Evidence of meeting #112 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was market.
A recording is available from Parliament.
Vice-President, Government Relations, Air Transat
We had $700 million in cash, in fact. The $700 million is gone, and we have $800 million that we owe to the Crown. It's enormous. It's a ratio that is too large, and it's one that we need to get under control to do what we need to do in this market.
Liberal
Vance Badawey Liberal Niagara Centre, ON
That's impeding on your operating budget, because you're probably financing a lot of that debt through operating.
Vice-President, Government Relations, Air Transat
That's absolutely the case, and I want to stress that it's not through any fault of our own, because we never had any before the pandemic. It is what it is, and we have to deal with it.
Liberal
Vance Badawey Liberal Niagara Centre, ON
With that, it's always easy to say that government can simply give you a cheque, but with some of the investments that you're making through your operating, especially as it goes to capital, one-time expenditures, the impact on your operations can be alleviated if in fact the government starts participating in some of the other expenditures you're accruing year over year.
Vice-President, Government Relations, Air Transat
There were other models. We're very grateful for the support we got. It was purely debt. There was an investment made, half a billion dollars, in the equity of Air Canada. There are other models in Europe. There were massive investments and forgiveness.
There are options on the table to make sure that, whether it's Transat or Porter or whichever carrier needs the support, we make it through that pandemic hole, and then we grow and enhance competition in the country.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you. I'd like to sit here and speak with you for another half hour.
Vice-President, Government Relations, Air Transat
It would be a pleasure.
Liberal
The Chair Liberal Peter Schiefke
Thank you, Mr. Badawey. Blame me.
I want to thank the witnesses who appeared before us in the first round. It is truly great to have all three of you appearing here in person. We thank you very much for that.
Colleagues, I ask that you remain seated as we suspend for two minutes and let the team welcome our next round of witnesses.
This meeting stands suspended.
Liberal
The Chair Liberal Peter Schiefke
I call this meeting back to order.
Colleagues, appearing before us for the second half, we have, from Abbotsford International Airport, Mr. Parm Sidhu, general manager, by video conference.
We have, from Flair Airlines, Mr. Stephen Jones, president and chief executive officer.
From the National Airlines Council of Canada, we have Mr. Jeff Morrison, president and chief executive officer.
Welcome to you all.
As discussed, I will be asking for unanimous consent to forgo our traditional opening remarks and have those submitted electronically and included as testimony, so that we can go straight to a line of questioning.
Do I have unanimous consent?
Liberal
The Chair Liberal Peter Schiefke
Seeing no objections, it is so adopted.
With that, I will be turning the floor over to you, Mr. Williams. You have six minutes, sir.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
Thank you, Mr. Chair, and thank you to our witnesses.
Mr. Jones, I'm happy to have you here from Flair Airlines. You are a competitor. We need more of you in Canada. I'm happy to talk to you today about competition in Canada.
Mr. Jones, I'm going to start right out. Being a new airline competing in Canada, have you seen any uncompetitive behaviour? If so, what behaviour are you seeing that's stopping you from being a better airline and competing in more routes?
Stephen Jones President and Chief Executive Officer, Flair Airlines Ltd.
Yes, absolutely, we've seen anti-competitive behaviour in the market. I think it's pretty clear to us that the presence of Flair in the market is threatening to the major carriers, to what we call “big air”: the two big duopoly carriers, WestJet and Air Canada.
I think that if you look back at the history you can see the formation of Swoop. Swoop was not created to promote competition. Swoop was a weapon designed to quell competition. We've seen it deployed against us around the market. I have some great examples. For Edmonton to Comox, we entered that market. Swoop immediately followed us a month later, at the same time and on the same days of the week. When we pulled out, they pulled out.
There's some real active deployment, I guess, of capacity against us, so yes, it's a tough market.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
This is what can stomp out an airline. When it comes to these complaints, we had another airline, Lynx Air, that is gone, and we've had others in the past. We had a witness yesterday talk about six panels of airlines that have gone bankrupt in Canada. What is the government doing to help you when you're finding and seeing uncompetitive behaviour like you just mentioned?
President and Chief Executive Officer, Flair Airlines Ltd.
There has been no assistance on those as it turns to predatory behaviour. I think the fact that Flair exists is a product of government policy. I think the 2018 policy that loosened up foreign ownership was one of the things that allowed capital to flow into Flair, and we have a great relationship with the government, but in terms of specific anti-competitive behaviour, there's nothing that I've seen.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
Does the government know about this? Have you made complaints to the government, but they're not doing anything?
President and Chief Executive Officer, Flair Airlines Ltd.
Flair—and this was prior to my time—did make a specific complaint around Swoop and Abbotsford, but it came to nothing.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
I mentioned in our last panel examples of where you're in a market and decreasing prices are what happens. Normally, when we have competition, we have increased service and decreased prices.
For Toronto to Vancouver, which is a route you were in, on a date that we looked at, compared with Toronto to Ottawa, the presence of your airline seems to bring prices down to about $385 on average for those airlines. When you're not in a market, such as Toronto to Ottawa, which is nine times less than the distance from Toronto to Vancouver, it seems to be a price of $585 for those airlines. It seems like you're decreasing those prices. How do we get you into Toronto and Ottawa—that route?
President and Chief Executive Officer, Flair Airlines Ltd.
You raise a great point. This is what we call the “Flair effect”. When Flair enters a market, it brings prices down for all the participants in the market. The Flair effect, on average, has resulted in a 34% reduction in fares in the markets that we operate in relative to what it was prior, and that's for all Canadians.
Whether people like Flair or not, people should be thankful that Flair is in there and competing, because we bring that benefit. We've estimated that to be in excess of $700 million since Flair really started to accelerate in 2021: $700 million of money that's gone into the pockets of Canadians at a time when affordability is one of the big questions on everyone's lips. Prices are going up across the board. Flair is doing the opposite. We're pulling prices down, and that money that stays in the customer's pocket flows through the economy generally, so it's good for everyone.
The specific example you raise, Toronto and Ottawa, is a market that's actually dominated by the big guys, and we don't believe that we could compete effectively there.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
What specific barriers do you see to entering and competing in that market?
President and Chief Executive Officer, Flair Airlines Ltd.
It's a relatively short market. It has expensive airport costs at either end, and the ability to amortize those airport costs per mile means that every mile you operate in is relatively expensive. Lower airport costs at either end would certainly make a difference.
Conservative
Ryan Williams Conservative Bay of Quinte, ON
In terms of the taxes we talked about, we've heard a lot of testimony that taxes seem to be higher across the airports across Canada. Do you find that a barrier as well? Are taxes from this government a barrier to entry?
President and Chief Executive Officer, Flair Airlines Ltd.
Undoubtedly. I mean, Canada is a very expensive place to do business.
I've worked in airlines around the world. I was 16 years at Air New Zealand. I was chair of the Star Alliance management board during that time. I was three years as the managing director and deputy secretary CEO of Wizz Air in Europe, one of the world's best ULCCs. You see the decision-making that's made by airlines, and the cost of doing business really impacts our network decisions.