Transport Committee on June 2nd, 2022

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

Thank you, Mr. Chair.

My questions are for Mr. Larivière, as well.

Given the Government of Canada's concept of airports, it really doesn't seem to understand how important regional air transportation is. The focus seems to be on international travel, but flights within Quebec and Canada are even more of an essential service and should be treated as such. That's my opinion, but I'm not sure whether you'll agree with me on that.

Do you think the approach should depend on the airport's designation, or at least it's size or the region it's in? For example, would it be appropriate to say that, in smaller regions, the central government will cover a larger portion of certain fees, instead of having those fees passed on to users? After all, we are talking about an essential service.

[Serge Larivière]

The answer is yes. The thing I would compare it to is mobile data, Internet service. It's like people having access to high-speed Internet in their region. Is it a luxury for someone to have access to high-speed Internet in their region? No, it's an essential tool for people to connect with the rest of the province or country. The same goes for regional air transportation. Canada is a huge country with low population density.

I'll focus on Quebec. Trailing behind everyone else when it comes to regional air transportation comes at a cost. It affects our ability to take advantage of our territory and develop our regions. The current situation is destroying some industries. If people have to pay $500 or $1,000 in airfare to visit a region, it's a death knell for that region's tourism. With prices like that, the Gaspé, the north shore and northern Quebec will never be able to grow their tourism industries.

A number of options are possible. Is there a way to bring down the fees for the smaller airports? Is there a way to bring down Nav Canada's fees for regional routes? Keep in mind that price sensitivity plays a role in regional travel. If I pay $800 to fly to Paris on holiday and I have to pay a $35 airport improvement fee at the Montreal-Trudeau airport, I might not think that's a big deal. However, say I'm going to Gaspé for the weekend and my ticket is going to cost $300 or $400, and then I have to pay a $150 airport improvement fee. Relative to the ticket price, the airport improvement fee is way too high. The air carrier can't do it.

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

Do you know of other countries that do a better job of ensuring the viability of regional air transportation? Can you give us any examples?

[Serge Larivière]

You don't have to look far. The U.S. is one. Canada went a different route than the U.S., and that happened decades ago. The Americans invest in their airport infrastructure, whether it's public or private, as soon as the airport offers commercial flights. The Federal Aviation Administration in the U.S. covers 90% of infrastructure costs. Here, in Canada, airports are told to look after themselves. That is why Montréal‑Trudeau International Airport, Québec City Jean Lesage International Airport and other such airports are forced to pass on infrastructure improvement costs to passengers. It's the same thing for regional airports.

I will say that we receive some help through infrastructure programs, but they don't cover all of the debt associated with capitalization or operational losses stemming from the fact that our airports have fewer passengers than our larger counterparts.

Canada could certainly do a number of things to remedy the situation, and all it has to do is take its cue from its neighbour to the south, the U.S.

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

A few years ago, I had the opportunity to meet an airline representative, and they told me that government taxes made up about 40% of the price of an airline ticket paid by regional air travellers. Do you think more people would take regional flights if they cost 40% less?

[Serge Larivière]

The answer is definitely yes. That's self-evident.

Transportation is a product like any other product, so price matters. Is there some price elasticity? Absolutely.

At Mont-Tremblant, we tested that price sensitivity with Ontario-based carrier Porter Airlines. A return trip between Toronto and Mont-Tremblant costs $350—which is unheard of in Quebec, by the way. No other region can offer a return trip for $350. We are filling airplanes with 78 seats. There's a market for flights under $400. At that price, people will fly regionally. We tested the market, and we saw it for ourselves. When the ticket price costs $400 or $500, people opt to drive instead. When a destination is too far away by car—Gaspé is an eight-hour drive—people just don't go, or they opt to fly to Cancún with our friends at Air Transat or Air Canada because it's cheaper than flying to Gaspé.

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

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Larivière.

Thank you, Mr. Barsalou‑Duval.

Mr. Bachrach, you will take the final spot today. The floor is yours, and you have six minutes.

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

Thank you so much, Mr. Chair, and thank you to both of our witnesses. That was a very interesting presentation by Mr. Larivière.

I'm going to focus my questions towards Mayor Atrill. I think there are some real similarities here, because we're talking about the affordability of air travel in smaller communities in more rural regions, and the impact on economies.

Mayor Atrill, I'd like to start off with a question about the economic impact of airline pricing and scheduling on the community of Smithers and the surrounding area.

[Gladys Atrill]

We feel the weight of that. For the benefit of the other folks here, from Smithers, our nearest community, it's two and a half hours down the road to the nearest airport. We feel a bleed when people feel the attraction, as the previous witness said, of a cheaper flight. It's one thing to have passengers making the decision, but also, because there has been a decision to increase the frequency from our neighbouring airport as well, there seems like a greater attraction in price and a greater attraction in opportunity. It's not just individuals making a decision to choose a different or a cheaper flight. It's businesses also making a decision that their businesses might be better served.... Even though, primarily, our community—Smithers and the Bulkley Valley—might have been the community of choice, economy matters, so if there's increased frequency and sometimes the perception, often the reality, of a lower price from a neighbouring community....

Again, it is the same mileage, as I mentioned before, so it's often the same aircraft and the same flown miles, but the price is cheaper. Those are things that are very difficult for us to compete against, so once a business chooses to relocate to another community, it's very difficult to get it back. It may be a small business, but sometimes these are large industrial operators that are going to take residents with them.

There's a whole cycle that happens after that. When businesses and residents choose to relocate, it takes from you some of the things that drive your community. I was listening the other day to decisions being made regarding health care and how health care services may be located. These things link together, so it's hard to tether out only the impact of the cost of air travel, because it spills out to the entire success of the community, whether or not businesses will be there, whether extenuating programs will be located there, and particularly, as the previous witness commented, on tourism. We're a tourism centre, so our tourism businesses have to be able to greet their clients, and clients have to be able to connect to other communities, so they're not going to overnight in Vancouver and then overnight in Smithers because we have one flight per day. The economic and cultural cost to the community with the relocation of businesses, I think, is severe.

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

Thank you so much, Mayor Atrill.

The Smithers airport is a municipal airport. Many of the costs of operating an airport are fixed costs. If revenues from airlines decrease due to scheduling decisions or competition from neighbouring airports, what kinds of choices is the municipality forced to make?

[Gladys Atrill]

There are not many choices to make. We have limited places to get money, so as I mentioned previously, prepandemic, the airport ran almost as an independent business, even though it is owned and operated by the municipality.

COVID showed the weakness of that. As the revenues dropped, the places where we could get money were through relief, and there was some of that, which was helpful, but the source we have to get money is taxation. Smithers is a community of 5,400 people. It's a very small community. The airport serves a larger geographic area, but we do not have the ability to tax or collect money from others. We are attempting to do that, but that is not actually what exists now. If there are costs or shortfalls at that airport, the last-ditch place to get the money is from the residents who live there, through taxation. We haven't gone there, but it got awfully close in the last couple of years.

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

Thank you, Mayor Atrill.

We heard from Mr. Larivière a moment ago that in the United States the federal government plays a much bigger role in funding airport infrastructure. I understand, and you mentioned in your opening remarks, that the Smithers airport has an airport improvement fee that is charged to passengers. I'm wondering how this affects affordability and whether there might be better approaches to ensuring that airport infrastructure is maintained.

[Gladys Atrill]

It does affect affordability. It's less obvious than it used to be, because it's hidden in the fee, but of course people know it's there. We have a fairly high passenger fee. It's $30 per person. It's high, and people know it's there.

There's one thing I think, though, about requirements for a certain level of service. The federal government regulates the airports and tells us how to operate them. That's okay, except that, as a small airport, sometimes we're told we have to upgrade something or that a system is not adequate and must be upgraded by a certain time. That's fine, but because we are so reliant on the grant system, it seems to me—not just with airports but with many systems where we fall under the regulation of other orders of government—if you know we must make an improvement in order to function, what I suggest is that the money should be there at the same time.

If we receive a new regulation that says lighting must be to a certain standard or water must be to a certain standard, and it's known that the only place to get the money to do that is through a federal grant, why don't they come together? Otherwise, it puts all this tension on a local service provider, the municipality, which is then trying to figure out how it can possibly get the money.

We don't write the regulations, but we have to respond to them in the time frame given, and the only place we have to go to get the financing is to other orders of government. I think one of the things that makes sense is, rather than creating the heartache and agony, attach the funding to the program. Then, when you tell us to do something, we know how and by when.

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

Thank you.

I know smaller airports rely really heavily on the ACAP program to support their infrastructure. Are there ways the federal government could strengthen the ACAP program to better meet the needs of airports such as Smithers?

[Gladys Atrill]

The ACAP program has been amazing for us. We rely on it and, because it often offers a very high percentage of the money required, that speaks almost to what I was saying before. It's back to letting us know in a timely way that the money required to meet the regulatory requirements—be it equipment, keeping the runway clear or keeping the lights on—is going to be made available in a timely way, so that we're not going to get close to being out of the reporting regime and so that we're not close to failure by not meeting some requirement. I just think that, when tethering the instruction to do something by sometime, the regulation ought to be more closely linked to the opportunity to get the funding to do it.

I concur with the previous witness. These small airports are critical to the people who live in rural and remote parts of Canada, and it's not just for the citizens there. It's for our entire province. We are a resource centre. We provide much to the rest of the province and to the country, and we need that kind of support to keep our community healthy and thriving.

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

Thank you so much, Mayor Atrill, for being here today. Thank you to both of our witnesses. I'm going to hand the balance of my time back to the chair and wish everyone a good day.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Bachrach.

I will echo what you said and thank Mayor Atrill, as well as Monsieur Larivière, for their testimony today. We very much appreciate it.

This meeting is now adjourned.