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[Recorded by Electronic Apparatus]

Monday, November 22, 1999

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The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good evening, colleagues. Pursuant to Standing Order 108(2), this is a study on the future of the airline industry in Canada.

Before us this evening we have three witnesses: the chairman of the Air Passenger Safety Group, Mike Murphy; the executive director of the Public Interest Advocacy Centre, Michael Janigan; and the president of Transport 2000 Canada, Harry Gow.

• 1805

Gentlemen, welcome to the Standing Committee on Transport. We look forward to your presentations of about five or six minutes each. We understand you each have a few words you'd like to say to the committee, so when you're comfortable, gentlemen, begin, and then we'll have questioning after your presentations.

Mr. Michael Janigan (Executive Director, Public Interest Advocacy Centre; Canadian Association of Airline Passengers): Thank you, Mr. Chair.

We have distributed copies of the Airline Passenger Bill of Rights we are proposing, in both English and French. I also have the English version of my speaking notes. Unfortunately we didn't have time to translate those.

First we'd like to extend our thanks to the committee for allowing us to present the views of the Canadian Association of Airline Passengers concerning the future of the Canadian airline industry.

The Canadian Association of Airline Passengers is an ad hoc coalition of public interest and consumer groups and organizations concerned with the delivery of this important public transportation service in a manner in keeping with the interests of the ordinary Canadian consumer.

The coalition was formed during the summer of 1999, when the various proposals for the merger of Canada's two principal airlines were being floated and it appeared the normal process for review of any merger by the Competition Bureau would be circumvented.

Rather than become enmeshed in the details of the Onex and Air Canada cat fight, we chose to concentrate on making recommendations for conditions that would be advantageous to consumers, regardless of whether the services were being delivered in a competitive, monopoly, or near-monopoly mode. The result is before you in the form of the Airline Passenger Bill of Rights, which has been recently revised to incorporate comments and suggestions from interested stakeholders.

The purpose of this was to establish a bottom-line set of consumer protections that would have to be addressed by all players in the Canadian airline industry. When this bill of rights was drafted, it was important to attempt to focus the attention of policymakers away from the beauty-show aspects of whether Onex or Air Canada should become the dominant airline towards the issue of how Canadians should be served.

Now that the perception of imminent disruption and chaos seems to have vanished with the Onex takeover bid, it is time to assess how we can best achieve the objectives set out in the Airline Passenger Bill of Rights. We certainly don't have all the answers, but a number of observations and recommendations may be pertinent to resolving key concerns. These include the following.

Mr. Milton's and Air Canada's plan for a three-airline company—which is Air Canada, a bent-but-not-broken Canadian Airlines, and a Hamilton discount airline—is interesting fodder for Air Canada shareholders. However, it only represents a model in which different business units of the same company propose to deliver service. As we have indicated to the Senate committee on transport, the idea that competition between these business units would be sufficient for the purpose of airline consumer protection breaks new ground in the well-fertilized field of economic confabulation.

Canada is not migrating from a system of genuine airline competition to a monopoly or one market-dominant player. We currently have a duopoly system in most domestic fare markets, offering intermittently effective competitive substitutes.

Lest there be any doubt of this, for those of you who travel between Ottawa and Toronto, you may have noted that your fares have increased for ordinary business travel by approximately 50% since the demise of Greyhound Air and VistaJet. Let me assure you it is highly unlikely that long-run marginal costs of operating these routes went up by a similar percentage amount. It appears evident that the current players are able to enforce price increases in lockstep without suffering loss of market share. This may be choice, but it is not competition.

One swallow does not make a summer. The presence of a potential competitor in several market niches does not constitute real competition. The view of many respected industrial economists at this juncture is that market dominance—namely the ability to enforce a price increase not reflective of changes in long-run marginal costs without loss of market share—commences at about a 40% market share, and that at least four to five competitors are required to constitute workable competition.

Similarly, in an industry where the financial outlay represents a significant barrier to market entry, one cannot simply assume that market forces will correct for price-gouging or for service or quality-of-service cutbacks. The normal behaviour of a market incumbent with a dominant share will be to discount prices in any markets where competition exists, financed by revenues gleaned in the monopoly markets from price increases and reductions in service.

It is no solution to say we are not going to regulate and market forces will overcome all difficulties. A policy of unregulated monopoly today, competition tomorrow will only deny to consumers the benefits and protections they should have had yesterday.

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Both in Canada and in the United States, where the airline market is closer to workable competition, consumers have observed considerable deficiencies in the quality of airline service giving rise to substantial problems of convenience, health, and safety. Judging from the U.S. experience, much of this consumer-unfriendly behaviour seems amazingly impervious to competition.

The Airline Passenger Bill of Rights incorporates much of the current flavour of these complaints. We would suggest that many of the terms of the bill of rights should be incorporated into the licensing approval process set out in the Canada Transportation Act.

However, there is no magic bullet to fix all problems in the Canadian airline industry. What is needed is the establishment of an appropriate framework that is flexible enough to adapt to the changing circumstances and powerful enough to implement solutions that are beneficial to consumers and the industry.

The Competition Bureau may wish to deny a takeover merger on the basis of lessened competition or impose such conditions as may be appropriate, including removal of market barriers, mandating reciprocity of airline points, or divestiture of regional subsidiaries. The Competition Bureau's intervention may not be sufficient superintendence for the purpose of addressing all issues, however. The Competition Bureau's authority is specific to the objectives of the Competition Act and is not likely sufficient to obtain all necessary results desired by the public interest and the objectives of the Canada Transportation Act.

The Canadian Transportation Agency, operating pursuant to the objectives of the Canada Transportation Act, should be empowered to set just and reasonable maximum fares and conditions of service for those routes on which a carrier carries traffic and where, in the opinion of the agency, competition is not sufficient to protect the interests of the users.

Secondly, the agency should refrain from setting fares or conditions of service to the extent it considers appropriate where there is competition sufficient to protect the interests of travellers purchasing carriage to and from any point in Canada.

As well, the agency should have power to deal with bottleneck facilities and other barriers to market entry. These powers should include, as they do in telecommunications, the right to order access by another carrier to the facilities of another, subject to payment of reasonable compensation.

Where a carrier's fees are subject to regulation, the agency should have power to disallow any fare where the amount does not recover the cost of operating the service. That's dealing with the problem of predatory pricing. This would operate similarly to the CRTC's imputation test and the way it's applied to tariffed telephone service of a local carrier.

The form of regulatory supervision, be it price caps, revenue caps, tariffs, or fare ceilings, based on benchmarking, performance-based regulation, or a cost-of-service framework, or a combination of the same, should be left to the determination of the agency. The agency should hold open hearings with appropriate public participation, enabled by the exercise of the cost award powers of the agency.

An air transportation user council modelled on the U.K. experience should be implemented. The size and importance of this means of public transportation in Canada are too critical to leave to only those parties with the resources or economic interest to persevere in setting policy. In the U.K., the Air Transport Users Council acts to recommend and advocate for policies on travel on behalf of all transport users.

Finally, in the past few months ordinary Canadians have been somewhat frustrated by the relative opaqueness of a process for determining airline policy in Canada that revolved around a choice between competing monopolists. If this committee adjourned to the lounge of an airline terminal, one would likely hear the differing concerns that have been expressed by almost all of the industry witnesses this committee has heard over the past several weeks.

Many of those concerns are reflected in our Airline Passenger Bill of Rights. The question we would leave with this committee is, how likely is it that the Canadian airline industry will deal with these concerns in the year 2000 and beyond, without intervention to protect the interests of the ordinary passenger?

The Chair: Thanks, Mr. Janigan.

Mr. Gow, please.


Mr. Harry Gow (President, Transport 2000 Canada, Canadian Association of Airline Passengers): Thank you, Mr. Chairman. I'll be making a fairly brief presentation on the Airline Passenger Bill of Rights.

The general principle underlying this bill of rights is that airline passengers flying in or out of Canadian airports or on flights operated by air carriers based in Canada are entitled to a safe flight, with a high quality of service at affordable, predictable prices on a year round basis.

One of the bill's broad principles calls for public participation. The current operation of Canadian airports, air carriers and the air navigation system requires increased public oversight and fair, enforceable rules to protect passenger rights.

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There are numerous outstanding issues relating to safety which must be resolved, along with a number of other problems which have resulted in poor service for airline passengers.

In addition to the application of consumer rights as part of normal industry operations, any pending or future mergers or restructuring of Canadian airports, air carriers, the air navigation system or the regulatory authority should be subjected to a publicly open, mandatory test of public and passenger interests. These matters should be heard by a competent and impartial party, such as the CTA, TSB or Civil Aviation Tribunal.

On reading page 2 of our submission, you will note that we attach a great deal of importance to safety. I'll let Michael Murphy elaborate further on that principle. We believe safety is the cornerstone of passenger confidence in the airline industry.

Lower fares and attractive features matter little to passengers if their lives are regularly in danger or threatened.

On page 4 of our submission, we focus on service quality. The first thing we are looking for is full passenger information disclosure. Passengers are entitled to complete, timely disclosure of all information that is material to their flight, including information on routing, connections, fares, accommodation, facilities and baggage rules. Passengers are entitled to be informed of changes in respect of reservations and other related matters.

I'm giving you a quick overview of our submission. While some of the points we raise may appear insignificant at first glance—for example, the width of the seats and other transportation considerations—they are in fact quite important. You will find listed on page 5 the general service standards that we believe should apply throughout the industry.

Page 5 of our submission also contains an interesting proposal, one that was inspired by US legislation, even though the proposal was subsequently withdrawn following intensive lobbying by the carriers. I maintain, nevertheless, that the proposal is a sound one. Airports and air carriers should provide a complaint service, and should publish monthly, including on the Internet, within 45 days of the end of each month the number of complaints received by mail and by e-mail messages on such topics as disability discrimination, including discrimination on the basis of race, colour, ethnic origin or official language.

Although I'm an Anglophone, I have sometimes been shocked by the lack of service in French available on certain airlines. The federal government should view the restructuring of the airline industry as an opportunity to impose an adequate level of bilingualism on flights across the country.

I'll conclude on that note. Although our submission also touches on fares, I won't get into that subject because Mr. Janigan has already talked about fares at considerable length. Thank you, Mr. Chairman.


The Chair: Thank you, Mr. Gow.

Mr. Murphy for five minutes.


Mr. Michael Murphy (Chairman, Air Passenger Safety Group, Canadian Association of Airline Passengers): Thank you, Mr. Chairman. I am honoured to be here today to address the committee.

I will begin in English and switch over to French later. I will be focussing on three issues: firstly, our concerns about passenger safety; secondly, passenger information disclosure; and thirdly, passenger participation in the regulatory process.

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First, on the subject of safety, we are concerned at the present time about the safety of our airlines because of the cuts to emergency services at airports over the past five years and because of the wiring used by the airlines, particularly aromatic polyamide wire such as Kapton and Apical.

We are also concerned in view of the cost-benefit analysis that is being done. In our view, such analyses serve no purpose and should never be the basis for policy formulation.


Another concern we have is the accuracy of information coming out on aviation safety. We find it our job to make sure statements made by government and other participants are accurate. We check footnotes and that sort of thing and frequently find serious errors that cause us to wonder if decisions are made carefully.

We have concerns about the databases that are kept on aviation safety. I think it's fair to say, even by internal admission, these are largely incomplete, in spite of the best efforts of people to keep them up to date.

We also have concerns about the federal oversight of large chunks of the aviation community. When Transport Canada spun off air traffic control and the airports, it was said there'd be federal presence on the boards of directors—three members of the board of directors of NAV CANADA, and members on the boards of all the major airports. Through access to information, we found out informally there was no briefing going on between these federal appointees and the federal government to—

The Chair: Mr. Murphy, I don't want to interrupt, but do you have anything relevant to the terms of reference this committee is attempting to study?


Mr. Michael Murphy: I apologize, sir, if my comments were not relevant.


I will move on. These are the security aspects of the Charter of Rights and Freedoms, Mr. Chairman. I apologize if they aren't deemed to be relevant.

In terms of public involvement, we would like to see passengers involved in more than just superficial opinion polls. We know that opinion polls are taken from time to time. We're told there's a CARAC process. It's a regulatory process and one that we participate in. We're told it's a public process, and indeed the public can appear before it. However, it is in Ottawa; it is unilingual; and it requires a tremendous knowledge of aviation, and travel to Ottawa.

We're suggesting that through the Charter of Rights and Freedoms, passengers be consulted in a more open manner. They need to be briefed. They can't simply be asked opinions on complex technical matters.

Finally, in terms of information, when you buy a car you can pick up consumer reports or go on the Internet and find information instantly that's usually free or at very little cost. The information is often plentiful. However, when making decisions on aviation, choosing to fly on an airline or aircraft or from an airport, this information is very difficult to find for passengers.

Without impugning anyone involved in the ATIP process, it is good only for government and is slow. It can be expensive, as we have found out, and doesn't provide guarantees. So we would like to see an openness in the provision of information to air passengers that doesn't currently exist. It exists more in the automobile transportation area than in the aviation industry.

We'd like to see the aviation industry break that taboo of talking about safety. You can watch television and see a Toyota Previa hit a wall. Crashworthiness tests are advertised by the major manufacturers. It's now become de rigueur in marketing. Those discussions are not held in aviation. We would like the aviation industry to get beyond that taboo.

Thank you very much, Mr. Chairman.

The Chair: Thanks, Mr. Murphy.

We can move on to questions. Mr. Dromisky, please.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Thank you very much, Mr. Chairman.

I am very impressed by the presentation you made and all the information you presented to us.

When I look through your bill of rights, I see that much of what you have presented to us is already in operation. Many of the concerns you have are also concerns of this committee and a great number of people who travel on a regular basis. There's the size of the chairs, for instance, when we know that Canadians basically are overweight. So we have a lot of bigger people trying to squeeze into those tiny chairs they have on some of the aircraft that are flying in Canada. There's no doubt about it.

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I'm concerned, and would like your reaction to the fact that if we really went ahead with your bill of rights and did everything you're asking us to do, we would end up with a multitude of regulations that would have a great impact on every air carrier in this country. You know the costs I'm talking about—staffing, inspectors, auditing, and so forth. Did you take that into consideration when you were drafting this bill of rights? Can you give me a rationale for your position regarding all of these requests for intense regulation, in light of the conditions and environment in which we're operating at the present time?

Mr. Harry Gow: Yes, indeed, we took that into account. We were in fact consulted by Mr. Schwartz, among others, who then gladly adopted many of the standards we had as his own. So I can't say these would be so onerous on the industry that they couldn't adopt and enforce some of them to some extent. In other cases, they may need help from a benign and vigilant government.

I would like to ask Mr. Janigan to continue on that.

Mr. Michael Janigan: I think to some extent you're correct, in terms of the fact that this represents a rather comprehensive list of consumer protection considerations, ranging from quality of service to safety to pricing concerns. Some of them could be put in effect by regulation. Some of them would probably be put in effect as a condition of licensing, with self-monitoring. Some might be put in effect by way of direct regulation in the event that we are in a monopoly circumstance. Of course we have to be concerned with pricing and quality of service in a different way from in a competitive circumstance.

In the majority of these cases, we are dealing with consumer concerns that are of such a common-sense nature that one would ordinarily anticipate the airlines would take steps to meet them as quickly as possible. It's more a matter that once you put a regime like this in place, the cost of adhering to it will not be so substantial as the benefits that will accrue to consumers across the board.

With issues like reasonable periods of time for reservations, seat size, or quality of air, I'm not quite certain whether or not the cost of implementing them is a prime driver in deciding whether or not we implement them. You may be correct about some of the others, and there may be reason for a compromise in adopting them, in terms of voluntary codes or whatever. But we think it's a pretty bare-bones set of common-sense standards that can be implemented across the board.

Mr. Michael Murphy: A 32-inch seat is the minimum we would like to live with. That's the standard you get on Air Canada Y class and Canadian as well. Some airlines are pulling that back to 30 inches on the charter flights. Most of us who are six feet or over, and even many people who are below six feet, have difficulty sitting in a seat like that for any length of time. We also have concerns about what that would do to any emergency evacuation time. It would tend to clog up the aisles and slow people down.

Mr. Stan Dromisky: Thank you very much.

The Chair: Mr. Bailey, please.

Mr. Roy Bailey (Souris—Moose Mountain, Ref.): Thank you, Mr. Chair.

I have some difficulty with the whole thing. It's such a huge thing you present, one has to wonder, haven't all these things...? The airline industry is super-cautious about safety. You've mentioned on the top of page 2 that perhaps passengers should be given status on boards of major national and regional airports. I'm not going to question your advice on this, but I'm wondering about the necessity of it.

I say this because I've never been treated with anything but total respect and safety. I've never seen any sign on any flight I've ever taken.

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There is one question I did want to ask on this. Mr. Gow, did I hear you say something about the safety of the trip on lower-price fairs, that perhaps the safety wasn't to the same extent? Is that what I heard you say?

Mr. Harry Gow: You heard me say something like that, sir. In Canada this has not so far been an actual concern; it is a potential concern. In the United States there are many suspicions that some of the bottom-of-the-market discount airlines, in particular ValuJet, put the lives of passengers at risk for monetary considerations, whether carrying illegal goods—in the case of the Okefenokee Swamp crash, oxygen generators—or not carrying out all the maintenance they should by delegating to a substandard contractor who then fulfilled his obligations in the breach. This is documented, sir.

This has not, so far, occurred in Canada because of the oversight exercised by our benign and vigilant government, among other things, and by quality air carriers such as Air Canada and Canadian, it's true. But that does not mean that would not change as we Americanize and cheapen goods. We have seen the same thing happen in some other areas, and we would be concerned that commercial concerns, rather than a concern for human beings, would drive safety.

Mr. Roy Bailey: I have one quick one. I've always wanted to ask this question. I've never had it answered properly, and I've asked before.

If somebody on board a flight.... First of all, he shouldn't have got on if he was intoxicated, right? Who makes that decision, that he's on there? And while he's on a flight, he gets himself involved in a real mix-up, some of the flight attendants are pushed aside and somebody else gets slapped around, and so on. Who lays a charge on the individual? Who's responsible for that? What recourse does an innocent passenger have against that individual—is it against the airline on which he's flying, or the individual, or both?

Mr. Michael Murphy: I'd like to answer that question, Mr. Bailey, and I would like to actually come back to your previous question.

It's been a while since I've been in charge of the enforcement program at Transport Canada, but the RCMP would tend to lay a charge once the airplane got to destination and information was taken by the police. Charges would be laid either under the Aeronautics Act or the Criminal Code, depending. The passengers would have recourse through the crown handling the case, or if there was any personal injury, battery or whatever, that could be handled separately. That is how it worked when I was in charge of that program.

If I could, sir, come back to your question about accidents, we have had a spate of accidents, and they do test our faith in airline flying. One thing we don't ever want to do is be irresponsible and say the sky is falling or sensationalize. I hope we've not done that.

For example, the Dryden accident did take place ten years ago. There were 191 recommendations that came out of that commission inquiry. The Dubin commission, which took place ten years earlier, after a series of accidents in Canada, came up with 247 recommendations. The Fredericton accident has pointed out serious problems, not only for the training of crew, but also in how Transport Canada regulates low-weather landings. We've had recent accidents at Sept-Îles, which again have brought to light certain problems with low-visibility landings. We have an accident at Baie Comeau that is still under investigation, at Pointe-Lebel.

I need to say, as well, that the mere lack of accidents does not mean that things are safe. Most pilots and many passengers can tell you of incidents they've experienced where their lives were in peril, but they were able to land safely—terrified, but able to land safely.

Thank you.

The Chair: Thanks, Mr. Bailey.

Mr. Calder, please.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

In our weeks of deliberation on this, there have been a number of points I've put together that we'll probably have to discuss for policy for the airlines. I have ten in front of me, but I just want to deal with three, and get your comments on them.

Currently we have a 10% and a 25% rule for the airlines. The 10% rule, if we were to change it, would have to be changed through legislation. Should that be increased to 15% or 20%? I'd like your comments on that.

In regard to the 25% rule on foreign ownership, do you think there's any need for that?

And finally, the third part that fits into this is the regional carriers, the feeders for the main airlines. What type of policy should we incorporate to deal with them?

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Mr. Harry Gow: Sir, we do not have a doctrine on these, but certainly one of our member groups, the Council of Canadians, is very concerned about the foreign ownership issue. I think, speaking for the coalition, we would have to say that we share their concern. So the current maximum foreign ownership regulation should stand, in our view.

The other one is not something we have expressed an opinion on in our internal discussions, unless one of my colleagues wants to point out that I'm wrong. On the foreign ownership issue, then, we're fairly firm that it's a need. Regarding the 10% ceiling, this was put in to ensure widely distributed ownership of Air Canada. As the industry changes, it may be that the needs change. That's the only comment I could make for now.

On the question of regionals, there's been a lot of discussion about this, including within our group. I think what we've come to is that if this House could do something to encourage diversity, it would be useful. We have seen a number of brave attempts, like Greyhound, be shut down either by their management for internal reasons, or because of financial inadequacy. Sometimes we have suspected that air miles programs have been anti-competitive, and some attention should be paid to factors that prevent new entries from flourishing.

I guess our bottom line on regionals is if you're asking about the question of one big regional, I personally—I haven't talked with my colleagues about this—am not entranced with the idea of one huge regional airline. But I am certainly interested in the idea of new entries and new initiatives in the field of regional airlines, some of which become more than regional in scope, WestJet being an example. They become almost national in size. Canada 3000 is another big carrier that is a relatively new entrant to the market. Some of these seem to be flourishing, and conditions might well be set such that more diversity could become a normal situation in the airline industry.

I think I'll end my answer here and see if either colleague has something to say.

Mr. Michael Janigan: Excuse me. Just very briefly, I think regional carriers may become part of the solution, but I don't think they're necessarily the solution. I'll return to the point I made earlier: I don't think there's any magic bullet here. I think we're going to have to pursue different initiatives on a number of different levels. The idea of encouraging market entry by way of creating competition through the regional airlines is an intriguing idea. The Competition Bureau, I would assume, will be looking at this very carefully as one possible condition of approval in the event they're asked to approve a new merger. It may well be promising, but it's not going to provide all of the solution for competition or consumer protection for Canadian air passengers.

Mr. Michael Murphy: Mr. Calder, my remarks are brief. Our only concern vis-à-vis the regionals is to minimize the instability. As we go through this transition, it's very stressful. It creates a lot of instability. Airlines are extremely complex operations, as you know, with many dependencies. There have been cases in the States where merging of airlines and the combining of cultures and checklists—the operating checklist for the aircraft—have contributed to aircraft accidents. We also saw some of that during the Dryden crash with Air Ontario several years ago. So we just want to minimize the trauma on the airlines as we go through this phase.

Mr. Murray Calder: Okay. Thank you very much, Mr. Chairman.

The Chair: Thanks, Mr. Calder.

Mr. Guimond, please.


Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré—Ile d'Orléans, BQ): Thank you, sirs, for your excellent presentations. I have two series of questions for you. Since I don't know if the chairman will recognize me for a second round of questions, I'll take this opportunity to quickly ask you three questions that you can jot down.

Firstly, have other countries adopted similar airline passenger bills of rights or is this something unique to Canada?

Secondly, you focused on public participation, on certain issues related to airport restructuring and on the importance that should be assigned to public and passenger interests. You say that these issues should be reviewed by a qualified, impartial arbitrator and you list some examples.

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I have a somewhat different opinion. We're all familiar with the process used to appoint members to the National Transportation Agency or to the Transportation Safety Board. There are no problems with the Civil Aviation Tribunal, but as for the other two organizations, I have my doubts. I have to wonder if the party in power, regardless of which party that may be—I'm not criticizing the party currently in power since the previous government also appointed some of the faithful—should be making these appointments. I'd like you to comment on this practice.

Thirdly, the whole question of competition needs to be addressed, especially in the context where a new carrier would be formed, one that would be a dominant industry player. The problem would be mainly with regional services. In your estimation, which authority would arbitrate and review cases? Last Thursday, as I recall, we heard from representatives of the Council of Canadians. Mr. Bleyer didn't return today because we heard from him last week. I believe he was accompanied by counsel, Mr. Bellemare. I want to caution you right away: if you're going to tell me that the Competition Bureau will ensure that there is competition within the industry, I'll have to remind you that Mr. Bellemare railed against the Competition Bureau, citing as an example the Loblaws-Provigo merger. In any event, he raised some doubts in my mind. From the outset, I've been convinced that the Competition Bureau must ensure a competitive environment, but Mr. Bellemare set off some warning bells and suggested that I think differently when we get around to drafting our report. Who then should act as competition watchdog?

Mr. Harry Gow: Thank you, Mr. Guimond. I'll try to answer your first two questions and give you my own personal opinion in response to your third one. Then I'll ask Mr. Janigan, our expert on competition issues, to elaborate further.

Other world countries have also adopted airline passenger bills of rights. In the United States, a bill was tabled in the House of Representatives, the equivalent so to speak of our House of Commons, but the initiative was withdrawn. It was replaced by a somewhat watered down voluntary declaration adopted by the carriers themselves. While not as forceful as the original bill, it is nevertheless been adopted.

In England, there are various declarations respecting different modes of transportation, including rail and air travel. The provisions they contain are not as extensive as the ones contained in our proposed bill of rights, but they touch broadly on the same principles.

France has taken a somewhat different approach to this whole issue. The Loi d'orientation des transports intérieurs sets out the national priorities of the French Republic and we looked to these for inspiration when drafting our own passenger bill of rights, which is far more detailed than the legislation in so far as the role of airline passengers is concerned. In France, however, the SNCF, Air France and numerous other carriers set aside seats on their board of directors for system users. An acquaintance of mine, Mr. Sivardière, is a user/member of the board of directors of France's SNCF. To my knowledge, the same practice applies to other modes of transportation.

We conducted research in the US, England and France to identify some precedents and to get ideas on which we could draw for the drafting our own passenger bill of rights.

You also had a question for us about public participation. There's no question that the current appointments process could be improved upon. Mr. Vastel writes about this very subject in today's edition of Le Soleil and Le Droit in connection with the National Parole Board. The same problems seems to crop up in all British-inspired democracies. On the one hand, we are asked to establish a highly transparent process and to safeguard the integrity and neutrality of the appointees. However, we need to acknowledge the fine work done by certain public bodies, including the NTA which has dealt with many issues in which I've been involved.

We have met with representatives of the Competition Bureau who, in my opinion, adhere to the belief that competition is a panacea. Having said this, I must say that they were well informed and vigilant. Now then, I'd let Mr. Janigan respond to your question.

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Mr. Michael Janigan: Thank you very much.

You bring up some key concerns associated with price and quality of service for airlines in the event that we move to a situation of having one dominant carrier or a monopoly situation in many markets. There are problems that are caused by this, not only in the markets where the carrier is dominant, but also in the other markets in which it competes, because it is then able to increase prices in its markets where it has dominance, or the monopoly markets, to finance its ability to compete in the other markets where there is competition or the start of competition. So it's a highly anti-competitive situation when you have one dominant carrier competing in these markets.

In terms of the solutions to that, some of the solutions are provided within the context of the Competition Act. But the Competition Act's solutions are by and large ones that are directed at specific instances of anti-competitive behaviour or are meant to compose episodic interventions by the regulatory authority to go in, clean up the problem, and get out.

Many of the problems that arise in the circumstance where we have one dominant airline require a vigilance over a longer period of time. Hence, for example, in the deregulation and introduction of competition in telecommunications or energy, it has been, by and large, the regulatory board of telecommunications or of energy that has introduced the steps and has monitored and promoted competition within the individual industry. I think you're going to have to see a role for the Canadian Transportation Agency in taking those steps.

The Competition Bureau will be helpful and will have a degree of superintendence, but it can't be the only mechanism. The problem you have with the Canada Transportation Act is that it represents a relatively early attempt for deregulation and competition in terms of the state of acts dealing with industries. For example, later attempts, namely in telecommunications, or latterly in the provincial energy acts, represented a much more cautious approach, one that realizes that competition does not come easily, that you have to be vigilant, that you have to take steps to ensure that barriers to entry are removed, and a consistent monitoring process, particularly in the initial steps by the board.

The act belongs in the category of the “let it rip” kind of theory of competition, which I think has gradually fallen into disfavour as people understand that the introduction of competition, particularly in monopoly markets or in markets that involve important public service, takes a degree of superintendence that is not present in this particular act which we are recommending be implemented.

The Chair: Thanks, Mr. Janigan.

Mr. Comuzzi.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Let me ask the questions first, and then I'll ask you for the answers.

First off, as a follow-up to Mr. Calder, why are you concerned about foreign ownership?

Secondly, you folks put a lot of faith in the Competition Bureau and the Canadian Transportation Agency and other regulatory controls. I don't think you take into consideration for a little bit how difficult it is for the average citizen in this country to deal with any federal government agency or level of government. It has a very high stress level, and that's in issues that are truly important, like their pension and their health care and other things. Why would you sit here and tell us that the Competition Bureau is going to cure all the ills? Or the National Transportation Agency will do something for the consumer protection that we're looking for in this committee? That's the second question. What I'm looking for are practical solutions on how the consumers in this country are going to be protected.

• 1850

Mr. Murphy, I attended most of the hearings in the Moshansky hearing into the Dryden crash, and the chairman and I have often been together on flights. Let me talk about not seat size but cabin space. Maybe the best airplane ever developed is this new 50-passenger jet we have flying around, but I have to tell you it's the most uncomfortable plane that anyone ever designed.

Do you attest to that, Mr. Chairman?

The Chair: Yes, sir.

Mr. Joe Comuzzi: I think you would also, Mr. Janigan. It's an absolutely uncomfortable aircraft.

In the Moshansky hearings on that Fokker F28, it was a full aircraft, and when you talk to any of the survivors, there wasn't any room to move. The spaces in these aircraft are great if you have 50 or 100 or 200 people jammed into a space and nothing happens on a flight. But when you have an abundance of turbulence or you have some problems, it turns from a safe condition into a very unsafe condition because of the lack of space within the cabin.

The Chair: Thanks, Mr. Comuzzi.

Mr. Joe Comuzzi: Answer those three questions, if you will, please.

The Chair: Gentlemen.

Mr. Michael Janigan: I'll take a crack at the first two.

First, with respect to the foreign ownership, I think the position is not so much that we're against dealing with the limits as that we haven't taken a position on it, principally because the members of our coalition have differing positions with respect to sovereignty issues. As well, we don't really have the kind of empirical evidence one would like to have to recommend that increases in foreign ownership would automatically lead to new market entry or new competition. If there were more empirical evidence along those lines, we might take a second look at it, but in fairness, I think our position is not so much that we oppose this, but that we just haven't taken a position on this as a coalition.

Secondly, with respect to your point as to the protections to be put in place, whether or not they're really accessible to ordinary Canadians, I think you're right in part. The problem is that the purpose of these acts and the actions of a regulatory agency are in large part to set terms and conditions in a broad sense. They may have some power to deal with complaints, for example, but primarily they're concerned with setting terms and conditions, in the case of the Competition Bureau, that might allow competition to flourish, and in the case of the Canadian Transportation Agency potentially to ensure that in the event there isn't competition, there are sufficient standards with respect to quality of service and price so that Canadians are protected.

Apart from that, there might be another level that's needed to enable the agency to deal effectively with passenger complaints. One of the things we've proposed is a transportation users council that would represent the interests of ordinary users of the transportation system, that would take up matters associated with the policies of the airlines, sometimes in an informal setting, sometimes recommending regulations like they do in the U.K. That might solve some of the gap between these rather formalistic agencies that deal and really have to deal in a very quasi-judicial way with everything that's before them, and the ordinary Canadian passenger.

Mr. Michael Murphy: Mr. Comuzzi, if I could answer your last question about the space, as far as I know, space is dictated by the requirement to do this evacuation test. The company that makes the airplane must prove that with half of the exits blocked, all of the passengers that have been put on that airplane can exit within 90 seconds. There are minimums for the aisle, the centre aisle, or aisles if it's a wide-body, and there are certain other minimums. But by and large, the major criterion is whether you can get everyone out of the aircraft within 90 seconds.

Those tests are done at the aircraft factory or at a test centre. There is no confusion or panic, because the people are briefed as to what they should do. As you would expect, baggage falls down in a crash. The overhead bins would open, and people would be trapped, or what have you. Of course smoke and injury and the breaking up of the aircraft are not factored in. So it's not surprising that in about 1995 the Transportation Safety Board did a study of actual evacuations and found that the passengers did not evacuate within that 90-second period in 66% of the cases. So it is a concern to us as well.

• 1855

Most aircraft have a seating density that exceeds anything any fire commissioner would permit in a theatre or anything like that. That is a problem, especially when you're surrounded by jet fuel and other flammables. So this is one of the concerns Mr. Guimond and ourselves have about the emergency response services at airports.

The Chair: Thanks, Mr. Murphy.

Ms. Desjarlais, please.

Ms. Bev Desjarlais (Churchill, NDP): Thank you for your presentation.

I want to say to you that it's good to hear your comments on safety and security, and that you do consider them an issue. I certainly consider that your comments fall within this mandate, since the minister was very clear in indicating that we must maintain a safe airline industry. I think we'd be naive to believe that in the fights for the best market and to keep costs down, businesses don't tend to take shortcuts in a lot of cases. That's just not the case. Most credible businesses don't, but we have to have rules in place for those that will not be up front.

My question is with regard to the number of accidents that have happened in the last couple of years. I believe I could probably recall three in which visibility was indicated as being the issue. In my recollection, the final outcome seemed to be that it was related to pilot error because he shouldn't have gone down or attempted to land because of that visibility. Has that been the case, or is it other reasons that are given?

Mr. Michael Murphy: Unless we can cite specific examples, the one that comes to mind most recently is Fredericton, but there was also the one at Sept-Îles on August 13. The August 13 report has not come out, and I don't expect it out for some time.

The Fredericton action report has come out recently, and one of the factors was that the aircraft was out of position for a safe landing, both in terms of speed and trim-wise. The weather was right on limits, so there was some criticism there. As a result, Transport Canada has stiffened the regulations, or is proposing to stiffen those regulations.

Unless we get specific on specific accidents, I just don't really feel qualified to go any further.

Ms. Bev Desjarlais: Certainly in regard to the recommendations to tighten them up, we heard some criticism of the attempt to tighten them up on the visibility issue from one group of airline owners.

I did want to ask you something in regard to one section of your proposal. On page 5, one paragraph says:

    The airlines' complaint service should include a designated staff person at each airport to handle customer complaints. The designated person's name, phone number, and e-mail address should be made available....

I wonder how anyone would feel about being the person getting all the complaints from the disgruntled customers, and whether or not it's somewhat of an unsafe situation to have available the full name of some worker hearing from a lot of disgruntled airline customers. I've seen a few disgruntled airline passengers, so I'm just curious whether you would foresee that this would be an issue.

Mr. Harry Gow: We certainly can, ma'am. I think this first requires a determination by the authority, the airline or the airport, that a position will be created, that there will be a fixed point of responsibility. We see this in social service systems sometimes.

When people were de-institutionalized properly into the community, some provinces like New Brunswick named officials who would be considered to be the overseeing trustees. In the States, in the Pennhurst case, the court appointed an executor, as it were, to be the fixed point of responsibility for the moving into the community of these people.

This provision is somewhat inspired by that in the sense that, yes, the official takes a lot of heat, but the official could be a highly trained person with knowledge of the airline industry—probably with a long practice in it—and someone who is noted for unflappability. It requires a particular type of experience, training, administrative responsibility and preparation, but it can be done. And it would be a lot better than having some poor, flustered 23-year-old attendant at a counter, someone who has perhaps not been in the airline industry more than a year, trying to answer very complicated questions asked by people who are stuck for three days in a blizzard at Pearson.

• 1900

In other words, what we're saying is that this should be a fairly well remunerated, senior position, and the person should have a lot of information and resources at his or her disposal.

The Chair: Thanks, Mr. Gow.

Mr. Calder, please.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

I was curious about the one answer on foreign ownership. Your answer to me and your answer to Mr. Comuzzi seemed to be a little bit different. Maybe you could clarify that.

What I did pick out, though, is that there is concern about the possibility of one major carrier, a monopoly, and where we'll go with pricing and everything like that. I would like your comments about policy dealing with the airport time slots instead. From what I can see right now, you control the industry if you control the slots. I'd like your opinion on that.

Mr. Harry Gow: I was the one who made the statement that seemed to contradict what Mr. Janigan said. My intent was to support, at least for my organization, the principle defended by the Council of Canadians. I apologize if I made it sound like there was a more general support, but certainly within Transport 2000 we have concerns about foreign ownership issues, as does the Council of Canadians. My apologies for not making that clear.

As to the slots and gates issue, like a number of other mechanisms within the airline industry, that is indeed a form of regulation that has the effect of permitting greater diversity. For instance, if you say that a certain number of slots and a certain number of gates will be freed up at Pearson by a carrier, this may well have the effect of improving the access to that hub for outfits like WestJet, NorthJet, EastJet, QuebecJet, or whatever. Within limits, this can in a sense have the effect of providing a form of implementation of policy.

Mr. Murray Calder: There's also the situation with Air Canada right now, with its proposed discount carrier, for instance. In the deal that Robert Milton has put forward right now to purchase Canadian, he went to the Mount Hope Airport and bought up all the time slots. That effectively blocks out anybody else from coming into the airport.

Mr. Michael Janigan: I think there are a number of market barriers that are—

The Chair: Sorry, Mr. Janigan. I just want to correct the record there.

Murray, Hamilton's airport doesn't have any slots.

Mr. Murray Calder: Well, it was my understanding that Milton went in and purchased something along that line.

The Chair: Unless we know what that is.... That's the agreement between Milton and the Hamilton airport. I'm not even aware of it, but Hamilton's airport doesn't have slots.

Mr. Murray Calder: Okay.

A voice: Mr. Chair, I'm going to concur with what he said. I'm of the opinion that Mr. Calder is correct.

The Chair: Order, please.

Mr. Janigan, please.

Mr. Michael Janigan: In effect, I think these slots represent bottlenecked facilities that have to be superintended by either Competition Bureau authority or by the agency, in order to ensure that there is access for airlines that want to come in to compete. There are a number of these kinds of market barriers or bottlenecked facilities identified by the competition commissioner in his letter to the minister last month. I think all of the suggestions, and particularly those on time slots, reservation systems, and airline points, are important in terms of removing barriers to entry. Once again, however, this is going to take some time to do.

It's having competitive entry up to the point where it actually challenges or provides effective competition to the dominant player. That takes some time, and you're still going to have to have some superintendence on that dominant player to prevent them from playing the kinds of games they like to play. Principally, they're not interested in losing market share; they're interested in remaining the dominant player.

That's why the CRTC, for example, opened up competition but kept its hand on the tariffs offered in long-distance tolls by the local incumbents until about five or six years after competition had developed. At that point in time, the CRTC decided there was evidence of enough rivalry to permit it to forbear from regulation of the carrier. A similar sort of circumstance will have to exist here.

A dominant player has a lot of different levers it can pull to make sure it remains the dominant player. Some superintendence is going to be provided by the Competition Bureau, and I think some of it should have to be provided by the agency.

• 1905

The Chair: Thank you.

Mr. Bailey.

Mr. Roy Bailey: Perhaps you could answer this question, gentlemen. I asked, just for the fun of it, on each flight recently what the most bothersome thing was for the flight attendants. And they pointed out, without any names being used, beyond a doubt, it was the size and the weight of the on-board luggage that passengers were allowed to carry on.

Who determines the size that can come on? Who determines the weight?

I lost a thumbnail in an aircraft. I was the one who helped put the bloody thing up, because the person who came on couldn't lift it up. They were right behind me, and they figured they could pull it out, and bang, I lost my thumbnail.

I want to ask this question because I've seen three or four accidents. Is there any standardization with this process of what you can bring on board?

Mr. Michael Murphy: There is a device at the airports, which is a standard fit, and it's developed in consultation—

Mr. Roy Bailey: It doesn't have anything to do with weight, though, does it?

Mr. Michael Murphy: No. There are weight limits for the overhead bins and usually they're marked on the doors inside. The little device to put your bag on near the check-in counter is sorted out as an industry standard. If the airlines can provide bigger holds and more room under the seats, then they can increase that, but it's generally sized to fit an industry average.

I can see why the flight attendants would be upset. Not only is it a safety issue to have tool boxes or whatever above your head, but also it creates a lot of aggravation, as you found in the cabin yourself, which might cause problems downstream. It takes a long time to get people settled in their seats, so it puts pressure on the schedule as well.

Mr. Michael Janigan: This is also a good argument for universal standard enforcement, because what happens is frequently these kinds of standards aren't enforced because airlines don't want to bother passengers or don't want to aggravate them to the extent that they change to another airline. If you had a standard that was enforced by all airlines and they could expect, wherever they go, to have that standard, it would improve the situation.

The Chair: Thanks, Mr. Bailey.

Mr. Guimond, please.


Mr. Michel Guimond: Could you possibly clarify for me your statement under part 4 on page 6 of your submission? You note the following:

    Where travel fares are set by market forces, the federal government has the obligation to ensure that anti-competitive conduct...does not affect the price of travel.

It's a known fact that regional fares are already rather high and that one of the offers deemed illegal by the court called for a freeze on air fares for the next five years. I'd like to hear your thoughts on the subject.

What kind of regional service can we hope to have in future? As things now stand, two aircraft depart either half full or half empty, depending on whether you're an optimist or a pessimist. After restructuring, perhaps there will be only one flight or flights without in-flight services or even attendants, whose job was mainly to ensure passenger safety, not to serve meals.

Could you also quickly tell me if you foresee a role for charter airlines in the charter transportation industry and greater competition? Charter airlines have told us that they are prepared to play a bigger role on the competitive market. Perhaps they could be assigned time slots which would allow them to land at 11:30 at Pearson. Everyone wants to arrive at 11:30, but that's not what business travellers want.

Mr. Harry Gow: Thank you, Mr. Guimond. There are several parts to your question and I will try to provide partial answers. However, I'll let my colleagues tackle those parts related more to their area of expertise.

There's a popular saying in Quebec that it's twice as expensive to fly to the Gaspé region as it is to fly to Paris. One of my colleagues with the Public Interest Advocacy Centre who frequently travels between Fredericton and Ottawa checked the fares posted for the Maritime provinces. It's indeed true that often, it's more expensive to travel within eastern Canada than it is to fly to Europe. There is no escaping this truth.

• 1910

As everyone knows, air fares have risen considerably, 7 per cent alone in the past year. This increase is due in part to factors beyond the control of the carriers, such as the cost of fuel. Any future regulations must take into account factors beyond the control of carriers.

However, we believe that regional fares should follow the same curve as fares elsewhere in the country. We've observed that to date, regional fares tend to increase more quickly. Undoubtedly, I haven't addressed some issues. Perhaps Mr. Janigan could take over at this time.


Mr. Michael Janigan: Just very briefly in terms of our recommendations concerning pricing, what we've said is that a passenger is entitled to a fare in accordance with a competitive market. If that competitive market does not exist, then he's entitled to have a fare set in accordance with some kind of scheme that allows for just and reasonable fares, presumably set according to costs. As well, what we would be concerned with in that circumstance is also whether the quality of service is maintained to a sufficiently high level.

So what one would ordinarily expect in a circumstance where there is not competition sufficient to maintain a competitive fare is that you would have fares set by reasonable cost. As well, you would have the quality-of-service standards that the regulated carrier would have.

You would also be looking in that same period of time to try to remove any barriers to entry for other airlines for getting into that market to compete with those airlines. That may include things like time slots, which we've discussed, access to the reservation system, and maybe access to the facilities that only that dominant airline owns. You may, as we've recommended in our material, take the example of telecommunications, whereby ordered access would be given to this airline provided that reasonable compensation is paid.

What you're attempting to do is to get to a situation where there is a competitive market for airline services for every passenger, but until you do, you need to have the controls in place that prevent passengers from being gouged and, at the same time, encourage market entry for competitors.

The Chair: Thank you.

Ms. Desjarlais, please.

Ms. Bev Desjarlais: I have two questions. First, do you see any particular scenario as the best one as far as how we'll meet the needs of passengers, whether it will be a monopoly, a duopoly as we have it right now, or a duopoly with increased regulations? Have you had any thoughts on which one you see as the better of the two?

Mr. Michael Janigan: I don't think we've attempted to forecast what the best mode for delivery of service is in terms of whether or not it's a monopoly, a duopoly, or a competitive system. We've suggested in our material that you require a competitive system, that every passenger is entitled to a fare set out by a competitive system, and if not, set by regulation. I don't think we've entered the fray in terms of attempting to determine from a cost standpoint across the board or an efficiency standpoint across the board that any particular system is the best. I think that's one thing we might like the market to determine.

I think it's inevitable that you're going to have a lot of service in Canada being delivered in only a monopoly mode. It's just because of the economics. But I think that as much as possible you should be encouraging market entry and the protection of consumers in the areas where there is a monopoly.

• 1915

Mr. Michael Murphy: If I could just add to that, no matter what happens, we'd like to see a more informed consumer. A more informed consumer is a safer consumer, which will also lead to being someone who wants to participate more in this process, who wants to be a part of the airline safety process. Only when everyone is involved will we make a breakthrough. We've hit a brick wall in the aviation safety business over the last 10 years. The accident rate has remained stable. We really do need a breakthrough, and perhaps this is one of the things that we can bust through that barrier with.

Ms. Bev Desjarlais: Do you have any timeframe limitation, say, when you head down the runway and you have to stop and wait? There have been cases where it's been 45 minutes to an hour, with the passengers as hostages on the airplane, waiting to fly to Ottawa. Do you have any kind of a timeframe in there as to what is a limit?

Mr. Michael Murphy: I don't think we have anything that specific. I know from my experience that people like choices. If you can give the people a choice to stay on the airplane or get off...if there's an available slot in the gate, that tends to settle people down and put them in the right frame of mind. Some people want to have a cigarette; other people want to get off the airplane for other reasons. If you can give people choices whenever possible, that's great.

Ms. Bev Desjarlais: Since the chair is not paying attention, one more question: what do you think would happen if you have a bunch of passengers on the airplane and the attendant comes up and says, I have to let you know information about the two exits and in the event of an evacuation are you willing to open the doors...what happens if all the passengers refuse?

Mr. Harry Gow: I haven't been up against that situation myself.


Mr. Michael Murphy: No, I haven't either. I'm afraid I don't have an answer to a hypothetical question.

Ms. Bev Desjarlais: It just kind of hit me one day. They ask you if you would mind opening it and I started thinking, what the heck would they do? Would the plane not go? What's the option?

Mr. Michael Murphy: I haven't had any experience with that one.

Ms. Bev Desjarlais: That's it.

The Chair: Thanks, Ms. Desjarlais.

Are there any further questions, colleagues?

Gentlemen, thank you very much for your presentation to the Standing Committee on Transport. We appreciate the time you've taken to be here.

Colleagues, I wonder if you could just stick around for a quick in camera meeting?

[Proceedings continue in camera]