]

It will all depend on the demographic of regional aviation and operators and where we're flying in Canada. If you take Pascan, for example, we fly in eastern Canada and Quebec. We fly in 10 different regions in Quebec and Labrador. Usually, at any given time, we're about six regional operators that operate in Quebec. It's highly competitive. People don't seem to think it's really competitive here, but it really is. The fact that a province or a territory could go down to just one competitor means there's definitely a way to make your case for survival.

Just to give you an example, Air Canada pulled out of certain regions in Quebec this summer. We're a small company. We're an operator with 150 employees. We love this business. We've built it from the ground up and are really passionate about what we do. When we saw Air Canada pull out, even in a pandemic, we were able to turn a profit. For us, it was amazing. Is the idea crazy? I don't think it's crazy at all. It's totally possible, but it depends....

In British Columbia, how are Pacific Coastal or Central Mountain Air going to feel? Then, in Manitoba, you have Transwest, West Wind and Calm Air. You have Summit here in the east, or you have Pascan, Air Liaison, Provincial Airlines and Air Canada Jazz, and the list just goes on and on.

Today, we're all fighting for our lives. Honestly, it is terrible, and it's really hard for me to be on this call today, I'll tell you, from what I'm hearing. All of my employees are cut. Nobody has had a raise. Nobody has had a bonus. Nobody has had anything. We've been fighting this thing out. We're shipping essential goods to regions: medicine, antibiotics, food. I'm just losing my.... I'm sorry, guys. I get a bit pumped up here.

It's really difficult. We're in this position today. None of us expected it. Yani and I went out and bought this company. We're totally passionate. We believe in aviation. We thought we could help regional communities in the province of Quebec and in eastern Canada, and we have. We've been fortunate that the Quebec government is there. They've labelled us an essential operator, so we have had some help from the provincial government in Quebec. Thank God for that. If it wasn't for that, all the big carriers in Quebec, I think, would have been pretty much over and done with today.

If you have the opportunity to be alone, hallelujah. Lucky you, because you'll definitely make a go at it. If you're in a competitive market like we are and like in some other places.... Mr. Deluce obviously has lots of competition. It's not easy for a company like Porter. He came up as an underdog as well.

I don't know if I answered your question.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Yes, and I think you have also pointed out the complexity of differences across the country. Obviously we have a huge country and there are so many factors to think about. We understand your frustration and the anxiety of all the employees because of everything we've heard.

Trying to be a little more positive, Ms. Marshall, obviously you're down to a bare-bones existence at the GTAA. Is there some opportunity to rethink business models at the airport? As you recover, and we know you will, are there some opportunities to rethink how you conduct your business at the airport?

[Hillary Marshall]

We have a new CEO at Toronto Pearson. Some of you have had the opportunity to meet with Deborah Flint. She came to us from LAX. Deborah never stops thinking about how we can pivot and innovate towards a better future, and how our industry needs to change.

One thing she wanted to look at and understand better as someone coming into the Canadian airport sector was what some of the underlying frameworks are for our governance model, including some aspects of ground leases at airports. One of the challenges, and I'm sure Ian will speak to this, is the need to return airports such as Pearson back to the government with no debt and in world-class condition. That's a challenge.

Secondly, we have a requirement to pay 12% of our gross revenues to the government in the form of ground rent each year. If I look back to 2019, that was about $170 million. That creates some challenges in terms of our flexibility to be as innovative as we want in new revenue generation opportunities, but that hasn't stopped us from trying to do that.

I'll turn it over to Ian to give you some perspective on how his team, the commercial team and the strategy team are thinking about new approaches to commercial opportunities.

[The Chair, Liberal, Vance Badawey]

Mr. Clarke, you're going to have to take some time from a future question to answer that.

[Hillary Marshall]

Come on....

[The Chair, Liberal, Vance Badawey]

Ms. Marshall, I'm sorry. Ms. Jaczek's time is up.

We'll now move on to Mr. Barsalou-Duval.

Mr. Barsalou-Duval, you have the floor for two and a half minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you very much, Mr. Chair.

My question is for Mr. Gagnon, from Pascan.

Earlier, your colleague, Mr. Roberts, pointed out that if Pascan and other regional air carriers of Quebec are still alive today, it is thanks to assistance from the Government of Quebec. The federal government's inaction and lack of assistance have often been bemoaned, but the Government of Quebec has helped that sector.

The federal government plans to provide assistance to major air carriers, with two conditions attached: plane ticket refunds, which are a good thing, and the return of major air carriers to the regions.

How does a regional carrier like Pascan view the fact that, thanks to federal money, Air Canada will once again start covering connections you are already providing? What could be the impact of that return to regional service? If I have understood correctly, Air Canada does not serve all the locations you cover.

[Yani Gagnon]

Thank you for your question.

Subsidizing Air Canada or other major air carriers, which will compete on regional markets, makes zero sense. Efforts should instead focus on forcing major air carriers to refund plane tickets purchased before the pandemic. The government is holding out a carrot to them by giving them money so that they would once again serve the regions, even though Pascan and regional air carriers across Canada have taken over. We can provide that service.

The only reason major air carriers like Air Canada are investing as massively in regional transportation is that they will pick up 30%, 35% or even 40% of the regional volume to provide international or interprovincial connections. We are already present at large international airports, including the Quebec City airport. We have the necessary authorizations to provide regular flights at the Montreal international airport. We are not currently doing that owing to a lack of demand and volume, but absolutely nothing prevents us from doing it and offering connections to passengers.

If the federal government continues to insist on subsidizing large air carriers for regional service, there will be serious repercussions for small regional carriers like Pascan.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Gagnon.

Thank you, Mr. Barsalou-Duval.

We'll now move on to Mr. Bachrach.

Mr. Bachrach, you have the floor for two and a half minutes.

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

Thank you very much, Mr. Chair.

Thank you to all of our witnesses for their presentations today.

My first question is for Mr. Bohn, picking up where some of my colleagues left off.

The pandemic has obviously resulted in a huge drop in revenue for Nav Canada. We've talked a little bit about your conversations with the government, but I don't think that we've heard the magnitude of financial assistance that would allow Nav Canada to avoid the cuts that are being looked at currently.

We have heard from the union that represents workers at Nav Canada on this topic, but could you speak about the kind of financial support that would be required to avoid these cuts that are being proposed?

[Ray Bohn]

First off, I want to briefly mention that in terms of the level-of-service initiatives that we're were currently looking at, we would continue to look at those level-of-service initiatives regardless of government support.

This is part of our normal process to look at what is appropriate in the context. We've looked at the traffic levels prior to the pandemic and at what they will be through the recovery and beyond, and we want to establish the appropriate levels of service. Therefore, we would continue, irrespective of any financial assistance from the government, with respect to those aeronautical studies.

I also will point out, though, in answer to your question, that it really depends on how long the public health crisis continues. However, as I mentioned in my opening remarks, between our last fiscal year and our current fiscal year, we are about $650 million short. That doesn't include what we anticipate will be a further erosion in the short term of air travel, and it certainly pushes out the recovery beyond when we would have anticipated that it would be.

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

Thanks, Mr. Bohn.

My other question is around the criteria that Nav Canada has used to select the towers that are currently under review, like Gander and Windsor. These represent significantly busy and strategically important airspaces.

Could you speak to the criteria by which Nav Canada created the list of locations to be reviewed?

[Ray Bohn]

Our policy on the delivery of air navigation services provides us with guidance on what services are typically provided based on traffic levels. We continuously monitor these traffic levels and work with regional management to determine whether or not a study should be undertaken. Predominantly, as I said, it's based on traffic levels.

I want to point out again that these traffic levels are not COVID traffic levels, but rather what we were seeing leading into the pandemic.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Bohn.

Thank you, Mr. Bachrach.

We're now going to move on to Mr. Soroka.

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

[Gerald Soroka, Conservative, Yellowhead, AB]

Thank you, Mr. Chair, and thank you to all the witnesses for coming today.

My first question is for Ms. Anderton and Mr. Petrou.

Your business is closely tied to the success of the aviation industry as a whole. For months now, the Liberals have promised a plan to help the aviation sector and still nothing has come forward. How confident are you that their plan will help the industry get back on track?

[Samantha Anderton]

I'm going to let my colleague, Mr. Petrou, take over that question.

[Andrew Petrou]

At this point we are focusing our efforts with the current government on our research initiatives and our immediate re-skilling. We're pushing for that funding to come forward and to be activated at a quick rate.

We are hoping that it is successful. We are getting uptake, but time will tell how successful that will be.

[Gerald Soroka, Conservative, Yellowhead, AB]

Mr. Deluce, that's quite an interesting concept you guys have had for the last number of months—being completely shut down. Are you concerned about having staff coming back or retaining staff?

[Robert Deluce]

That's always a concern with any company that is in an extended period of suspension. We have been focusing a lot of attention on our team members, their health and well-being, and their suitability for coming back and resuming service at the appropriate time. That's really of utmost importance to us.

We think we have a fairly supportive group. They have been very instrumental in how successful we have been to date. We will depend on them greatly once we're in a position to resume service. I think we're doing all the right things, but we are somewhat constrained in our ability to do so because our revenue stream today is basically near zero. The expense levels, obviously, continue even though we have scaled them back somewhat.

[Gerald Soroka, Conservative, Yellowhead, AB]

Mr. Deluce, because of what you've been doing while the main airlines have still been competing—and in a highly competitive market—how do you think you're going to be able to compete with the big companies coming out of this pandemic?

[Robert Deluce]

We competed with them prior to the pandemic against fairly significant odds. We made the decision back in March to suspend service, to take care of our team members and to do the best we could to support the health initiatives that were launched to fight the virus.

In the meantime, we've remained ready in terms of aircraft being refurbished and having a certain number of team members ready. We've painted airplanes. We revised and refined many of our things. We've used the period as constructively as we could to make sure that when the time was right we could launch forward on good solid footing with the intention of being as fully back in service as possible in the shortest period of time.

[Gerald Soroka, Conservative, Yellowhead, AB]

Mr. Chair, do I still have some time?

[The Chair, Liberal, Vance Badawey]

You have one minute.

[Gerald Soroka, Conservative, Yellowhead, AB]

On your freight, Mr. Rodgers, you said that about half your freight isn't coming into the country anymore and that prices have gone up substantially. Because of the high cost, how much longer do you think that's sustainable? Or is it that people need it and they're going to just keep paying for it?