Transport Committee on June 2nd, 2022

[Suzanne Acton-Gervais]

The pandemic has been hard on everybody, with no exceptions. It has been particularly hard on Canada's airlines and their workers. The pandemic has exposed vulnerabilities and shortcomings in how the industry is funded. We have a unique opportunity, coming out of the pandemic, to address these issues and improve the viability of the industry as a whole.

The federal government could take immediate steps by reviewing all third party fees and charges and consider reinvesting these back into airports. Further to that, I could add that we need a path and a plan as we go through the ebbs and flows of the pandemic and the possible new variants.

We are eager to continue to work with the Government of Canada to ensure the ongoing operations of our airlines and, of course, the larger travel and tourism industry as a whole.

[Vance Badawey, Liberal, Niagara Centre, ON]

That's wonderful.

Thank you, Mr. Chairman.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Badawey.

The next speaker is Mr. Barsalou-Duval.

You have the floor for six minutes.

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

Thank you, Mr. Chair.

It is my turn to thank the witnesses for their presence. We are very grateful to them.

My first question will be for Mr. Liebman, from Air Transat.

We recently learned that Air Transat has partnered with Pascan Aviation to facilitate connections to international destinations from regional airports. Some might say that this arrangement is a win-win situation, where one carrier benefits from the other carrier's traffic. This is a type of arrangement that can be seen in other areas as well. What is interesting in this case is that we are talking about regional air transport.

Mr. Liebman, do you think there will be more associations like this in the future? Do you think that if there were agreements of this type throughout Quebec and Canada, it would allow for a better coexistence of large companies and small carriers?

[Howard Liebman, Senior Director, Government and Community Affairs, Air Transat]

Thank you for the question.

Thank you also for the invitation to appear before the committee.

The answer to your question is yes. We're very proud of this agreement and we anticipate that there will be others. It's very encouraging to travellers, because it greatly facilitates the customer's experience. That's why we've introduced code-sharing with Pascan Aviation. It's a two-way street: the goal is to bring more international visitors to the regions and to give our customers from all regions easier and more affordable access to Air Transat's international network.

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

Air Transat does not offer regional transportation, but, indirectly, regional transportation could benefit from policies of this kind.

How could the government facilitate the implementation of similar agreements?

[Howard Liebman]

I would direct the question to my colleagues who are in regional transportation.

Having said that, Air Transat certainly supports any policy initiative to encourage regional tourism. Canada has a lot to offer, and regional tourism is an important economic driver in almost every region. Such initiatives are therefore welcome.

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

Would anyone else like to add anything?

[David Rheault]

In terms of regional transportation, what's important to know when you talk about competitiveness and the costs imposed on the industry is that the volumes are smaller in regional markets, so the impact of higher costs is felt more.

As part of its study on how to reduce costs to the industry, the committee should look at all the costs in the ecosystem, whether it is the rents that the government charges airports, the taxes that airports have to pay to municipalities that have no equivalent in the United States, or the impact of the pandemic on navigation fees. Obviously, all these costs are reflected in the costs of transportation. In the smaller regional markets, the impact is greater because there are fewer customers to absorb these increases.

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

Mr. Gibbons, I'll give you the opportunity to respond as well. I was basically talking about interline agreements, but perhaps you would like to add to what has been said so far.

[Andy Gibbons]

I have a few comments.

Allow me to respond in my own language.

On regional travel, we've signed many interline agreements and co-chair agreements and have been innovative. We didn't need the government to encourage us in this direction. There was a market that we wanted to serve.

A great example of that is in western Canada, where we partnered with Pacific Coastal, a smaller British Columbia-based airline. We jointly share the operations of C-32 aircraft so we can bring service to places like Medicine Hat, Lethbridge, Lloydminster, etc., many communities that had never had any competition. Out east, we have a full interline agreement with PAL.

Coming out of the pandemic—and Monsieur Rheault touched on this—it's become increasingly clear that regional travel is how these communities across Canada stay connected to each other in the world. However, the way that the government treats air travel under the user-pay model is very different from other modes of transportation.

If you look at a province like Newfoundland and Labrador.... The federal government currently subsidizes rail passengers—I have nothing against rail—from Montreal to Moncton, to the tune of hundreds of dollars each.

[Churence Rogers, Liberal, Bonavista—Burin—Trinity, NL]

We don't have railways.

[Andy Gibbons]

Mr. Rogers said it; he does not have railways.

We need to look at intermodal equity. If you're looking at recommendations on how regional travel and transportation can come to life and be more cost competitive, I would say take a very close look at how the federal government treats different modes of transport in terms of taxation, and how it treats the air traveller—not the airlines, but the air traveller. There might be some policy answers there.

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

Thank you very much.

Mr. Liebman, I will continue with you.

Of course, other companies than yours have been hard hit by the pandemic, but, as we know, there has been a lot of talk about Air Transat in recent years. Despite all the current difficulties, the travel industry is doing better.

What measures could the government put in place to allow your company in particular to do better going forward?

[Howard Liebman]

Thank you for the question.

I want to point out to everyone that Air Transat was closed twice during the pandemic, for a total of 10 months. This winter, we were also affected by the omicron variant. So the impact has been great. Our industry was among the first to be affected by this crisis and is among the last to emerge.

I would humbly suggest that the study this committee is undertaking is perhaps an opportunity to review the whole issue of fees and taxes in the system, taking into account our sector's contribution to the Canadian economy and its competitiveness internationally, compared to the situation in other countries.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Liebman.

Thank you very much, Mr. Barsalou-Duval.

Next we have Mr. Bachrach.

Mr. Bachrach, the floor is yours, and you have six minutes.

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

Thank you very much, Mr. Chair, and thank you to our witnesses for being here today.

I will ask for my colleagues' forbearance while I ask some questions that are very specific to northwest B.C., but I imagine they would apply also in other areas of Canada.

In the region I represent, there's a vast discrepancy in the price air passengers pay for flights to the same hub airport. For instance, I had my staff look at the cost of flying in the first week of July, from Terrace to Vancouver, from Smithers to Vancouver and from Prince Rupert to Vancouver. The lowest fare each day to fly from Terrace to Vancouver averaged $198. From Smithers to Vancouver, it was $302, and from Prince Rupert, it was $443. These are the same airplanes, approximately the same distance and yet a dramatically different cost. This is something that has a profound impact on communities that are facing unaffordable airfares.

Ms. Acton-Gervais or Mr. Rheault, I'm curious as to whether you could explain why it costs over double to fly out of Prince Rupert and half as much again to fly out of Smithers.

[Suzanne Acton-Gervais]

High taxes and fees imposed on airlines and travellers create a competitive disadvantage for our aviation industry. Facing fewer travellers during the pandemic, a number of institutions have increased their fees to compensate. The federal costs that airlines absorb, such as airport rents, air traveller security charges, airport improvement fees, Nav Canada fees, city taxes and federal taxes, all play a role in why costs are so high.

There's also the landscape of our country being so vast, and our population being smaller than in other foreign jurisdictions, for example.

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

I have very little time, so I'm going to ask Mr. Rheault if he understands the geography and can speak to the specific situation, because I don't think it's the taxes and fees in those different communities. They are very similar airports.

Perhaps, Mr. Rheault, you wouldn't mind commenting, because Air Canada is the primary carrier that we're concerned with. That would be appreciated.

[David Rheault]

It's difficult for me to comment on the average price. The price always depends on the market. It depends on offer and on demand. It also depends on the number of seats available on the aircraft and at what time they are booked.

I'd be pleased to follow up with your office and discuss if there are particular issues regarding your riding.

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

In my previous role, I met with you several times—or rather, I met with your company to talk about this specific issue. Terrace is the only community where WestJet is a major competitor for Air Canada. Is the lack of competition what is allowing Air Canada to charge prices that are half as much again and twice as much out of Smithers and Prince Rupert respectively?

[David Rheault]

I would say that air transport is a very competitive market in Canada. Prices in the different markets depend on different realities.

As Ms. Acton‑Gervais said, it's important to understand that the industry is emerging from a very difficult period. We must therefore take into consideration the issue of the resumption of demand.

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

Mr. Rheault, this has been a problem for five or 10 years. It has been the same issue facing these communities. I met with Air Canada several years ago and was told that because WestJet had entered the Terrace market it had driven down prices, and it was going to be a very temporary situation because there was no way that WestJet was going to be able to sustain those prices.

That was years ago, and still the price is twice as much to fly out of Prince Rupert and half again as much out of Smithers. Why, when you're flying the same airplanes and flying the same distance, are customers in some communities paying so much more? It can't possibly be fair.

[David Rheault]

I can't respond to comments made at a meeting held several years ago and that I didn't attend. I can't comment on that, but I could check with my colleagues.

As I said, each price in the different markets depends on the different realities of each market.

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

Okay. Perhaps shifting back to Ms. Acton-Gervais, there has been some talk here about the vaccine mandates. I know that people are asking a lot of questions, particularly about the domestic air travel mandate. I understand the government being a bit evasive when the questions are coming from the opposition, but in your industry, you're a major stakeholder, and you clearly have conversations—honest, heart-to-heart conversations—with the government about your industry. You've said that this particular mandate is a concern for you. Has the government explained to you why this is still in place? Has it talked to you about the mechanism it sees affecting pandemic outcomes?

I don't know if that's a clear question.