Transport Committee on Dec. 13th, 2024

[Leila Dance, NDP, Elmwood—Transcona, MB]

Okay, that's fair. I just know the other airlines were able to.

I do have some of your fees in here. A checked bag is $35 to $42. For advanced seating, it's $15 to $80. Earphones are $3 to $21. Pets in cabins are $50 to $120. Pets in baggage are $105 to $270. It kind of goes on and on here. I won't keep going.

We were told—correct me if you feel it's different—that these add-ons are where airlines are making most of their money. If that's the case, how do you feel knowing that we, as consumers, see those add-ons, as much as they are, as profits and that it's hurting customers and making it harder for Canadians to travel annually?

[Michael Rousseau]

Again, we look at the overall cost to the consumer when we generate our revenue. Although we have visibility on the fees that you mentioned, it's all part of an overall delivery of a product to the customer that hopefully is competitive. It has to be competitive for us to stay in business.

[Leila Dance, NDP, Elmwood—Transcona, MB]

That's fair.

We heard from the other airlines specifically about the external fees.

My colleague mentioned some of the other fees that come along with that, like air travel security and the airport improvement fees. The other airlines suggested that maybe if the government was able to lower those fees, it would save travellers money. We also know that companies like yours are responsible to their stakeholders and for showing them that you're making money.

What is the guarantee that if we can manage to get the government to lower some of those excess external fees, we will see those savings being passed on to the consumer?

[Michael Rousseau]

I want to reiterate something I said in my opening comments. The average fare in Canada has dropped by 50% since 1990. That has been, again, a function of competition and a function of investment in better planes. Canadians have seen price declines in constant dollars, inflation adjusted.

However, to your point, Canada has a very unique model here. It's a user-pay model, which doesn't exist anywhere else in the world and it does cause higher prices for passengers to pay. We've talked about this for decades. Unfortunately, it hasn't changed.

I don't know what my competitors said in the earlier hour, but certainly if some of these fees did come down, then that should generate more traffic. Filling more seats on a plane is good for everybody—for consumers and for Air Canada—because it should lower the price.

[Leila Dance, NDP, Elmwood—Transcona, MB]

WestJet mentioned filling five million empty seats on their carriers and such. I can only think that even if we dropped everybody's fee just a little bit and had a bunch of people purchasing seats, there would still be a huge profit.

Before my colleague mentioned the number in the billions, I had no idea. I think that there has to be a better way to lower prices so that more Canadians can travel, which will, in theory, still continue to make the airlines billions of dollars.

[Michael Rousseau]

Yes. We invest billions of dollars on new planes to take Canadians around the world, to be more efficient from a carbon-emissions perspective and for a lot of good reasons.

[Leila Dance, NDP, Elmwood—Transcona, MB]

Thank you.

[The Chair, Liberal, Peter Schiefke]

Dr. Lewis, the floor is yours, and you have five minutes, please.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Thank you, Chair.

I just want to thank the witnesses and also to inform you, Chair, that I would like to give a minute of my time to my colleague, Mr. Lawrence.

My question is going to be for the CEO of Air Canada, Mr. Rousseau.

Mr. Rousseau, we know that government regulations, fees and taxes overall in Canada carry a big weight on the airline operations in Canada. This is one of the reasons why it's more expensive to fly in Canada than in other countries. We heard this during our study of airline competition, and we also heard that here today.

Would you agree that when governments dump higher taxes and fees onto airlines, that has a consequence of raising the prices of tickets for the average traveller?

[Michael Rousseau]

I absolutely agree with that statement. It also potentially provides barriers to entry for new entrants.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

We also heard today that this government's airline taxes, rents and fees are out of control. We heard evidence that 30% of the domestic fare is for government fees. Isn't it true that other countries avoid flying through Canada just to avoid the high out-of-control government fees?

[Michael Rousseau]

That may be true. I don't have evidence of that. That would be a logical conclusion to the high cost structure that we have here in Canada.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

We heard that here today, but thank you for giving that forthright answer.

If we look at this government's taxes, fees and regulations, like the carbon tax, it's clear that they are largely responsible for why Canadians pay more to travel to travel in Canada than in other countries.

[Michael Rousseau]

It's a combination of factors. One, our business model is a user-pay model, as I mentioned before. For example, airports have to charge customers an AIF to build a capital fund to build infrastructure. In other countries, that's funded differently. There's a combination of taxes from the Government of Canada and from the fact that we have a unique model here, a user-pay model.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

How much carbon tax is Air Canada paying in 2024?

[Michael Rousseau]

That's a very good question. I wish I had the answer, but I can certainly provide it post this meeting.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Okay. We heard from WestJet that they paid $10 million, and we heard that they'll likely pay in excess of $100 million by 2028. Can you give us an idea of what the impact is for a much larger airline than WestJet?

[Michael Rousseau]

WestJet's not public, so I don't have their information, but in 2019, we were roughly three and a half times their size.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

If WestJet will potentially be paying in excess of $100 million by 2028, I would assume that your share will be around $300 million. Can you explain what impact a carbon tax of that size would have on the cost of flights for average Canadians?

[Michael Rousseau]

We fly roughly 50 million customers a year, so that would increase the cost by roughly $6 or $7.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Essentially, the increase in the carbon tax would be passed on to customers who would pay higher fares.

[Michael Rousseau]

I mean, that would be a logical assumption to make.

[The Chair, Liberal, Peter Schiefke]

Thank you very much.

I'll now pass the floor to Mr. Lawrence.

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

Thank you, Mr. Chair.

At this point, I'd like to move a motion,

That at the conclusion of the meetings on Air Canada's Plan to Impose Cary-on Baggage Fees, the committee expand the study by an additional three meetings with a focus on how government policy has increased the cost of air travel and;

A) Produce a final report for this study that includes proposed areas where these fees can be reduced with the intention of lowering costs Canadians pay for airfare;

B) Report to the House its recommendation that the government undertake a review of all federal fees, taxes and charges applied to airlines and airports and that the review include proposed areas where these fees can be reduced with the intention of lowering costs Canadians pay for airfare within 30 days and that this clause of the motion be reported to the House at the earliest opportunity following the adoption of this motion.

We have it translated, and it should be arriving in your email—

[Adam van Koeverden, Liberal, Milton, ON]

I have a point of order, Mr. Chair.