Transport Committee on Dec. 3rd, 2020

[The Chair, Liberal, Vance Badawey]

I call this meeting to order.

Welcome to meeting nine of the House Standing Committee on Transport, Infrastructure and Communities. I'm going to forgo the usual speech, as I'm sure many of you are well aware of what to do and what not to do in these new virtual meetings.

Pursuant to Standing Order 108(2), the committee is meeting today to continue its study on the impact of COVID-19 on the aviation sector.

I now welcome our witnesses and introduce, from the Air Transport Association of Canada—

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Mr. Chair, on a point of order, my understanding is that we have the potential to have the resources until 6 p.m. Eastern Standard Time. Given that the witnesses have been patiently waiting and have put aside their afternoons to be here, I ask that we please extend for the maximum amount of time possible, until 6 p.m. Eastern Standard Time.

Perhaps you can personally confirm that this is the latest we can go. Second, can you please confirm that this is possible?

Thank you, Mr. Chair.

[The Chair, Liberal, Vance Badawey]

Thank you, Ms. Kusie.

Yes, it is. I can confirm that it is the latest we can go. My intent was to go six o'clock, but now that you've brought it up, I'll ask the committee.

Is everybody okay with that?

[Some hon. members]

Agreed.

[The Chair, Liberal, Vance Badawey]

That's great. Thank you, Ms. Kusie.

Moving on, I'm going to introduce the witnesses. We have, from the Air Transport Association of Canada, John McKenna, the president and CEO; from the Canadian Airports Council, Daniel-Robert Gooch, president; from the Coopérative de transport régional du Québec, Serge Larivière, director general; from the National Airlines Council of Canada, Mike McNaney, president and CEO; and from the Regional Community Airports of Canada, Brian Grant, the chair, and Todd Tripp, vice-chair.

With that, gentlemen, I'm not sure who wants to start us off, but I'll throw it at you and recognize the first person who puts up a hand. That person will have the floor.

Mr. McKenna, do you want to start? The floor is yours.

[John McKenna, President and Chief Executive Officer, Air Transport Association of Canada]

Good afternoon.

The Air Transport Association of Canada represents this country's commercial aviation and has done so since 1934. We have approximately 180 members engaged in all levels of commercial aviation, operating in every region of Canada. We welcome this opportunity to speak to this committee on the impact of COVID-19 on our industry.

The damage is easy to assess. Operations are at levels 80% to 90% lower than one year ago. Some operators have suspended operations altogether. Tens of thousands of jobs have been lost. There's hardly enough revenue to meet our short-term obligations. Airports are raising fees to compensate for lost revenue. Not allowed by law to incur deficits, Nav Canada has implemented a fee increase of 29.5% as of last September 1.

All these increases, resulting from an absence of government assistance, dangerously limit our industry's ability to survive during the pandemic and seriously undermine any future recovery strategy.

The challenge facing us is to come up with solutions to limit the irreversible damage to our national aviation transportation system. While the Prime Minister recognizes that our industry is one of the hardest hit, only limited support has come so far from the government.

The financial update presented by the Minister of Finance on November 30 offered nothing in the way of financial relief to regional air carriers, and little more than repeating promises of a process regarding financial assistance for the larger airlines.

We have written over half a dozen letters since March to the government, offering our full cooperation in finding comprehensive and viable solutions. We have yet to receive a single acknowledgment from the government.

On November 8, the Ministry of Transport issued a statement to the effect that “The air sector cannot respond to these challenges on its own, given the unprecedented impacts on its operations.” The anticipated discussions would begin that week to establish a process with airlines regarding financial assistance. Three weeks later, our members and many other key stakeholders are still waiting for this process to begin.

Therefore, the question that the aviation industry has been asking for so long is, what is the government waiting for?

We fear two things from an airline perspective. The first is that the government is simply waiting to see which air carriers survive and perhaps then step in to help re-establish lost services, but at a great cost. Our other fear is that the government will choose to help only the two largest carriers. That would demonstrate a profound lack of understanding of Canada's air transportation network and quickly lead to a significant and very long-lasting disruption of domestic scheduled air services. Very many regions depend almost entirely on regional carriers as socio-economic lifelines with the rest of Canada.

The support of regional air transport in the North was most welcome. However, much more must be done if regional air transport in Canada is to survive, as there are many other remote parts of the country that rely on air transport as an essential service.

To limit the sweeping damage to the air industry, the Government of Canada must set up a financial aid program immediately, offering substantial, equitable and easily accessible funds. It should dedicate specific and adequate funding support to the regional airlines and provide Nav Canada with commensurate funding that the recent fee increases are designed to provide. It should champion rapid COVID-19 testing programs and contact tracing for international arrivals, and fully utilize the available science in reducing quarantine periods at Canada's major airports as quickly as possible.

The government should also recognize that the December 12 implementation deadline for the new pilot flight and duty time regulations is totally unrealistic. Canadian carriers are already fighting for survival and operating within unprecedented travel restrictions, and they cannot achieve the necessary pilot training and software development and implementation. Most certainly, they are not able to bear the extra cost at this crucial time. A deferral to post-pandemic times will not jeopardize safety in any way, and there would not be any cost to the government or taxpayer.

The government should order the Canadian Transportation Agency to work with carriers, rather than enforcing new APPR regulations that leave carriers with little choice other than to cancel flights in the face of the agency's totally disconnected appreciation of the reality our industry is facing in complying with the constantly changing government health restrictions on air travel.

Our plea to the government is to support aviation when it most needs help, work with industry, increase interdepartmental co-operation efficiency, assume a leadership role in the coordination with the provinces in finding Canada-wide solutions and, finally, lift travel restrictions.

Service cuts have already been announced all over Canada, and more are to come unless something is done soon.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. McKenna. We will now go to Mr. Gooch.

Mr. Gooch, the floor is yours.

[Daniel-Robert Gooch, President, Canadian Airports Council]

Mr. Chair and members of the committee, thank you for the opportunity to speak with you today, and for the study.

I'm Daniel Gooch. I'm president of the Canadian Airports Council

We have 54 members that represent more than 100 airports around the country, including all of the privately operated national airports system airports and many regional airports.

We appreciate the opportunity to address you so soon after the fall economic statement. While we are still waiting on program details for much of it, our initial assessment is that airport measures are a positive first step, but they are insufficient to avoid serious challenges in the new year, such as additional rate and fee increases that nobody wants to see.

Along with our sector partners, airports moved quickly when the pandemic began, to invest in increased cleaning and social distancing and to mandate masks indoors before being asked to. They had implemented nearly all global ICAO standards before they were even released, all while watching the business collapse.

Since April, passenger traffic in Canada has dropped about 90%. Today the business is about 10-15% of normal. This has placed a big burden on our workers. It's thanks to them that our airports remain safe and healthy, but they are doing this work under very difficult circumstances. The air sector has laid off about half of its employees.

Most of Canada's airports are not subsidized by government. They rely on passenger revenues. All of the services they provide, including emergency services, are supported by passenger revenue, which has vanished. During an unprecedented crisis like this, the system simply cannot work.

As travel restrictions and quarantines drag on into the winter, the outlook is bleak. Airports expect to incur more than $4.5 billion in lost revenue, and debt levels will increase by $2.8 billion by the end of 2021. With COVID-19 on the rise and full global vaccination some time away—maybe years away—this will not be solved soon. Critical decisions must be made now if Canada's travel and tourism sector is to start recovery next summer, as we expect it will in other northern hemisphere countries. Summer 2021 simply cannot look like summer 2020.

This is critical for regional airports and their communities. With route cancellations already announced by both Air Canada and WestJet, and potentially more to come, regional connectivity is under threat. Airports are part of a system. Airlines, Nav Canada and other partners are hurting and need federal attention if our system is to recover.

This is why we were hoping to see news in the FES, the federal economic statement, on rapid antigen screening at airports. This is an essential piece that needs to be implemented for those who are travelling today and to return consumer confidence in the travel process when Canadians are ready to travel again in great numbers.

We were pleased to see the FES announce $500 million to make critical investments in safety, security and transit infrastructure at large airports. While this is a positive move, the money won't go far over six years, given the need and the size of some of these projects.

The FES increased funding to the airports capital assistance program by $93 million a year over two years. It provides important funding for small airports for safety- and security-related investments. It is a positive move, but we do wonder how airports will be able to contribute their part, given they have run down their cash reserves.

It is good to see $206 million for regional air routes, but we have no details, and regional connectivity is essential to the well-being of our communities, so we urgently want to understand more.

On the airport ground rent paid by 22 airports, the CAC has sought multi-year waivers at the eight busiest airports until business has recovered. We recommend that government eliminate rent for the other 14 small airports, as they have never provided more than $15 million in revenue in any year to the federal government. This would make a big difference to those airports when revenue recovers.

The federal government owns the land that these 22 airports sit on, so rent is like a dividend they pay to their sole shareholder. It is a revenue-based charge that is very lucrative for the federal government in good years, providing $419 million in 2019 and $6.5 billion since 1992.

In the FES, the largest four airports, which pay 85% of the rent, were only granted a deferral on 2021 rent, which is to be repaid over 10 years, beginning in 2024. Rent was waived just one more year for 12 mid-sized airports that pay about about 15% of rent, while the eight smallest rent-paying airports were given three more years of rent relief, which represents 0.3% of rent paid in good years.

None of these airports were expecting to pay any rent in 2021, because they won't make enough money to trigger it.

This is helpful, but airports won't receive any cash from this. It means that these airports will be able to stop paying the federal government its dividend for one year longer, but we expect recovery to take as long as five years.

Rent really needs to be waived beyond 2020 as the sector recovers. Then these funds can be used to pay down debt accrued through the pandemic.

I must note that most airports pay no rent, which is why we also asked for interest-free loans or direct operational support. The FES did announce a highly affected sectors credit availability program, HASCAP, but its cap of $1 million is insufficient to help many airports. The very small airports it might be able to help include a lot of municipal airports, which have been excluded from federal COVID programs so far.

[The Chair, Liberal, Vance Badawey]

Mr. Gooch, can you wrap it up?

[Daniel-Robert Gooch]

To conclude, no matter where you live in Canada, the air sector is essential to putting our economy back on track, and airports are a key part of that. We need them to be ready for every journey.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Gooch. That was well done.

We'll now move on to Mr. Larivière. Mr. Larivière, the floor is yours.

[Serge Larivière, Director General, Coopérative de transport régional du Québec]

Good afternoon.

Thank you for the opportunity today to present the Coopérative de transport régional du Québec initiative, TREQ.

There are many major impacts of the COVID-19 crisis on many industries. For sure, today you have been presented with the impacts on the airlines and the airports of our country.

This unprecedented crisis might also be viewed as creating an opportunity to rethink our domestic air transportation systems. As you might know, a large part of the country is poorly served at the regional level. More specifically, the east—Quebec and the Atlantic provinces—doesn't have a normal regional service.

Everyone knows about the high price of tickets, but what's more important to know is the impact of these prices on utilization. IATA and Stats Canada reveal the magnitude of the dysfunction of our regional air transportation on this side of the country. There are five times more passengers per capita flying point to point on regional carriers in Ontario than in Quebec. On the domestic side, just to bring us back to the national level, Quebec is missing 10 million passengers in its airports.

What are we saying? While the rest of the country and the continent are using air transportation for their need of long-distance travel, those of us in the east of Canada are either driving six to 12 hours to get to a meeting or a medical appointment, or worse, we don't travel. This goes to our ability to occupy our territory, develop our economy and our tourism industry, or just to provide quality of life to many remote communities on this side of the country.

Our project mission is to correct this situation for the province of Quebec. We are breaking away from the paradigm by using a collective approach, putting the regions and their communities at the centre of our governance. Our model will combine the drive of the private sector with the nobleness of the public sector. That model is a co-op, the Coopérative de transport régional du Québec. Without going into the detail of what it looks like, our model is similar to that of Porter Airlines in Ontario, and we will be flying 78-seater Q400s starting in June 2021.

Thank you.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Larivière.

We'll now go to Mr. McNaney.

Mr. McNaney, the floor is yours.

[Mike McNaney, President and Chief Executive Officer, National Airlines Council of Canada]

Thank you, Mr. Chair, and I will get this in at four minutes and 45 seconds.

The National Airlines Council of Canada represents Canada's largest air carriers: Air Canada, Air Transat, Jazz Aviation, and WestJet. That represents approximately 90% of domestic capacity and about 60% of international capacity.

In 2019, our members carried over 80 million passengers to communities across the country and the world. They employed over 60,000 Canadians directly, and over the past decade they built a level of connectivity and service regionally, domestically and internationally that supported more than 630,000 jobs in the overall transport, tourism and aerospace economy.

However, as we are all brutally aware, none of these numbers reflect current reality. Today, tens of thousands of employees have lost their jobs, billions in dollars of aircraft are parked, 80% of capacity is shut down and passenger numbers have crumbled to 10% of typical levels, with no line of sight on when things may begin to recover.

However, the path to stabilizing the aviation sector is actually quite clear. It is clear because basically every other country in the world has already started down this path and did so months ago. Canada is indeed an outlier. There have been some measures instituted and others announced this week, but almost one year into the crisis—and my members started to be impacted in January—we are still talking about a process for establishing financial assistance.

Meanwhile, countries around the world have already provided $173 billion U.S. in support to their aviation sectors, precisely because of the critical role aviation must play in their respective economic recoveries. While this support has taken various forms, at its most basic it consists of financial measures to stabilize the industry, promotion of rapid testing within aviation and travel, and taking a science-based approach to quarantine in conjunction with testing.

Since the spring, we've been asking the government to provide low-interest loans and loan guarantees. We have also asked the government to address liquidity challenges within the broader sector, including airports and government service providers such as Nav Canada. As astounding as it may seem, in the midst of this pandemic and its incredible destruction of demand, airlines were hit with a 29.5% tax increase in September for air navigation services as Nav Canada tries to address its own financial shortfall, with the government refusing to provide assistance.

Though our requests for liquidity support have not been addressed, we have not stood still and simply waited for government action. Over the past few months, airports and Air Canada and WestJet have led the development and implementation of testing projects at Toronto Pearson airport, Calgary International Airport and Vancouver International Airport in order to provide government with further data to enable science-based decisions concerning quarantine. As members of the committee heard on Tuesday, federal departments are being fully engaged in these projects, and we are hopeful that the Calgary initiative in particular, given the extensive involvement of the Alberta government, will provide a model for implementation in other provinces.

As we continue our work to drive further action on testing and data-based decision-making and continue to implement the myriad of measures required by Transport Canada to protect passenger and employee health, which again members also heard about on Tuesday, we are very appreciative of the statements made recently by Dr. Tam that the risk of transmission of COVID-19 on aircraft is low.

However, while we try to move Canada down the clear path presented by other governments, the economic situation continues to deteriorate. Canada has now lost approximately 85% of its connectivity, with flights significantly reduced or service eliminated across every region in the country as carriers try to preserve liquidity and some semblance of operation.

My members have spent years and invested billions of dollars building regional and international networks to create the level of connectivity our economy enjoyed at the end of 2019 and the level of connectivity that will be required to ensure our overall economic recovery across every region of Canada, but that investment—and much more importantly, the tens of thousands of direct jobs it entails—is being systematically eroded. In addition, we have now begun to see foreign carriers that have received liquidity support from their governments taking international market share from Canadian operators. This is a direct threat to the future competitiveness of the sector and may roll back years of successful international expansion.

In closing, over the past several weeks we have seen heartfelt demonstrations by aviation workers who have lost their jobs, and appeals by aviation unions for government action. We have also seen the government statement concerning refunds as a condition for financial assistance, as well as statements by ministers that they realize the industry will not be able to move forward without government assistance.

The objective here is not just to have the sector survive; it's to have a competitive, thriving industry that drives jobs and investment and quality of life in every region of the country and in every community, large and small.

The overall path ahead is very difficult, but it is clear. The rest of the world is on it. We need to join them.

Thank you, Mr. Chair.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. McNaney. The was four minutes and 26 seconds. Well done. You beat it by a couple of seconds. Good job.

[Mike McNaney]

Thank you.

[The Chair, Liberal, Vance Badawey]

We're now going to go on to Mr. Grant.

Mr. Grant, the floor is yours.

[Brian Grant, Chair, Regional Community Airports of Canada]

Thank you.

Thank you for the opportunity to speak to the committee regarding the effects of COVID-19 on the aviation sector, and in particular for us today, to address the staggering impact on community and regional airports across our country.

My name is Brian Grant. I am chair of the Regional Community Airports of Canada, and I am joined by Mr. Todd Tripp. We are CEOs of regional airports located in northwestern Alberta and northeastern Ontario. Our organization represents a unique sector of the industry as airports that provide local and regional transportation infrastructure and services in support of rural and remote areas of our vast country, including emergency health services, cargo shipment, forest firefighting, passenger connections between communities and larger links for domestic and transborder international destinations.

Our membership is composed of airports that move 500,000 passengers or less annually. In essence, our airports support the necessary transportation for economic development and acceptable qualities of life for Canadians who deserve it, no matter where they live.

Many Canadians and various levels of government hear of air transportation and think of airlines that move people and goods. In reality, air service includes much more, with airports, cargo and baggage handling, refueling, air navigation and more playing essential roles and providing jobs in the local economies.

The COVID-19 pandemic has inflicted debilitating effects on passenger traffic and business sustainability in all sectors of aviation, particularly on the regional components of the system. Airports are subject to stringent regulations imposed by the federal government, which are necessary for the safe and effective movement of aircraft and passengers. We are faced with limited abilities to reduce our operating costs, while our sole sources of revenue continue to be stifled by COVID outbreaks and restrictions. The vast majority of regional and community airports are experiencing in excess of a 90% loss in passenger travel and over a 70% loss in revenues. Most of these airports are experiencing less than 25% of pre-COVID flights, and in some cases have lost their passenger service completely.

This pandemic has caused airports to drain financial reserves that may have existed, and it is now pushing airports to reduce availability of infrastructure, reduce levels of service and lay off essential staff to face the continuing pressures of COVID-19. A recent report compiled by RCAC in May 2020 identified 46 airports that suffered total loss of airline service by the end of April. Additionally, 11 airports experienced flight reductions in excess of 90% compared to January 2020. A further 79 airports saw reductions of their flights in excess of 80%. Many of those conditions remain today, and they will continue throughout the entire pandemic. Industry analysts indicate that recovery will take two to four years.

Nearly all assistance programs and announcements to date are not applicable to rural and regional airports, as these airports are ineligible to apply for help. Immediate priorities must include a review of the current eligibility requirements for the Canada emergency wage subsidy to include airports, regardless of their ownership or governance models; sustainable funding to replace lost revenues and ensure that local infrastructure remains open and rates and fees remain low to support the airline recovery; an immediate increase to the airports capital assistance program for small airports, to $95 million annually for the next five-year period; and a removal of the required contribution share for these airports for the next two years.

Airports' access to regional air service programs is essential to enable airports to reduce rates and fees and bolster air service. Our federal government, as regulator, holds sole jurisdiction over the aviation industry. It is critical that a holistic approach to the impacts of this pandemic be applied to ensure the survival of aviation in Canada.

In closing, airports are the foundation of our air service in the country. Without safe, secure and accessible airports, the efforts made to sustain other sectors of the aviation industry cannot be successful.

I thank you, and I'm able to take questions.

[The Chair, Liberal, Vance Badawey]

Thank you, Mr. Grant; well done.

We're now going to go to our first round. We have Ms. Kusie from the Conservatives, Mr. Bittle from the Liberals, Mr. Barsalou-Duval from the Bloc and Mr. Bachrach from the NDP.

Ms. Kusie, for six minutes the floor is yours.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair, and thank you very much to all of our witnesses.

First of all, as the vice-chair of this committee and a member of the official opposition, I want to express my complete disappointment in the government's response to all of you and your employees. I can't tell you what an honour it has been to advocate for them. I know you do it well, but it has truly been an honour. How touching it is when I receive their messages, and how heartbreaking to receive pictures of them in uniform holding their children.

With that, I'll move to Mr. McNaney first. It's very nice to see you, Mike, as always.

As question number one, the government introduced the LEEFF and talked a lot about it as a potential financing tool, but many of your members didn't apply. Why did they not apply for the large employer emergency financing facility, please?

[Mike McNaney]

Thank you for the question. It's nice to see you, too.

I think there are a few elements to it. The general view was that LEEFF was never set up to deal with the challenge that we are facing in aviation, particularly large operators, given the sheer size of the companies.

Sorry; I seem to be getting simultaneous interpretation in my earpiece here.

[The Chair, Liberal, Vance Badawey]

Mr. Clerk, we're getting the French and the English at the same time. Can we ask interpretation about that?

[The Clerk of the Committee, Mr. Michael MacPherson]

We're going to have our IT guys check that out.

[The Chair, Liberal, Vance Badawey]

Let's try this again.

Carry on, Mr. McNaney.

[Mike McNaney]

Okay, thank you.

There were a couple of reasons to it.

We didn't think that LEEFF was necessarily set up for large organizations. Of course, it is just for large employers. It has been stuck at stage zero on the economic recovery continuum since the beginning of the pandemic. All the measures that applied in March and April, from a travel perspective or a border measures perspective, are all still in place, so we have never been moving forward on the economic continuum.

Also, the terms and conditions of it—and you've seen this stated publicly by various companies—were not consistent with the depth and scope of the crisis we have been facing.

We started to write to the government in midsummer with a request for low-interest loans and loan guarantees that would be available to all in the sector and would be structured such that there could not be any potential competitive impact on the sector overall.