Transport Committee on Oct. 1st, 2024

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 128 of the Standing Committee on Transport, Infrastructure and Communities.

Before we begin the meeting, I want to remind all in-person participants to read the best practice guidelines on the cards on the table.

Those guidelines were introduced to protect the health and safety of our great team of interpreters.

Today's meeting is taking place in a hybrid format. All witnesses have completed the required connection tests in advance of the meeting.

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 the Competition Act and air travel in northern, rural and remote communities in Canada.

I'd like to now welcome our witnesses.

From the Régie intermunicipale de l'aéroport régional de Mont-Joli, we have Bruno Paradis.

Welcome, Mr. Paradis.

From North-Wright Airways, we have Susan Wright, director of human resources and communications. Welcome to you as well.

In the second hour, we will have Philippe Noël, vice-president of the Fédération des chambres de commerce du Québec, as well as Laurent Corbeil, from that same organization. Both will be attending the meeting via video conference.

Welcome, gentlemen.

From the Town of Churchill, also joining us by video conference, we have Mr. Michael Spence, mayor. Welcome to you, Mr. Mayor.

Up to five minutes will be given for opening remarks, at which time we will proceed with the rounds of questions.

For those joining us online, which is all of our witnesses today, if I raise the yellow card, it means you have 15 seconds left in the time allotted to you or in the time remaining in the round of questions. If I raise the red card, it means your time is up. I don't like raising the red card, because it means I have to cut you off, and I very much appreciate your testimony. Let's make sure that doesn't happen. We'll work together on that.

I will now let Mr. Paradis make his opening statement.

Mr. Paradis, the floor is yours for five minutes.

[Bruno Paradis, Chairman of the Board, Régie intermunicipale de l’aéroport régional de Mont-Joli]

Thank you very much, Mr. Chair.

I would like to thank the committee for this opportunity to discuss the current situation in my neck of the woods and that of the Mont-Joli regional airport.

Mont-Joli regional airport is a former military airport from the Second World War, when it was the largest airport in eastern Canada. I would note that Newfoundland and Labrador were not part of Canada at the time. It housed the No. 9 Bombing and Gunnery School, where many thousands of Canadian, Australian and English soldiers were trained. Mont-Joli became a civilian airport in the years from 1960 to 1970 and was retroceded to four regional county municipalities. I am the chairman of the board and, in my spare time, prefect and mayor of one of the towns in my region.

Mont-Joli regional airport has not been air-linked to Montreal or Quebec City by any commercial carrier since December 4, 2023. The reason given for that is that there is insufficient demand and that the link is therefore unprofitable. Some blame the situation on inconvenient schedules, unreliable service and high ticket prices. It's also suggested that teleworking has obviated the need for business travel. However, very few airports have returned to the passenger volumes they had before the pandemic.

Ours is not a unique situation. Analysis of recent decades shows that aviation has been rocked by several crises. Recessions, the changes in the economic direction by certain governments and, of course, the major impact of September 11, 2001 have had an effect on our regions. They have been particularly hard hit and, in many instances, are forced to start over from scratch. The response to every crisis is the same: identify temporary solutions, then support them with short-term funding and provide financial incentives. As laudable as those efforts may be, they are never enough to ensure the survival of regional air links.

On their own, our communities don't have the financial resources to support these long-term measures. It takes two to four years for a new air route to turn a profit. Since carriers are private businesses, they can't absorb these costs alone, particularly since operating costs to serve remote regions such as ours in winter are particularly high. As not-for-profit organizations, municipal airports mainly rely on revenue generated by landing fees and other charges that are billed to air carriers.

In addition, most of us also have to rely on subsidies to keep our infrastructure up to standard. However, current subsidy programs remain limited. Take the airports capital assistance program, or ACAP, for example. Funding available under that program has not increased for many years, a fact that further complicates efforts to manage growing needs in a context of rampant inflation.

We think the government should draw on the practices of our southern neighbours in its efforts to improve funding for our regional airports. It should also acknowledge that air transportation is an essential service in developing our regions if we want to attract investors, help our skilled labour force and welcome tourists, physicians and other professionals. Businesses in our regions should be able to travel to the major centres so they can develop their markets, attract investors and deploy their teams.

Sustainable regional conductivity support programs must absolutely be put in place. Maintaining financial stability will become a major asset in developing the regions. Investments would be adjusted in accordance with the economic situation; in other words, less funding would be granted when the situation is good and more when it isn't.

Mont-Joli regional airport recently commissioned a study on population movements during the period from January 1 to December 31, 2023. Study findings showed that, in the four regional county municipalities served by the airport, 46,000 out of a labour force of 63,000 persons had travelled to Montreal Island by car.

A second study revealed that 10,383 and 5,053 persons travelled respectively to Montreal and Quebec City airports by car. That means that more than 15,000 people drove their cars to those airports. These numbers are consistent with 2019 data showing that more than 53,000 passengers boarded commercial flights at Mont-Joli airport.

What do these passengers have to do in 2024? They have to drive their cars to Montreal or Quebec City. We're talking about 46,000 persons in the Bas‑Saint‑Laurent region who drove to, and thus increased traffic on, Montreal Island. Then there are the people from other regions, such as Abitibi, Saguenay—Lac‑Saint‑Jean and Côte‑Nord. This is one of the reasons why the major airports must expand their parking facilities.

If I had wanted to speak to you in person today, I would have had to make a more than 20-hour round trip, but I would have attended the meeting in person if service had been available. Many businesses also seem willing to take their employees off the roads and provide them with more efficient travel arrangements. We were surprised to learn this week that Transport Canada inspectors had to travel by car for cost reasons.

Lastly, I would like to say that this problem is having a major impact on services provided to the population of eastern Quebec. It has an impact on education because professors at the Université du Québec à Rimouski are refusing to teach courses in the regions; on research because eminent researchers are refusing to co‑operate in locating research projects in our regions; on health because medical specialists are refusing to operate here; and on dentists, who are refusing to provide services in the region. All this forces people to drive, in some instances, five hours to obtain a service, to have a dentist place a filling, for example. It also has an economic impact because, for example, investors have terminated certain projects upon realizing they had to drive six hours to get to our region.

We were initially just talking about a few flights, but we now realize this issue is having a major impact on our communities.

Thank you very much.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Paradis.

I'll now turn the floor over to Ms. Wright, from North-Wright Airways.

Unless my eyes deceive me, they already have snow on the ground where she is.

[Susan Wright, Director, Human Resources and Communications, North-Wright Airways]

Yes, we do. We had snow today.

[The Chair, Liberal, Peter Schiefke]

The floor is yours, Ms. Wright. You have five minutes, please.

[Susan Wright]

Hello, committee members. Thank you for the opportunity to speak to you today.

I come to you from the traditional territory of the Sahtu Dene and Métis people, where I work for an airline that is proudly majority owned by the indigenous people we serve, called North-Wright Airways. My perspective today will give you insight into operating a regional connector airline in Canada's most remote regions with respect to the Competition Act and air travel in Canada's north.

We are an airline that provides essential scheduled and chartered services, and the largest aircraft we are licensed to operate has seating for 19 passengers. We service eight communities between Yellowknife and Inuvik, with six of those being off the road system. We are the only air service provider in five of those communities. Our entire operation is based in a fly-in-only town of 800 people called Norman Wells, where we are central to our service network. When we think about competition, we think more about continuously improving the scale of our operation to be able to grow and provide a low-cost option for our customers. We connect largely through the hub of Yellowknife.

In Canada, there are a wide range of operators doing very similar work. We represent a very small portion of Canada's aviation community; our network is very limited in size and scope with respect to the industry as a whole. Across the north, we see very similar challenges to other operators, so we know that our challenges are shared.

In our region, we face unique challenges that have an impact, such as basic airport and navigational infrastructure, an incredibly volatile and inadequate supply of fuel, significant fuel costs, skilled labour shortages and a very limited market to draw from.

The runways are short, typically around 3,900 feet long, and are gravel, which really restricts us as to what types of aircraft we can operate a scheduled flight with. Essentially, we are extremely restricted in terms of how much we can take, depending on temperature. We face seasonal disruptions on the gravel runways due to damage to our propellers from the slush, the airports have basic navigation that doesn't let us get all of the weather reports we need, and we face crippling fuel shortages that occur due to disruptions with our historically low water levels on the Mackenzie River.

These are all examples of very real and legitimate logistical challenges that inhibit our ability to act to our full potential, let alone create an environment for more competition. Additional costs that arise from these factors, in addition to inflation and the U.S. dollar, are passed along to our customers. Our ability to service with a low-cost model is limited, if not impossible. Our economies of scale are just so limited.

Operators are also generally very small family-orientated companies and have a hard time handling the incredible pace of change within our federally regulated sector. The past four years alone have meant more work on management to adhere to new regulations, versus working to grow and better offer services to our customers, who rely on us to do so. These regulatory changes are all significant and are beneficial to us in the federally regulated sector, but it's important to recognize that the pace of new regulations coming into effect draws a lot of resources from smaller airlines to keep up. The past four years have consumed resources in adhering to big regulation changes, such as flight and duty regulations, pay equity, workplace violence, disabilities and access regulations, CTA passenger rights and so forth. A lot of these new regulations come with a lot of fines, and we are definitely struggling to keep up with this systematic regulation change, which has a huge impact on us.

The new flight and duty regulations have had the largest impact on operators like ourselves to be able to grow or continue with the same level of work that we had in previous years. We have actually become less competitive, and I see that with other operators as well.

North-Wright is committed to collaborating and working with all levels of government to give a perspective on the ground level of how operations in the north are difficult and how the Competition Act can reflect that.

In addition, we believe that, moving forward, there needs to be more of a focus on things such as paving and increasing the length of runways; navigational systems that support airlines 24-7; proper funding for airport amenities to support things such as de-icing services within Canada's north; and expanding road systems, such as the Mackenzie Valley Highway, to improve access to fuel markets and provide a more dependable supply chain for fuel and supplies.

As well, we need to focus on understanding the strain of new regulations on small companies that are doing big work in regional centres like ours and realizing the impact that it has there.

We also need to work to provide some sort of relief support program for airlines that are operating in these communities. Maybe there's a community that does have competition in that community. How can those companies be supported when there are fuel shortages due to climate problems? We believe in protecting regional airlines to account for their small operating area, where competition is not viable and may have long-term impacts to the communities they serve.

Thank you so much. It's been my pleasure.

[The Chair, Liberal, Peter Schiefke]

Thank you, Ms. Wright, for your opening remarks.

We'll now begin our line of questioning.

I'll turn the floor over to Mr. Muys. You have six minutes, sir.

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

I'd like to pass it to Mr. Lawrence for a moment.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes, this is a brief administrative break here.

We've had some changes in our schedule, Mr. Chair, and I'm wondering if you could give us what the topics will be for October 3, 8 and 10, and in that, could you give us an update with respect to the invitations we sent out to the ministers?

[The Chair, Liberal, Peter Schiefke]

I can confirm that for Tuesday's meeting, we will be having the passengers from the Via Rail incident appearing before committee. That's happening next Tuesday.

[The Clerk of the Committee, Ms. Carine Grand-Jean]

It's Thursday.

[The Chair, Liberal, Peter Schiefke]

It's Thursday; excuse me. Next Tuesday will be the last meeting on this study on rural and remote airports. Next Thursday we are due to have the minister appear, if all goes well.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

You're very welcome.

Mr. Muys, I'll start your time now.

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

Thank you, Mr. Chair.

Thank you to the witnesses for bringing that perspective from the front line, so to speak.

We had a study at this committee back in the spring that looked at the state of competition in the airline sector. We heard from WestJet and Air Canada, which both indicated some of the similar themes we've heard from you—that taxes, fees, costs and regulatory burden are stifling competition.

You've both mentioned costs. You've mentioned fees. You've talked about the regulatory burden, the four years of increasing burden that have added costs and constrained your resources.

You're an airline and an airport operating in the north. I was struck by the comment that 15,000 people in your region drive to alternate airports. It sounds like a business opportunity there, but that's stifled by the state of competition.

I'd like you to comment on these costs and competition and elaborate on some examples as to where that impacts both your airline and your airport, because we'd like to see more competition in Canada.

Maybe we'll start with Ms. Wright.

[Susan Wright]

I did allude to the fact that we operate in a very small, remote, fly-in-only region. One thing I neglected to advise you of was the population and the amount of travel that comes through our area. Just so you're aware, we have fewer than 3,000 people who reside in this region. A lot of the travel in the region is based on essential, very basic travel needs. That has a lot to do with the higher cost of operating and of being unable to control all of the factors that continuously keep getting hit onto small northern airlines. As soon as a northern airline is able to catch its stride, there's another thing that just kind of hits.

I feel that if northern airlines could do their thing and, in my opinion, operators could work to stay focused on offering the lowest cost possible, that would probably be a lot more sustainable for the region than splitting the business up between multiple businesses or offering an environment to invite new people in.

Those are some of my thoughts.

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

Mr. Paradis, would you comment?

[Bruno Paradis]

Pardon me. I didn't catch all the interpretation, but I think I understood the essential part of the question on competition. I'll answer to the best of my knowledge.

As you can understand, the low volume that we have here in the region isn't very attractive to businesses. We've previously had as many as 100,000 passengers here in Mont-Joli, some 20 years ago. That's no longer the case today.

For a carrier to be profitable, it has to serve many airports so it can establish a critical mass of passengers, as it were. The problem, however, is that most airports have been retroceded and have to charge landing fees in order to pay their costs.

For example, take a carrier that has some passengers in Mont-Joli, others in Gaspé and so on. It has to pay landing fees that may range from $500 to $2,000 depending on the aircraft it uses. That has an excessive impact on its operations. If the airline serves two, three or four airports, those landing fees may eat up most of the profit it would otherwise make. As a result, ticket prices rise and people in the regions are even less interested in flying. This situation explains why there isn't really any competition.

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

Pardon the interruption, but I have to ask something, because the time is dwindling down.

Both of you have indicated costs, and obviously taxes and costs from the federal government are impacting both your airline and your airport. There was a Department of the Environment poll commissioned recently that was looking at Canadians' willingness to take fewer flights or pay a surtax. That's already on top of the carbon tax, which is impacting both your bottom lines as well as adding to the costs of all the various aspects of the air sector.

Perhaps you can comment particularly on whether you think that's a good idea and also what that does to airports in the north and in remote areas, which you've identified are an essential service for people in your regions. Do you think an additional surtax and the existing carbon tax are advised?

[Bruno Paradis]

Of course, any tax increase will actually have an impact. Basically, however, the incidental landing fees charged for the purpose of paying for the infrastructure that has been ceded back to us are entirely disproportionate to the taxes that may be introduced.

The airport's operating costs force us to charge landing fees, and that really has the biggest impact on ticket prices. Taxes could potentially have an impact, but, in my opinion, if there were no landing fees, taxes would have little or no impact on ticket prices.

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

Go ahead, Ms. Wright.

[Susan Wright]

If I could add to that, for us, I wouldn't say that taxes or levying these is something that would scare us away. I would actually believe if there was a mechanism....

I'm sorry; I should correct myself.

Any reduction in taxes, landing fees or carbon taxes is welcome. However, really what we would have to get at is looking at more of a control mechanism for fuel prices. I think that would be where we would be at—chasing down how we could get control of the fuel pricing situation.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Ms. Wright. Thank you, Mr. Muys.

Next we have Mr. Hanley.

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

[Brendan Hanley, Liberal, Yukon, YT]

Thank you very much, Mr. Chair.

I want to thank the witnesses for being here today.

Also, I want to thank once again my fellow committee members for allowing me to substitute in for this meeting and also for helping me to bring this important study to your committee to shed light on some of the challenges that regional airlines are facing, particularly in the north.

In the first meeting of the study, which was on May 30, Joseph Sparling, the CEO of Air North, Yukon's airline, spoke to some of the challenges. Under his leadership, Air North has really built a strong regional airline through a lot of smart business decisions over the years, by taking some risks as well as by earning the support of the local population and developing a partnership with the Vuntut Gwitchin First Nation. Air North is very forward-thinking and innovative and is offering direct competition with mainline carriers.

However, in his testimony Mr. Sparling talked about, and I'll quote, how “In the post-deregulation environment, regional services have become consolidated and centralized, with many communities losing jet service in favour of turboprops and some communities losing service entirely.” He goes on to say that the “risk was acknowledged” in a previous report from this committee, in which two of the 42 recommendations called “for mandatory interline and code-share agreements between all Canadian scheduled airlines”.

He, in his testimony, said, “This would serve to level the playing field between the small regional carriers and large network carriers by providing regional carriers with access to mainline networks”. He reflected that this has been “addressed through legislation in both the telecommunications industry and the railroad industry.”

My first question is about regional interline agreements.

Ms. Wright, perhaps you could comment on whether this resonates, whether you see some agreement or not in this area of interline connections and how this might support you as a regional airline.

[Susan Wright]

Thank you, Mr. Hanley.

Overall, I believe that interline agreements really are a good thing for the consumer. I really do believe that for our travelling public, it would be wonderful to unite two different airlines so that a passenger would have one itinerary for the entire length of their travel.

The trouble we get into, and where we've had problems with the interline or co-share agreements in the past, is that a small airline like ours cannot carry the same terms and conditions as a fellow interline company.

Typically how it worked in the past, historically, was that the interline agreement somewhat protected the consumer from the amount of baggage they had and the different terms and conditions they had. For us, as a small regional airline, we don't necessarily have a tiered approach for our fares, and we don't have a tiered approach for our benefits, and it goes on.

My concern with interline agreements actually is if it exposes the air carrier to be responsible for something that happens out of their control. Typically how it works with normal travel is that our agreement with our customer is to go from Norman Wells, let's say, to Yellowknife. In having an interline agreement, we would have to work to ensure we carry them for the length of their travel. I would say that I wouldn't be overly against it, but for a small airline with smaller airplanes, aircraft and payload, it's really hard for us to guarantee those three bags at 80 pounds, whatever Air Canada or WestJet decides—