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37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Thursday, October 9, 2003

0910

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))

Mr. Paul Mulrooney (President, Air Georgian Limited, Air Georgian clba Air Alliance)

The Chair

Mr. Paul Mulrooney

0915

The Chair

Mr. Paul Mulrooney

0920

The Chair

Mr. Paul Mulrooney

The Chair

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance)

Mr. Paul Mulrooney

Mr. James Moore

Mr. Paul Mulrooney

Mr. James Moore

Mr. Paul Mulrooney

Mr. James Moore

Mr. Paul Mulrooney

Mr. James Moore

Mr. Paul Mulrooney

0925

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

Mr. Paul Mulrooney

0930

The Chair

Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

Mr. Paul Mulrooney

0935

Mr. Roger Gallaway

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance)

The Chair

0940

The Chair

Mrs. Lynne Yelich

Mr. Paul Mulrooney

Mrs. Lynne Yelich

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

0945

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. Paul Mulrooney

The Chair

Mr. James Moore

The Chair

Mr. Mario Laframboise

Mr. Paul Mulrooney

0950

The Chair

Mr. Paul Mulrooney

The Chair

The Vice-Chair (Mr. James Moore)

Mr. George Petsikas (Director, Government and Industry Affairs, Air Transat)

1005

1010

1015

The Vice-Chair (Mr. James Moore)

Mrs. Lynne Yelich

Mr. George Petsikas

Mrs. Lynne Yelich

Mr. George Petsikas

Mrs. Lynne Yelich

Mr. George Petsikas

Mrs. Lynne Yelich

Mr. George Petsikas

Mrs. Lynne Yelich

Mr. George Petsikas

Mrs. Lynne Yelich

Mr. George Petsikas

1020

Mrs. Lynne Yelich

Mr. George Petsikas

The Vice-Chair (Mr. James Moore)

Mr. George Petsikas

The Vice-Chair (Mr. James Moore)

Mr. Mario Laframboise

Mr. George Petsikas

1025

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

1030

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

Mr. Mario Laframboise

Mr. George Petsikas

The Vice-Chair (Mr. James Moore)

Mr. Marcel Proulx (Hull—Aylmer, Lib.)

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

Mr. George Petsikas

Mr. Marcel Proulx

The Vice-Chair (Mr. James Moore)

Mr. Larry Bagnell (Yukon, Lib.)

1035

Mr. George Petsikas

Mr. Larry Bagnell

Mr. George Petsikas

The Vice-Chair (Mr. James Moore)

Mr. George Petsikas

Mr. Larry Bagnell

Mr. George Petsikas

1040

Mr. Larry Bagnell

The Vice-Chair (Mr. James Moore)

Mr. Larry Bagnell

Mr. George Petsikas

1045

Mr. Larry Bagnell

The Vice-Chair (Mr. James Moore)

Mr. George Petsikas

Mr. James Moore

CANADA

Standing Committee on Transport

NUMBER 036

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, October 9, 2003

[Recorded by Electronic Apparatus]

¿ (0910)

[English]

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): When we have a quorum, we will put the motion for the study of Bill C-26, for the budget of $100,400 for witnesses' expenses to be agreed to, and that the chair be authorized to submit it to the liaison committee. As soon as there is quorum, we will put that motion.

But in the meantime, I welcome Mr. Mulrooney from Air Georgian. Thank you for coming this morning, Mr. Mulrooney. I apologize for the lack of members, but your evidence will be transcribed and they will all have copies of it.

The normal process is to give some form of introduction, and then there will be questions from the floor. If we proceed that way, make yourself comfortable and maybe you could start by telling us the areas Air Georgian flies to. That would be very helpful.

Mr. Paul Mulrooney (President, Air Georgian Limited, Air Georgian clba Air Alliance): Thank you very much for letting me appear before the committee this morning. And some ears are better than no ears at all, so I thank the committee members who have shown up.

Air Georgian is a subsidiary of Georgian Aircraft. It's a Toronto-based company employing approximately 200 people. Our business is divided into general aviation, which consists of cargo and charter on-demand type of flying, contract flying, and a provision of tier III scheduled services for Air Canada, mostly in the 20-seat and under category of aircraft.

Under our tier III code share with Air Canada, we operate up to 85 flights a day from Pearson International Airport. They go to various domestic and transborder routes. A sampling of that would be Toronto-Albany, Toronto-Manchester, Allentown, Pennsylvania. We also do some domestic routes to the small centres such as Sarnia, Kingston, North Bay, those types of areas. Toronto is our hub.

We're a 100% privately owned Canadian company. The company was originally started back in 1987 and it progressed into scheduled services in 1996. We originally started out with the ailing Canadian Airlines and switched over to Air Canada as a tier III service provider when Canadian Airlines folded into Air Canada.

That's a bit of basic history about our company.

The Chair: What planes do you usually fly?

Mr. Paul Mulrooney: We use a Beech 1900D type of aircraft. It's an 18-seater, twin engine, turbo prop.

I asked for and received permission to come to testify because, while I can offer no great insight into what the bill should be, I thought it was important that we at least put our comments on the record on what we thought the bill shouldn't be.

On the surface, it would appear that Bill C-26 would have little detrimental effect on a company such as ours, since we provide a service mostly to the bigger carriers. Perhaps it might even be conceived that it would be of some benefit to us, but this appearance would be deceptive and misleading at best.

The sections with which we are primarily concerned would be proposed sections 60, 66, and 85, dealing with the advertising rules and restrictions as presented in the bill. It's really not entirely clear what would be advertised in terms of an entire package tour. At the present time, if you thumb through the newspapers or any of the travel brochures, cruise ship tours advertise the cost of their packages. How you get to Florida or wherever that tour may start from is entirely up to you. I think there's a small disclaimer in any of the advertising at the present time that the trip starts from Florida, or wherever the trip may start, but that's the only insight you get that there are extra costs involved in being able to complete that tour you've just bought. The natural question that springs to mind is why the airline industry would be singled out to do chapter and verse on services that they are probably not even involved in.

Retail outlets, from hamburger outlets to coffee stands, advertise only the price of the product or the service they provide. There might be small provisos in that advertisement that would carry the disclaimer that taxes are not included, subject to APR financing, all manner of that, but certainly no specifics as would be outlined in Bill C-26 as to what we would have to comply with within the industry.

It appears that the airline industry alone would be forced to outline the detail of every service fee and tax incurred in providing that service. This creates the impression to the customer that it's the airline charging you, the customer--not the government, not the security agency, not the airport authorities. It all comes back to the airline, whether that be Air Canada, Air Georgian, or Bearskin Lake Air Service. It's their advertisement. It's their cost, and therefore they are the ones charging it. Everybody gets their share of the charge, but the blame continues to lie with the company that is doing the advertising.

Advertising in general is currently well governed by existing government regulations and agencies. Why single out aviation for special treatment in the way it presents its advertising?

As far as the forced interlining and program sharing are concerned, the best description that occurs to me in reading the bill is that it is arbitrary, it is unfair, and it's a huge impediment to an already ailing industry.

¿ (0915)

The Chair: Could you be more descriptive?

Mr. Paul Mulrooney: I think there was a fourth one, but my secretary took it out.

I think to be forced to let your competitors share in your just desserts and the efforts that you make to garner market share is just plain wrong. It's against the process that we've grown up with, in which we invested our money in the business; it's against all the precepts we put out there, on which we've established our company and run our business. It's just plain wrong. Adding insult to injury would be the only way to describe the process of allowing the various bureaucrats administering this bill to make both commercial and policy decisions involving a private company. Who wants to put their buck up and have someone else tell them how to spend it? It just doesn't click .

We don't believe that government interference and control at this level will do anything to encourage any private or commercial investors to put badly needed investment money into this industry. It's already bad enough out there in the commercial markets trying to attract any form of financing, whether it be hard asset financing with regard to airplanes and so forth or soft financing in setting up infrastructure and so forth. To have that money be invested and then be controlled by somebody completely outside of the company is certainly not going to endear you to any investor I know about.

Adding to the costs of an already burdened industry would be the two-sided effect of the government deciding what is a just fare for a given route rather than letting the market dictate the market, and also deciding the cost of answering any complaint about the fare or the service, even if there were no customer complaints. You can have a bureaucrat just believe there is a problem, and while there is a process in place to address that issue and to address the bureaucrats' concern, it costs money, and it costs time, and it costs people.

We are already very well regulated, some say over-regulated, and we already have to answer to many different agencies, with many different forms of paperwork, and so forth. To add another layer to this just doesn't make any sense.

We believe this bill will do a disservice not only to the companies in the aviation industry but also to the consumer. Why bother to come up with any kind of a points program, an incentive program, an enhanced service product, or even to service certain domestic routes, if in the end you're going to have to share it with everybody else. After all the effort you've put in to bring that customer in the door, you now have to share this with any other company that wants to walk up and say it wants a piece of this.

If you could set your price for that, I suppose it would be okay, but even that is going to be denied. The price is going to be determined by somebody who is totally outside the realm of what you're doing, and in doing that.... The price you put on it may not be the price he puts on it, and therefore, why would you bother to do it? Why would you expose yourself to that?

A commercial rate arbitrarily decided by a government body--there is no other industry that has that type of restriction on it. The consumer will probably suffer because he'll see fewer of these incentives, fewer of the types of programs that I'm talking about going out there, because if everybody is on that so-called level playing field, we'll let the customers come through the door as they come.

Perhaps by now I've gotten down to a couple of pages of rant.

¿ (0920)

The Chair: You're making very good sense.

Mr. Paul Mulrooney: I'm glad.

You are probably wondering why a company of our size--Air Georgian is small; we're a niche player in the overall aviation game here and we provide a service to the larger airlines--would even make the effort to get up here to talk about this, because it doesn't affect us directly, but it will indirectly affect us simply because of the fact that as the cost burden goes on the larger airlines, the first things that go are the service providers at the lower end--that's us. We're the frill, if you will, at the bottom of the tree. We provide, as I said earlier, the connecting services into the smaller centres. As soon as this stops being cost-effective, that is, going out and gathering people in to get them into hubs, to put them on longer-range flights and so forth, we will be the first ones out of the picture, forced to curtail interline agreements, drop domestic short-haul routes, etc., any one of these, because they lack a uniqueness in the marketplace or adequate pricing. We'll be the first to suffer.

I think the airline industry--and I know certainly your chair is very familiar with the airline industry--over the past couple of years has been just battered, has gotten it from all sides, with costs going up, ridership going down, yields going down. The industry has been battered for the past couple of years. The bill does nothing to help it recover and much to hinder it. I believe that if you want to help aviation, you need to review and start changing some of the clauses in this bill.

I thank you very much for your time, and thank you for allowing me to have a say.

The Chair: Thank you, Mr. Mulrooney.

Mr. Moore.

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance): I think you have two broad concerns, and certainly those of us in the Alliance agree with you completely on them. First, there is the concern about the issue on the advertising side, and the second thing is with regard to forced interlining.

The third one, which you didn't mention and which I will ask you about, is on clause 20 of the bill, which would allow the federal government to mandate the fair price for flying into communities where there is not whatever the government decides is adequate competition--the government being experts in competition with regard to Canada Post and other things. But they will decide what a fair price is for your product.

Are there communities into which you fly where you don't face competition?

Mr. Paul Mulrooney: At the present time, yes. Probably the only one we would have on our domestic route right now is Sarnia. There is no other competition in there.

Mr. James Moore: How have your numbers been with regard to overall traffic loads since the imposition on April 1, 2002, of the air tax?

Mr. Paul Mulrooney: Probably--and I know you'll have a hard time getting a relative feeling for this--our load factors have been running around about 52% on an 18-seat aircraft basically on three runs a day into that type of community. So most of the time you're doing probably a 70% to 75% load factor in the morning, the mid-day flights are relatively light, and then the evening flights, of course, coming back and forth tend to come up around 70% to 75%. On average, it's about a 52% load factor.

Mr. James Moore: Tell me about your advertising regimen for your carrier. Where do you advertise? How big a financial commitment is that for you?

Mr. Paul Mulrooney: That goes back to, again, the committee wondering why we would be here, because we don't pay advertising. We act as a tier III service provider for Air Canada, so all the advertising that's done is done through Air Canada. We're an Air Canada product.

Mr. James Moore: What would the forced interlining clauses of this bill mean to you?

Mr. Paul Mulrooney: As for a direct effect, if you took it right on the surface, I think it could be construed as a benefit to me because I would have no other smaller company coming after me to try to interline on my airplanes. I could be in a position where I could go to a larger regional carrier and say, I want to interline with your company; if you won't let me interline with your company, I can go to the government and they can establish a price, but we are going to interline. So that's why I say this bill could almost be construed as beneficial to our company.

But I think at the end of the day, in the bigger picture, forcing people to form relationships with each other at prices that are not determined by the two parties has to be detrimental to the overall product, the overall industry.

Mr. James Moore: I'll let some of my colleagues ask questions in a second, but my final question is this. In summary of your presentation, what is your single biggest concern about the bill, and what could we, as a committee, do to allay that fear?

Mr. Paul Mulrooney: I think if you had to sum it all up, the sections that we're obviously concerned with...and to your point, clause 20, which you mentioned, was one of the other clauses. I thought I had covered that in proposed section 66. But the overall summary for the bill is that I guess what we don't need at this point in time is any more government regulation or interference in an industry that is already over-regulated. Any more costs or restrictions on the industry at this point in time are just adding to the heat.

The overall thing is that unless there's a very commanding reason for this Bill C-26 to go into effect or to be passed either as it is or amended, if it doesn't do anything for the industry, what is the point of it? It's just more regulation.

¿ (0925)

The Chair: Thank you, Mr. Moore.

Obviously, Mr. Mulrooney, from your remarks you're bureaucratized. Is that a fair word?

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chairman.

During your first intervention, you had harsh words for clause 16 of the bill and more specifically about subclause 60.1(1) concerning the advertising of air services and you said you did not want to have to advertise the prices. But you must understand that we have had a lot of complaints from consumers who say that when it is time to pay up the amount is not what was advertised. You do not seem to agree with that. Clause 16 of the bill, sub 60.2, reads as follows:

60.2 No licensee, and no person acting on behalf of a licensee, shall advertise the price of an air service if no person can obtain the service at the advertised price.

At the end of the day, our objective is to see to it that the consumer will really get his money's worth. Now, this morning you were harsh in saying that that is too much and you do not want to be the bearer of bad news; that is sort of what you have been explaining. I would like you to tell us what you think we should do to advise the consumer without you necessarily bearing the blame. That is not what we want, but what we wish is for the consumer to know what all the costs are when you advertise in the newspapers or the media.

[English]

Mr. Paul Mulrooney: Yes, I think I understand what your comment is to me about the consumer being advised of what the true price is. Obviously, if a consumer is told in an advertisement that there's a trip for $600, he should be able to acquire it for $600, and if that's the service that we provide for the $600, then the consumer's getting what has been advertised.

The objection I raise is that we're being forced to advertise a whole bunch of other services that have no relation to the service we provide. Is it an annoying fact? Yes, it is, but unfortunately, it's not isolated to the airline industry. As I said, I went to Tim Horton's this morning to get a cup of coffee, and the girl said it was $1.28, and then she looked for $1.35 because there are taxes. There's absolutely no obligation for anybody else to advertise service charges and taxes and so forth in their advertisement, other than, as I say, that extra taxes are applicable or something of that nature.

The question I raise is why is advertising being raised as a specific issue in airline regulation as opposed to selling shoes or selling cars? We have advertising rules in place right now that are looked after by the government, and they apply to all products. As far as I'm aware, it's not only in the airline industry that if you advertise a trip you must provide the trip or if you advertise a service you must provide the service that you advertise. I think if I had a car dealership and I advertised that I had a car for sale at x amount of dollars and you showed up and there was no car there, you'd have recourse to me under the present government regulations. It's not the objection to the regulation or the restrictions that the regulations propose, but it's a question as to why the airline industry is being singled out to have the specific legislation put in place to govern it and it alone.

We certainly don't want to be the bearer of bad tidings and we don't want to be the messenger with the bad message and so forth. Again, maybe I'm here to ask questions and raise objections, and I'm not sure what input I could give to the committee with regard to how you would deal with the service charges and all the extras that seem to go along with travelling on an airline these days. You have security charges, airport improvement fees, and so forth, but perhaps it's time for those agencies to collect their own. As someone walks in the door of an airport, let the airport authority, as happens in some airports right now, have a booth and let them collect it. Let the traveller know that the money is not going to the airline. No matter how often we seem to explain that, no matter how much written message we give to that effect, time and time again I've had people come back and say it's too expensive to travel on airlines. But it's not the airlines that are getting the money. It's not the airlines that are structuring some of these costs. However, we do bear the brunt of it, because we're the most visible end of that thing.

¿ (0930)

But picture, if you will, what use an airport would be without an airline. Just this morning coming down, I heard on the radio that Toronto has just elevated itself into the top 10 most expensive airports in the world. We have five or six national carriers that are saying, we don't want to come in here any more if it's going to be this expensive. By their doing that, that's how I get hurt as the little guy, because the people who they bring in are the guys I'm going to bring to Sarnia, or Manchester, or Allentown. If they don't bring them in, I have no passengers. If I have no passengers, I have no reason to have my airline.

The Chair: Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): You're not the first person who has been here who has loudly and clearly objected to clause 16, the so-called “consumer protection provision” and the “interlining provision”. Many of us have been scratching our heads, trying to understand how the Department of Transport could be so out of step with reality.

We've heard from a number of witnesses about these things called “consultations”. They're bureaucratic exercises to engage certain sectors of the economy. It's really bureaucrats playing politics or policy-making. Were you ever talked to by somebody from Transport Canada under the guise of consultation? Did you ever have any inkling that they were looking at these things and that indeed this bill would come forward and contain these punitive measures for an industry?

Mr. Paul Mulrooney: I think that over the last short while there have certainly been many rumblings at various functions, such as the ATAC general meeting, the Air Transport Association general meeting, and various other meetings that we sit in on from time to time, that yes, these things were being looked at. I'm not sure we were ever given any indication that revealed to us the true nature of Bill C-26, that revealed how punitive it was going to be.

There was what I suppose you would call the “consultative process”. The bill was sent out and so forth, as a result of which we've made representations, and as a result of which I'm here today. But I don't think we ever understood that the true intent of the bill was going to be a government walking in and making your business decisions for you. I don't think it was ever envisioned that they would go this far.

The third thing is that it makes you stop and wonder why the airline industry, one industry, is being singled out. We belong to a larger entity; we have a car dealership and a retail restaurant chain. Nowhere in those industries do we get this kind of restriction or regulation.

In regard to the regulations that Transport has with regard to safety and so forth, there's nobody who will argue with either the necessity or the reason for those regulations being in place. But getting into the commercial end of the thing, with no direct bridge back to really what Transport's mandate is with regard to the aviation business, it just defies belief.

¿ (0935)

Mr. Roger Gallaway: Thank you.

I should add too, Mr. Mulrooney, that in terms of jurisdictions, consumer protection law is generally around the sale of goods and services, which is the business you're in. I'm certain my colleague Mr. Laframboise will object to it on the basis of provincial jurisdiction.

Mr. Paul Mulrooney: Provincial jurisdiction, federal jurisdiction, they're still jurisdictions.

The Chair: I'm interested in Mr. Gallaway's questions. You didn't answer the question as to whether you feel there was any consultation with your airline before Transport Canada brought these recommendations forward.

Mr. Paul Mulrooney: Mr. Chairman, the key part of that question would be whether there was a consultation or meaningful consultation. There was consultation--

The Chair: Let me rephrase the question: do you feel there were meaningful consultations?

Mr. Paul Mulrooney: No.

The Chair: Do you feel there was non-meaningful consultation?

Mr. Paul Mulrooney: Yes.

The Chair: By that, am I led to believe that the mind was made up and they just wanted to...?

Mr. Paul Mulrooney: We tend to run into an awful lot of that these days, particularly in the heightened security environment we're in, and so forth—and not just with this end of it. Yes, there is consultation, but the consultation tends to be very, very superficial and very, very self-serving, if you will: “Yes, we've consulted, but this is what we're going to do anyway”.

The Chair: Thank you.

Mrs. Yelich.

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance): Thank you, Mr. Chair.

I wanted to ask you about the airfare, and about being clear—

The Chair: Ms. Yelich, perhaps I could just interrupt, and then I'll come right back to you.

We do have a quorum, so I will put the motion now. Proper notice has been given. The motion before us is that for the study of Bill C-26, a budget of $100,400 for witnesses' expenses be agreed to, and that the chair be authorized to submit it to the liaison committee.

(Motion agreed to)

¿ (0940)

The Chair: Ms. Yelich.

Mrs. Lynne Yelich: I'd like to go back to the transparency of the ticket, which you're concerned about. You made the comparison with a doughnut; you didn't know what the price of the doughnut was this morning because there was tax on it. And then we compared that to, lets say, the gas at the pumps, where the tax is included in the price of the gas.

Isn't it better for you to buy that doughnut and realize that's what the doughnut is worth and have the tax included after than the situation, let's say, at the gas pump, where you don't know how much the taxes are? I don't understand why you wouldn't want to have the ticket clearer for your benefit. The airline itself benefits knowing that all it's getting for the ticket is $200. If your ticket is worth $400, and there's $200 worth of taxes and $200 worth in the airline ticket, doesn't that make more sense for the airline? It's more transparent and clearer, so why does that bother you? Is it because of the change, or is it because you want everyone on the same page? What is your concern here?

Mr. Paul Mulrooney: I think it's important that we all be on the same page. From a consumer standpoint, you're probably very correct in that. I've saved $600 and I have exactly $600 with me, and when I get to the counter, I'm not going to be turned away because I don't have the $20 for the airport improvement fee, because it's included in the $600.

The objection I have to that is the fact that we're now being enlisted to sell and collect for services that have nothing to do with the actual product we're offering for sale, which is an airline seat from A to B. We're now being charged to put people through the terminal, to build new terminals, to have people check through security, and so forth.

It was really interesting that back when we were a tier III carrier for Canadian Airlines, I was at a board of trade meeting in Windsor and the question of a ticket price came up. They asked me to justify our point-to-point fare. At that time, our arrangement was a little bit different from what we're entered into right now, where Air Canada sets the fares, and so forth and everything else. But at that time, we put out our own fares, and at this board of trade meeting I was able to show them that if I could take the passengers at the end of the runway and deposit them at the end of the runway in Toronto, I could cut the fares in half, because none of that was my money. It was an absolute flow-through; it came into my company, went back out of my company, and it incurred a cost going through my company because it took one or two people to process it.

So I guess the question is, why collect for stuff that you have absolutely no control over and that is not part of your product?

Mrs. Lynne Yelich: Yes, I understand that.

What I'm surprised by is that it sounds like you have a problem with the advertising end of it. I can see it's a problem collecting all of those taxes, which makes your argument even more open and transparent, because every time you sell a ticket you can say, “See, the ticket is $100, but we have all of these taxes”, and you can start making the consumer aware of what you're doing, that you're becoming a tax collector.

I just am surprised that's something that bothers you a bit.

Mr. Paul Mulrooney: As you say, from a consumer convenience standpoint, I concede your points; but the problem is that no matter how much we educate the consumer, no matter how much we write it up, it's the airline that's collecting the money, and therefore, the ticket price is too high. But the ticket price is too high for a number of factors, the least of which is moving that seat from A to B.

If you go back and take a look at fares 10 years back, the fares haven't moved that much; they really haven't. I used to be a regular commuter to the east coast.

The Chair: Have you bought a ticket from Air Canada recently?

Mr. Paul Mulrooney: As a matter of fact, I have.

The Chair: Don't say that the fares haven't gone up very much, please. Maybe on your airline—not on Air Canada.

Mr. Paul Mulrooney: Ten years ago, Mr. Chairman, I used to go back and forth to the east coast quite regularly, and the fare to do that today is within $100 of the fare to do that ten years ago.

¿ (0945)

The Chair: Mr. Mulrooney, ten years ago, I used to be able to fly from Thunder Bay to Ottawa for less than $400; today, it's almost $2,000.

I don't know where you're getting your numbers from, and with the greatest respect, all of you folks in the airline industry keep telling us that the airfares are just about what they were ten years ago. I've got to tell you I don't see the evidence of that. Now, if you can get on WestJet and Jetsgo and so on, that's fine. I'm talking about the major airlines, whose prices I can't understand when they're going to stop.... You're not consistent when you talk about those areas.

Mr. Paul Mulrooney: I'll be the first to admit, Mr. Chairman, that the pricing process within the airline industry is convoluted, to say the least, but—

The Chair: How come I always end up paying the most?

Mr. Paul Mulrooney: I used to ask the same question myself, before I became involved with Air Canada.

The Chair: I'm sorry, but it kind of gets me when you folks come here and say airline fares haven't increased.

Mr. Paul Mulrooney: I can only go from my personal experience at that point. Granted, these days I do travel on a pass, but there was a time when I didn't.

The Chair: Oh, that answers the question.

Mr. James Moore: The industry isn't rolling in a sea of profit either.

The Chair: Go ahead, Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

I will come back to a statement about clause 20 of the bill which, in proposed subsection 66(1) mentions that if a complaint is filed concerning a licensee about an increase in rates considered to be excessive, the Canada Transport Agency could intervene.

You are fundamentally opposed to that, but I would simply like to know how to go about it. This is about a licensee who is the only one providing service because, basically, this is for domestic service and that operator is the only one offering that service between two given points. You object to that.

How can I make sure that there will not be excessive exploitation of outlying areas that are as important for Quebec and Canada's development as major centres like Montreal and Toronto? Those outlying areas often need air transportation.

The clause is very clear:

[...] a licensee, including affiliated licensees, is the only person providing a domestic service between two points [...]

Of hand, I find it is quite reasonable to ensure there are no excessive increases and that no excessive rates are being applied. You are fundamentally against that, but how can we guarantee people in outlying areas that they will not be taken advantage of by their air transportation provider?

[English]

Mr. Paul Mulrooney: I understand your point. I guess in certain areas your argument would be correct. I would be willing to wager that perhaps 80% to 85% of the communities in Canada with air service right now can be accessed by road and rail, so there are alternatives to the airline industry. There are alternatives to having your cargo shipped by air. I run into those alternatives every day. Right now, my biggest competitor out of the Windsor and Sarnia markets is VIA Rail; they certainly keep my pricing in line there.

To the communities that have only the one method of airlines, which would apply to communities up north, I know that in the past the CTA has been able to deal with that particular situation in respect of certain restrictions on licences and how licences are obtained, and the public input into it, and so forth. I think there are other mechanisms that would ensure that one method of transportation those communities have would be protected from that type of activity.

But as I say, by far and away, the majority of communities we're talking about have road, rail, and air transport available to them. Unless we're competitive in our rates and our service and so forth, we are not going to exist in those markets.

¿ (0950)

The Chair: Thank you, Mr. Mulrooney.

Thank you, Mr. Laframboise.

I very much enjoyed what you had to say this morning. I come back to Mr. Gallaway's comments on the consultative process; we are hearing more and more that the consultative process was not what it should have been. Perhaps we wouldn't be here having to go through it had it been.

To give you some assurance, if I had to make a judgment call today, I don't think the aspects on how Bill C-26 affects the airline business will be part of the legislation, as it goes through—if we are to get this piece of legislation through before the House adjourns. I suspect there is general feeling that the whole airline industry has to be addressed. We can't do it piecemeal, such as by interlining and sharing, without addressing the issue of airports, and what the future of air travel is going to be in Canada, and how we're going to look at the pricing policies.

I think it's the consensus in the committee that all airline industry issues, plus the security of CATSA, and all issues to do with air traffic should be looked at together in total rather than in any fragmented approach. I think it's fair to say that the committee has indicated to us, or to the chair anyway, that this is the way we should approach it.

I thank you. You were very enlightening today.

I used to be a car dealer, too.

A voice: Oh, oh!

The Chair: Thank you very much.

Mr. Paul Mulrooney: Thank you very much, Mr. Chairman.

Thank you, committee members.

The Chair: Our next witness is Mr. Petsikas, from Air Transat.

Let's take a break for 5 minutes, please.

¿ (0953)

À (1001)

The Vice-Chair (Mr. James Moore): I'd like to welcome Mr. George Petsikas, who is the government and industry affairs director for Air Transat. You have 10 minutes to make your presentation, but if it goes to 15, I don't think anybody will object.

Welcome to the committee.

Mr. George Petsikas (Director, Government and Industry Affairs, Air Transat): Thank you very much, Mr. Chairman. Yes, it'll probably go to around 15, with your indulgence.

I was wondering if you had any discretion about moving the meeting outside to a terrace somewhere, and perhaps we can enjoy ourselves over a beer. It's too nice a day to be sitting inside doing this.

Mr. Chairman and honourable members of the committee, thank you very much for the opportunity to appear before you today to share our thoughts regarding Bill C-26. All of my comments, unless otherwise specified, will deal with the proposed provisions dealing directly with, and related directly to, air transportation.

Last May, the president of the Air Transport Association of Canada, Cliff MacKay, appeared before you and expressed his exasperation at having to testify on this bill at a time when our industry was undergoing a period of unprecedented crisis. In essence, he called Bill C-26 the wrong legislation at the wrong time. In my view, his uncharacteristically strong and cutting words properly reflected the industry's profound frustration and disenchantment at what appeared to be a government with its gyroscope clearly out of order.

[Translation]

Five months later, here I am, representing Air Transat, just as perplex at the government's insistence in passing this bill that will serve to micromanage some of our commercial activities and, even worse, providing for State control concerning essential strategic decisions in relation to key elements of our operations. So, not content with pocketing over one half-billion dollars a year in the guise of the highest security tax in the world not to mention rent for airports whose costs were paid back generations ago, the government today is actually trying to tell us how to operate our business, no more and no less.

[English]

This is wrong in principle, and does absolutely nothing to deal with the severe challenges we continue to face.

Permit me, Mr. Chairman, to provide a little context again in this regard. In the last two years, the worldwide airline industry has lost more money than it made in all the years previously, going back to the Wright brothers. When travel- and tourism-related industries are factored in, losses easily exceed U.S. $50 billion, with almost 200,000 jobs lost worldwide.

At the same time as revenues collapsed as a result of 9/11 and SARS, we faced and continue to deal with a cost crisis in Canada, in the form of unceasing increases in airport and security costs, along with a myriad of direct and indirect taxes and user fees, not the least of which is the government's yearly take of up $275 million in ground rents—which could rise under the current formula to a total exceeding $3 billion over the next 10 years.

[Translation]

During the last decade, the boards of our airports have approved expenditures of over $6 billion CDN to develop airport infrastructure and they now expect the airlines and our clients to pay them back through airport improvement fees. Consequently, landing fees for one of Air Transat's domestic flights in Toronto have gone up by over 340 per cent since 1998 and Calgary today, for the same kind of flight, is charging 122 per cent more in increased airport fees and those are only two of the most egregious examples.

À (1005)

[English]

Canada's largest and most highly leveraged airport, Toronto Pearson, is currently experiencing a cash crunch following SARS, and will be dependent on huge double-digit fee increases over the long term to meet its financial obligations, which carriers may or may not be able to pay or accept paying. The resulting economic disruption and political repercussions from the potential financial meltdown of Canada's most important air transportation hub will be hard to overestimate.

Canada's air traffic control service provide, Nav Canada, is required by law to increase its fees when revenues are down and insufficient to cover costs, which, of course, inevitably leads to higher costs down the road as a result of lower revenues through depressed traffic. The 100% cost recovery and user-pay approach is, therefore, a vicious circle, completely disconnected from the extraordinary revenue problems the industry continues to face, and simply exacerbates the problem. This is something we need to look at.

[Translation]

Europe and the USA undertook discussions last week concerning a liberalization of air services between their respective territories and that could have an enormous impact on the future regulatory control of all of international civil aviation. As it became clear earlier this year that this initiative as well as other European measures could have serious impact on Canadian transatlantic services, Air Transat being the second major carrier in that area, we asked for the creation of a task force including the key players on the government and industry side with a view to defining and discussing urgent matters in order to arrive at a consensus on strategies and an action plan. This request was put out seven months ago, but nothing has been done since and we're now being asked to wait until the transition is completed. That has to be a flagrant case of political paralysis.

[English]

I therefore respectfully submit, Mr. Chairman, that we may all wish to focus our legislative and policy-making efforts on such real problems, which Bill C-26 abjectly fails to do. Nevertheless, if the need remains to seriously consider moving on Bill C-26's air transport provisions, I would ask that you consider our comments regarding the two sections that cause us the greatest consternation.

The first is proposed section 85.2 on agreements. I'm sure you've already heard a little bit on it this morning. Forcing carriers to enter into commercial arrangements with competitors regarding frequent flyer programs, interlining, joint fares, and pro-rates is, to our knowledge, unprecedented in the western industrialized world. The government is seeking nothing less than having bureaucrats dictate our corporate strategies, and to make decisions for us that can have serious repercussions on our cost structures and overall viability. Given the current context, which I took pains to explain just a few seconds ago, this meddling approach could lead to disaster and further lead to the pressures and market instability that are now our way of life.

[Translation]

On the other hand, we don't understand which supposedly pressing need might serve to justify the intrusive control of the State over essential commercial decisions. To our knowledge, almost all, small and major, Canadian airlines have publicly stated they were not at all interested in such provisions and there certainly has not been any political pressure nor general outcry on this matter. Besides, if the determining factor were competition and market access, we might suggest a far less intrusive solution and that is the use of the Competition Act and more specifically those clauses referring to complaints about anticompetitive acts by abusing one's dominant position which, in our opinion, would allow to follow up on any referral to trade based on predatory trade practices. In short, proposed clause 85.2 is useless and dangerous and should be done away with.

[English]

Then there is proposed section 60.1 on advertising. Again, I'm sure you've heard of this. Air Transat is aware of some public discontent existing in the past regarding what I call “sticker shock”, resulting when the long list of departure and security taxes, airport fees, facilitation user charges, and other surcharges are added to the originally advertised seat price.

We would point out, however, that this add-on practice is not unlike that used in many other different retail services, ranging from cellular phones to car leasing. Consequently, the air transport industry is being singled out for special treatment in this case, and no attempt is being made to justify this discriminatory approach.

À (1010)

[Translation]

Moreover, if the objective is really to protect consumers, we believe the unintentional consequence of that provision would be to cause even more confusion in the ranks of the public and, even worse, to upset the rules of competitive pricing for the carriers, based on the product distribution methods they choose.

Further, though the question of content is important, in other words the exclusion of all government and airport taxes and fees from the advertised prices, the matter of harmonizing with the provincial rules applicable to the essential flights distribution networks is of capital importance if we want transparent advertising of prices for consumers as well as maintaining uniform conditions for all stakeholders. That is particularly crucial for Air Transat because as member of an integrated travel group, we sell most of our seats through travel agents or wholesalers who market them in the context of the travel agencies retail sales network.

[English]

If we take a specific example in this regard, the Quebec consumer protection office requires tour operators and travel agencies to advertise a single price inclusive of all taxes, airport fees, surcharges, etc. This far exceeds what is proposed in Bill C-26. Its effect would be to make air travel, chartered by a tour operator and sold thereafter through the retail travel agency distribution network in Quebec, subject to these stricter requirements. That would potentially result in the advertised price being less competitive than similar air travel sold directly by the carrier to the public, and therefore subject to Bill C-26.

While it may be argued that proposed section 60.2 is designed to address this situation, it only does half the job. Since it applies to the arrangements between carriers and tour operators, the jurisdiction or validity of which is doubtful at best, the real public distribution agreement is between the tour operator and the travel agency. Those are two provincially regulated undertakings, and the content of that agreement, in my opinion, is clearly beyond the purview of the federal Parliament.

Conversely, in provinces where there are no such advertising requirements--basically everywhere else in Canada--a carrier that chooses to charter its capacity to the tour operator, which in turn distributes via the retail travel agency network, would have price advertising for its services fall beyond the scope of Bill C-26, thus putting it at an obvious advantage over carriers that market to the public directly and are subject to Bill C-26.

In short, the type of consumer protection initiative envisaged by Bill C-26 can only be undertaken properly in consultation with provincial legislators who are directly responsible for regulating the key distribution sources and networks.

[Translation]

Finally, there most be more flexibility to exclude certain additions to advertised prices in exceptional circumstances and when the totally unforeseen increase in costs for the carrier could be enormous. I am mainly referring to the price of fuel and exchange rates which, as you know, are major costs elements for most air carriers and are extremely volatile beside being subject to conditions beyond our control. Thus, when a carrier can prove that the price of fuel or exchange rates are higher by a certain percentage than the reasonably foreseeable figures used to budget the advertised prices, then the carrier should be authorized to increase the amount of the advertised prices and recover specifically itemized costs during a period which will be lengthy enough to ensure costs stabilization.

[English]

In conclusion, Bill C-26 is the wrong legislation at the wrong time for Canada's airline industry. It does little to help us in the current crisis and is harmful in many respects unless properly amended as per our suggestions.

I thank you for your time, Mr. Chairman,

and I'll be pleased to take some questions, if you have them.

À (1015)

The Vice-Chair (Mr. James Moore): Thank you for your presentation.

Ms. Yelich.

Mrs. Lynne Yelich: Thank you very much for your presentation. Yours is one of the more exasperated presentations I have heard.

Mr. George Petsikas: My wife says I'm exasperated in general.

Mrs. Lynne Yelich: I think we've heard you clearly. The acting chair here, Mr. Moore, is a member of the finance committee. He joined to become an ad hoc member just to fight this air tax that you are vehemently against.

We have unanimously recommended cutting the airport ground rents and the federal excise tax on aviation, and scrapping the air tax. Given CanJet's and WestJet's fights before the Competition Bureau, what would you propose in the act to let us stop Bill C-26's airline provision?

Mr. George Petsikas: I'm sorry, what are we proposing we...?

Mrs. Lynne Yelich: What change would you propose to the act to stop the Bill C-26 airline provision?

Mr. George Petsikas: I'm not sure I follow. You're asking what we need to do to stop Bill C-26's air transport provisions?

Mrs. Lynne Yelich: Yes, given the fight that WestJet and CanJet have before the Competition Bureau.

Mr. George Petsikas: I'm sorry, you're referring to the provisions that have already been adopted in the Transportation Act, not the ones here before us?

Mrs. Lynne Yelich: Yes.

Mr. George Petsikas: That's a good question.

We were a little concerned about having industry-specific provisions in the act, which, as you know, we identified and defined as anti-competitive practices in the airline industry. I'm not a competition expert, but I have friends who are who have told me the constitutionality of that may be questionable. I think the abuse of dominant position provisions, which already existed in the act before the amendments were made to it a few years back, were sufficient to deal with a lot of the issues that are being brought before us.

What do you do now in this legislation to stop that or to repeal it? I'm not sure what I could suggest. The legislator is supreme.

I don't think we need industry-specific provisions in the Competition Act.

Mrs. Lynne Yelich: I just wanted you to talk a little bit about the interlining and the program sharing. What is your suggestion there, to leave it voluntary...?

Mr. George Petsikas: My suggestion there is get rid of it. We are profoundly uncomfortable with the Canadian Transportation Agency, which is designated under the act, telling us when and where we should enter into such agreements. We just don't understand what is being served there.

As I said in my remarks, our fellow ATAC members, the smaller carriers, may be the ones trying to line up and get this thing done, because they're the ones that may say they'd like to be able to hook up with WestJet or maybe even Air Transat and be able to offer a Kamloops-Vancouver or Vancouver-Glasgow operation on an interline basis. To our knowledge, that's not happening. Those carriers are not requesting this sort of thing. So who's behind this? Where's the pressure coming from? Why is this needed?

Again, as I mentioned, if you have a situation where you clearly have a “dominant carrier”--and again, I'm not very comfortable with that term anymore--obviously if that carrier is “dominant” in a certain market and they don't want to deal, I think you have recourse under the current Competition Act in terms of refusal to deal as an anti-competitive act, an abuse of dominant position.

I don't see the reason.

And frankly speaking, as carriers we choose not to interline or enter into these agreements for very special reasons. It has nothing to do with our commercial strategy. It can very easily increase our administration costs. That is one reason WestJet, for example, would never want to interline, because it costs more to do it. We have a fundamental problem with that because it goes to the heart of our commercial strategic planning.

À (1020)

Mrs. Lynne Yelich: Did you feel you had any consultation on Bill C-26, or do you feel you would like to have had more input? Do you feel you were left out of the consultations?

You kept saying “Why? It's the wrong time for wrong legislation”. Would you like to expand on that? Why do you think we have Bill C-26 before us? Why do you think the government is imposing it?

Mr. George Petsikas: Honestly, we had been briefed by Transport Canada personnel prior to the tabling in the House, first reading, about what was coming down the pipe. But I underline that it was a briefing. It certainly wasn't an active consultation process.

Nevertheless, we told Transport very clearly, why are you doing this, guys? This is rearranging the chairs on the decks of the Titanic. We are undergoing an incredible crisis here. If this is the best, if this is what the government thinks is the priority right now in terms of legislation for the industry, I can assure you the message was made clear to the Transport Canada people, no, guys, go back and start talking to us about real things--for example, as I mentioned before, the national rent policy, the ground rent policy for airports, which they have been reviewing for the last three years.

How long does it take to review something? And this is costing us a lot of money.

Right now, as I mentioned before, in Toronto...I don't want to do my Chicken Little routine here, saying the sky is falling, but let me tell you that people in the know will tell you they have a serious cashflow problem there.

The Vice-Chair (Mr. James Moore): Do you mean Pearson in Toronto?

Mr. George Petsikas: Yes, Toronto's Pearson. The GTA, which runs the airport...because of all of the well-known circumstances, including of course Air Canada and their problems. But they still have to make out that cheque for $130 million a year to the federal government. The question becomes, when do we hit the wall, and how hard? And 25% annual increases on our landing fees and terminal charges, going down the line for the next five or six years--I can tell you that's not on.

I can tell you there are a lot of foreign carriers I've spoken to who in fact spoke with some media yesterday and indicated that you're pushing it, Canada. If you continue to do this and you continue to let infrastructure costs go out of control, there are some airports in the U.S. that are a lot cheaper. Put the traffic through there, and they'll connect up to Canada. It's our choice.

[Translation]

The Vice-Chair (Mr. James Moore): Mr. Laframboise, you have ten minutes.

Mr. Mario Laframboise: Thank you, Mr. Chairman.

As regards you statement this morning, we, as a committee, adopted a unanimous report specifically requesting that the real issue be resolved. However, at report stage, we were given a broad no as an answer in all sectors. In other words, the government is giving the impression that things will settled down in the industry, that everything will fall back into place within 18 months and that the companies will be making terrific profits and will be able to pay the suggested fees.

The problem I have with Bill C-26, is that you do not appear to have been consulted. I would like you to explain what role you play in air transportation. I know that you play a significant role in chartered transportation, but what role do you play in the industry? Could you please summarize your role to me?

Mr. George Petsikas: Certainly. By and large, Air Transat is a subsidiary of Transat AT, an integrated company specializing in the area of leisure-travel. The group has sales of $2.2 billion. We are one of the biggest independent groups in the leisure-travel sector in Canada. Air Transat's mission is to meet the air travel requirements of its wholesalers, who are subsidiaries of the group, as you may know. These subsidiaries include Vacances Air Transat, Nolitour, World of Vacations in Ontario and in the rest of Canada.

Over the past two years, Air Transat's transportation capacity has been significantly reduced. Prior to the attacks of September 11, we were running 24 planes and had approximately 2,500 employees. From now until early next May, we will be operating only 14 planes and our personnel will have been reduced by 1,000 employees. This is not a complicated situation: we are going through a crisis.

We have to manage our capacity to meet the demand, we have to manage our costs. Accordingly, you will note that we have had to cut back our activities significantly, which is too bad.

We are the second largest international air carrier in Canada, after Air Canada. We travel to 90 destinations in about 30 countries. This is quite an impressive network. Considering the size of our company, the number of destinations we travel to is quite impressive. We view ourselves as a player able to provide competitive rates, particularly to those travellers looking for low costs flights to significant destinations, such as the transatlantic area.

So, as far as we are concerned, the stakes are very significant. In Toronto, we are the second largest airline in terms of number of passengers. Consequently, we are shouldering a large portion of the costs. Air Canada is by far the largest carrier.

So that is an overview.

À (1025)

Mr. Mario Laframboise: So we are to understand that you are nevertheless a significant player and you were not consulted about this bill, aside from the briefing you received from transportation employees—

Mr. George Petsikas: Aside from the briefing that we received along with all of the other member companies of ATAC, no. We were never consulted prior to this bill being tabled in the House.

Mr. Mario Laframboise: And if I understood correctly, you do not need what is contained in this bill.

À (1030)

Mr. George Petsikas: What I am saying is that there are other priorities. As regards the domestic service agreements such as those found in proposed clause 85.2 of the bill, I could clearly say that the answer is no.

As regards advertising, I can tell you that this is already happening. There are significant initiatives under way provincially, in Quebec.

What I am saying is that if you want to get into this, you have to do it properly, by harmonizing everything, by discussing and consulting with the other jurisdictions that have a say in the way we do business. We fear that there has been some distortion of competition, given that Air Canada could go to Quebec today, if Bill C-26 were adopted as is, advertise a price that would undercut ours because as we market our flights through the wholesaler who in turn sells the package to the travel agent, which will include everything. The price therefore includes the famous security tax, and that has quite a significant impact on the seat price.

In our field, it is the price that counts. If there is a $10, $15 or $20 difference per seat and that a family of four wants to travel for its vacation, that immediately starts to have an impact, and we must not underestimate the impact that this will have on competition.

So I am telling you that if you want to do that, if you think that it is absolutely necessary to regulate the advertising of air ticket prices, you have to make sure that you do so properly. You cannot simply say that you are going to do such and such a thing, that it is good and that that is the end of it, without considering what the distribution reality is or the problems that will occur.

Looking at the flip side of the coin, if I were working for Air Canada, I would tell you today that Bill C-26 constitutes a big problem for me because, in Ontario, although the provincial government does deal with the whole question of advertising, it does not impose any all inclusive packages. That means that I would be at an advantage, because if I advertise and market my seats through my wholesalers and travel agents, well, I could offer a special event charter price, no taxes, of $199 between Toronto and Orlando. Suddenly, Air Canada, if it were to advertise in the Toronto Star, would have to, for the same flight between Toronto and Orlando, have to include the security tax, the surcharges, the NAV Canada fees, etc. So this would be a distortion on both sides.

Mr. Mario Laframboise: I have one final short question, Mr. Chairman.

You said that the current Competition Act allowed complaints. Do you have any complaints that have been made against you, or have you filed any complaints against other companies? Do you currently have any outstanding complaints?

Mr. George Petsikas: Complaints?

Mr. Mario Laframboise: Yes.

Mr. George Petsikas: No. Not as far as I know.

Mr. Mario Laframboise: I am referring to complaints under the Competition Act.

Mr. George Petsikas: There have been no complaints filed against us. We have already thought about filing complaints under certain circumstances, but that had nothing to do with what we are talking about in clause 85.2, for instance. There were other files where we were experiencing a small problem with a company, that I mentioned earlier, but I do not believe that...

Mr. Mario Laframboise: The current legislation could enable you to resolve your problem. You do not need an improved act like this one in order to resolve a problem.

Mr. George Petsikas: Are you referring to the Competition Act?

Mr. Mario Laframboise: Yes.

Mr. George Petsikas: For the kind of complaint that might be lodged, I am not sure that the Competition Act would be enough but as I have said, I do not want to go beyond the matter we are discussing here now. It is clear that it is a file that does not touch upon the refusal to deal question, as I call what we have here, but yes, there could be a problem at that level. If you want to talk to me formally about the Competition Act, I might be able to make suggestions about that.

Mr. Mario Laframboise: Fine, thank you.

Mr. George Petsikas: I would be prepared.

The Vice-Chair (Mr. James Moore): Mr. Proulx.

Mr. Marcel Proulx (Hull—Aylmer, Lib.): Thank you, Mr. Chairman.

Good morning, Mr. Petsikas and welcome. You are a member of the ATAC. How are the consultations held or what is your participation in those consultations through your association? Do you have representatives on ATAC'S board?

Mr. George Petsikas: Yes, exactly. ATAC is a representational organization, lobbying for the industry, if I am not mistaken. My colleague Mr. Everson is a vice-president of ATAC and he is responsible for policy and legislation. Actually, ATAC is a rallying point for all kinds of things going on.

Mr. Marcel Proulx: And your company participates?

Mr. George Petsikas: Absolutely. We are a participant.

Mr. Marcel Proulx: So, if ATAC tabled a brief with the committee examining the Canada Transportation Act, I presume your company would have been supportive of that brief or that you would have helped set down ATAC positions.

Mr. George Petsikas: Yes, that is quite possible. Normally, we are consulted in advance and normally, we can give our point of view, yes.

Mr. Marcel Proulx: If ATAC participates in the round tables, there are representations made from inside the association by the several stakeholders in order that it, in turn, may make those representations for them.

Mr. George Petsikas: That is the normal process; ATAC is there to represent its members.

Mr. Marcel Proulx: Perfect.

Now, I am hearing your complaints this morning, but is there one thing in Bill C-26 dealing with the civil aviation industry and with which you are in agreement?

Mr. George Petsikas: With which I am in agreement?

Mr. Marcel Proulx: Yes.

Mr. George Petsikas: I would say that there are provisions to which I have no objections. I could answer that way. Can I tell you yes, we must absolutely...?

Mr. Marcel Proulx: You do not actually want to.

Mr. George Petsikas: As I was saying, there are things that are not prejudicial to me.

Mr. Marcel Proulx: You do not absolutely want them, but you do not object to them.

Mr. George Petsikas: No, but in principle, if memory serves, I think there is something on advertising the rules of the transportation contracts over the Internet, on corporate websites, sort of to promote transparency of the rules of air carrier transportation contracts, in other words fees, etc. I think we are talking about clause 21. We are all in favour of transparent regulations.

Mr. Marcel Proulx: You cannot go against motherhood .

Mr. George Petsikas: Of course not. If you want to know how many kilograms you can take with you to Portugal, it is clear we would like you to be able to consult a website and get the answer to that question. I have absolutely nothing against that. Besides that, there is nothing else.

Mr. Marcel Proulx: Thank you.

[English]

The Vice-Chair (Mr. James Moore): Merci.

Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): What country is the majority of shareholders of Transat from?

À (1035)

Mr. George Petsikas: The majority of shares of Transat A.T. are owned by Canadians. We are a Canadian company under the Canadian Transportation Act.

Mr. Larry Bagnell: As for the land rents you talked about at the beginning, I don't have a problem with paying rents; every business pays rent. And, of course, you have to pay the fees to pay for the airports.

One of my problems is that when the airport boards design these fees, you don't really have a very big statutory role in that; you don't have a guaranteed seat on the board of directors in these airports. It would seem to me that the airlines would know best what an airport would need technically. You've got the number of flights, and you know what design would work best for you, and maybe how much you can afford at a particularly time in the air economy, and about foreign investment in a new airport.

We're trying to correct that with another piece of legislation. I assume you would agree with that direction.

Mr. George Petsikas: I certainly agree with the direction you're talking about in giving us more of a role in terms of input.

The problem is that I saw the attempt at how you wanted to correct that with Bill C-27, and frankly speaking, there was a lot to be desired in terms of where you were willing to go in terms of airline representation on these boards. Obviously we need a lot more than what was proposed. We are the ones who pay the bills at these airports; we are the ones who bring the customers. Certain airport CEOs like to talk about “their customers and their passengers” and all that. I'm very sorry, but without the airlines, these people are managing shopping centres; they're not managing airports. We are the ones who make it an airport with our passengers.

So it's obvious we need to expand our role in the decision-making of these airports, because frankly speaking, as I mentioned before, we're seeing the results—projects, construction, and infrastructure, development, which in our view was probably a lot more expensive and a lot bigger than we needed at the time, which we're starting to pay for big time right now. It's the old, “Well, there you go, guys, get me my rent cheque every month, and it's you and your passengers who are on the hook.”

The Vice-Chair (Mr. James Moore): This committee will be considering Bill C-27 as well. One of the things the committee was talking about prior to the House rising for the summer break was imposing into Bill C-27 the mandated makeup of the Nav Canada boards. The makeup of the Nav Canada boards is much more balanced and there's a mandate in there to have air carriers on them, while Bill C-27 specifically excludes air carriers from being mandated into the composition of these boards. I just wanted to make you aware of that.

Mr. George Petsikas: I think ATAC has been very vocal about saying the Nav Canada model is one that could very well work in the airport context. We would support that absolutely.

Mr. Larry Bagnell: You brought up the very good point about the negative spiral a bad economy can perhaps have with the fees, where airport navigation fees are fixed costs and even gas prices expand in a downside economy. To solve that problem, might one propose more of a Keynesian model, where Nav Canada and airports--and I don't know about the gas tax or not--were mandated to charge a higher fee in good times in order to put that away to subsidize operations in bad times so there would be a more stable price impact on airlines.

Mr. George Petsikas: I think you're saying let's squirrel away more peanuts now when times are good to get ready for when times are bad. Well, I'm reluctant to publicly say yes, I would support such an approach, only because we are already paying such high fees at some of these airports. Frankly speaking, to advocate something to the extent that we should even add on to that right now because one day times will be bad, well, I can assure you I'm going to have a lot of people looking at me in a very cross way.

I don't think we should be getting into a debate now in terms of how the infrastructure in this country is now run for air transport, meaning the airports and air navigation services. The 100% cost recovery, user-pay model we've adopted in this country under the national airports policy and the Nav Canada act can work in normal circumstances, in normal up-and-down economic cycles. As you say, times are good, and yes, normally you will squirrel away a little bit of money there, and you will have a little bit of a cushion when you start getting a little dip again in the normal ups and downs.

The problem is that in the last two years we have not had normal ups and downs. We have had unprecedented disasters in revenues. This has never been seen before, and the system cannot absorb that shock; that's what we're saying. The problem we have is the new world we're living in, where airlines and our industry are so deeply impacted that if somebody sneezes in Afghanistan, people start worrying about buying tickets again. It's obvious we're subject to geopolitical factors away beyond our control, and the system can't take those shocks any more.

What I'm saying is that we might have to look at a situation where the Government of Canada says, look, this is essential infrastructure to our economy; we cannot allow this infrastructure to fall on its face financially. At some point in time the airlines are going to say, look, guys, we are rocks and you have just squeezed the last drop of blood out of us. That's where we're going--inevitably.

The government may have to one day say, look, we may have to provide some sort of backstop or insurance for the system in terms of liquidity. When the system is clearly in big trouble because of what we've seen happen, maybe the government has to be the one that steps in and says, look, as opposed to giving us that $275 million a year net, maybe we're going to have to put a little bit back into the system in times of crisis like this, where we clearly identify abnormal drops in revenue.

It's not going to work any more just to sit around and say that the customer is going to pick up the slack, like the airports and Nav Canada are saying. I can assure you it's not going to work, and I think we have to have a debate down the road on that.

À (1040)

Mr. Larry Bagnell: It would be helpful for me if any Transport Canada people listening to this or reading the transcripts could provide the committee with a response to the suggestion that airlines weren't consulted in advance of this bill.

You asked why interlining is here, and I think most of the input we've heard is against that. I'm not sure why it's here either, but I'll tell you why I like it in my situation, and unless you can solve the problem.... Perhaps because you haven't had experience with the competition law, it isn't solving the problems. The one case took years to go through, and we're looking at putting a lot more court costs on everything, so it's actually more of a problem for the big airlines. Maybe it will work when we've fixed it up, but it's not working right now.

We have a situation with the small airlines where, if a big dominant airline refuses to interline, it makes it a lot less attractive and technically possible for tourists to get into our more remote areas, which the small airlines are serving. I had an experience this weekend related to luggage, so for me.... Sorry?

The Vice-Chair (Mr. James Moore): I was just saying that Mr. Bagnell is from the Yukon, in case he didn't know.

Mr. Larry Bagnell: In my own situation, the only one I am aware of, it's very useful. It would be bad for us if it was prohibited, and for me the provision would be useful in our situation.

Mr. George Petsikas: All I can say to that is that I understand the sensitivity, especially regionally, of your situation. By the way, we tried to address that issue by just bypassing everybody and flying tourists directly from Germany into the Yukon a few years back. It wasn't a bad program, but unfortunately we're not going to renew it this year.

But as far as the issue of Air Canada is concerned, my problem is simple. You're basically killing a fly with a sledgehammer, in my opinion. I hate to say you're going to have collateral damage, to use the expression we hear too much on CNN these days, but you have a problem here. You have carriers that are going to be caught by this who are perhaps not the main source of the problems you're talking about.

We're going to say, look, you are telling us how to run our business, which can have an impact on our costs, which can have an impact on our ability to make money and therefore survive. This is not small stuff we're talking about here. These are very serious issues in terms of interlining and access to frequent flyer programs, pro-rates, and all that sort of stuff.

If you have a specific problem with a specific carrier, well, what can I tell you? If you think the Competition Act is insufficient to address the issue, I am not in a position to tell you how to solve it other than to say it would be wrong to put it in legislation. That may have very negative effects on carriers that are not involved in the problem here and that may one day find themselves in a situation forced upon them that impacts their ability to make money and survive.

This is a very big concern for us. I wish I could tell you what you should do. I'm not a competition law expert, as I said, but I don't think this is the way you solve the problem.

À (1045)

Mr. Larry Bagnell: Mr. Chair, we're not having a problem with Air Canada's situation; they have interlines. I just want to make it clear for the record that we don't have a specific problem; I was talking about a potential problem.

Thank you.

The Vice-Chair (Mr. James Moore): We are just about out of time here. We have to vacate the room in about five minutes, but I think pretty much everybody has had a chance.

Thank you very much, Mr. Petsikas, for coming here today and giving your firm, blunt testimony. We appreciate it very much.

Mr. George Petsikas: Thank you very much.

Mr. James Moore: With that, the meeting is adjourned until next week.