Transport Committee on Oct. 3rd, 2022

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting number 31 of the Standing Committee on Transport, Infrastructure and Communities. Pursuant to Standing Order 108(2) and the motion adopted on Thursday, February 3, 2022, the committee is meeting to study the issue of reducing red tape and costs on rural and urban Canadian airports.

Today's meeting is taking place in a hybrid format, pursuant to the House order of Thursday, November 25, 2021. Members are attending in person in the room and remotely using the Zoom application.

Members of the committee, today we have appearing before us Mr. John Gradek, faculty lecturer and academic programs coordinator of supply chain, logistics, operations and integrated aviation management at the school of continuing studies at McGill University. Welcome.

We also have Patrick Charbonneau, mayor of Mirabel.

From the Public Interest Advocacy Centre, we have John Lawford, executive director and general counsel.

In the second half of today's meeting, we will have Tom Oommen, who is the director general of the analysis and outreach branch at the Canadian Transportation Agency.

We will begin the opening remarks with Mr. Gradek.

The floor is yours.

[John Gradek, Lecturer and Academic Programs Coordinator, Supply Chain Management and Logistics, and Aviation Management, School of Continuing Studies, McGill University, As an Individual]

Thank you very much.

Good afternoon, members of the committee.

My name is John Gradek. I'm a faculty lecturer and academic programs coordinator for supply chain and aviation management at McGill University's School of Continuing Studies.

I'd like to start by thanking the committee for inviting me to appear today to speak on the issue of reducing red tape and costs on rural and urban Canadian airports.

My professional credentials to speak on this very important subject come from close to 20 years in direct aviation in operations at Air Canada, in several operating roles in marketing and planning, as well as teaching commercial aviation at McGill for the last 10 years.

One of the things I've done in my current role at McGill is give the students I work with, both undergraduate and graduate, the opportunity to understand the intersection between things like the supply chain and the best practices associated with airport infrastructure and airport capacity.

The evolution of the Canadian airport structure is well known to committee members, so I won't go into that detail. I will focus my remarks on the relationship between the federal government and Canada’s airports, particularly over the last three years.

It is no secret that commercial aviation was impacted as never before with the onset of the COVID-19 pandemic. In many corners of public health and economics, commercial aviation was identified as an enabler of the rapid spread of the pandemic, and governments reacted to such expression of concern by literally shutting down international air travel, back in the early days of 2020.

The aviation industry reacted quickly to this shutdown of operations by cutting staff and selling off assets in order to cut expenses and minimize risk to air service. The airports and agencies that work within airports proceeded to make massive layoffs in response to the effects of the reduction in air service.

Several Canadian airports expressed the need for additional funding to support core infrastructure, and some minor support programs were implemented.

Airlines could avail themselves of the LEEFF program assistance offered by the federal government, but no such direct funding was available to Canada’s airports. Many resorted to taking on additional debt, a financing burden that has longer-term implications for the financial viability of these airports.

An important element in McGill's academic programs is public administration and governance, and such governance issues must now be addressed for Canadian airports. The underlying principle we have in airport revenue generation has been and continues to be “user-pay”, wherein Canadian airports are directed under the terms of their Transport Canada leases to look at entities at the airport to generate sufficient revenues to cover their financial requirements. We are seeing a lot of pressure on Canadian airports to modernize their facilities, pay off increasing debt levels and maintain a safe and secure operation.

Airport administration fees have been the subject of debate for many years, a target of low-cost carriers, most recently, looking to offer airfares that have a similar look and feel to what European and American air travellers have become used to. These airport improvement fees seem to be a target for these low-cost carriers, which say that they cannot offer low fares to Canadians because of these fees that are charged. We now see Canadian airports increasing their AIFs to attempt to shore up their financial status. For example, as of January 1, 2023, Toronto Pearson will be increasing its AIF from $30 to $35.

In light of all this, one has to wonder if the current Canadian airport governance model is still the best or if it might be appropriate to consider another. As for me, I believe the current model is no longer the best and that it should be reviewed.

Thank you for your attention. I am pleased to answer any questions you may have.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Gradek.

Next, we have the mayor of the city of Mirabel, Mr. Patrick Charbonneau.

Mr. Charbonneau, you have the floor for five minutes.

[Patrick Charbonneau, Mayor, City of Mirabel]

I thank the committee for having me.

I'd like to tell you the story of our town. Since 1969, the year the then federal Liberal government decided to build an international airport in Mirabel, our town suffered many mishaps that have had direct and, at times, irreversible impacts on our citizens and on municipal development.

This airport, built at surprising speed—under five years—came at a cost of over $500 million. Mirabel was meant to become the main airport for international flights. In the medium term, there were even plans to expand it to meet future needs.

In order to build this 21.1-square-kilometre airport site, the government had to expropriate 97,000 acres of land. At the time, the city of Mirabel, especially the Sainte‑Scholastique sector, made their living from agriculture, and a great many of its residents practised subsistence farming. This is still the case today. The expropriations led to the loss of many farms and family homes, as well as job losses. Without any land to farm, it became difficult to plan for the economic development of the airport sector and neighbouring sectors, mainly because of the easement around the airport preventing any kind of development.

The last passenger flight out of Mirabel occurred in October 2004. From that moment forward, the airport would only handle commercial flights, cargo transport and activities related to aircraft manufacturing. Residential and commercial development is still quite limited in the area, since many parcels of land are still encumbered by the easement preventing construction, which has become outdated, and more importantly entirely irrelevant, since the land was never used as it was intended to be used. The assessors believe this easement to extend several kilometres beyond the runways.

For our municipality, this easement is impeding the development of several sectors, including Sainte‑Scholastique, which has roughly 1,600 residents, Sainte‑Monique, which has 400, and Saint‑Augustin, which has slightly over 14,400 residents.

Specifically, here are the direct impacts of this easement on our community: limited residential and commercial development in the sectors involved; devitalization due to a lack of infrastructure development; devaluation of those sectors in the municipality with the fastest-growing population; a lack of economic development and public services; the uprooting of residents and their families from an area where they've lived their entire lives.

Our wish is then to allow our people to get what they're entitled to, in other words access to proper infrastructure that meets the current needs of a society deserving of respect in the area in which it chose to live. For that to happen, we need your co-operation in order to lift the easement that will allow for the completion of a variety of projects that will benefit a generation that has suffered a great deal. I can think of the proposed seniors' residence in the Sainte‑Scholastique sector, which happens to be the subject of a petition signed by over 200 citizens of Mirabel. A day care centre could also be built in Sainte‑Monique.

In conclusion, we're happy to be able to speak to you about some of the projects we have and which will require your co-operation in lifting this easement around the airport preventing further development. The goal of all of these projects is to offer quality services to our citizens.

We remain at your disposal to answer any and all questions you may have that would allow us to move forward on this issue.

[The Chair, Liberal, Peter Schiefke]

Thank you, Mr. Charbonneau.

The floor now goes to Mr. Lawford.

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

[John Lawford, Executive Director and General Counsel, Public Interest Advocacy Centre]

Mr. Chair and honourable members, my name is John Lawford. I am the executive director and general counsel at the Public Interest Advocacy Centre here in Ottawa.

PIAC is a national, not-for-profit and registered charity that provides legal and research services on behalf of consumer interests, in particular vulnerable consumers' interests, concerning the provision of important public services. PIAC has been active in the field of air passenger protection and policy for 20 years.

The air passenger protection regulations are not red tape. Removing or amending them will not ease airport delays or reduce traveller frustration. The APPRs are hard-won redress and fairness for the flying public. Modern air transportation regulatory schemes throughout the world have such rules, including the EU and the U.K.

There is currently a problem with a backlog of consumer complaints at the Canadian Transportation Agency, CTA. There are somewhere between 16,000 and 20,000 that are about a year old. This backlog is due in part to bad timing, as the APPRs were proclaimed just before COVID-19, in the fall of 2019.

However, it has always been the position of PIAC that the APPRs were going to generate a backlog. The CTA's facilitation, mediation and adjudication streams within a quasi-judicial formal framework are a ridiculous approach to dealing with high-volume, low-value consumer redress for such routine and, unfortunately, now chronic issues as flight delays and cancellations.

A better model is a dedicated administrative complaints agency with a regulatory overseer for systemic issues. This administrative model is currently in place for telecommunications and broadcasting; it's called the CCTS. For banking and investments, we have the OBSI. The federal government should not abandon the APPRs but should remove them from this formalistic tariff-like adjudication process.

We also note that consumer baggage complaints cannot be solved through changing or improving the APPRs. The APPRs effectively say nothing about baggage. Due to the Carriage by Air Act, the Montreal Convention stipulates that compensation for delayed or lost baggage must be contained in the domestic tariffs of the aircraft carriers. This means that consumer frustrations with baggage can only be solved with a directive for airlines from either the minister or the CTA to meet a minimum standard in their tariffs.

PIAC also wishes to underline that the present APPRs are under attack by the airlines, first by styling all crew shortages to be safety cases. WestJet has appealed from the CTA to the Federal Court of Appeal, the issue being whether staffing is within the airlines' control and therefore whether the safety exemption to the APPRs compensation for a delay or cancellation can be applied by the airline. We note that, in the European Union, under the passenger protection regime there, staff shortages must be planned for and compensation must be paid, with the implicit message to airlines not to schedule flights for which they cannot manage their labour supply.

Second, major Canadian as well as U.S. and European air carriers, along with IATA, are also challenging the entire APPRs, at least for international flights, at the Federal Court of Appeal as conflicting with the Montreal Convention. This committee can and should, by contrast, express its undying support for the APPRs despite their growing pains and challenges. Consumers do need them.

Moving now to airports more specifically, Canadian airports are fragile. They are largely a hybrid of public-private partnerships, and COVID-19 has exposed the fragility of this model when the usual flow of commerce is interrupted. Likewise, CATSA and Nav Canada are privatized emanations of the entire airport matrix, and they face sudden economic pressures during a financial downturn like COVID. Short of renationalizing these entities, we are resistant to these parties all pointing the finger at each other, and we wonder whether the minister might come in and help.

Finally, we note that major airlines fired or retired workers during COVID-19. They made their own labour shortage, despite taking large CEWS amounts that were intended to keep staff on the payroll. Most of the airlines also took some of the money offered as bailouts—not WestJet, and Air Canada did take amounts only for consumer refunds—but they were not required to rehire or to be ready to restart at the level that we see at airports now. This money only supported their balance sheets while COVID requirements faded away.

I thank you and look forward to questions you may have.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Lawford.

We will now begin with our first round of questioning. To get us started, we will have Mr. Muys.

Mr. Muys, the floor is yours. You have six minutes.

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

Thank you very much, Mr. Chair.

Thank you to our witnesses, both here in the room and online, for their testimony today.

The study, of course, is focused on reducing red tape and costs in our airports in Canada, so I want to bear that in mind with this line of questioning.

Mr. Gradek, I'd like to draw upon your 20 years of experience in the sector—operations, marketing and now teaching are what I heard. I think we'd be remiss if we didn't hear some more testimony that's going to add to our study.

First of all, you mentioned a new governance model. With the frame of mind of how we can reduce red tape and improve cost efficiency for Canadian travellers and, of course, the carriers themselves, maybe you could elaborate a bit more on that and what we should be including in the recommendations.

[John Gradek]

The issue about governance is really important, that we try to understand that we have airports that are major drivers of economic growth in this country. We need a strong and financially viable airport system to make this thing work. I think it's important that we have a way in which we can in fact sustain the current state of the airports. More importantly, we need to invest in airports and have airports become key vehicles in terms of growth and sustainability of the Canadian economy.

If I look at other models around the world in terms of how airports are financed and have been able to sustain growth and invest in infrastructure, there has been a significant amount of private money put into the system, whether it's share capital or concessions. We even have large Canadian funds, such as pension plans like the Ontario Teachers' Pension Plan, that are major investors in European and Asian airports. They're basically there to support growth and invest in airports.

We don't have such a vehicle in Canada. The vehicle in Canada for airports is debt-based and user-pay. I think we need another vehicle within the airport environment in order to grow the airport structure we have and to renew the airports.

The other thing is on smaller airports. We have hundreds of smaller airports. The problem with the smaller airports we have is that there is no real funding mechanism in the airport infrastructure to renew that infrastructure base, that capital base we have in smaller airports. That's where the other governance model needs to have some way of looking at how we in fact invest in smaller airport infrastructure to maintain viability and improve their infrastructure.

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

Thank you for that.

In my own constituency, the Hamilton International Airport is certainly a key driver in our local and regional economies and one of the major cargo airports in the country. It's growing very rapidly and is full, in essence, because of that lack of forward planning and investment.

I know we can't judge the situation based on just the last few years, but obviously there are problems that are choking our airports. Toronto, of course, being deemed the worst airport in the world, is an embarrassment for all Canadians. There are the delays, the baggage mayhem, all of the issues we've seen over the past summer.

What would be your vantage point on what's choking our airports, and how do we get out of that and move forward?

[John Gradek]

I think what you're seeing at Pearson and at the Montreal Trudeau airport is not lack of infrastructure. We had capacity in both airports to operate the schedule that can be put through those airports. If you look at the flight movements in 2019 in both Pearson and Trudeau, they're significantly lower today than they were in 2019, yet the 2019 performance was acceptable. It wasn't great, but it was acceptable.

The issue is not lack of investment at Pearson and Trudeau. It really is a question of how you manage the asset, in terms of looking at adequate resources to make the best use of the assets.

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

What fell down in the last three years? What are the pain points that we can fix?

[John Gradek]

I think it's pretty obvious. When you talk about March 2020, when industry was shut down by government policy, the airlines, the airports, the air nav people, everybody basically shut down their staffing and released people in order to save their P&L, their operating line.

Now passengers are coming back in droves, and we do not have the capability, the capacity people-wise and operating-wise, to be able to support that growth. That's where it choked off in the spring of 2022.

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

Thinking about your 20 years of experience, if there was one piece of red tape you could cut immediately that would have a significant impact, what would that be?

[John Gradek]

When you're looking at the airports and how the airports work today, and whether there is anything in their administrative practices that would have resolved the problem we saw, I don't think there is.... I think the only thing that was missing, really, was the authority by the airport to manage the demand of their services and understand what the infrastructure was capable of handling. They needed to basically exercise that responsibility and accountability, and say, “There's only so much we can handle through this airport.” That was not happening.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Muys.

Next, we have Mr. Iacono.

Mr. Iacono, you have six minutes.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Thank you, Mr. Chair.

I thank the witnesses for being with us today.

Mr. Gradek, it appears that airlines offered too many flights this summer, more than the network could handle. In fact, you made the following observation:

“The airlines have been very greedy”.

Could you elaborate?

[John Gradek]

In the spring and summer of 2022, the airlines saw an increase in demand. In response, they decided to significantly increase the number of flights. They had the aircraft and the pilots they needed and proceeded to embark on a major marketing campaign. Then they released a very busy flight schedule without first checking the airports' handling capacity or even their own airport capacity. I had to wonder why they were in such a rush to meet demand.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Are you referring to international flights, domestic flights, or both?

[John Gradek]

I'm talking about all flights. The airlines were greedy, especially when it comes to international flights, but domestic flights as well.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Okay.

Going back to the congestion issues over the summer, are there any other countries or foreign airlines that better handled the situation? If so, could you identify them and tell us what lessons we might learn from them?

[John Gradek]

Everywhere on the planet, the airline industry went through a pretty tough time, during which it had to assess the available capacity and the impact on services. Several airlines and many European and Asian airports, such as Schiphol in the Netherlands and London's Heathrow, made significant efforts to better align available capacity with the number of flights being offered. The airlines made parallel efforts to lessen the impact of their activities on airport capacity, with a view to supporting their own activities and better serving their passengers.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

You named a number of airports but no airlines. Could you name one or two?

[John Gradek]

I'm thinking in particular of a handful of American airline companies that made some effort over the last few months to really cut back on the number of flights being offered. American Airlines, United and even JetBlue cut back on 10% to 15% of their operations in order to better match available airport capacity.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Thank you.

Some time ago, you publicly stated that the airlines ought to speed up the rehiring process in order to return to the staffing levels needed to make the system more functional. Are you still seeing significant labour shortages?