Transport Committee on Oct. 8th, 2024

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 130 of the Standing Committee on Transport, Infrastructure and Communities.

Before we start the meeting, I would remind all in-person participants to read the best practices guidelines on the cards on the table. These measures are in place to protect the health and safety of all participants.

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 now like to welcome our witnesses, all of whom are joining us online today.

From Goose Bay Airport Corporation, we have Mr. Rex Goudie, chief executive officer. Welcome. From the North West Company, we have Michael Beaulieu, vice-president, Canadian store operations. From the town of Happy Valley-Goose Bay, which is by far my favourite name of any community in the country, we have Mr. George Andrews, mayor. Welcome to you.

Appearing for the second hour, we have from Central Mountain Air, Douglas McCrea, president; from Perimeter Aviation, Michael Pyle; and from Summit Air, Myles Cane.

For witnesses joining us online, I have two pieces of paper here, one red and one yellow. The yellow one gives you the 30-second warning to let you know that your time is running out. The red one means that unfortunately, if you don't stop talking, I'll have to cut you off. I do not like to do it, as I have a high amount of respect for each and every one of you.

We will begin with opening remarks from Goose Bay Airport Corporation. For that, I will turn the floor over to you, Mr. Goudie. The floor is yours. You have five minutes, sir.

Has he gone? Did we lose Mr. Goudie?

While we figure out the connection issues with Mr. Goudie, we'll turn the floor over to you, Mr. Beaulieu. The floor is yours. You have five minutes, sir.

[Michael Beaulieu, Vice-President, Canadian Store Operations, The North West Company]

Good afternoon. Thank you for inviting me to appear today.

My name is Mike Beaulieu. I'm the vice-president of the North West Company's Canadian store operations. I'm joining you today from a back office at our store in Iqaluit, where I am participating in the Nunavut Roundtable for Poverty Reduction this week.

The North West Company is a retailer operating in underserved communities across Canada, the South Pacific, the Caribbean and the United States. Our operations in Canada are predominantly in the north, although not exclusively.

Today, I will focus solely on our operations in the Canadian north. The north is a special place for me. It's where I started my career, where I met my wife and where my family still lives. I have lived in the territorial and provincial north, and I know the realities of the people who must navigate the region's unique challenges every day. When I talk about our northern operations, this is very real for me. Our ability to serve these communities means serving my loved ones, too.

Transportation is a critical part of food availability and food prices in the north. Our stores rely on air freight, sea barges, ice roads and rail lines, facing logistical challenges that do not exist in southern Canada or in most of the world. Many of these challenges have been exacerbated by climate change and are all the more difficult due to the current state of northern infrastructure.

We recently learned that, yet again, barges supplying the Mackenzie River will be cancelled. The Hay River community—which was devastated by wildfires last year—and the communities in the Sahtu region will be particularly hard hit. We are again trying to find new routes to supply communities throughout the Northwest Territories with essential food and other goods, which we may need to do through air cargo services.

While the nutrition north Canada program has been flexible in working with us to offset these costs to our customers, the program is not a solution on its own. We need to do more to strengthen our supply chains and lower the cost of transportation in the north.

Each year, with growing frequency, our road, rail and air shipments are cancelled or delayed due to floods, forest fires or other reasons. Disruptions mean more food spoils while sitting on runways. This can mean communities face shortages of healthy foods or critical hygiene goods. It's bad for everyone. Air freight is expensive, but it's often the most reliable way to get goods to communities. Nonetheless, melting permafrost and prolonged wet seasons mean our shipments are often delayed because runways are out of service for extended periods of time.

In the north, we often experience severe difficulties with our air deliveries due to weather, which is severe and, due to the lack of weather reporting services, makes it even more difficult for airlines to plan for local conditions. Additionally, the lack of local de-icing services results in many flights never being attempted. The scarcity of paved runways restricts aircraft size and capacity. Labour shortages and other factors mean our shipments are often delayed or cancelled. These transport disruptions, in turn, create cost pressures.

There's limited competition for air freight in the north. As you are aware, many northern communities are small and lack airport infrastructure like hangars or unloading equipment. Conditions are not favourable for competition, so we have few options. While we negotiate the lowest rates we can, the same high operating costs that impact all carriers keep rates high. Even if there was more competition, realities on the ground would likely mean that cargo rates would continue to be high. Lower operating costs and conditions that favour larger, more efficient aircraft are needed to effect change.

I want to note, however, that there are other challenges once freight arrives in communities, including local delivery issues from the plane to the store and infrastructure shortages. While I recognize that this study is about airlines, it's important to take the entire supply network into account so that we can lower prices for our communities. I believe there's ample room to work together for the benefit of our northern communities.

Of note, in recent emergency events like last year's forest fires in Quebec and the Northwest Territories, we observed that we had access to information on the ground, technical knowledge that governments could benefit from. The airlines did, too. Together with the government, we can help Canada with logistics to help communities when they are in need. We also observed the challenges across the northern supply chain caused by labour shortages.

The north requires significant attention and investment. We cannot lose sight of the importance of the people in the region. We are, first and foremost, a business about people, providing essential lifelines to communities. The North West Company wishes to be the government's partner to support northern communities and northerners.

I look forward to answering your questions.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Beaulieu.

We'll now go to Mr. Andrews, who is joining us by video conference.

The floor is yours, sir. You have five minutes, please.

[George Andrews, Mayor, Town of Happy Valley-Goose Bay]

Thank you, Mr. Chair and members of the committee.

We thank you for the invitation to appear before you today to discuss the Competition Act and air travel in northern, rural and remote communities in Canada. It is a huge issue in my part of the world.

My name is George Andrews. I'm the mayor of a beautiful community in northern and remote rural Canada, and that's the community of Happy Valley-Goose Bay. It's located in central Labrador. We're a community of approximately 8,000 people, and nearly 50% of our residents identify as indigenous.

Our town grew around the establishment of 5 Wing Goose Bay and its airfields; both during World War II and today, it is a diverse, vibrant and welcoming community. While we boast many amenities that are the envy of towns of a comparable size, it is, unfortunately, our remoteness that requires these facilities and services to entice workers and workforces to live in a remote area.

For my residents, air travel is an essential service, not only to access things like health care and educational opportunities but also to build business connections and economic development. The extreme cost of airfare, limited route option availability and the unreliability of one carrier servicing Happy Valley-Goose Bay are deterrents for people who call this place home and want to work and live in this beautiful town.

Seniors and others who have limited incomes often cannot afford the travel costs to attend specialist appointments that are only 1,600 kilometres away in St. John's. We also suffer delays and cancellations of flights that cause travellers to miss medical appointments, business meetings or time with family when an urgent situation arises. Business and leisure travel incur additional costs for meals, accommodations and limited flight options, and delays to destinations outside the province result in poor connections to the rest of the world.

Our local airport authority, the Goose Bay Airport Corporation, which you'll hear from in a bit, reported that from May 1, 2024, to August 11, 2024, a period of just 103 days, 54% of the 110 flights were delayed by 30 minutes or more. This places tremendous financial stress and strain on travellers. As a municipality, we encourage business opportunities and economic development in our region. More choices of destinations, flight times and affordable fares are vital to investment in and expansion of the commerce and opportunities and current business opportunities within our community, within Labrador and within our region.

My town council recently met with the Goose Bay Airport Corporation to hear what it's been doing to address the concerns raised by residents and visitors regarding the affordability and reliability of air travel to our community of Happy Valley-Goose Bay. The Goose Bay Airport Corporation shared that they have been advocating to have these issues addressed by communicating with provincial government officials; our single provider of service, Provincial Airlines, or PAL; and Air Canada, operated by PAL. They engaged an independent aviation consultant to conduct a market assessment, and we are working with the local chamber of commerce, as well as a group of our friends in Labrador West who are also concerned with the same issues of affordable and reliable air transportation, to make air service development the number one priority.

Additionally, GBAC, our airport corporation, has submitted a brief to the Standing Committee on Transport, Infrastructure and Communities regarding the Competition Act and air travel in northern, rural and remote communities, and it is also appearing as a witness at this honourable committee today. The fare analysis conducted by InterVISTAS and shared with the town in a report showed the airfares at Happy Valley-Goose Bay's airport have increased an average of 33.1% in 2024 over 2019 fares, whereas the national average increase is only 9.2%.

We're left wondering why. Is it because of our development with fly-in, fly-out operations? We don't know. In Wabush, our neighbours in western Labrador have seen an average 47.3% increase, which, again, is over the national average of 9.2%. We believe the lack of competition accounts for a substantial increase impacting our residents. Labradorians have long had a local saying, “a little more in Labrador”, in reference to the cost of goods and services in Labrador, but sometimes, lately, it's a lot more.

I'll give you an example. Today I priced an Air Canada flight from Goose Bay to St. John's, Newfoundland, and the total cost was $1,553 at the flex rate, which is your seat and your bag. On Provincial Airlines, that same flight to St. John's is $1,281. I'm going to Costa Rica at the end of October, and I'm paying less than it costs within my own province. There are severe issues.

Our hope is that this standing committee will recognize travel as an essential service for residents of Labrador and northern communities and make recommendations to develop or reframe programs and strategies that will reduce the cost for our residents.

Again, thank you for allowing me the opportunity to speak, and I'm pleased to answer any questions.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Mayor. We very much appreciate having you here with us.

Next, we'll go once again to Mr. Goudie.

Mr. Goudie, the floor is yours. You have five minutes for your opening remarks, sir.

Mr. Goudie, unfortunately, we still can't hear you. Could I kindly ask you, sir, to unplug your microphone and plug it back in to see if that makes a difference?

No.

He's still there, but he turned his video off.

[Rex Goudie, Chief Executive Officer, Goose Bay Airport Corporation]

Can you hear me now?

[The Chair, Liberal, Peter Schiefke]

Yes, we can. Thank you for doing that, sir. We appreciate it. We very much want to hear from you.

[Rex Goudie]

Thank you once again, members of the committee.

Before I begin, I would like to acknowledge that I am joining you today from Happy Valley-Goose Bay on the traditional territory of the Innu and Inuit.

My name is Rex Goudie, and I'm the CEO of the Goose Bay Airport Corporation.

The Goose Bay Airport is an important economic driver and serves as the transportation hub for the region.

Labrador is characterized by a vast geography, rich resources and sparse populations. It has a population of about 26,000, 60% of whom are indigenous, spread out over 6,000 kilometres of coastline and 294,000 kilometres of land mass in 26 communities. Eight of those communities are not connected by road. The remaining communities are connected by an 1,100-kilometre stretch of paved highway. Even though many communities are accessible by road, all the communities in Labrador are remote. For communities in Labrador, air travel is not a luxury but an essential part of our everyday lives.

In recent years, we have seen a steady increase in flight cost, a continued reduction in choice and a network that is not reliable. Air travel is an essential service for connecting communities, facilitating economic development and ensuring access to health care and education. Despite its significance, the air travel market in the Labrador region, like many regions across the north, is predominantly served by one carrier.

The one carrier connecting Labrador to the rest of the province and beyond is Provincial Airlines. Service from central Labrador to remote communities along the north and south coasts is provided by Air Borealis, a subsidiary of PAL, in partnership with two Labrador indigenous groups. Air Canada ceased operations at the Wabush Airport in 2021 and in Goose Bay in 2023.

In preparation, as noted by the mayor, we commissioned a brief to be done by InterVISTAS, which did a fare analysis on six airports across Canada. I won't go too much into the study, but the airports included were Goose Bay, Wabush, Nain, Kuujjuaq, Iqaluit and Rankin Inlet. Basically, as the mayor noted, the increase for Canadian airports was 9.2% versus 34.2% for all northern airports. While we understand that the cost of operating in northern regions is more expensive, we find it hard to justify or support the huge increases that were noted in the fare analysis.

For better context, I will include the return costs on airfare from one of our most remote communities, to give you a sense of how cost-prohibitive and impactful it is for those living in communities not connected by road. The average return price from Nain to Goose Bay is $1,245, and a return trip from Nain to St. John's, where most medical services are provided, is $2,497.

The lack of competition in air travel not only affects individual passengers but also has broader economic and social repercussions. Businesses looking to invest or expand in Labrador are discouraged by the high cost of travel and the lack of choice. Competitive airfares and choice are crucial factors in attracting and retaining professionals and allowing the regions to fully capitalize on their resource potential.

In an ideal world, the market would make the necessary adjustments. The northern environment is much more complex, and market forces don't really work like they do in the south. To address these critical challenges, we request that the committee recognize that air travel in the north is an essential service, and we ask that you recommend programs and policies that will foster more equitable access for communities in remote northern regions.

GBAC recommends that the committee consider the following suggestions to make air travel more affordable and reliable.

The first is to look at best practices in other jurisdictions that view air travel as an essential service, and provide traveller subsidies for residents and businesses in the north.

The second is that special consideration be given to communities not connected by road. There are many communities across Canada's north, including eight in Labrador, that are not connected by road, and special consideration should be given to introducing user subsidy and infrastructure support programs for those communities, recognizing that the challenges are even more pronounced in those communities.

The third is that all policies and regulations be reviewed through a northern lens to ensure that regulations and policies better reflect the unique and challenging environment of carriers operating in the north.

Our final suggestion for consideration is that a dedicated infrastructure program be developed for the north to facilitate better service and attract entrants, and to make it more attractive and less costly for existing carriers.

In conclusion, we encourage the Standing Committee on Transport, Infrastructure and Communities to deem air travel as an essential service for northern regions and to make recommendations to restructure Canada's airline industry to foster more equitable access. This will give their residents and businesses affordable and reliable access to vital services and better position the north to fully capitalize on its immense and untapped resource development potential.

Thank you for your attention. I look forward to the discussion.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Goudie.

We start 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 of the witnesses who have joined us today and for making time for that.

To start with Mr. Beaulieu from The North West Company, I know that your perspective is with regard to the Canadian operations, particularly in the north. However, since you mentioned at the outset some of the other jurisdictions that The North West Company operates in, I'm wondering whether you could speak about the comparison between parts of Alaska and the Canadian North—we have northern communities on both sides of that border—and any differences in regulatory, tax and cost burdens on each side of that border that may impact, obviously, air cargo, which is essential to your business.

[Michael Beaulieu]

I'm not an expert in our Alaska operations. However, I am aware that their bypass mail system for healthy, nutritious foods is quite different from what exists in Canada. It has some benefit in the sense that cargo is tendered to whatever airline has the capacity to take the cargo, so it has a tendency to optimize use of any available aircraft going to any of the qualifying communities. There is, to some degree, some benefit in speed of delivery in that model. I also know that in Alaska, I believe, they don't have the same user-pay system, so the use of airports isn't burdened in the same way by the air carriers as it is in Canada. That's probably the extent of the value I could provide in answering your question.

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

Thank you for that. In recognizing that it's not entirely your area of expertise, you identified a few areas of cost differentials between the system here, which is federally regulated, and some of the costs, fees and taxes in Canada versus in Alaska.

You spoke about the high operating costs of air freight, which is an increasingly important aspect of your business and the most reliable. Of course, everyone spoke about the fact that it's an essential lifeline for the north—I think you have agreement here, and we certainly heard that echoed as a theme throughout this study. When we look at the fares that are provided as examples from the airport in Goose Bay in its submission to this committee, it's quite striking. The comparisons were between 2019 and 2024. In recognizing a lack of competition, yes, there's an average, in the six northern airports that are attached to this grid, of a 34% fare increase compared to 9% overall at Canadian airports. Recognizing that, obviously, costs are amortized against, perhaps, a larger passenger or freight base in other parts of the country, what has been the impact of escalating carbon tax costs, other taxes and fees that are an additional impediment to what is already a high operating cost environment?

[Michael Beaulieu]

I'm sorry, but is that question for me again?

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

It is for you, and then I'll go to the Mayor of Happy Valley-Goose Bay.

[Michael Beaulieu]

We saw similar compounding impacts of air cargo costs in our freight rates, for delivery of goods to our stores, similar to what was reported with air passenger travel costs. There's definitely a compounding impact that occurs the further north you go. Carbon tax, I think, right now makes up about 13% of the fuel surcharge component of our cargo contracts. It definitely plays a role in higher food prices. It has had a compounding impact, one of many, but so have changes in pilot duty time, hours and regulations, reducing the number of flights and distances of flights that the same pilot crew can cover. Among fuel, pilot duty time and things like the carbon tax accumulating, over the last four years in particular we've seen higher rates of inflation than I've seen in my 30-year career working in the north.

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

To the mayor of Goose Bay, we just heard about the 13% increase in food prices as a result of the carbon tax, but also, you spoke in your written submission to the committee and in your testimony about the regulatory barriers, flight duty time being one of them.

You talk about, as all witnesses have, how essential a lifeline air travel is to the north, not just for the communities that are there but also for attracting talent and labour, which is important, and for future economic potential.

Can you speak a bit more about how adding these additional regulatory burdens, adding these additional fees, costs and taxes, is really shooting ourselves in the foot in terms of the growth potential?

[George Andrews]

Yes, from my community's perspective, from my region's perspective, I think we've been enjoying some development, whether it be through mining or other projects. The challenge that we have is that the increase in any time.... For instance, from a regulatory perspective—I'll speak to that just quickly and then go to the duty times—unfortunately, we don't have a lot of opportunities to fly in, fly out. We do have two carriers, I guess, technically, but Air Canada doesn't fly. They've chosen PAL to operate their contract.

You sit in Halifax on the daily flight that happens, and it's a departure at around 10 o'clock in the evening. You're sitting watching your cell phone, waiting for the ding, because you know that there's going to be a delay or that a flight's going to be cancelled, either because of duty time or for some other reason. Most times it's the duty time. Crew unavailability is another one. On what is a very expensive trip already, that adds another $200 or $300 for a taxi and a hotel, so the travel side is difficult. Yes, we are connected by road, but it's a 15‑hour drive to Baie-Comeau. It's a ferry and several hours, 10 or 12 hours to drive to St. John's, so that's difficult.

Anytime you put an additional cost to a fare, whether it be the Nav Canada fees, tax fees or security fees, they just all add up. On top of that, we seem to be nickel-and-dimed lately with baggage cost increases, other seat selection fees and things like that. That really adds up to a fare that's just not reachable for most people, and that's an impairment when you're up here and your family's in the rest of Canada. It's becoming very difficult to entice people to come up. The cost of travel is an impediment. It's really disheartening.

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

Thank you for your detailed analysis with the chart of average fare increases. That's quite instructive and informative for this committee. Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Muys, and thank you, Mr. Mayor.

Next, I have the pleasure of turning the floor over to Ms. Yvonne Jones.

It's good to have you at committee. The floor is yours. You have six minutes, please.

[Yvonne Jones, Liberal, Labrador, NL]

Thank you very much, Mr. Chair. I want to acknowledge Mayor Andrews and Mr. Goudie from the wonderful riding of Labrador, who have joined us today at committee, and to thank them for their presentations; and also to acknowledge Mr. Beaulieu from The North West Company, and to thank you as well for your presentation.

I think all of us who live in the north see air services as an essential service. It's essential not just to communities that are isolated and remote but also to communities that are partially isolated in terms of their access to the outside world. Whenever you have a service that is essential, obviously, it has to be affordable and available to people. This has been the issue not just in Labrador but across many northern regions in Canada in the last number of years.

It could be for a number of reasons, and I guess that's what we're exploring here. It could be the merger of a number of airlines. It could be the shortage of personnel and pilots, but what we know is that we need to make some changes if this service is actually going to do what it's intended to do, and that is support people in northern and rural regions.

My questions, I guess, are going to be focused on that. My colleague asked questions about Alaska. One of the things that Alaska has that I know my riding doesn't have in Labrador or most northern and Arctic regions in Canada is competitive airlines, and that has been one of the drawbacks. There's no doubt about that.

Today I can book a flight to the Arctic of Iceland for cheaper than I can book a ticket to the Arctic of Canada. I can go to Iceland almost any week for cheaper than I can go to my riding, and that is a fundamental problem. Mr. Goudie outlined what some of those costs are.

I'd like to ask a couple of questions to our guest today. One, what do you see as the role of government to ensure that there is a more competitive market and more affordable rates for consumers in northern and remote areas of Canada, areas that need this essential service?

I'll start with Mr. Goudie.

[The Chair, Liberal, Peter Schiefke]

I apologize, Mr. Goudie. You're on mute once again, sir.

[Rex Goudie]

Can you hear me now?

[The Chair, Liberal, Peter Schiefke]

Yes, we can. The floor is yours.

[Rex Goudie]

Oh, my. Okay. Thank you so much.

Thank you, MP Jones, for the question.

I gave that some thought in terms of how we could foster competition. I think, in some cases, the airlines are right. There are some regulations that impact connectivity in more remote areas. That's why I've suggested that we look at some of those regulations through a northern lens. Some examples there would be the duty time and the airline passenger protection regulations. Those could have some negative impacts on attracting regional airlines.

Beyond that, I'm not sure how much I can add in terms of.... I'll leave it to some of the other panellists to add to that question.

[Yvonne Jones, Liberal, Labrador, NL]

Mr. Andrews, would you like to address that, or perhaps Mr. Beaulieu...?