Transport Committee on Dec. 13th, 2024

[Alexis von Hoensbroech]

We are a private company, so we don't disclose specific revenue numbers.

However, let me make a broader point, which is that, if you look around the industry, you will find that almost all airlines actually make more revenues on optional fees than they make a profit. That means, in turn, that airlines subsidize their base fare through optional fees, which is good because it actually allows airlines to offer lower fares to those who select lower fares and don't select an optional fee, compared to what airlines would be able to do if they were not able to get those fees. If it were all the same price, it would be higher for everyone.

[Vance Badawey, Liberal, Niagara Centre, ON]

You made some comments earlier about the fees that you're charged by the government, airports and security. You know, being in business myself for many years, one thing I tried to do, both with my customers as well as my suppliers and others that I was in partnership with, was to make sure that our company not only ran smoothly for us but, more importantly, it ran smoothly for the people that we serve. With that said, and to enter into that true partnership, one thing that this committee asked for previously was for you to disclose your finances. Now, I understand you are a private company, and you do have that choice. Of course, to date, it's not been good, and the answer has been, “No.”

However, I go back to my earlier comment. One thing that I would be very interested in is seeing what that gross, that net is, taking into consideration the other side of the balance sheet, your expenses—some of which you've mentioned today—to see which areas we as a government can look at to partner with you to mitigate those affordability issues. At the end of the day, that's what we're here for. That's why we're here right now. We're here for affordability for the passengers.

I'll ask the question again. This is with sincere intent, as a government, to look at the possibilities that may lie ahead of us with respect to affordability, so that we can work together towards affordability for the customer. Is there an opportunity for us to sit down and have you disclose your finances, so that we can look at exactly which areas we can work on?

[Alexis von Hoensbroech]

First of all, we are always happy to sit down and also to talk about specific numbers. I have no problems with that as long as it's in a closed room.

However, I want to say what I already said in my introductory remarks. If we really care about affordability in Canada, the main hurdle—and it has been said by all the others as well—are the sky-high and off-the-chart-high fees and charges that government-controlled entities charge airlines. This is far beyond what you see in other countries. If it's $100 per ticket, it basically means that, if you are entering the market as a new entrant and you want to price-break by offering a double-digit ticket end price, you'd basically subsidize your tickets until you're bankrupt. The graveyard of “passed away” airlines in Canada is really big—just two airlines were added this year alone—and that's the reality. That's the challenge that makes it very difficult to offer those low fares Canadians would need, because this is a country where air travel is essential.

[Vance Badawey, Liberal, Niagara Centre, ON]

That's the whole purpose of this dialogue. At the end of the day, sir, these costs will land somewhere. Either it's going to be a subsidy by Canadians, or it's a user-pay system paid by you. The cost has to land somewhere, hence the reason for my earlier comments and questions, and my desire to sit down, to look at your balance sheets and to see exactly where you're standing with respect to your margins, what you're making—and what you can absorb, most importantly—and then, therefore, mitigate the challenge for you and your customers. More importantly, it's to mitigate the subsidies that would otherwise land on Canadians to then put more money in your pocket, and that's what's key here.

I want to see that. You're making a lot of claims here, but I want to see how credible those claims are by looking at the numbers on your balance sheet.

[Alexis von Hoensbroech]

I'm more than happy to discuss all those details. That's no problem at all.

What I want to say is that the user-pay model needs a reform for sure, because it's a user-pay plus model. Users pay in excess of the infrastructure that they use.

By the way, this is in sharp contrast to how you deal with other modes of transportation. Rail receives billions of dollars of subsidies, although only a tiny fraction of Canadians use it.

As a thought experiment, if we were to receive the same per passenger subsidy as Via Rail gets, we could not just let everyone fly for free, we could even hand them cash as they enter the airplane. That's the reality in this country.

[Vance Badawey, Liberal, Niagara Centre, ON]

What we're looking at here, again, is affordability. We want to make sure that the affordability lands on the people that it should land on. We don't need to have Canadians subsidizing and putting money in your pocket but affordability for the customers who fly on your planes.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Badawey.

I now give the floor to Mr. Barsalou‑Duval for six minutes.

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

Thank you very much, Mr. Chair.

Welcome to all the witnesses. We're pleased to hear their explanations about the new fees that we've seen appear in the air transportation sector in recent years.

Ms. Guérard, your company is one of the only airlines that currently doesn't charge for carry‑on baggage.

First of all, how was that decision made?

Also, do you intend to keep it this way in the future?

Finally, what percentage of your customers don't use carry‑on baggage?

I asked you three questions at once, but I'm particularly interested in the answer to the last question.

[Annick Guérard]

First of all, we're taking note of Air Canada's announcement this week. As I said earlier, all of our Canadian competitors now charge passengers some kind of fee for carry‑on bags in certain markets.

We're thinking about it right now. That said, for obvious competitive reasons, we're not necessarily going to announce our commercial intentions here.

We offer five fare families to give our customers more choice. Today, carry‑on baggage is included in all options.

Since we don't necessarily have the same network as other carriers, we have to be careful when comparing ourselves to WestJet or Porter, for instance. Our network is international. People on long-haul flights are much more likely to bring carry‑on baggage than people on shorter flights. On shorter flights, they are more likely to carry a backpack than a carry‑on.

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

I understand that you don't necessarily have specific figures at your fingertips.

[Annick Guérard]

It varies from flight to flight.

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

In the media, some commentators or experts have said that about 90% of travellers would carry carry‑on baggage. Does that number make sense to you?

[Annick Guérard]

The number really varies depending on the routes. For example, for our long-haul flights between Canada and Europe, almost half of the people check their luggage, so it ends up in the cargo hold. The other half have carry‑on baggage in the cabin. It varies by destination.

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

Thank you very much.

I'll now turn to the representatives of WestJet.

We've learned that the famous new $35 fees that will be imposed by Air Canada for carry‑on baggage will be applicable not only on the way out, but also on the way back. In addition, those bags won't even be in the cabin, but in the cargo hold.

Do you have similar policies on your end? Will it still be possible to have bags in the cabin or will they be sent directly into the cargo hold?

[Alexis von Hoensbroech]

I certainly cannot speak to what competitors offer, so I don't know. I can speak to what we offer, and our ultrabasic fare specifies that, if you buy an ultrabasic fare, you cannot bring a large carry-on bag into the cabin. If you have a large carry-on bag, you have to check it in, and then it goes down into the cargo hold.

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

I understand, but if a person pays for cabin baggage and it meets the standards, will their baggage go in the cabin or the cargo hold?

[Alexis von Hoensbroech]

The ultrabasic customers cannot pay for cabin baggage. They can bring their small cabin baggage. If they have a large one, it can only go into the cargo hold.

Part of it is also that it's a choice. Everyone who buys this fare knows this. This is not a surprise. This is something that someone deliberately chooses. We had 1.2 million Canadians who bought an ultrabasic fare, did not bring a bag for the overhead bin and also did not check a bag. That's a real saving.

If they do show up with a bag, it has to go into the cargo hold.

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

Perhaps it's because of the language barrier, but I'm not sure I fully understood the answer.

The reason I'm asking you this question is that a lot of people decide to bring luggage into the cabin because they're afraid it will be lost if it's put in the cargo hold.

If all carriers force consumers to put their luggage in the hold when they're already afraid of losing it, they're ultimately being forced to accept a situation that's the opposite of what they want. Wouldn't you agree?

[Alexis von Hoensbroech]

There's not enough space in the passenger cabin for all the bags that people will potentially want to bring. They have to go into the cargo bay and that's just the case. If a passenger really wants to bring a big carry-on bag, then they can buy a different fare class.

Again, it's all down to choice.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Barsalou‑Duval.

Next we have Ms. Dance.

Ms. Dance, the floor is yours. You have six minutes, please.

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

Thank you so much.

I just want to thank everybody for coming today. Your responses really help us, as members of Parliament, be able to talk to our constituents and keep them informed.

I'm going to go back to the basic fares. I think there were some discussions about the number of people who actually travel with no carry-on baggage.

From WestJet, could you just give me that number again?

[Alexis von Hoensbroech]

So far, since we introduced it, 1.2 million did not check a bag, did not bring a carry-on bag, bought an ultrabasic fare and, collectively, saved more than $20 million.

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

Perfect.

Air Transat had a number that was about 50%, for those who travel with no baggage.

[Annick Guérard]

No, that's not what we said.

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

I'm sorry.