Transport Committee on June 11th, 2024

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 121 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Tuesday, April 16, 2024, the committee is resuming its study of air travel competition in rural and remote communities.

Colleagues, I have a couple of reminders in regard to avoiding audio feedback.

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

Pardon me, Mr. Chair, but there's no interpretation.

[The Chair, Liberal, Peter Schiefke]

All right. We will stop for a moment. There appears to be a delay.

Is it working now?

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

I can hear you in French because you're speaking French, but I can't hear the French interpretation when you speak English.

[The Chair, Liberal, Peter Schiefke]

Okay.

I'll keep speaking in English really quickly just to see whether our colleague Monsieur Lemire can hear this.

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

It seems to be working now, Mr. Chair. Thank you very much.

[The Chair, Liberal, Peter Schiefke]

It's my pleasure.

To prevent disruptive and potentially harmful audio feedback incidents that can cause injuries, all in-person participants are reminded to keep their earpieces away from all microphones at all times.

As indicated in the communiqué from the Speaker to all members on Monday, April 29, the following measures have been taken to help prevent audio feedback incidents. All earpieces have been replaced by a model that greatly reduces the probability of audio feedback. The new earpieces are black in colour, whereas the former earpieces were grey. Please use only the approved black earpieces.

By default, all unused earpieces will be unplugged at the start of the meeting. When you're not using your earpiece, please place it face down on the middle of the sticker that you will find on the table, as indicated. Please consult the cards on the table for guidelines to prevent audio feedback incidents. The room layout has also been adjusted to increase the distance between microphones and reduce the chance of feedback from an ambient earpiece.

As always, these measures are in place so that we can conduct our business without interruption and to protect the health and safety of all participants, including the interpreters.

Thank you for your co-operation.

Colleagues, I'd like to now welcome our witnesses.

We have Sébastien Benedict, who is vice-president, public affairs and communications, at the Alliance de l'industrie touristique du Québec.

Welcome, sir.

From Gander International Airport Authority, we have Reg Wright, president and chief executive officer. He is joining us by video conference.

Welcome to you, sir.

From Northern Air Transport Association, we have Robert Kendall, chair, alternate runway materials.

Welcome to you as well.

I'd also like to point out, because it's very rare that we have guests, that we have Kandra and Beatrice from the University of Ottawa joining us in the back today.

Welcome. I hope you enjoy the committee.

We will begin with you, Mr. Benedict. You will have five minutes for your opening remarks.

[Sébastien Benedict, Vice-President, Public Affairs and Communications, Alliance de l'industrie touristique du Québec]

Thank you very much.

My name is Sébastien Benedict, and I am the vice-president for public affairs and communications at the Alliance de l'industrie touristique du Québec.

The Alliance is a non-profit organization that represents 12,000 businesses and 50 regional and sectoral tourism associations. We are the largest specialized tourism business federation in Canada.

You may be wondering why you've invited tourism industry representatives to appear today before a parliamentary committee that's studying air travel competition and the competitiveness of flights to remote communities. The reason is that tourism really happens everywhere you go. When you go to a hotel or a restaurant, you do business with a tourism entrepreneur. If you go fishing, hunting at a hunting lodge, camping, skiing or boating, or if you attend a festival or some other event, chances are that tourism businesses organized those activities.

The vitality of our remote regions depends heavily on the vitality of our existing tourism industry. That vitality is an important factor in supporting regional economies, in land use and in protecting language; it also helps in transmitting the culture of each of those communities.

Quebec is divided into administrative regions, but it also consists of what are considered tourism regions. We have 21 tourism regions, many of which are northern or remote, such as the Bas-Saint-Laurent, Gaspésie, the Îles-de-la-Madeleine, Abitibi-Témiscamingue, Saguenay—Lac-Saint-Jean, the Côte-Nord, Baie-James, Eeyou Istchee and Nunavik.

In 2022, only 17% of registered flights in Quebec were flights to remote regions. In addition, only 3% of passengers who took those flights actually travelled to remote regions. As these numbers suggest, it's very difficult for an airline to offer reliable, regular and profitable flights to regional destinations. Furthermore, when tourists are asked why they prefer not to vacation in remote regions, they always cite the same reasons: price, flight availability and flight reliability.

To remedy the situation, in April 2022, the Quebec government introduced a new program, the Programme d'accès aérien aux régions, commonly called “the $500 tickets program”. Consumers need only go to the website of a participating air carrier and purchase a ticket directly. Their flight to a destination in one of the regions I just mentioned could depart from Quebec City, Montreal or Saint-Hubert airports. The carrier then simply contacts Quebec's Ministry of Transport and Sustainable Mobility to be reimbursed.

We are very pleased with the program, which I can discuss with you later should you be interested in more details. However, some improvements to the program would be desirable. We find it ironic that, on the one hand, the Quebec government subsidizes airline tickets using taxpayers' money to cut costs while, on the other hand, the federal government imposes numerous charges on airports and airlines that inflate ticket prices. It's as though there was a fire in the regions and the provincial government was trying to extinguish it while the federal government poured on the gasoline. Consequently, it's impossible to stabilize ticket prices. The federal and provincial governments really should review this dynamic because it isn't working.

Lastly, in 2020, the Alliance, together with the Fédération des chambres de commerce du Québec, the Union des municipalités du Québec and the Conseil du patronat du Québec, drafted a lengthy brief on the regional air transport situation in Quebec. Four findings emerged from that joint effort: first, regional air transport is an essential service if we want to occupy our land; second, we can't realize our ambitions under the present model if we want reliable access to the regions; third, there is a real observed consensus and a desire within the tourism industry and Quebec's business community to work closely with existing carriers; and, fourth, one could say that demand hasn't been properly stimulated and that it is therefore difficult to establish the tourist volume necessary to achieve profitability.

Four years and one pandemic later, we believe that these four findings are still valid. Despite the many efforts made at the provincial level in recent years to bring together all the actors, that is to say government, carriers and airports, we realize there has to be a better alignment, a better synergy, between the federal and provincial governments if we want this to work. Otherwise, we fear we're going nowhere.

There's one thing that I'd really like you to take away from the Alliance's appearance today: that the solutions that should be introduced to improve air transport reliability cannot exclude tourism. It's essential that the tourism industry co-operate closely with governments and businesses. If we want flights to remote regions eventually to be profitable, and if there are to be affordable connections every day, the tourism industry must be part of the equation. That's what will really help us fill flights.

Thank you once again for including the tourism industry in your committee's study. I will be pleased to answer your questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Benedict.

Next, we have Mr. Wright.

Mr. Wright, I'll turn the floor over to you. You have five minutes for opening remarks, please.

[Reg Wright, President and Chief Executive Officer, Gander International Airport Authority]

Thank you.

I wish I could join you in person today, but I'm glad to be here to make an appearance.

I'm in Gander in central Newfoundland, which may not be technically considered remote, but on my morning commute this morning, I passed two moose and just three stoplights, so it is, in fact, rural. Like most rural communities, central Newfoundland is a very trade-dependent economy. It's home to a billion-dollar perishables industry, notably fisheries and aquaculture. A nascent coal industry is creating thousands of jobs. Tourism is a crucial economic generator, and there's a big flow here of people, labour and services.

In this big, beautiful home we all call Canada, aviation is really the load-bearing wall that holds us all together. It's no mistake, there are some pretty wide foundational cracks that have developed since the pandemic, and it has some of us listing for sure.

Despite COVID-19 receding in the rear-view mirror, our airport here in Gander has only recovered two-thirds of its 2019 passengers. There are other airports in Canada facing much worse, some on the precipice of closure.

You'll know airports are crucial public assets, but they also operate as a business. The primary business of an airport clearly is airplanes and passengers, neither of which has really recovered in many cases. Even in the earliest days of the pandemic, it was very clear that air travel would become less convenient and more expensive.

There's also a fairly clear divide between how passenger traffic and air service have returned to large, urban hubs versus regional markets like ours. I knew then, and I see it now, that clearly the smaller airports would be the last dogs to the bowl of recovery.

This is where we sit today. There are four real, major influences there, forming a sort of—I can't say a Bermuda triangle—Bermuda rectangle for Canadian travel, which we're coping with now, collectively.

The first is that there's an acute pilot shortage, which is improving, but still a challenge. This naturally favours larger aircraft flying between larger cities to achieve economies of scale. It's not just in the cockpit. There's a shortage of qualified personnel in control towers, in the maintenance hangar, behind the counter, below the wing, at the border and in other key areas.

The second is that airline mergers and retrenchment of service at hubs have disproportionately affected smaller Canadian markets. There are some fleet issues as well in terms of aircraft availability, but more particularly the retirement of airplanes in the sub-50-seat market.

I can tell you here in Atlantic Canada, in particular, travel within the Maritimes has only recovered about 60%. It's really been eviscerated.

On the cost of everything, as we all know as consumers and community leaders, the cost of everything is up: labour, fuel-borrowing materials and all of those things. All of those inputs are up over 2019, clearly.

It's important to remember that every airline in our nation exists to do an important job for all of us, but also they need to produce returns for shareholders or owners, and that's often done with a quarterly lens. There's nothing wrong with this. Canada's airlines do a great job largely, and they must be well capitalized and financially healthy. However, that mandate contradicts the social and economic utility of dependable air service for rural communities.

Ultimately, it puts airlines in a position where they're choosing winners and losers, and they have an outsized voice in which communities flourish and which perish. None of us wants a Canada where only a dozen urban hubs have timely, affordable air service. Rural economies need air access if they're going to remain fertile ground for economic growth.

A couple of weeks ago, I was at a meeting of all of the Canadian airport CEOs, and we did discuss at that point the need for a true, renewed national aviation strategy. The national airports policy, which guides airport operation, and the blue sky policy, which informs international, bilateral air service agreements, are almost 30 years old now, yet we continue to use them as guideposts. Aviation has changed profoundly over those three decades, and the policy compass really needs to be recalibrated.

In my view, part of that strategy should include a couple of things. One is reviewing foreign ownership and fifth freedom rights within Canada. The second will be working with the airline and industry sectors to recruit new talent, with an emphasis on pilots, but there are certainly other key positions in deficit.

Government should probably have an assessment of the role it can play in subsidizing and guaranteeing a base level of air service for rural and remote communities, as happens in the EU, United States, Australia and here in Canada to some extent too.

In addition, there's working with the aircraft manufacturers to incentivize the production of sub-70-seat aircraft that can operate profitably—and I stress profitably—in small, light-density spoke markets. In the interim, I think more money probably needs to be made available for all small airports for safety-related capital. This is a universal call.

All of these things take money. There's that recognition, and we do also recognize this is a time of austerity and a time of constraint. I will say this though, combined, airports pay the federal government $400 million in rent, annually. These funds are not earmarked for reinvestment in the national air network. Instead, they go to treasury.

It can be frustrating, because there certainly seems to be widespread recognition among elected officials of all stripes. Policy-makers at Transport Canada and Infrastructure Canada and in tourism do seem to understand that reinvesting a portion of that $400 million to strengthen safety and service and make air travel affordable for middle-class Canadians would be a very good investment.

In terms of the current context, there are still some very material impacts on our airport. Right now, our balance sheet is a little broken and our recovery keeps getting pushed further out on the horizon. There are going to be severe tests for Gander and other small airports going forward.

I'll close by saying it's really important that we act collectively and deliberately and keep Canada's best interests at the forefront of our minds.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Wright.

Next we'll go to Mr. Kendall.

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

[Robert Kendall, Chair, The Alternate Runway Materials Committee, As an Individual]

Thank you.

Air service in the Arctic is the Trans-Canada Highway for Arctic locations.

The 737-200 provides most of the jet service to communities in the Arctic. In 2014, I attended a meeting with Boeing where they said that the 737-200 would no longer be supported for its gravel kit operations, and they would no longer be producing aircraft that would replace the 737-200.

In 2017, we formed the alternate runway materials committee to investigate suitable wearing surfaces that would work as efficiently as asphalt or concrete. The reason for that is asphalt and concrete are suffering seriously due to permafrost implications in the Arctic.

Today, numerous aircraft are being manufactured with composite materials, and many of these aircraft are not going to be certified for gravel runway operations, yet there are well in excess of 90 gravel runways servicing communities in the Arctic.

The reason composites are becoming materials of choice is that they improve fuel efficiency, they increase the cargo that can be carried in the aircraft, they lower operational costs and they increase the capability to lower prices to communities themselves. However, debris from gravel runways can puncture these composite materials and cause very serious damage; it punches holes right through the aircraft and is very expensive to repair, and it is a serious safety issue.

We've been working with Transport Canada, and they're in the process of developing a new category of hard surface. For materials to be recognized as a new hard surface, they have to demonstrate that they're capable of the same level of safety as traditional hard-surface runway materials, which would be asphalt, asphaltic concrete and concrete. Testing is going on to verify that the structural integrity, durability and friction characteristics, as well as their behavioural characteristics for working in Arctic conditions, are approved.

Upgrading to the new category of hard surface improves safety for all aircraft. It doesn't matter whether it's a turboprop or a jet; as the future rolls on and these new carbon fibre aircraft are brought into service, they'll all end up with problems from gravel.

Without reliable, large capacity air service to Arctic airports, communities will continue to experience high prices for goods and services and reduced levels of service.

The current materials being considered for these new categories are thin bituminous, which is being used extensively throughout the northern Saskatchewan area right now. Aluminum is a military-based product that has been in use for over 50 years in military applications. There is a facility in California that has been running an aluminum airport for 48 years.

The aluminum links together in panels and is laid over the gravel surface. It takes some time to lay the surface, but it does not affect the service at the airport itself because they can be transitioned on a daily basis from where they've laid to where they're about to lay surface.

The next product is a high-density polyethylene matting. It links basically the same way as the aluminum panels do and goes over the existing gravel surface. Again, aircraft servicing is not interrupted.

Both of these materials can be easily removed if there's a problem with permafrost in the centre of the runway or if there are drainage issues. The problem can be repaired and the matting put back in place, and it can all be done by the airport staff. If you had asphalt or concrete, you'd have to have specialists with specialized machinery coming in to make some of those repairs.

There are two other substances we're working with. One is called EK35, and the other one is called Dust/Blokr. They're both soil stabilization products. EK35 has been in use in the Arctic now for 20 years at several airports, primarily at mining operations and what have you. They have reduced the gravel problems at these airports, but they do have to be looked after on a regular basis and consistently upgraded.

Aluminum, HD matting and soil stabilizers are also considered to be environmentally friendly products.

The main advantage of upgrading these airports to non-gravel surfaces is to improve the safety for all types of aircraft and return jet service back to the Arctic communities.

Right now, Canadian North, Air North and very soon Air Inuit will be retiring their 737-200s. The only ones operating will be a charter group, Nolinor, and, I believe, Chrono, so it's important to get the runways that require repair done. For example, there is Cambridge Bay, which used to receive jet service. Kugluktuk and Old Crow receive services 12 months of the year.

I'm done.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Kendall. I'm sure you'll be able to share that information during the line of questioning that will be forthcoming.

Colleagues, it's a pleasure for me to welcome to committee Mr. Herbert Pond, the mayor of the City of Prince Rupert.

Welcome, sir. The floor is yours for your opening remarks. You have five minutes, Mr. Mayor.

[Herbert Pond, Mayor, City of Prince Rupert]

Thank you, and good morning.

As you said, my name is Herb Pond. I'm the mayor of Prince Rupert. As an aside, I happened to work in the airline industry for about 20 years when we went through airport devolution and the deregulation of airlines, so I kind of have an interesting perspective on all of this.

This morning, I hope to frame my comments through the lens of nation building. Most of the concerns that today's leaders deal with come from the vast majority of Canadians living in large urban centres. They're grappling with growth and the challenges of maturing cities but not nation building, but there still remains a portion of the country that's very much pioneering and, indeed, nation building. That's certainly the case in Prince Rupert, where 12,000 residents are creating one of Canada's most important trade corridors. It's currently Canada's third-largest port. The most recent announcement by AltaGas brings the current committed projects to over $2 billion in the port of Prince Rupert.

Changes in the broader economy and the way that government services are delivered have made the task of nation building more difficult than it used to be. The tools available at the community level have become outdated. It used to be that a town grew up around an industry. Merchants built retail shops and paid property taxes. Workers brought families, built homes and paid property taxes. Those taxes paid for the services that kept the town alive. That was the compact, and it worked.

Today, retailers in small towns drive vans with Amazon logos, and they pay no local taxes. Increasingly, the workers are fly-in, fly-out and pay little or no local taxes. The same, in a different way, is true of airlines and airports. Not long ago, Transport Canada owned and operated our airport and many, many others. It was a recognition that, in nation building, communities require core assets to be put in place because they're necessary long before they're viable. Not long ago, airlines held rights to certain routes, which allowed them to make investments in those routes and commit to their development.

Today, airlines move like piranhas in feeding frenzies, seeking only the most lucrative markets. A community like Prince Rupert with a heavy industrial base has no choice but to maintain an airport. We are not only a heavy industrial base; we're the hub for four first nations communities who depend completely on access to that air ambulance service. There must be access to air ambulance service or the port will fail. This is particularly true in the winter months, when travel by road to the nearest airport is often ill-advised or not possible at all.

The community of Prince Rupert watches with grave concern as air carriers play their game of three-dimensional chess with their rationed equipment and flight crews. Fare wars right now in our neighbouring community draw traffic from our airport. We estimate that roughly 40% of our air traffic now moves through our neighbour's airport. That traffic justifies more flights next door and fewer flights in Prince Rupert, and fewer flights mean it's more difficult to fly in and out of Prince Rupert, which means even less traffic.

In Prince Rupert, what was once five jets a day in the 1980s is now down to one Q400 daily. We worry that without intervention that trend is irreversible.

All kinds of other infrastructure disappears as that process takes place such as rental car companies and support services for the airlines, so the burden gets shifted to the local taxpayer, and that burden becomes enormous.

I thank you for the opportunity to speak, and I look forward to your questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mayor Pond.

We'll begin our line of questioning today with Mr. Muys.

Mr. Muys, the floor is yours. You have six minutes, sir.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you, Mr. Chair.

Thank you to all the witnesses for participating today.

I want to direct my first set of questions to Mr. Kendall.

At the last meeting, we had someone who appeared as an individual, but was with Arctic Aviation. She spoke about the aluminum runways. I understand she's going to be submitting a written brief as well, which will be instructive. Maybe we can start with that.

It seemed to me that it was a good opportunity to expand the capabilities of our northern airports. I know you spoke to that. You were cut off toward the end. You were about to cite some of the statistics around that and some of the locations. Maybe you can pick up from there.

[Robert Kendall]

The aluminum runway is a system that has been used primarily by the American military and NATO partners, as I said, for over 50 years. They land everything on it from jets through to heavy transport carrying up to 850,000 pounds.

The company that developed an aluminum runway for military use has now developed one for commercial use, which is twice as strong as the military version and has been designed ideally for locations where there are going to be limited maintenance capabilities. It's something that will be able to deal with permafrost issues, and it's going to last for years.

I took a group of people down to Twentynine Palms air marine training base to show them the runway that has been there for 48 years. Some of the panels on that runway are the same ones that were installed 48 years ago, so we know it's going to last.

The problem, thinking on the money side of it, is it's probably two to two and a half times as expensive as putting down an asphalt runway. However, over the course of 40 years, at about the 20-year mark, it becomes equal to an asphalt runway because you don't have to resurface it all the time. Over the course of 40 years or 50 years, of course, it's far cheaper and it's totally recyclable.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

You indicated that you've been working with Transport Canada, and you indicated a timeline of the last 10 years, since 2014, when, frankly, some of these problems were identified with the jets being able to land.

What have you encountered? Have there been regulatory hurdles or delays?

[Robert Kendall]

It's not so much hurdles as it is informing Transport Canada of the product, and then setting down some standards that would have to be put in place in order to test it to ensure that it has the safety aspects that are necessary and equal to or better than the asphalt or concrete runways in place today. As we moved along with that process, it became more involved. We ended up with other companies coming along and saying they might have a product that's equal and will do the job too, and that's—

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Where is that process today, and what's the projected timeline?

[Robert Kendall]

Right now, they're reviewing the technical data for the aluminum surfaces. There will be some final tests that are needed at the university level to verify the tests.

The HD matting is in the process of being tested now. We should have the results from that within the next four to six months to determine whether or not it will be suitable for runways. We already think it might be suitable for tarmac areas and taxiways. There are talks and discussions now about whether or not there might be a combination of materials that can be used to lower the cost to put these runways in place.

There are issues with asphalt right now in Arctic communities, and there are issues with gravel runways. They're getting less snow and more rain. There are runoff issues and, of course, the permafrost is a serious problem.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

Thank you.

Let me turn to Reg Wright, from Gander, Newfoundland, which has a famous history and a great story around it.

I can empathize with some of what you're saying, because just yesterday, I was disappointed to learn that WestJet has dropped a couple of flights out of my home airport of Hamilton, Ontario, to Halifax and St. John's. Fewer people will be travelling to the great province of Newfoundland.

You talked about the recovery of passenger traffic since 2019, labour shortages and the retirement of planes, and a number of the issues around that. We've heard from the large airlines and the smaller ones that are servicing the north and remote areas that costs, fees and regulations are all adding to the price of tickets, which has an impact.

Would you agree with that?

[Reg Wright]

Yes. I think anything that adds to the end use of the consumer does choke off demand, for sure.

[Dan Muys, Conservative, Flamborough—Glanbrook, ON]

You indicated in your testimony that obviously the cost of materials is up. As you're looking to do a number of projects and as you're looking for traffic to return to Gander airport, what would be the impact of the carbon tax on that? I mean, obviously the carbon tax is applied to the cost of materials but also to anything that goes into the operation of the airport. Are you able to quantify what that might be for Gander?

[Reg Wright]

Yes. Absent my accountant being here, I mean, anything new and incremental certainly does add to our operating cost.

To your point about the airlines and fees and regimes, it's important to keep in mind that Gander airport is a national airports system airport. We took the airport on behalf of the federal government with the intent that the community was best positioned to represent the airport's needs and the needs of constituents, but it was also based on airports being self-sustaining and recovering their costs through user fees. We've done a very good job of that, I believe, in most ways. The last year Transport Canada operated the airport before transfer, I think they lost $12 million before capital investment in today's dollars. They had 155 employees. In the 20 years that we've run it, it's only since the pandemic that we've not covered our operating costs or have had loss-making years.

I'm sorry.