Transport Committee on Oct. 8th, 2024

[George Andrews]

Yes. Thank you, MP Jones.

A bunch of things come to mind with regard to exactly what can be done. I think it was mentioned before that the issues that happen in northern and rural Canada need to have a northern and rural lens. The information needs to come from the lived experience instead of from sitting around a bureaucratic table in some other larger cities in the country.

Fostering competition is critical, whether that be through opportunities for funding, for infrastructure development or for the subsidy side of things, especially where communities are without a road connection or without another means.

I look back to years ago when Newfoundland joined Confederation. We talked about ferries. The ferry was invoked then, because that was the way to travel. Well, it's many years later, and now it's airfare. Some people can't travel to critical medical emergency places or doctors because of the cost of air travel.

The other thing for me is that, for those who can travel, maybe there's something that can be done in terms of the northern residents deduction increasing. We could offer the tax incentive, or that the tax return include more than just the one or two trips, or it could be larger amounts, which would return money back to travellers.

Those are just some things that come to mind very quickly. However, the biggest thing for me is that a northern and rural lens needs to be applied here, because even though.... As I said, my community is connected by road, but we do have winter. That road closes. It's a 15-hour drive to an airport.

Again, I'll go back. I'm going to Costa Rica at the end of the month with my daughter. It's cheaper for me to go to Costa Rica—just the airfare—than it is to travel in my own province. There's something seriously wrong with that picture.

[Yvonne Jones, Liberal, Labrador, NL]

Do I have any time left, Mr. Chair?

[The Chair, Liberal, Peter Schiefke]

Unfortunately not, Ms. Jones. You're at six minutes and two seconds.

Thank you very much.

Mr. Barsalou‑Duval, you have the floor for six minutes.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you, Mr. Chair.

Thank you to the witnesses for being with us today.

I had the opportunity to go to Newfoundland and Labrador a while ago, when we did a tour of Canadian ports as part of the committee's work. I must say that I greatly enjoyed it.

Having said that—

[George Andrews]

I'm not able to hear the speaker, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

Thank you for pointing that out, Mr. Andrews. We'll make sure that translation is functioning properly.

Okay, is it working now?

[George Andrews]

Yes, it's working now. Thank you.

[The Chair, Liberal, Peter Schiefke]

Okay. Thank you so much, Mr. Andrews.

What we'll do is give the time back to Mr. Barsalou-Duval.

You can start over, Mr. Barsalou‑Duval.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Mayor, what I was saying is that I had the opportunity to go to Newfoundland and Labrador during a tour of Canadian ports as part of the committee's work. We didn't go to Goose Bay. We went to St. John's. Despite the short duration of our stay, I discovered a beautiful place, which few Quebeckers have the opportunity to visit.

Mr. Goudie, people working in airport management appeared before the committee at our last meeting. According to them, one of the biggest problems stems from the fact that the airport has to operate on a user-pay principle, which applies to the Canadian system as a whole.

Such a system may be useful in major urban centres, but that's not the case in the regions. Given the low volume of regional flights, cost recovery is complicated, given the high fixed costs that must be allocated to each flight. This approach acts as a deterrent, because only a large volume of flights can absorb these fixed costs. As a result, airports pass those costs on to consumers.

The current system is essentially based on ridership. Small airports, with low passenger traffic, will therefore have high fares. Large airports, on the other hand, can distribute these fees among a larger number of consumers. That is less visible in ticket prices.

In your opinion, is this system functional?

[Rex Goudie]

The situation in Goose Bay is a bit unique in the sense that the airfield itself is owned and operated by DND, so many of the costs that we would have at the airport in Goose Bay with respect to the airfield will be covered. We wouldn't have the same cost model.

Having said that, I know some of my colleagues with airports across Atlantic Canada do have some issues with lack of traffic. I think you had a witness who presented from Gander, Mr. Reg Wright. They are having issues in terms of the amount of traffic to recoup and be able to operate in a sustainable way.

It's not a big issue for Goose Bay, given the fact that our costs with respect to the airfield will be covered by DND. That reflects on the rates. The rates in Goose Bay in terms of what we charge for user fees and passenger and facility fees are much less than they are in other regions. That's reflective of the fact that we have DND that covers a large percentage of those costs.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

Thank you very much.

My next question is about the air transportation system in general.

According to witnesses, situations arise where a small business creates a market in order to offer a new service. They invest in that project, and then once the market becomes functional, a large company, a national carrier like Air Canada, finds out. It then begins to take over the market. However, since that market is not necessarily big enough for two carriers, the small carrier ends up withdrawing. Air Canada then decides not to maintain as good or as efficient a service as previously. In addition, rates start to rise as soon as there is no more competition.

Some people mentioned that it might be necessary to have what's called a floor price to prevent tickets from being sold at a lower cost. This would ensure that unfair competition, which aims to break the back of a commercial adversary, could not be used to undermine the smaller competitor's cash flow.

Do you think that kind of policy could be useful? Is that applicable in your region?

[Rex Goudie]

Yes, again, I find that Goose Bay is in a unique situation. We haven't found ourselves in that situation. We had a situation where we did have two airlines, but like lots of airlines across the north, they consolidated, and we now have one airline. I guess that translated into higher costs.

However, again, I think some of my colleagues at other airports across Atlantic Canada have suffered or been impacted by the issue that you raise. I'm not quite sure if I'm in a position to say that lower prices would be one avenue to address that.

There need to be some policies put in place that encourage better regional connectivity in northern regions. I'll speak to Labrador. When we look at Goose Bay and at Wabush, we have decent airport facilities, and we have an incredible rotational workforce. One would think that would translate into better airfares.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Barsalou‑Duval.

Next we have Mr. Bachrach.

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

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

Thanks so much, Mr. Chair.

Thank you to our witnesses for contributing to this study.

It's really interesting to hear that the circumstances facing residents of Newfoundland and Labrador are very similar to the circumstances facing rural and remote communities on the other side of the country. Certainly, communities in northwest B.C. face the same pressures that our witnesses have described.

I think over the course of this study we've been grappling with some of these different policy approaches to get at this issue of cost and lack of competition in small communities. I'm especially interested in these programs that have been implemented in Quebec and in the United States that directly subsidize air service for people in more remote or rural areas.

I was noting that in 2015 there was a report by the Legislative Assembly of Nunavut on protecting rural air transit, and that idea of direct subsidy programs got panned pretty thoroughly, both by airlines themselves and by others, as being overly expensive and open to abuse, misuse and often serving political ambitions. There were some pretty strong words given when it came to those kinds of direct subsidies, favouring the approach of investing in infrastructure and driving down costs for airlines.

I guess the question we've been wrestling with is that if you drive down costs for airlines, it's difficult to ensure that those savings are passed on to the passengers themselves. I wonder if all of our witnesses could just talk about this tension between directly subsidizing the passengers to ensure that they get the best possible price and affordable air service, and making it less expensive for airlines to operate in the hope that that will reduce barriers to entry for new airlines. What's the right mix of those kinds of policies?

Maybe we can start with Mayor Andrews, and then we'll go around the virtual table.

[George Andrews]

Thank you.

Based on many years of air travel, I'm not so confident that those types of savings would be passed along if it was directly bringing the costs down for the airlines. In our particular circumstance here, our costs are a bit different, I guess, from those of other airports across the region. However, I look at friends in Labrador west, and they have the opportunity. The Quebec government subsidizes a flight to and from Quebec, from Labrador west. It costs $500 return, which is amazing. It gives you the opportunity, then, for a much lower cost, to get you out to an airport, so that you may be able to continue the rest of your travel with a very affordable, decent price.

Personally, I think I would support that type of approach as opposed to passing savings to carriers with the hope and intent that, on the trusting side, they would return that savings to travellers. I don't seem to have a great lot of hope in that working very well for the end-user.

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

Thank you, Mr. Andrews.

I wonder if perhaps Mr. Goudie could offer his thoughts on that same question.

[Rex Goudie]

No, I'll answer in a similar vein.

When I quickly look at the program that Quebec offers, I see that it seems to be getting a favourable response and that it provides low-cost travel to people in remote regions. The benefit goes directly to the traveller, which is why I suggested that government look at all subsidy programs with a view to looking at some of the best aspects that could be considered.

However, at the end of the day, often you would want to put a program in place that translates into savings to the travelling public. There are programs that we offer in northern regions that are put in place—food by mail being one of them—for which it can be argued that, despite all the subsidies, the subsidies don't translate into benefits to the end consumer. My suggestion would be that any consideration for subsidies be done in a way that the consumer or the traveller would realize the benefit.

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

Mr. Goudie, the only subsidy program that we see in Canada is the one that Quebec has to directly reduce airfares for rural residents. Would a program like that be better managed by the federal government so that all Canadians in rural and northern Canada can have access to those affordability measures, or is this something that each province and territory should contemplate based on its unique conditions?

[Rex Goudie]

That's a good question.

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

Maybe that's a good question for us to ask ourselves.

[Rex Goudie]

From an airport corporation perspective or, really, at the end of the day, from a consumer perspective, there's one taxpayer. Whether it comes from the province or from the federal government, the benefit will accrue, and ultimately the benefit accrues to the consumer.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Bachrach.

We'll start our second round with Mr. Lawrence.

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

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

Thank you very much, Mr. Chair.

I apologize to the witnesses, because I have two hopefully brief but important administrative issues that I just want to take care of.

If the chair would be kind enough to give us the schedule for the next three meetings, say, that would be terrific.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Lawrence.

I believe we have the minister appearing on Thursday with officials. Then we have the break week. When we get back, I believe we will be conducting the business of the McKinsey study. Then, after that, we will be going to the Bloc Québécois for their study, and we invite Mr. Barsalou-Duval to share with members, perhaps after the meeting, what that study will be on.