Transport Committee on June 11th, 2024

[Sébastien Benedict]

We think the current model doesn't work. I only have numbers for Quebec, but if you have an average of only 13 passengers on an aircraft bound for the regions, you can definitely expect that the airlines can't run a profitable service. Having said that, I'm honestly not here to defend the airlines.

Once you understand the principle, it's obvious that flights to the regions have to be full. We would like all remote regions, or the hubs of those regions, to have two morning flights and two evening flights and the average cost to be $500. However, planes have to be full for that to happen.

Would it be feasible to introduce programs to assist airlines in making those connections viable in the short term? We could define the parameters. For example, 70% of tickets could be reserved for tourists and 20% for business travellers. That would help ensure that everyone who has to take those flights can do it and that we don't wind up with only community people who have to travel but who alone can't fill the aircraft.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

We estimate that the fees charged to passengers represent about 40% of the ticket price. These include property taxes, housing costs and airport fees, among other things. There are a lot of fees, and the federal government will collect between $50 million and $70 million in fees from Pierre Elliott Trudeau International Airport, all of which will obviously have been passed on to clients.

Is it right for people flying from Abitibi-Témiscamingue to Montreal to have to pay for such expansive infrastructure when, for them, it's the reference point for landing in Canada's big city? They also pay service fees. The same is true of the tourism industry, where fees are passed on to producers. In the meantime, the U.S. government invests millions of dollars in infrastructure, while users have to pay for it in Canada. Is that an option that we can explore as a way of significantly lowering the cost?

Personally, I really like your fourth proposal. You say we need to think about the fact that we aren't maximizing our industry, that we aren't maximizing flights. On the contrary, all the signals are that people aren't flying. In real terms, how can we change this trend and lower fees?

[Sébastien Benedict]

If we always ask users to pay, we will definitely find ourselves in a similar situation to the present one. As you said, it costs less to fly to Paris than to certain regions. That's obviously an example that people have in mind. They realize that it costs less to buy an all-inclusive package than to go on vacation in Canada. There are a lot of stereotypes about that.

If you ask users to fund this, the model definitely won't be viable in the long term. We've discussed percentages: an airline ticket often represents as much as 40% of the cost of a tourist's trip. When people plan a vacation, if the family or individual spend 40% of their budget on airline tickets, that makes certain destinations completely unattractive or unaffordable. It can't work this way, and the government definitely has to invest in infrastructure and provide support to establish new connections.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

These fees also include Nav Canada fees for essential services that used to be public but have been privatized. The federal government could pay those fees if we want regional airports to be viable.

There are committees in Quebec whose members are discussing how to improve air transportation. Can you tell us more about them? Who sits on those committees? Is the federal government involved?

[Sébastien Benedict]

Quebec's transport minister struck a standing committee on regional air transportation two years ago. Representatives of the air carriers, airports, chambers of commerce and the tourism industry sit on it, but there are no federal government representatives for the moment.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Benedict and Mr. Lemire.

Next, we have Mr. Bachrach.

The floor is yours. You have six minutes, sir.

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

Thank you, Mr. Chair, and thank you to all of our witnesses. This has been a really interesting study, and I can't wait until we get to the report and the recommendations.

I want to thank Mayor Pond for joining us and bringing another northwest B.C. perspective to the committee. I think that with your airline background as well, it's going to be a great contribution to the committee's work.

Mayor Pond, you talked a little bit about the deregulation of the airport sector and the airline sector, and the devolution of airports to municipalities in the 1990s. I wonder if, in your view, that has been a good deal for small municipalities like Prince Rupert or whether, in hindsight, the costs of that approach have outweighed the benefits.

[Herbert Pond]

I would say it's the latter in our case.

There are many benefits, so I don't want to rain on the whole parade. There's been tremendous benefit. I think it has lowered costs for Canadians. There have been efficiencies achieved. Certainly, for the major airports where there is significant traffic, you can actually make a go of those airports.

However, if we believe that air service is critical to community life—and I would argue very strongly that it is in my community's life; we just won't be able to continue to do what we do without air service—then you have to ask yourself if this free market system is meeting the need or if it is putting Canada's third-busiest port in jeopardy. I would argue the latter.

There are challenges. I sort of went through the litany of the other challenges to the tax base. Municipalities can't be picking up everything. The local retired teacher who wants to stay in Prince Rupert can't be the one who has to pay for everything.

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

When you talk to businesses and potential investors in the community, what do they tell you about the impact that the current availability and price of air service has on their decision-making process?

[Herbert Pond]

It's hard to describe it, but everything goes to the winner here. If there's a nearby airport.... There is, in the case of Terrace. It's accessible most of the year. It's not reliable for us on an emergency basis, but it's available most of the year. As more traffic goes through there, as WestJet and Air Canada hammer it out and fight each other for fares and whatever, more traffic flows there. Then what happens is the rental car companies all build their capacity there.

Increasingly, those businesses are saying that they want to come through Prince Rupert. When you look at the safety of moving their crews down the highway versus landing in Prince Rupert, that's a safety factor for those industries. They don't want to incur two hours of highway driving down the Skeena River, although it's beautiful. They don't want to take the risk with their crews, but they are simply forced to because with a single flight a day, there's not enough choice in terms of frequency.

The market is there. That's the most frustrating part: The market is there. However, without some sort of kick or catalyst, Air Canada and WestJet will deploy their resources fighting each other rather than serving a particular community.

I don't think that policy meets Canada's need, quite frankly.

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

You mentioned the two big carriers fighting it out in markets where they both see a business case. In really small markets, there isn't likely to be enough traffic to justify having two carriers—to allow two carriers to coexist and compete.

[Herbert Pond]

That's correct.

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

I'm wondering what your ideas might be around how to ensure affordability and attract those investors to the community. This all relies on having relatively affordable and reliable airfare, and enough frequency. How do you do that in the absence of competition? What role can the federal government play in that equation?

[Herbert Pond]

You know, the airfare part is something that is hard, but I think a certain amount of minimum service could be a requirement of a licence. It could be a requirement. If you're going to operate in British Columbia, in Canada or wherever, there should be some requirement to say that you're going to maintain a minimum amount of service in this community or that community.

We actually do a fairly good job of holding Air Canada accountable on a regular basis. We will call them up and say, listen, have you looked at your fares out of Prince Rupert? Have you looked at your fares out of Terrace? We'll ask them why, and they'll do something. But if you don't keep your eyes on them, they bump them.

This was my frustration, honestly, when I worked for the airline industry. Well, it was then CP Air. We had the highest revenue miles flying in and out of northern communities, like Prince Rupert, anywhere in the system. We made more money in revenue miles than they did flying to Tokyo or anywhere else, yet they would put all their equipment into battling each other between Calgary and Vancouver. Really? Come make some money up here. That's the most frustrating part. They can make money here, but they are just intent on fighting with each other for market share.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mayor Pond. Thank you, Mr. Bachrach.

Next, we have Mr. Strahl.

Mr. Strahl, the floor is yours. You have five minutes, sir.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Thank you very much, Mr. Chair.

My question is for Mr. Wright to begin.

We've just done a study on Lynx Air, the latest low-cost carrier to abandon their project of providing low-cost fares for Canadians. They cited some of the regulatory burdens and the high-fee environment. We've heard previous panels in that study talk about how the federal government treats the aviation sector as a bit of a cash cow. I'd like to get your feedback on that. If this information is public or if you're willing to share it, what is the amount that your airport paid in airport rent to the federal government in the last year for which figures are available?

[Reg Wright]

Sure. Actually, as part of the pandemic support, our payments to the federal government were essentially waived last year. We'll resume payment this year.

For our airport, it's not a sizable amount. I think it's about $55,000 to $60,000 a year based on a graduated revenue formula. When you get into major hubs, the rent figures are sizable for that. We have been asked to operate under a user-pay system. That's what airports have done. They try to collect enough money from passengers and users to fund capital, and there's no getting around it. It does add cost to the system. There's a bigger thing at play with who should be operating airports. I think the current model has a lot of positives in terms of service, capital and infrastructure. There's a bit of a legacy over 20 years. I think it's fair to beg the question of who should be operating them, because it does add to the cost, for sure.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Right. What's your current airport improvement fee charge for passengers?

[Reg Wright]

Ours would be in the top 75th percentile in Canada. Ours is currently at $35. There's a very simple reason for that. We have to spread operating costs across too few passengers. That's added to the ticket, not unlike some of the other fees and charges that are there, which I know airlines don't like. We don't like anything that de-stimulates travel either. That's a product of trying to finance.... We have an airport here built in 1959 for an era that's long past. We have to finance that based across very few users in a user-pay model.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Do you have, offhand, the amount of grants and contributions you receive directly from the federal government in terms of airport infrastructure funding? Did they buy you a new snowplow or anything like that last year in terms of the direct investment from the feds into your operation?

[Reg Wright]

No. There were a suite of measures that happened over the pandemic to sort of carry us through when our business fell off by 90%. We had to stay open for non-commercial reasons such as life-saving and medical support and things like that. I think that amounted to $6 million or $7 million, and, for a limited time, national airports like Gander were included in what's called the airports capital assistance program. You might be familiar with it. It is made available to divested airports. Our argument, of course, is that there's not enough in that fund. I think it's $40 million, and that hasn't changed in decades. NAS airports aren't eligible, because we're supposed to be self-sufficient.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Right. So, they collect about $400 million, and there's a $40-million fund that distributes to everyone.

You mentioned, as well, a review of the foreign ownership limits. What part of the aviation sector were you referring to there? Were you referring to the airports themselves or to the airlines? I know we heard some who believe that the limits within the 49% foreign ownership should be lifted to allow maybe one entity to hold that much. Is that what you were referring to, or is there another component there that you were talking about?

[Reg Wright]

No, I was referring to the airlines.

I don't have a strong opinion one way or another, but I think it's important to at least have a cursory look at it to see if it would be stimulating. Certainly, I join the rest of Canada in saying that the collapse of Lynx Air is poor for Canadians. That's not something anyone wants to see. Ultimately, competitive pricing is going to be a function of the level of competition that is, in fact, profitable. We can't ever expect airlines to operate unprofitably at our airports. It's not like a bricks and mortar investment. They have wings. If they don't make money, they fly away. It's very crucial that they're all healthy and have good balance sheets and all that good stuff. I guess the question here today is how we work together to ensure that.

[Mark Strahl, Conservative, Chilliwack—Hope, BC]

Right.

Mr. Chair, I can't see your red flag there. How much time do I have left?

[The Chair, Liberal, Peter Schiefke]

You have 45 seconds, Mr. Strahl.