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STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 13, 2000

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[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues. The order of the day, pursuant to an order of reference of the House dated March 31, 2000, is consideration of Bill C-26.

Before us this afternoon we have one witness from the Yukon Department of Community and Transportation Services, Mr. Marc Tremblay, director of the aviation and marine branch. Joining him is Harley Trudeau, who is a senior representative for the Yukon government Intergovernmental Relations Ottawa Office.

Gentlemen, welcome to the Standing Committee on Transport. We look forward to your presentation of between five and eight minutes. Then we'll have the members ask you questions. Whenever you're comfortable, please begin.

Mr. Marc Tremblay (Director, Aviation and Marine Branch, Yukon Department of Community and Transportation Services): Mr. Chairman and honourable members, we appreciate the opportunity to appear before this committee to outline the Yukon government's concerns related to the airline industry in Canada and the Government of Canada Bill C-26.

Before I get into my presentation I'd like to introduce the other member from the Yukon delegation, Mr. Harley Trudeau. He is the senior government representative from our federal relations office here in Ottawa.

Over the past eight months, since the airline restructuring initiative began and the proposals by Onex and Air Canada were tabled, the Yukon government has been very active in putting forward its concerns about the eventual outcome.

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Three issues of great importance to the Yukon provided the focus for the interventions made last fall by government leader Piers McDonald and the Minister of Community and Transportation Services, the Honourable Dave Keenan. The three issues of great importance to the Yukon are pricing, level and continuity of service, and protection of workers. Since our first interventions, our understanding is that the third issue, the protection of workers, has been addressed through undertakings between Air Canada and Minister Collenette.

We note that the restructuring will have no negative impact on workers for the next two years, and we look forward to learning how employee protection will be assured in the longer term. With that understanding in place, this presentation will focus on the remaining two issues of pricing and the level and continuity of service.

In terms of air transportation service, the Yukon's experience is unique in many respects. It is important for me to take a few minutes to provide you with some context before getting into the details of the presentation.

The federal government national airport policy identifies a core of airports in Canada known as the national airports system. These are airports considered essential to Canada's domestic prosperity and international competitiveness.

The Whitehorse International Airport is part of the national airport system and is currently serviced on a year-round basis by one carrier, Canadian Airlines International. The service is twice daily to one location in southern Canada—Vancouver. The exception is in the busy tourism months, when the service increases to three flights daily.

The air route between Whitehorse and Vancouver served by Canadian is not one option among an array of air or ground transportation options; it is the only option. Canadian Airlines International's flights are in fact a lifeline to southern Canada. It is a lifeline for all Yukon people who travel south and rely on this connection for holiday or business travel. It provides a critical link for Yukoners who need to travel outside Yukon for both emergency and non-emergency medical attention. It is a lifeline to Yukon businesses that rely on reasonably priced and predictable air cargo capacity. It is also a lifeline for businesses in our growing tourism sector. We know, for instance, from extensive surveys that tourists who flew to Yukon in 1999 comprised 20% of the total visitors, but spent 36% of all tourism dollars.

Consistent and uninterrupted air access between Yukon and southern Canada at a reasonable price is of great importance for all Yukon people and for industries that rely on thousands of tourists who arrive in the Yukon by air every year. It is in this context of this heavy reliance by Yukon people and businesses on a monopoly air carrier that I will now address the issue of pricing.

Historically, the only air carriers able to provide year-round competition to Canadian Airlines International on the Whitehorse-Vancouver route were Air Canada and its partner, Air BC. However, Air Canada and its partner decided not to maintain a competitive service on this route. This threat of competition is no longer present. To state the obvious, Air Canada will not compete with itself by undercutting Canadian Airlines. The airline merger has now confirmed the monopoly environment that has persisted over time.

Recent history and indications from current and future offerings by Canadian Airlines may be good indicators of what we can expect. The fraction of seats that are sold by fare class helps to illustrate our concerns about the monopoly situation.

The number of people flying on the Vancouver-Whitehorse route in either business class or full-fare economy is nearly twice the average in southern markets. Of domestic scheduled passengers who fly across the country in the south, 87% take advantage of some form of price discount. This compares to only 70% in the Vancouver-Whitehorse route. In the Yukon government's view, this is a significant difference and does not constitute a fair pricing structure for Yukon people and business travellers. It is certainly a disadvantage to our tourism sector.

As you know, most Canadians are currently enjoying the benefits of a spring seat sale and have access to an array of low-fare options. Yukoners, for reasons we attribute to a lack of competition, do not have the same access to reduced-fare travel. For example, the Whitehorse-Vancouver leg of my trip today cost over $700. The Toronto-Winnipeg route is similar in distance and load factor, yet the price available on this route was less than half, at $339.

Looking at my trip from Whitehorse to Ottawa, the five-and-one-half-hour leg of my total eight hours in the air cost less than 40% of the total ticket price.

Again, Yukon people are not seeking special treatment. They seek only fair treatment, as though they were in a competitive market rather than a monopoly.

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Within the past year the Yukon department of tourism successfully negotiated a convention rate for air travel to Whitehorse with Canadian Airlines. For people travelling to a conference in Whitehorse, this provided that their costs would be no more than if the conference were held in Vancouver.

This agreement was a significant contributing factor that led to a number of conferences being staged in Whitehorse. Since the merger, Air Canada has indicated that this zone fare arrangement will not be renewed. We find this decision unacceptable, and have expressed our strong concern directly to Air Canada.

I have addressed the pricing of air passenger service the Yukon receives, but air cargo rates are also an issue of great importance to the Yukon. Currently, the freight deals are far higher in the north than can be gained in southern markets. This cost of business is obviously passed on to Yukon people in terms of higher prices. But again, in a competitive environment there can be little doubt that we would be facing a different and much more favourable cost structure.

The Yukon government endorses Minister Collenette's commitment to a safe and healthy airline industry in Canada. However, we believe it is important to clearly define those air carrier practices that are acceptable in the current dominant carrier environment.

The Yukon government recommends that Bill C-26 be amended to ensure that passengers travelling on the lifeline route to Yukon's only NAS airport are provided with the same structure of seats sold by fare class as are sold on comparable southern routes. Pricing for cargo on these flights should be similarly provided for, under a revised Bill C-26. The airline should be required to demonstrate annually that the pattern of seats sold—not claimed to have been available—is comparable to the pattern of seats sold across the country. A similar approach to enforcement should apply to air cargo.

With the remaining time I have, I would like to highlight the importance of the level and continuity of service to Yukon people. The legislation does not protect an acceptable floor level of service that is essential to achieve the objective of the national airport system and meet the Yukon's strategic air service requirements. The Yukon government believes that the current two flights per day is an absolute minimum level of service to ensure an acceptable connectivity to the southern systems for Yukon people and business travellers.

Connectivity is important for the Yukon's tourism sector and to assure that southern and international destinations can be reached in an acceptable period of time. For example, a schedule of one flight a day would mean that travel between Whitehorse and Ottawa for this engagement could not be completed in one day. Overnight stays, for lack of an acceptable connection, mean that tourists will spend two fewer days per visit in the Yukon—one day each way as they stay overnight in Vancouver. The vacation time that tourists have is limited. Lack of connectivity, layovers and delays mean that other choices for destinations will be made, and this will be translated into losses for Yukon businesses and workers.

The Yukon government recommends that Bill C-26 be amended to ensure that the lifeline route to Yukon is provided with a minimum service level of two flights per day with modern jet aircraft at current passenger and cargo capacity.

A provision in Bill C-26 that also causes significant concern relates to the notice that must be provided prior to discontinuance of service. In the event of the withdrawal of service between Whitehorse and Vancouver by Canadian Airlines International, the demand and yield available from this route would, in our view, be sufficient to attract an alternate air carrier. However, in the Yukon context, the current provision of 120 days' notice is totally inadequate. Neither a complete nor partial service withdrawal could be filled within this limited window. The Yukon's dependence on its air service lifeline to the rest of Canada requires the assurance of uninterrupted service, as long as the dominant carrier serving this jurisdiction operates in monopoly environment.

The economic implications of a service disruption are substantial. The tourism industry relies heavily on lengthy lead times and certainty. Tourists arriving by air to the Yukon have a 12-month to 14-month planning horizon. Any service disruption by a monopoly air carrier would inflict severe and long-term damage on the Yukon's reputation as a destination that can be reached with reliability. The ripple effects on the tourism sector and the Yukon economy in general would be enormous.

Various approaches are available to deal with this weakness in Bill C-26. Clearly, the notification timeframe must be significantly extended in the Yukon situation. Also, the airline must complete consultations with local government well before the notification date. Given the potential impact on the Yukon economy overall, the Yukon government would have a significant interest in the discussions relating to the service discontinuance.

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The Yukon government recommends that the notification period for a discontinuance of service below the two-flight-a-day level be increased from 120 days to one year for service between the Yukon's NAS airport and the south. Consultations with local governments for discontinuance of service below this level must include the Yukon government and occur within 30 days of the notification.

Mr. Chair, I would like to convey our thanks for the opportunity to appear before you. This presentation is a key component of the work the Yukon government is undertaking as we express our concerns to the federal government and to the airlines.

I'd like to conclude now by quickly reiterating the three main Yukon government recommendations for amendments to Bill C-26.

Since the Whitehorse International Airport has been identified in the federal government's national airports system and is in a non-competitive market, the Yukon government recommends the following.

Passengers travelling on the lifeline route to Yukon's only NAS airport should be provided with the same structure of seats sold by fare class as sold on comparable southern routes. This should be enforced on the basis of actual sales, not seats made available, and similar provisions should apply to air cargo.

A minimum of two flights a day, at current passenger and air cargo capacity, with modern jet aircraft, should be provided to a southern Canadian hub airport.

The notification period for a discontinuance of service below the two-flight-a-day level should be increased from 120 days to one year, and consultation for discontinuance of service below this level must include the territorial government and occur within 30 days.

I trust you will consider our recommendations favourably, and I look forward to answering any questions you may have.

The Chair: Mr. Tremblay, thank you very much for a very thorough report and for your recommendations, and thank you for making the extra effort to come to Ottawa to present your report. We very much appreciate your efforts in coming before us. Thank you.

Colleagues, questions? Val?

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you, Mr. Chair.

Thank you for appearing before the committee and thank you for your recommendations. I would like to deal with your third recommendation right now. Your recommendation to increase from 120 days to one year the notification for the discontinuation of service may be applicable to a dominant carrier in Whitehorse, but we've been advised by other witnesses that any change to the legislation, and even this 120 days, may cause some hardship for small air carriers who operate in the north, who for the most part operate monopoly routes. The suggestion from them was that 120 days is actually quite high, and they would not look at expanding their services into small, remote communities if they were forced to stay there for four months and there wasn't traffic to support that new service.

So I assume from the way it's worded here that you were strictly thinking of Whitehorse and a dominant air carrier, Air Canada.

Mr. Marc Tremblay: Absolutely. An enhancement to the 120-day requirement for small operators even to our communities could pose difficulties. What we're looking at here is the strategic impact of any interruption in service to the Whitehorse airport, which is part of the national airports system and is strategic in terms of air transportation for Canada. So our recommendation applies to an NAS airport only, not to any airport of a lesser standard than Whitehorse.

Ms. Val Meredith: So that's how you would divide it. It would have to be one that's already been identified as part of the national airports system.

Mr. Marc Tremblay: Yes.

Ms. Val Meredith: Okay.

The other issue I will raise is your first recommendation, where you're asking for the same structure of seats sold by fare class as sold on comparable southern routes. I think you're going to find there will be less variation in seat-sale prices. I would imagine airlines offered those seat sales because those seats were running empty, and in order to take any advantage of having that seat filled, they offered those seats for a lower price to encourage travellers. I don't imagine that with the reduction in capacity there's going to be an excess number of seats, so if there aren't seat sales anywhere else, I don't think you're going to find any seat sales going to Whitehorse.

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I think what you're identifying is you feel you've been overcharged for the distance the flights have gone. You made a comparison, I believe, between Vancouver and Whitehorse and Winnipeg and Toronto. That probably is more an issue one would want to address with the carrier, to get explanations as to the differentiation in fare price when the same distance is being travelled.

Mr. Marc Tremblay: We've been in the monopoly environment for some time. However, we've had the benefit of another large carrier, Air Canada, sitting in the wings. Every two or three years, Air Canada would demonstrate to the carriers serving the Yukon that if they didn't follow some kind of acceptable behaviour, Air Canada would be in there. They tried two or three times during my tenure in the Yukon.

What we're looking at here is not so much a pricing structure but a fairness of opportunity to Yukon people. It's our sense that if the mechanism for travel across the country allows travel at certain times of the year for people who aren't quite as affluent, through discounted seats.... During the busy time of the year is actually when we're getting the lowest fares, because we have some charter competition in the summertime.

We're not asking the airline to establish a particular price. We're not saying their full-fare price should be x dollars. We're saying give equal opportunity for air travel in this jurisdiction. If you've demonstrated that the norm across the country is that 20% of your seats go at a 10% discount and 30% of your seats go at a 40% discount, then give the same opportunity to Yukoners travelling south and southerners travelling to the Yukon. It's not a question of level of service but of opportunity to access service.

Ms. Val Meredith: The other issue that has been brought before us in our hearings is a concern from those other two airlines you referred to that come in during the summer months, the high, peak season, and offer services. It is apparent to us that the support for those airlines has been withdrawn from Canadian through the cancellation of a contract they had with them. What kind of impact is it going to have on your communities if Transat and Canada 3000 are unable to find the ground service required?

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Bearskin.

Ms. Val Meredith: Is it Bearskin as well?

Mr. Marc Tremblay: I had an opportunity to sit in at yesterday's discussion and listen to the competition commissioner trying to grapple with whether that was an anti-competitive action or a service action. If we had been aware of the issue prior to last Thursday, I might have been able to incorporate it into the presentation.

But what's key is that the notification period of 120 days for this location, which has no alternatives, is insufficient time to accommodate changes in ground handling, and it's insufficient time to have another airline gear up to cover a loss of frequency. If the notice required for some kind of change—and ground handling is a good example here—were a year, there would be no issue, because we would ensure some alternative was developed.

Clearly 120 days is insufficient. In about November we ordered air stairs for the large aircraft that are coming in this summer. They're still not delivered. And this is rush, trying to get equipment as quickly as possible.

So in our context, we can probably accommodate changes, but we need time to adjust.

Ms. Val Meredith: Thank you.

The Chair: Thanks, Val.

Could I just get a point of clarification from you, Mr. Tremblay? You spoke of changing the 120 days to one year, and Ms. Meredith explained to you how some of the smaller aircraft that would be attempting to fly into your airport.... What is your explanation for going to one year for anyone else who would attempt to fly into your airport?

Mr. Marc Tremblay: The one year applies, again, to the national airports system airport we have, which is Whitehorse airport. It doesn't apply to the more remote or smaller areas.

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The requirement to extend from 120 days to one year is based on the opportunity to have a replacement service addressed. We can't start up or attract or have people ready to add frequencies on certain dates. We are not able to replace the tourism marketing efforts. These tickets and seats and packages are sold 12 to 15 months in advance.

The Chair: I think it's your inclusion of the CAS. Let's just set aside CAS.

You have an airport at Whitehorse. Let's say Steve Smith at WestJet decides, hey, there's a lot of traffic potential there, so why don't I do a run from Edmonton to Whitehorse? Instead of going to Vancouver, you'll come to Edmonton, and then maybe jump on another WestJet to fly to Winnipeg, Hamilton, Ottawa, Montreal, Moncton, or wherever.

Why would Steve Smith ever want to come and do business? You're shutting the door to a guy like that, because he says, “Look, if it's not going to work, I'm not going to get stuck operating for one year, realizing after four months that I don't want to fly into Whitehorse any more because there isn't the traffic, or they're not flying my airline”. By saying you want to extend to a year, you're shutting the door on people like WestJet, or other airlines like WestJet, and private entrepreneurs who might want to take Whitehorse on as an opportunity.

Mr. Marc Tremblay: If we didn't have a carrier present as we speak, if Canadian Airlines or Air Canada—whichever name we use in a few months—wasn't in place, it might be a different story, but we've had a longstanding relationship with Air Canada. We've also had longstanding experience with the monopoly operation.

So we're not looking at a market, nor would any other NAS—sorry I have to bring that in—have a situation where they're looking at attracting the basic level of service. We're looking at a floor that we're hoping never has to kick in, a floor of two flights daily, which is widely held by transportation economists and others as a minimum level of service where service is strategically required.

The Chair: I may stand to be corrected on this, but I think there is an understanding that the day Canadian Airlines says they're not flying out of the Yukon any more, Air Canada must go in and replace Canadian's service at Whitehorse.

Ms. Val Meredith: If the legislation passes.

The Chair: Yes, if the legislation passes, and we're certainly hopeful that's going to happen.

What we have is if Canadian leaves, Air Canada comes in. So you still have Air Canada back. Whether it's two, three, or more flights, that will be dependent on the market, of course. They're not going to run empty planes from Whitehorse to Vancouver. But I still think, given the restructuring that's going on in the airline industry today, with the changes that are being made, there is, of course, encouragement to the discount airline services and the smaller owners, and so on, to start to pick up some of the slack. I still think you're doing yourself a disfavour by demanding a one-year term, because, I tell you, if anyone is half interested, you will scare them away.

Mr. Marc Tremblay: Yes, our forecast of how this would play out doesn't see it having any impact on entrance. In our definition of competition—and this requirement is only needed in the absence of competition—if there are two flights daily, we're happy campers and the strategic requirement is met. We believe the two flights daily is a minimum level of service, but because of the demand and the market, we won't be in that position.

What we're seeking here and how this came about as an issue in the Yukon was during the Onex discussions, where there was potential for loss of service from Canadian due to financial difficulties, where there was some uncertainty. It was a big issue politically in the territory. We could not afford to have a one-week or two-week period where there was uncertainty. So we're identifying for the dominant carrier, which has currently about a three-year assurance, that it's very important to us.

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We recognize that an airline may not always want to provide two frequencies a day, but we need that as a government. If somebody is going to withdraw from that basic level of service, we're requesting that they be required to give us one year's notice.

The Chair: Okay, I understand where you're coming from, anyway.

Mr. Calder.

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

Just kind of along in that vein, on page 6 you say you need two flights per day on your lifeline route with a modern jet aircraft for both passengers and air cargo. How many people would be on those planes? Would those two flights a day be full, or what percentage would there be?

Mr. Marc Tremblay: I have to be cautious with my use of statistics, because there is only one carrier, and some information we have has been released to us by the airline on a confidential basis, but I can tell you that the load factors on the Whitehorse-Vancouver route exceed the national average.

Mr. Murray Calder: In other words, what you're telling me is that with the minimum service of two flights per day, you could probably look at expansion.

Mr. Marc Tremblay: And certainly in the summertime. You've heard from Air Transat and Canada 3000. We do have domestic service by Canada 3000 during the busiest months.

Mr. Murray Calder: Then with your other one, wanting to see the 120 days extended to a year, would you be looking at that same thing applying to a new entrant if you actually have a market in which you have some potential for expansion?

Mr. Marc Tremblay: We're visualizing that the requirement for the one-year notification would be to the current service provider.

We're expecting and certainly hopeful that in short order growth will be such that there will be competition and the minimum floor would also be a moot point.

Mr. Murray Calder: Okay. I want to switch gears here.

One of the other things we've heard is with different components of Bill C-26, if there is a competition problem, of course there's the Competition Bureau that we can go to. But yesterday we heard from the bureau, and they're not really interested in listening to customer complaints and what not. So this morning I threw out the idea of an ombudsman. The vehicle we could use for that ombudsman would be an extra appointee to the CTA. That individual would take and work those complaints and then basically plug them into wherever applicable. What would you think about that?

Mr. Marc Tremblay: Having survived a monopoly environment—I don't know which word to choose here—having been the subject of a monopoly environment for many years, an office, a voice, an avenue whereby our voice could be heard and a determination made as to whether treatment is fair is something we would favour highly. We would look forward to something like that.

One of the difficulties the Yukon has is that because of the lack of access to information through Statistics Canada and the ability for the airline to hold information close to its chest, we have not really been in a good position to make a case to the CTA or to anyone else. The only way the Yukon has had access to seat sales from time to time is when public outcry was at such a level that the airline couldn't stand it. So any avenue we have to ensure that the treatment is at least similar to what other Canadians are receiving is something we would sponsor.

Mr. Murray Calder: Okay.

Thank you very much, Mr. Chairman.

The Chair: Thanks, Murray.

Mr. Bailey.

Mr. Roy Bailey: I have a few questions.

You had mentioned that you favoured an amendment to Bill C-26 in which you would get your guarantees or whatever. We're dealing with one area in northern Canada. How many amendments would be necessary to deal with the Gaspé, northern Ontario, and so on?

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Mr. Lee Morrison (Cypress Hills—Grasslands, Canadian Alliance): Iqaluit.

Mr. Roy Bailey: Yes. I'm not criticizing you, sir; it's just that it opens up something I don't know whether this bill could accommodate.

Mr. Marc Tremblay: I appreciate that comment. It's something we gave a lot of thought to. We knew there's no sense in talking to anybody about a particular amendment that would apply on one route. It would just raise a windstorm of amendments. But in doing further analysis—and I met with my provincial counterparts earlier this week—it became clear that we are unique. We're in a situation where we are the only national airport system airport in the country that has a monopoly situation—or had a monopoly situation prior to the amalgamation. We're the only national airport system in the country that currently has the minimum level of service: two frequencies per day.

So the amendment we seek is not necessarily a Whitehorse-Vancouver route or a Whitehorse-Edmonton route. The amendment we seek is that where you have a national airport system and the airport has been identified as strategic to the overall national transportation system, where you have an airport that is viewed as important in that regard, it should have what transportation economists view as the minimal level of air transport. So it only applies through the analysis that we've been able to do in the Whitehorse-Vancouver situation, but it applies in the sense of a level of protection to those locations strategic to our transportation system.

Mr. Roy Bailey: To put this into my own perspective here, what's your main southern airport? Is it the Vancouver-Whitehorse run?

Mr. Marc Tremblay: Yes.

Mr. Roy Bailey: But you also have a run in from Edmonton?

Mr. Marc Tremblay: No. We have one run, twice a day.

Mr. Roy Bailey: The reason I ask that question is it seems to me that when you look at air traffic flow, they have their triangles. WestJet definitely has a triangle, and that is Edmonton-Calgary-Vancouver and so on. It seems to me to guarantee.... If you could somehow get that one southern base to be Edmonton, with the other southern base you could have two airlines in there, and you would accomplish exactly what you want. But at the present time there is no interest in that—am I safe in saying that?

Mr. Marc Tremblay: It's hard. I'm not running the airline—

Mr. Roy Bailey: No, I know.

Mr. Marc Tremblay: —and it's certainly a desire. Yukoners would love to have additional access.

Mr. Roy Bailey: But if you had two bases, there certainly would be a lot of traffic that would move from the Edmonton base, as well as the Vancouver—

Mr. Marc Tremblay: A lot of traffic comes to Ottawa; a lot of traffic is international. If there were additional routes.... But what we've had, and we will continue to have, is an airline that doesn't wish to compete with itself. So until the volumes are such that another airline comes in, they would like to route all of the passengers on one route, which is more efficient in their environment.

Mr. Roy Bailey: That's all.

The Chair: Thank you, Roy.

Dennis.

Mr. Dennis Gruending (Saskatoon—Rosetown—Biggar, NDP): Thank you, Mr. Chairman.

Thank you, Mr. Tremblay and Mr. Trudeau, for coming. I want to give you greetings from Bev Desjarlais, our transport critic, and Louise Hardy, your MP from the Yukon, both of whom have to be away and for whom I'm pinch-hitting. And thank you for taking the long flight to get here.

I want to mention to you that although your situation is probably more severe, in Saskatoon, where I'm from, we're suffering service deterioration. We're going to have only Canadian Regional supplying us, not both airlines, later this spring and we're going to be down by about 60 to 90 seats a day. People are very concerned about that.

I want to mention that you and we are not the only people concerned. Mr. Lawrence O'Brien, the Liberal MP from Labrador, says service to the major airport there is rapidly deteriorating. He says he's lost time on government business and had delays and missed connections. And also Mr. McGuire, from Prince Edward Island, said in the House last week that Air Canada has become an arrogant, overbearing corporate bully, and he says things are just not going well in his part of the world either.

So I'm coming out of a context here of trying to elicit some information from you about just how serious an effect you think this may have on your community. People in Saskatoon are saying “We're growing and we're a tourism centre, we're a convention centre, we have a synchrotron at the university, which is going to attract a lot of academics, and it's completely the wrong thing for us to suffer service cutbacks”. And when I made this point I was challenged by people saying, “How can you predict what the effect will be in your community?”

I would like a little more detail from you, if you can give it to me, in terms of what effect you think the situation you're facing would have on the Yukon Territory.

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Mr. Marc Tremblay: I'd be pleased to. I'd like to start, though, by emphasizing that our position is based on a floor level of service. We certainly advocate competition and we advocate as much service as possible. How I would respond is by indicating that if there's a lack of continuity or a disruption in our floor, our basic level of service, we see dramatic impacts.

Already, across the country you experience weather difficulties. There are times when there are delays, and there are times when planes don't show up. When those happen in our environment, where there is not an alternative to service, and having only one frequency in the morning and one in the afternoon, industry is disrupted. At times years of investment in terms of developing credibility in a particular area are lost.

We had an experience this past fall where Disney was doing a movie in the Yukon. There's a lot of coordination required, and there's a lot of sensitive travel in terms of equipment and high-priced people and that type of thing moving across the country. As soon as you don't have that one connection in the morning and one connection in the afternoon, the cost of business increases substantially.

If you don't have notification and aren't able to provide alternates for that loss of a flight or two, your credibility is gone and the investment that your community or your jurisdiction has put into the activity that's taking place—possibly millions of dollars—you may never get back, because you've just blown it.

There are other factors here too, and I haven't addressed them yet. There are things like medevac services. We count on this airline twice a day to ensure that our people have access to specialized health care, sometimes very critical health care. Without the connectivity available by two flights a day, you're in a different world, in a sense.

This one-year notification for a change, as well as the request to have the airline communicate, discuss, consult, whatever word we choose, with the government prior to making the change, is very important. If we know that our medevac alternative is x dollars, there may be some opportunity to discuss options with the airline that would ensure there wasn't a loss of service.

So it's seeking a good arrangement with the airlines, seeking a communication back and forth where a lower level of service would have an impact on the safety, the efficiency, the effectiveness and the ability of the jurisdiction to participate in the confederation.

Mr. Dennis Gruending: I have a follow-up question. I know we're dealing with this here at a legislative level, but when I did a news release and news conference about a week ago in Saskatoon there was also a lot of community feedback, and I think people there are going on a two-track approach. They're relying on the MPs, and eventually the senators, to get it right in the legislation. But they're also wanting to get to and talk to the airline. I'm curious to know, in your situation, to what extent the community has mobilized to put pressure on Air Canada. And secondly, how possible is that? Can you get to them? Can you get the information you need? Do you find them at all responsive? That's another avenue here.

Mr. Marc Tremblay: Certainly we have a large jurisdiction geographically but a very small jurisdiction in terms of population. We have 33,000 people. When somebody hiccups, the minister is aware. So our communication and the communication of the concerns of Yukon is vivid. If one flight misses, the phones ring and we know that we've just lost $600,000 or something. We could have paid for that flight tenfold by the loss that was experienced. So we need that communication to ensure that any reductions are smart from a broader perspective.

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In terms of relationships with the airline, we're a pretty small cog, but they recognize that the Whitehorse-Vancouver route is a lucrative one. Yet we don't have a whole lot of influence on how they manage that, as demonstrated by their withdrawal from the ground handling arrangements. This is a new arrangement for us, working with Air Canada. To be honest, some of those actions leave us uneasy. So we're in a new relationship. We are talking to them. We have communicated to them those areas of particular concern, and we're hoping to be able to establish a good relationship.

Mr. Dennis Gruending: This is my final question, or semi-final if I have more time. You talk about a role here for the territorial governments in discussing this and getting notice. Clearly, you see a role to play, although it's mainly a federal jurisdiction. You're asking for some things in the bill that I think amount to more government intervention or regulation, if you will. Some people are uncomfortable with that. Coming from the prairies, where we've had to deal with a railway monopoly for generations, I'm not uncomfortable with that. But I want to know what role you see the federal government playing to protect the interests of you and your people.

Mr. Marc Tremblay: If you will bear with me, I'll tell a bit of a story.

Our sense is from pretty far away and somewhat isolated, but I think we know the history of the country. We've seen the country evolve and develop based on some form of vision. The vision involved the building of a railroad, not necessarily based on economics of the day, and we ended up with a connected country.

Certainly the vision involved the building of an air transportation system owned and operated by government and with significant subsidies. That allowed a new era to take place in the country. The continuation of the air transportation vision resulted in a policy in 1994 by the federal government that identified locations that continue to be strategic. But at that time we were in a society that was moving away from government or public participation in transportation.

In a competitive environment or where the threat of competition existed, we weren't worried. There was always continuity of service and the threat that service would be there the next day if it was withdrawn.

We're now not going to be in that environment. We're now in an environment where a monopoly exists and where we have not reached the level of maturity in terms of service frequencies, as have all of the other national airports. At all of the other airports that were identified by the federal government as strategic for air transportation in the country, we have the lowest level of service. Therefore we're identifying that public government has a role to play to ensure that the strategic services are protected.

The Chair: Thank you very much.

Mr. Tremblay, given the load factors you've mentioned, have you or your colleagues contacted WestJet, Canada 3000, Royal, or Air Transat?

Mr. Marc Tremblay: The marketing side of air access to the Yukon is handled by another group. But we are in communication with all of the airlines rather frequently. We spent significant effort—and the document was just approved in the last couple of months—on a global market access study, which identified every airline that might have the potential to service the Yukon, their aircraft types, and the distances they may be able to fly from the Yukon. So we are providing these airlines with information about our market, and hopefully—

The Chair: Somebody will bite.

Mr. Marc Tremblay: —somebody will take advantage of the great opportunity.

The Chair: As long as you don't have a one-year continuance, you'll probably get bites.

Mr. Marc Tremblay: If I could, Mr. Chair—

The Chair: Sure.

Mr. Marc Tremblay: —on the one year, we're not saying that we won't speak to the airline. We're asking that they provide a one-year notification and talk to us. We see in the legislation a mechanism built in where if we're not reasonable, there is the opportunity to speak to the CTA and get a reduction in the timeframe.

• 1615

The Chair: In the pricing and a reduction in the timeframe of 120 days. But that 120-day reduction is more for the airline that says “I'll take a chance, but I might not cut it. So I want to get out of there in 30 days, because as a small company, I can't survive if I don't.”

Mr. Marc Tremblay: Again, looking at a jurisdiction that is trying to encourage and attract competition, if somebody is interested in coming in, we know that we will be reasonable. Now, people don't trust people sometimes. But on obtaining the certificate, the protection could be provided. “We will come if you don't impose this.” “Okay. Let's go. Let's see what happens.”

The Chair: I just want to assure myself that we're not talking in circles here. You're not suggesting that taxpayers' dollars should go toward subsidizing an airline so that you can have a floor of a minimum of two flights, are you?

Mr. Marc Tremblay: Not at all.

The Chair: All right. So that brings me sort of full circle. We're talking about complaints, and Dennis mentioned a few of them. Sometimes there are 80 or 90 fewer seats available coming out of a community. Planes are no longer leaving on the hour, every hour, as they so conveniently did in the past. That's because there was too much capacity. That is what brought us to the problem we're in today, where a Canadian and an Air Canada went head to head, and we had all this capacity, and they were fighting for market share and all the rest of it. All it did was put us in a pickle as far as having the service available, yet at the same time seeing the demise of Canadian Airlines and the possibility of tens of thousands of jobs being lost.

So when I see a community complain, for lack of a better word, that they have 80 fewer seats available to fly out of their community, it's probably because there was too much capacity. If an airline has the people to put on their planes, they will fly. They will be there. They want to make money. That's a certainty. But if the people aren't there, they won't be there, or they'll have fewer seats and fewer flights.

In the case of Whitehorse, you're asking us to put in regulations that there be a minimum of two flights a day. But if the planes aren't full, you're asking us to tell a private sector company to spend money and possibly lose money to ensure a floor for Whitehorse. I don't know if we can do that.

Mr. Marc Tremblay: I think you may have gone one step beyond what our request is. We're certainly asking for the floor, but we're not asking for the airline to lose money. We've proposed a pricing structure that assures a proportional fare structure, but we have not imposed what the price is there.

The Chair: With regard to your proposed price structure, if you want Air Canada to make the two flights a day as a minimum floor for Whitehorse, are the passengers prepared to pay more money for their seats?

Mr. Marc Tremblay: For certain seats, the time-sensitive ones, where a person is not able to meet some of the conditions of airlines, we expect that the cost of service is covered through the price structure. We're indicating that we would like to see a twice-daily service incorporated into that. But we're not suggesting that the actual ticket price be anything other than what is market-driven.

The Chair: I'm glad to hear that line. Thank you.

Ovid Jackson.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): I thought you had forgotten me, Mr. Chair. I was wondering if I should take off.

The Chair: It's nice to see you here, Ovid.

Mr. Ovid Jackson: I have a couple of questions, Mr. Chair, for our guests.

Do you have any days when you have a low ceiling and planes can't fly at all?

Mr. Marc Tremblay: During the early fall, when the temperatures are changing, the ground is freezing, and the air is still warm—it isn't very often that the air is that warm—there are some ice fog situations, but they're relatively few. When they have occurred, there have been opportunities to just change the scheduling of the aircraft a little. But with the navigational aids and the technological equipment on the aircraft, the lack of availability or the lack of access due to weather is negligible.

• 1620

Mr. Ovid Jackson: You don't have the luxury of an alternate site you could use, eh?

Mr. Marc Tremblay: No, there's no other.... There is another airport in Watson Lake, which is about 500 miles from Whitehorse, but no, we have one airport, and that's where the Yukon is served from the south. And it is served, as the gentlemen have indicated, from Vancouver. We don't have a flight from Edmonton and a flight from Vancouver and a flight from Winnipeg. It's one location, twice a day.

Mr. Ovid Jackson: So you do have two flights a day, come hell or high water?

Mr. Marc Tremblay: Pretty much.

Mr. Ovid Jackson: You don't have any days when you just can't get in?

Mr. Marc Tremblay: It has happened. I can't say never. But it's very infrequent. And if that were the case, it would be moments before there would be a commitment on behalf of the public government to put in place better technological equipment so that the aircraft could be there.

Mr. Ovid Jackson: That's not to say they don't have trouble at Pearson either.

How about the aircraft themselves? Do you move passengers around? Do you take seats out to bring luggage in? Are they that adaptable? How flexible is the aircraft to bring your stuff in? I know you have to have stuff in your air freight, stuff that is time-sensitive—perishables and what not. How do you arrange that?

Mr. Marc Tremblay: On the Whitehorse-Vancouver route there are no Combi-configuration aircraft flying, although a Combi environment does exist in other northern locations. Until recently, the situation on the Whitehorse-Vancouver route was that the weight-carrying capacity of the aircraft was very dependent upon the weather. If it was hot out, they could carry usually all the passengers, but maybe no cargo. If it was cold out, they could carry whatever they could fit in the plane.

In an attempt to improve on that air cargo capacity for the territory and to attract whatever types of aircraft we could attract to the territory, we expanded the main runway at Whitehorse from 7,200 feet to 9,500 feet. That has made it possible for Canadian Airlines International to pretty much fly with full cargo and full passenger capabilities.

Mr. Ovid Jackson: What other accesses do you have and at what time are those accesses available? Do you go to the Yukon any time of the year by road at all?

Mr. Marc Tremblay: Certainly. The Alaska Highway commences in Dawson Creek and makes its way through the Yukon to Fairbanks, Alaska. A lot of improvements have been made on that highway over the last twenty years. It's pretty much all sealed surface; that would be a gentle way to put it. It is a safe route during good weather conditions. It's a thousand miles to Dawson Creek from Whitehorse.

Mr. Ovid Jackson: Are there any navigational routes by ship as well?

Mr. Marc Tremblay: There's the Alaskan Inside Passage down to.... Actually our shipping route starts in Seattle, because the only vessels that move up and down the coast are serving Alaska, and we take advantage of that. About 48% of all cargo to the Yukon is via the Alaska marine route.

Mr. Ovid Jackson: Okay. Thank you.

The Chair: Thanks, Ovid.

Lee Morrison, please.

Mr. Lee Morrison: Mr. Tremblay, I'm afraid our chairman has pre-empted the bulk of the things I wanted to ask you. He's becoming a real free enterpriser. Adam Keyes.

However, one thing troubles me about your presentation, Mr. Tremblay. I'm confused. It seems a little bit contradictory. On the one hand you're talking about the service being overpriced—and I'm sure you're right—and you talk about high load factors, and yet in the same report you're expressing fear that somebody might cut you off at the knees and all of a sudden you'd have no service. That wouldn't be a rational business decision.

• 1625

So I'm wondering why you have this concern. I mean, you have a very solidly locked-in market for somebody there. Why on earth would anybody want to cut their service or leave you abandoned?

Mr. Marc Tremblay: I'll go price, service, and then load factors.

On price, yes, we recognize that prices are higher, and we recognize that load factors are higher. We see that this is why the airlines fight very effectively to maintain that route.

The anti-competitive behaviour regulations and undertakings may well give us a different environment. We welcome those changes. We're anxious to see those changes understood by the airlines and to have the airlines take advantage of them, because we've seen every airline that's tried to come in be cut off at the knees by the monopoly airline that could withstand the time and all kinds of price-cutting when there was someone else there.

So price is high. We're not asking that the price be regulated. We're asking that the opportunities be regulated, so that if you're willing to put up with a number of different conditions, you can travel regardless of your income level on those conditions at certain times. You'll be given the same opportunity as other Canadians.

I'll ask Harley, when I come to an end, to read something with regard to the attitude and the structure upon which fiscal arrangements and other services are based and funded across the country.

In terms of high load factors, yes, we know that another airline will come in in the event that the dominant carrier isn't there, generally practising anti-competitive tactics to keep them out. The difficulty is that even with protection in terms of anti-competitive practices, what we cannot tolerate or withstand, without significant economic implications to the territory, is a lack of continuity of service.

It's not significant to us what is on the tail wing in terms of a marking, who the airline is. What's significant is that we can't go two or three days without someone coming. So we need the notification period to ensure continuity of service.

Does that...?

Mr. Lee Morrison: No, I don't get it at all, because for you to lose this continuity of service, somebody has to make a foolish business decision. You're suggesting that this monopoly carrier that has what is effectively a goodie bag locked in would capriciously decide they're not going to serve Whitehorse any more, and leave you in the lurch. That doesn't make sense to me.

Mr. Marc Tremblay: I hope that's the case. We are seeking protection. It was derived from the nervousness that was generated during the earlier discussions on Onex.

Mr. Lee Morrison: I have one further question, and maybe there's some explanation for your unease in this one. How do your landing and terminal fees compare with other airports in the national system? Is there any reason a carrier wouldn't want to come to Whitehorse?

Mr. Marc Tremblay: To go any lower, we would be paying them. I looked at it earlier, before coming today, and for a 737 landing at Whitehorse, all inclusive—fuel taxes that he would pay for fueling, landing fees, fees for using the loading bridge and the airport terminal space, and other ground handling stuff—it comes to $400.64.

Mr. Lee Morrison: Hell, if I were a carrier you couldn't keep me away from Whitehorse. I don't know why you're....

The Chair: Well, after two years nobody's going to be able to leave Whitehorse anyway.

Mr. Lee Morrison: Pardon?

The Chair: After two years no one will be allowed to leave Whitehorse anyway. So maybe they can see the benefit of using the Whitehorse airport.

• 1630

Are there any further questions, colleagues? Dennis, did you have another one?

Mr. Dennis Gruending: I have one question, but first I'd like to make just a couple of comments.

Mr. Chair, you talked about us getting into the situation because we had too much capacity and flights leaving every hour on the hour. That certainly is true from Toronto to Ottawa and Montreal on RapidAir perhaps, but the flights never have and do not leave hour by hour from Saskatoon, for example, nor the Yukon obviously.

Perhaps this is only anecdotal evidence, but I fly every week, as most members here do, and the planes are completely packed. One recent flight I was on started in Saskatoon and went to Regina, at which point we were informed that eight of us had to get off the plane or it would not leave, because there was not enough staff available. After half an hour to three-quarters of an hour, they brought in an extra staff member, and eight of us did not have to get off the plane. But the anecdotal evidence from people in my city is that the planes certainly are full in our case.

The Chair: I imagine there will be a shakedown period, from about two months ago and for at least the next year. So I think you are going to see the schedules being changed, airlines discovering what service levels they have to maintain in order to see what kinds of passengers there are, how many are flying, etc.

Mr. Dennis Gruending: Well, in the meantime it is very disruptive.

The Chair: Oh, there's no question about that.

Mr. Dennis Gruending: Mr. McGuire and Mr. O'Brien indicate so in their far reaches of the country, and that's true in ours.

Regarding Mr. Morrison's wondering why someone wouldn't rush in to fill this vacuum, we're looking at the behaviour of monopolies, and if they can keep people out and provide certain kinds of service that could be better if there were competition, they often will.

The Chair: That's what we're trying to prevent here, yes.

Mr. Dennis Gruending: You mentioned at the beginning of your presentation that you were concerned about what would happen to people working for the airlines, but you're not so concerned about that now, because of some promises that have been made. The last time I asked somebody working for Air Canada at the check-in in Saskatoon what was going to happen to them in a couple of months, when Canadian Regional begins to serve Saskatoon and Air Canada per se doesn't—although they're now the same company—these people told me they didn't know what would happen to them. In other words, they may have jobs, but that's about all they know.

I'm just curious, if we can back up a little bit, about what research you've done or what assurances you have in detail about the fate and the plight of the people who work for the airlines.

Mr. Marc Tremblay: I certainly shared the nervousness earlier, when the undertakings were put forward—the undertaking in terms of employment and the undertaking in terms of service continuity to communities. As time has gone on, the clarity has helped us, has calmed us, and we're of the understanding that the Canadian Airlines employees currently located in the Yukon have an assurance of employment without need for relocation for the time period.

Mr. Dennis Gruending: I'll just make one other comment. When we talk about Canadian Regional, which serves Saskatoon, they're not nearly so certain about their future. But I certainly hope you're right in the case of the larger carrier.

Mr. Marc Tremblay: I had mentioned while Mr. Morrison was here that I would have Harley read a little section of the Canada Act, 1982, which specifies a basis for comparability of services in Canada.

The Chair: How long is this, Mr. Trudeau?

Mr. Harley Trudeau (Senior Government Representative, Intergovernmental Relations, Ottawa Office, Yukon Government): I won't read it to the members, because I'm sure they're all familiar with it, but in section 36, we as governments have made a commitment to promote equal opportunities for Canadians and to further economic development to reduce disparity in opportunities. Those are the things our government is bringing to this level of government to make sure the rights of Yukon Canadians are upheld.

The Chair: Thanks, Mr. Trudeau.

Gentlemen, thank you very much again for taking the time and spending all the time you have just getting here to be with us at the transport committee. We do value the input you've given and the submission you've made to the committee. It will be digested by the committee, and your recommendations will be on the list of recommendations this committee will consider before we go clause by clause. So I thank you for having been here, and we appreciate the time you've taken to answer our questions.

Mr. Marc Tremblay: Thank you very much. And if you should require any other information, please feel free to ask.

• 1635

The Chair: Thank you very much, gentlemen.

Colleagues, have a good Easter, and we'll see you in two weeks.