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STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Monday, May 8, 2000

• 1604

[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.): We will begin the public portion of our meeting.

Joe, you go ahead.

(On clause 2)

Mr. Joe Fontana (London North Centre, Lib.): This section essentially deals with the agreement between Air Canada and the Competition Bureau. While we can't change or amend that agreement, as I understand it, one might question whether or not Air Canada is sticking by that agreement.

Thanks to the good work of the Competition Bureau and Transport Canada, when Air Canada was found to not be living up to its obligations—Penticton being a good example, where there were already some problems in their covenants or their agreements—we were able to move quickly to get them to rectify the situation.

• 1605

I want to raise two issues. One is with regard to British Airways, as an example. If one were to believe British Airways, Air Canada has announced fare increases on that portion of the trip from London, England, through to Toronto and then to Ottawa, especially the leg between Toronto and Ottawa. It says here that joint fare agreements must be negotiated in good faith on reasonable commercial terms.

Of course, Mr. Milton said “Well, yes, we did post the increase, but that's standard; there were no negotiations.” All of a sudden, the fare went from $338 to $1,200. Is that living up to the agreement, where Mr. Milton and Air Canada said they would do it?

We've heard about some problems with certain carriers not getting the interlining agreements that are absolutely necessary in order for there to be a seamless service for certain Canadians, especially in smaller communities.

If I can't change the agreement, I may very well want to do it on the regulatory side, to make sure Air Canada, by regulation, do what they promised by agreement.

The Chair: Ms. Dufour.

Ms. Valerie Dufour (Director General, Air Policy, Department of Transport): I would start by saying that there are no obligations in the undertaking to a foreign carrier, period. Jacques can speak to you about the process for actually prosecuting according to the rules in section 56.

The whole issue of British Airways' claims is quite separate. It's also subject to international IATA rules among carriers, which in the normal business of operating internationally offer two levels of pro-rated fares for domestic legs of international trips: a standard pro-rate for non-partner airlines, and a superior rate for partner airlines.

This debate carries on among international carriers all the time. Yes, you may want to get at it through a regulation. No, you can't get at it through section 56. Jacques can explain the process, if you want.

Mr. Joe Fontana: I know we can't open up this agreement, but say, for instance, I wanted to capture...because it wasn't on international or foreign carriers. What clause of the bill, on the regulatory side, would I have to address if I didn't like what Air Canada was doing by way of their agreement?

I'll talk about a second plan—access to Aeroplan. It says:

    Air Canada has undertaken to sell its frequent flyer points to other Canadian carriers. It has promised to sell points on reasonable commercial terms to all Canadian air carriers that have domestic passenger revenues of less than $250 million

I think we've also heard that if we truly believe we want Air Canada to be the responsible corporate citizen it says it wants to be, how is it going to be possible? I can't change the agreement that was signed between Air Canada and the Competition Bureau, but I may want to do it on the regulatory side, by virtue of the fact that if they deny selling their frequent flyer points to any other company, they can do so. It says here, “has undertaken to sell its frequent flyer points to other Canadian carriers”. Does that mean new entrants into the market, or who does that mean? Does it mean anybody who asks? I just need a clarification.

The Chair: Okay.

Mr. Joe Fontana: Is it any Canadian carrier? If WestJet went to Air Canada and said they wanted to—

The Chair: They're a Canadian carrier, Joe.

Mr. Joe Fontana: No, just let me get this. If WestJet went to Air Canada and wanted to buy into their frequent flyer program, has Air Canada made a commitment that it could occur?

Ms. Valerie Dufour: It could if they continued to stay under the quantum.

Mr. Joe Fontana: Under the $250 million. I don't know how big that is.

The Chair: Joe, the catch-all here, in the second line of the undertaking, is that it has promised to sell points on reasonable commercial terms. So you have the commercial aspect and the Canadian aspect.

Mr. Joe Fontana: No, that's why I said they've promised to do it with Canadian air carriers with less than $250 million of revenue. To tell you the truth, I don't know how big that is. I don't know what WestJet—

The Chair: WestJet made $10 million last year.

Mr. Joe Fontana: No, that's profit. I'm talking about gross revenue.

The Chair: Is it gross revenue, Valerie?

• 1610

Mr. Joe Fontana: It says: “...have domestic passenger revenues of less than $250 million”. That's not a heck of a lot of revenue for any air carrier. Air Canada is $7 billion or $8 billion, and so is Canadian. I think Air Ontario, as an example, is in the hundreds of millions of dollars. Again, if I can't address it by changing it here, where can I address it in the regulatory framework?

Ms. Valerie Dufour: The regulatory framework will build up from a document the commissioner of competition handed to members as a working document dated March 22, called Regulations on Acts or Conduct of a Person Operating a Domestic Service. He gave you a sample of what was being developed.

If you remember, that regulation-making power is something that.... The regulation needs to be approved by both the ministers of industry and transport. It goes through a full-dress regulatory process to come into effect, and it's a public process involving two rounds of consultation.

Mr. Joe Fontana: I know that, Valerie, but I just want to know where in this bill are the powers to the Competition Bureau? We're moving so quickly. I knew what I wanted to talk about, but I just want to make sure that I—

Ms. Valerie Dufour: It's clause 13.

Mr. Joe Fontana: Okay. So I can wait until we're at clause 13 for that.

Ms. Valerie Dufour: Yes.

The Chair: Yes. It was stood down, so it's open for debate then.

Are there any other questions on clause 2?

Michel?

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): Ms. Dufour, we heard the testimony of Régionnair's representatives who were complaining about the delays regarding their Air Canada points membership. They were told that they could expect an answer in October or November when one knows perfectly well that a carrier as small as Régionnair, which must compete directly with Air Nova and is not in a position to offer these points, will not be able to stay in business until November even if it offers similar fares.

I will table amendments to clause 2 at the report stage because I think this clause does not offer sufficient protection in that regard. We could also give the example of Baie-Comeau airport where Air Nova took over most of the counter spaces. Clause 2 does not guarantee us that we will be able to avoid an excessive capacity expansion such as the one that can be observed right now in the Baie-Comeau market. We are witnessing attempts on Air Nova's part as another carrier that left this airport ten years ago is indicating the desire to make a come back. I consider that clause 2 provisions should be more restrictive than they are right now.

[English]

The Chair: Valerie, isn't this an example of where the competition commissioner's powers kick in, where he can receive these kinds of interventions and deal with them if they're found to be predatory in nature?

Mr. Michel Guimond: And when will we have the report? Three months? Five months? They will be in bankruptcy.

The Chair: Do you mean this bill?

Mr. Michel Guimond: I know you gave them the chance to answer; they just have to go to the Competition Bureau. But Commissioner von Finckenstein will.... When will we have the report? In two or three months it will be too late. Those small carriers will be bankrupt. This is the reason we must give more power in the bill.

The Chair: Valerie.

[Translation]

Ms. Valérie Dufour: Mr. Chairman, Mr. Guimond, I would tell you that Régionnair has the absolute right to make an immediate claim to the Commissioner of Competition so that Air Canada meets its undertakings. I will let Jacques explain to you the legal procedure to be followed when one claims that a sanction should be applied. When we identified deficiencies at the very beginning, we asked that the situation be corrected, which has been done. If other measures are required, the process provided by the bill could be applied. I will yield the floor to Jacques.

• 1615

Mr. Jacques Pigeon (General Counsel, Legal Services, Department of Transport): Clause 2 aims to bring into force a review process of mergers and acquisitions in general so that it applies the day this provision takes effect. However, clause 2 is related to clause 19, where two things are stipulated: proposed subsection 10.1(1) stipulates that the proposed acquisition described in the letter dated December 21, 1999 is deemed to be a transaction that has been approved by the Governor in Council and proposed subsection 10.1(2) stipulates that the undertakings provided to the Minister of Transport and the Commissioner of Competition are deemed to be terms and conditions established by the Governor in Council. These two clauses are related.

Clause 2 includes subsection 56.2(9) which stipulates that:

    (9) Every person subject to terms and conditions specified in an order shall comply with them.

Proposed section 56.5 contains two mechanisms aiming to insure enforcement of this statutory obligation. There is the civil remedy that allows the Commissioner of Competition, if there is a breach of a term or condition that relates to competition, to go before a superior court and to ask that orders be made to compel the offender to fulfil the undertakings provided. Civil remedy is divided in two. Proposed subsection 56.5(1) deals with applications made by the Minister regarding the fulfilment of undertakings that relate to transportation while proposed subsection 56.5(2) deals with applications made to a court by the Commissioner of Competition for the fulfilment of undertakings that relate to competition.

Proposed subsection 56.7(2) stipulates that anyone who contravenes proposed subsection 56.2(9), that I read to you earlier, is liable to the penalties provided for in that subsection. Therefore, there are two possible remedies.

Mr. Michel Guimond: Stan is not listening to me but it does not matter.

[English]

The Chair: I always listen, Michel.

[Translation]

Mr. Michel Guimond: How much time elapses between the moment where a small local carrier complains and the moment where the Commissioner of Competition makes a directive? How long does one have to wait before getting an answer?

Mr. Jacques Pigeon: It depends on how long it takes the Commissioner to go to the court and to obtain an order under the provisions of proposed section 56.5.

• 1620

Mr. Chairman, Mr. Guimond, I would like to complete my answer by telling you that when the time comes to implement contractual undertakings, it is the procedure I just described that applies.

As well, in section 13 and more specifically in section 15, the legislator proposes that we give the Commissioner means to make orders when in his opinion a carrier has engaged in anti- competitive conduct. The Commissioner can intervene very quickly. The procedure provided in proposed section 104.1 allows the Commissioner to take immediate action if he is convinced that the section applies. Temporary orders have been included in the bill to give the Commissioner the tools required to intervene quickly in cases of anti-competitive conduct.

Mr. Michel Guimond: Could we not talk about immediate action?

Ms. Valérie Dufour: No, we are talking about the authority given to the Commissioner to act quickly. Our objective was to allow him to make a temporary order. In fact, if we want to act quickly, we must quickly pass this section of the bill so that Régionnair can make a complaint against Air Canada.

Mr. Michel Guimond: I am still looking for an answer to my question. Where does it say that the Commissioner will act quickly? When we say quickly, what kind of time frame do we have in mind? I read subsection 104.1(1) and I did not find any mention of timeliness. I understand that the Commissioner may make a temporary order but how long after commencing an inquiry? I am wondering if you are aware of the fact that a small carrier might not be on a sound enough footing to hang on for one, two or three months.

I will ask another question that might complicate the matter even more.

[English]

The Chair: Well, let's deal with it one at a time, Michel. If you go to the top of page 18, or proposed section 104.1....

[Translation]

Mr. Michel Guimond: Where does it say in subsection 104.1(1) that the Commissioner will act quickly?

[English]

The Chair: But the point—

Mr. Michel Guimond: He's looking for my answer.

The Chair: While they're looking, the explanation that I and everybody on this committee received is that the commissioner of competition...page 18 says that the commissioner of competition can act immediately.

What's the exact wording? “The Commissioner is not obliged—

Mr. Michel Guimond: What page? Is it page 18 of the bill?

The Chair: Yes. At the top. It says: “The Commissioner is not obliged to give notice to or receive representations from any person before making a temporary order”. So he walks in there and he learns, by whatever means, that there is predatory pricing or predatory activity going on, and he shuts it down. Then you have your investigation—your hearing and everything else. But the point is that it's shut down immediately.

Do you have another question, Michel?

[Translation]

Mr. Michel Guimond: Mr. Pigeon, you referred me to clause 13 of the bill, is that right?

Mr. Jacques Pigeon: Yes, clause 13 contains an enabling provision in that it gives the Governor in Council the authority to specify anti-competitive acts. Clause 78 of the Competition Act already contains an impressive list of such acts. Provisions of clause 13 would enable the Governor in Council, on the recommendation of the Minister of Transport, to make regulations in order to add to that list. The specific authority given to the Governor in Council would consist in making provision for anti- competitive acts in the field of domestic air transportation.

• 1625

Mr. Michel Guimond: Where does it say that those obligations apply? You were telling me earlier that Air Canada and Canadien had obligations but I don't see any mention of Air Canada's subsidiaries. I hope that my colleagues realize once more that I am not raising this issue because I want to prolong the debate unduly. I want you to know that I will not be making comments on the other clauses of the bill but I consider that there is a crunch here. We are in the crunch and it seems to me that Air Canada does indirectly what the law does not allow it to do directly. Air Canada is using Canadian Airlines and its subsidiaries Air Ontario, Air BC and Air Nova—at home, in Quebec, and in the Maritimes, especially Air Nova—to commit anti-competitive acts in order to eliminate small carriers. Do those obligations apply in full to Air Canada and where is that written?

Mr. Jacques Pigeon: The bill does not contain such provisions but I wish to refer you to the undertakings provided by Air Canada and submitted to the Commissioner of Competition. If you look at the definitions that apply to these undertakings, more specifically in clause 1...

Mr. Michel Guimond: Do we have a copy of those undertakings in our binder?

Mr. Jacques Pigeon: It is paragraph c). Unfortunately I do not have the same binder as you.

[English]

Mr. Michel Guimond: We have the—

Ms. Valerie Dufour: The undertakings in the briefing book.

Ms. June Dewetering (Committee Researcher): That's tab 5, number 2.

Mr. Michel Guimond: Okay.

[Translation]

I am sorry for interrupting but I want to be able to follow you.

Mr. Jacques Pigeon: There is no problem. I would ask you to look at the definition of Air Canada in paragraph c) of clause 1. It says that:

[English]

    “Air Canada” means Air Canada and its affiliates;

[Translation]

Ms. Valérie Dufour: No, you don't have the right page.

[English]

Mr. Michel Guimond: Tab 5, number 2....

[Translation]

We have here a document that was prepared for us but it does not include the original copy of the undertakings.

[English]

The Chair: Colleagues, I might remind you that we're in no hurry. We can relax.

Mr. Joe Fontana: I thought you were rushing us.

The Chair: No, Mr. Fontana, I'm not rushing anything. I'm not cutting anybody off. Take your time and we'll get this sucker right.

Mr. Michel Guimond: We have just the summary. I have a problem reading the definition in the summary.

[Translation]

Ms. Valérie Dufour: All right. Jacques will tell you...

Mr. Michel Guimond: Is it in the booklet?

Mr. Claude Drouin (Beauce, Lib.): The undertakings provided by Air Canada are there, Michel, at tab 5.2.

Mr. Michel Guimond: It is only a summary, Claude, not the main document.

Mr. Claude Drouin: A base document and a summary...

Mr. Michel Guimond: A base document is not a summary. It is an abstract we have here. I want the whole text.

[English]

The Chair: Do we have the French copy of the agreement?

Mr. Jacques Pigeon: I don't have it with me, but I could obtain it for you.

The Chair: Would an English copy do for now?

Mr. Michel Guimond: Yes, I have no problem with that, but—

The Chair: We'll get the clerk to do that.

Mr. Michel Guimond: In your booklet, you don't need the original of those?

The Chair: We've read them all, but if you would like a copy.... Our research team over here on the government side is a crack research team.

The Clerk of the Committee: So that's copies for everyone?

The Chair: Yes.

We'll make a copy right now, Michel.

Would it be faster if a member took it to his office? Ovid's office is here on the second floor.

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): I don't know if my budget can stand it.

It's room 218.

The Chair: Ovid, you'd better call your office and let them know what's coming. Thanks, buddy.

The Clerk: Thank you, Mr. Chair. The printing office closes at 4:30.

The Chair: Michel, do you want to come back to that after the copies come back?

Roy, you were next on the list.

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): No, I have my answer.

The Chair: Are there any questions on this clause from any government members? If not, I'll stand it down. We can go to the next clause and return to clause 2 when we get the information.

• 1630

Mr. Joe Fontana: I had the same question.

The Chair: Okay, we'll just go by clause 2. We won't do anything with it right now until we get the information back from Mr. Jackson's office.

(Clause 2 allowed to stand)

(On clause 3)

The Chair: There is an amendment by Mr. Hubbard that Bill C-26, in clause 3, be amended by replacing line 39 on page 7 with the following....

Mr. Hubbard, you should be moving this, not me. Why don't you entertain us?

Mr. Charles Hubbard (Miramichi, Lib.): You're doing a good job with it, Mr. Chair. Continue.

We did hear from some of the airlines that might be interested in routes that to enter a new undertaking and to have to worry about 120 days' advance notice if they discontinue the...[Inaudible—Editor]...would be unfair. So we're proposing that in terms of a new route determined by a carrier, which was not in existence for at least one year, they would require only 30 days' notice for termination of that operation.

I move that, Mr. Chairman.

The Chair: Thanks, Mr. Hubbard.

Is there any discussion on this?

It's a good amendment, right, Michel?

Mr. Michel Guimond: Yes. I had one at 60 days.

The Chair: You see, for the Bloc, that's one more off the old slate. Ours was even tougher than the Bloc's.

Is there any other discussion on this clause?

(Amendment agreed to)

The Chair: Roy, did you have a question?

There's an amendment to clause 3 moved by the Canadian Alliance. Go ahead, Roy.

Mr. Roy Bailey: Ours is to add proposed subsection (2.1).

Charlie, were you were saying here a period of expiration of 60 days?

Mr. Charles Hubbard: It was 30 days.

Mr. Roy Bailey: That's 30 days. What do we have? Wait until I find it here.

The Chair: Your amendment says:

    (2.1) Subsection (2) does not apply to a route on which the licensee has been providing air service for a period of less than one year.

It's the same, really.

Mr. Roy Bailey: Yes.

The Chair: You can probably withdraw it. We've already passed the amendment for 30 days. Do you want to go less than 30 days?

Mr. Roy Bailey: No.

I'm a little bit confused with this one. There's another amendment coming, dealing with new lines, new routes started up for protection, but that's under a different clause.

The Chair: Yes.

Mr. Roy Bailey: That's fine. I got the two confused, because I want to have something to say about that one.

The Chair: Do you withdraw this amendment, then?

Mr. Roy Bailey: Yes, I do.

The Chair: Okay, amendment CA-1 is withdrawn.

(Clause 3 as amended agreed to)

(On clause 4)

The Chair: There's a government amendment being moved by Mr. Jackson, amendment G-3, that clause 4 be amended by replacing line 25 on page 9 with the following:

    number of seats available at those fares;

and so on. I take it we're doing this as read. This has much to do with cargo rates on monopoly routes.

Ms. Dufour, do you want to offer an explanation, or Mr. Jackson?

• 1635

Mr. Ovid Jackson: Mr. Chairman, as you know, we had many presentations. It is a combination of some of the other models that we've had with regard to transportation, and it has to do with respecting the charge rates and making sure the rates stay competitive.

The Chair: You are saying there would be relief in zones where competition exists, is that right?

Mr. Ovid Jackson: Where competition exists, yes.

The Chair: Is there any discussion, colleagues?

Roy.

Mr. Roy Bailey: Would this amendment not be extremely difficult to adhere to?

The Chair: Ms. Dufour.

Ms. Valerie Dufour: What this proposal does, Mr. Bailey, is allow a carrier on a monopoly route carrying cargo only to be able to argue, when faced with a complaint of price-gouging, in addition to the other tests that were in the legislation we put forward on the seventeenth, that their price is reasonable compared with other modes offering the same service.

For example, a small package can go from Toronto to London on the monopoly small air carrier that would be complained against, but they would be able to say “Yes, but look at what the rail is offering, look at what the bus is offering, look at what other purveyors of this service are offering.” It is an additional piece of information to assist the agency in determining whether its fare is unreasonable. That's all it is intended to do, and it responds.... Without giving up cargo, it has the effect of giving an additional test.

In southern Canada in particular, where cargo does compete against the other modes, without giving up.... You will remember that ATAC and First Air and Air Canada all said leave cargo alone. We said “No, we're staying with cargo, but we'll give a little bit of relief here to take into account the competition that you face from other carriers”, along with anything else that's in that list.

Mr. Roy Bailey: My next question is more for information purposes, and some of you ladies or gentlemen can answer. I'm not into air freight or cargo, but do they have a basic minimum for every package? Is there a minimum for each package that is shipped by air, regardless of weight and so on?

Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): For meat and fish and things like that, it's 200 pounds minimum. Otherwise the price is really very, very high for anything below that.

Mr. Roy Bailey: What about something weighing 10 pounds being shipped? I don't know whether that's a good example, but I'm trying to establish if the airlines have a high minimum in the handling of one single package or commodity.

Ms. Valerie Dufour: Every carrier is free to have their own cargo pricing structure. The more competition there is, the better the prices will be. The issue here is when there's no competition by other air carriers. In that case they would be able to compare that price with the competition they do have, which would be by other modes.

The Chair: Mr. Sekora.

Mr. Lou Sekora: I can tell you that I shipped product from Toronto to Vancouver, and if you shipped 200 pounds you paid $96. If you shipped 100 pounds it was still $96.

Mr. Roy Bailey: That's the point I was getting at.

Mr. Lou Sekora: Exactly.

Mr. Roy Bailey: There's a minimum then.

Mr. Lou Sekora: That's right.

Ms. Valerie Dufour: At that point it's the choice of a carrier. It's not by regulation. There's no federal rule that says—

Mr. Roy Bailey: No, no. But I'm saying that if you have that minimum there, as Mr. Sekora has mentioned, and then the companies add accordingly, you will get different rates depending on each airline's minimum. Is that not right? And that would be taken into consideration by the agency.

• 1640

Ms. Valerie Dufour: In defending itself, the carrier is free to put any argument they want. What the bill does is make sure you cover comparing a monopoly route with a competitive route, and you look at historical data, and in the case of cargo you look at other modes.

The Chair: But in fact you can make the argument.

Ms. Valerie Dufour: Yes.

The Chair: Is there any other discussion on this amendment to clause 4, colleagues?

Joe, is it on this amendment?

Mr. Joe Fontana: No, it's not on this amendment.

The Chair: Well, this is discussion on this amendment.

Mr. Joe Fontana: Okay. That's a good one.

The Chair: I call the vote on the amendment to clause 4.

(Amendment agreed to—See Minutes of Proceedings)

The Chair: Mr. Fontana, you had something else on clause 4.

Mr. Joe Fontana: Mr. Chairman, clause 4 is essentially the beef and potatoes of this whole thing, especially as it relates to pricing, ownership, official languages, amendments to the Competition Act and the Competition Tribunal Act on predatory behaviour, and so on and so forth. It goes on and on here.

Can I just take it one step at a time? As I read through the clause, as an example, on monopoly routes, it says:

    If, on complaint in writing to the Agency by any person, the Agency finds that a licensee, including affiliated licensees, is the only person providing a domestic service between two points and that a fare, cargo rate or increase in a fare or cargo rate published or offered in respect of the service is unreasonable, the Agency may

do a number of things. They may roll it back or do a number of things.

That's only on monopoly routes, as I understand it, and it says “two points”. A lot of people travelling between two points may have to go to a third point or a fourth point before they get to their ultimate destination. Now we have a dominant carrier that might control 80% of the marketplace, but there are some smaller feeders that we want to create competition.

I'm just wondering how we define what that monopoly route is between two points. Is it truly between A and C, or is there a B if in fact there are intermediary stops in between?

The Chair: Joe, could we bite these off one piece at a time? You have a tendency to ask five questions.

Mr. Joe Fontana: No, no, I just want to deal with unreasonable fares and rates on monopoly routes. That's obviously going to be a concern to a lot of people. I just want to understand first and foremost—

The Chair: I don't have a problem with that, but you have a question there now. Can we answer it and then move on to the next question, instead of trying to get all of them?

Mr. Joe Fontana: Sure.

The Chair: Go ahead, Val.

Ms. Valerie Dufour: The answer to that, Mr. Chairman, is on page 9, proposed subsection 66(4), “Alternative domestic services”. The agency has the job, by legislation, to decide when domestic service between two points is monopolistic, and it says, “if every alternative domestic service between those points...”.

So yes, Mr. Fontana, we are talking about A to B. That's the monopoly route, A to B. If you were looking at alternative domestic service to get from A to B by unreasonable methods other than the direct way, it says, “taking into consideration the number of stops, the number of seats offered, the frequency of service, the flight connections and the total travel time.”

And we usually use ludicrous examples to make the point. There's only one carrier flying Toronto-Victoria once a day, but you can get there sixteen times a day by Vancouver. It's not an unreasonable difference in time; it's probably about an hour and a half. That would not really be a serious monopoly route. Vancouver-Whitehorse is a serious monopoly route, because you can't get there from Vancouver by any other way that makes any sense at all. It's the same thing with, say, Ottawa-Iqaluit. There are even probably a few in Ontario where between A to B there's just no reasonable alternative.

This is a process the agency has in fact been using since 1988 to decide whether it's really a monopoly, or whether it's just the best way to get there, but there are reasonable alternatives that cost the same price, even though you might have to go through a second stop. But if you have eight stops and so on, it's not reasonable.

• 1645

Mr. Joe Fontana: Also, as I read clause 4 and some of the related clauses, I like the idea that we're going to force, or at least it will be incumbent upon, the air carrier to publish the airfare increases, rate increases for cargo, and so on and so forth prior to.... At least that's what the briefing notes say clause 4 will do. But as I read clause 4, I can't find where it says the air carrier will publish its rates and its fares in plenty of time so that the public knows those airfares are going up or what have you.

Ms. Valerie Dufour: That, sir, is clause 5. At the top of page 11 it says “No fares, etc., unless set out in tariff”. That essentially means you—

Mr. Joe Fontana: Wait a minute. You're moving too fast for me. I know you know this thing backwards, but—

The Chair: It's clause 5, Joe.

Ms. Valerie Dufour: It's clause 5, sir. It's not in clause 4; it's in clause 5.

Mr. Joe Fontana: But my briefing notes say.... Wait a minute.

Ms. Valerie Dufour: It's on the bottom of page 10 and the top of page 11.

Mr. Joe Fontana: Wait a minute; wait a minute. Just hang on to your straps. Our book says it's under clause 4.

The Chair: Actually, Valerie, I think it's on page 10, proposed subsection 66(7), which talks about a published timetable on a regular basis, informing of existing tariffs, etc. Isn't that proposed subsection 66(7) in clause 4?

Mr. Joe Fontana: Okay, yes.

The Chair: Do you see it there, Joe?

Mr. Joe Fontana: Yes. I'm just wondering why my....

Ms. Valerie Dufour: Those are filed electronically. That's pretty straightforward.

The Chair: I think Joe was asking where in clause 4 it is.

Jacques.

Mr. Jacques Pigeon: Mr. Chairman, also we have to recall that this new section builds on the already existing section 66 of the Canada Transportation Act. Subsection 67(1) of the Canada Transportation Act says, “The holder of a domestic licence shall”, and the first obligation is to “publish or display and make available for public inspection at the business offices”, etc.

So to answer Mr. Fontana's question, the obligation to publish is found in subsection 67(1), but we are not amending that subsection by this bill.

The Chair: That's in the CTA, though.

Ms. Valerie Dufour: Existing.

Mr. Joe Fontana: We're just building on it so that at least the public knows there are some rate increases or what have you; they have to be published well enough in advance?

Voices: Yes.

Mr. Joe Fontana: The other thing is this. I know it talks about the fact that carriers must talk to elected officials and communities, and there's an opportunity for—

Ms. Valerie Dufour: That's on exits, sir, and that's in clause 3.

Mr. Joe Fontana: Okay. Yes, I have you there. I'm sorry. On that one I agree.

The other thing with regard to clause 4, Mr. Chairman, is that within the two-year period—I think that's what we're requiring—a report shall be forwarded. At least I think that's what I think it says here. It says here that for the next two years the agency will be able to review fares and rates on monopoly routes on its own motion and will also be given authority to extend this power for a further two years. That's correct, right? Okay.

Is the predatory behaviour covered in this clause? Okay.

How about the Air Canada Public Participation Act?

Ms. Valerie Dufour: That's separate, later in the bill.

Mr. Joe Fontana: As well as the official languages?

Ms. Valerie Dufour: That's in the Air Canada stuff.

Mr. Joe Fontana: Okay.

Mr. Chairman, with regard to fares, I know this bill in clause 4 speaks of just monopoly routes. When I asked Mr. Milton about fare increases across the board—and as you know, there are 12,000 price changes a day—he indicated that basic prices have not gone up, and yet I believe the chair and other committee members have heard that in fact there have been changes to prices.

• 1650

He offered me 20 boxes of pricing information and changes to go through to find out where those changes might be. I'm just wondering whether it might not be, especially in this transitional time period.... I'm not only talking about Air Canada; I'm talking about everyone. What is the common practice now? Is notice required to be filed with anyone, with the public, prior to there being fare increases? Do they just do it automatically in their computers? Do they have to tell anybody what's changing from one day to the next?

I know that prior to 1988, one of the ways of being able to regulate the industry, not only in terms of capacity seating but pricing.... We wanted to ensure that the public interest was well served. I'm just wondering whether you're in this transitional period. I know we do this on monopoly routes; we require all of the Canadian carriers to notify the public of any increases in their basic fares.

I know there are 12 or 14 different kinds of fares, from Y class to J class to L to K to M. I know you probably know of the pre-regulatory period before 1988. I'm just wondering whether there's a public interest to be served by requiring all carriers to publicize their fares in advance, fare increases and changes and so on, other than seat sales. They obviously do that for seat sales as a promotion.

Ms. Valerie Dufour: It was well before 1988 that carriers had to publicize fare increases by means other than commercial marketing practices. To go back to that now flies in the face of being able to get Air Canada on the Internet and see exactly what fares are available anywhere in the country at any given time.

We require them by law to have the fares they offer in the market available formally and not to have secret fares where they do special deals for people, other than through confidential commercial contracts. The legislation we have now says that if anybody wants to know what the fares are, the carrier has an obligation to provide that to them for the cost of the sheet it's printed on.

In addition to that, they have electronic links with the Canadian Transportation Agency. In fact, any seat inventory manager has the full range of prices at any given time. It's too static a notion to say....

You said there are 12,000 price changes a day, and yet what is the fare they're going to be putting in place? The issue really is how many people are using what fare and how many seats are in each bucket at each fare level. Every flight is different, and every flight is managed by way of a yield management process. So the Y fare might have nine seats and the Y minus one might have twelve, and the back of the seat has Aeroplan, and in between you have all your discounts and you have ten seat sales. And that's only good for that flight.

Mr. Joe Fontana: That's my point. How do we expect the public to understand how pricing works and whether or not there are price increases, even on monopoly routes? This is only going to be done on a complaint basis, according to the bill.

Ms. Valerie Dufour: Except for the next two or four years.

Mr. Joe Fontana: Yes, but on monopoly routes. If it's confusing for you and you're the authorities, and if it's confusing for me, how do we expect the average person to understand and know they're not getting ripped off by price increases?

When I asked Mr. Milton the question, his people called me back and said they would deliver 20 boxes of prices to me to show me that their prices haven't gone up. First of all, I don't have the time to go through 20 boxes of stuff. Do we have some information...? Are there questions we could ask, which maybe Air Canada would be able to answer, as to what has happened to the price increases over the past six months on a domestic or an international basis? Can we ask, as an example, that they give us some comparisons?

How are we going to know whether there have been price increases in the marketplace at all? Maybe we don't care, but at the end of the day, what we're trying to do is to protect the public interest.

• 1655

I think forcing them to publicize all their prices, as of the proclamation date, to at least someone—you, the Canadian Transportation Agency, or the Competition Bureau—so there is a reference point of how in fact we are protecting the public from any exorbitant price increases.... I'm prepared to give them CPI and I'm prepared to say that if fuel costs have gone through the roof, then maybe that should be considered. How are we going to know? How is the public going to feel confident that they're not being ripped off?

Ms. Valerie Dufour: Well, for one, the agency has been given the power to look at prices. In order to determine monopoly pricing, they do have to look at pricing in general.

I would come back to the point that was made earlier. We have obliged holders of domestic licences to publish or display and make available for public inspection all the tariffs offered by the licensee and to identify the basic fares so that you know which one is your benchmark fare.

Mr. Joe Fontana: Where are you getting this?

Ms. Valerie Dufour: I'm reading from the 1996 legislation, which is the 1988 legislation with no change. It's the same thing that's been in place—

Mr. Joe Fontana: Where do I find that, though?

Ms. Valerie Dufour: That's the CTA from 1996 and 1988. This is not new behaviour; this is old behaviour.

I have two answers for you for the individual. First, talk to a good travel agent, because they're paid to figure this stuff out. Also, learn to use your Internet. The Internet has Travelocity, Pricefinder, and a whole lot of things whose sole purpose in life is to find the lowest possible fare and obviously the highest possible fare.

Mr. Joe Fontana: I understand that, but I'm trying to figure out whether or not there's been a price increase. There are unreasonable price increases and rate increases. That's my point. I'm sure that if you go to an agent, they'll get you the best price. But I'm talking about making sure there haven't been any unreasonable price increases, recognizing that we don't have an awful lot of competition here. I'm sorry, a lot of people think there's a lot of competition, but I just don't think there is.

The Chair: We can go on and on with this thing. From what I've heard Valerie say and from the question I'm hearing, you have your monopoly routes and we have protection for those prices on monopoly routes and we have them monitored.

Mr. Joe Fontana: On a complaint basis.

The Chair: No, no.

Mr. Joe Fontana: Oh, by notice. I'm sorry, it's by notice.

Ms. Valerie Dufour: Up to four years by the agency.

The Chair: So monopolies are covered off. I think our chief concern was the monopoly.

On the non-monopoly side, you have your domestics. If you're asking if we're going to somehow legislate that we will somehow do all the research and demonstrate to a constituent whether or not their price has gone up over the last six months, I doubt it. If you're saying price increases are happening, the consumer will be able to tell you in a heartbeat whether or not they are, because the travel agent they're dealing with is going to tell them which is the cheapest rate. The agent will tell them at what time of the month, at what time of the day, at what hour, and on what day they can fly in order to maximize their savings on a particular route. They'll be able to tell them right away.

There are monitoring agencies out there today that will tell you.... I can't remember the name of it, but there's one that tells you that on average, all airlines are seeing their prices increase by 6% over the last six years and this is the reason.... There are monitoring agencies out there doing that already.

I understand your question, Joe, but I can't see how we're going to resolve a problem through legislation or through even regulation. Are we going to start monitoring the competitive fares on each flight, on each airline, etc.?

Mr. Joe Fontana: I'm sorry, Mr. Chairman. These are unusual times. I don't want to go back to reregulation of the total industry, but we are in unusual times, especially in the transition period, where in fact we now have a dominant carrier.

I heard and saw our report. This committee spent days and hours telling the Canadian public of how uncomfortable we are with a dominant carrier. Even the Competition Bureau is really uncomfortable with this. I'm only saying, yes, we may have looked after monopoly routes, but at the end of the day we don't have an awful lot of competition in this country.

The Chair: Not yet.

Mr. Joe Fontana: Well, we hope to eventually get there, but by the time we get there, I just want to protect the consumer.

The Chair: Joe, we all want to do that. You don't have to wave a flag.

Mr. Joe Fontana: Then my point is this. What is wrong with that—

The Chair: Give me an example of how you're going to do it, Joe. How are you going to monitor all those prices on all those fares on all those airlines on each route?

• 1700

Mr. Joe Fontana: I'm not suggesting...that's why I was asking the questions. Do we have the capability of monitoring? And failing that, the simplest and easiest way to do it is forcing or asking all of the domestic carriers to publish their rates.

The Chair: They do.

Mr. Joe Fontana: Where? They change them 12,000 times a day. There are changes going on each and every time. How do you know whether or not people are being gouged?

Let me ask you something about the computer system.

The Chair: No, hold it, before you go too far.

Mr. Joe Fontana: I want to know—

The Chair: No, I want Ms. Dufour to answer your question. I think we all got your point six times over, Joe. Let's let Ms. Dufour answer your question.

Ms. Valerie Dufour: So what is the specific of the question?

Mr. Joe Fontana: The specific is that if we get them to publish their rates as of today, May 8, as an example, 10 days from now or two months from now, if the price is up, people will know. People say go to the computer and you can find out. It doesn't tell you what the price was on May 10 or May 8. It can tell you what the price is today.

The Chair: Okay, Joe.

Ms. Dufour.

Ms. Valerie Dufour: The carriers have not been doing that. This is a perishable product. It's a movable feast. You won't have a fixed price. You will have two seasonal blocks where, if you want to test, you can test. There's a summer season and a winter season. As daylight saving comes and goes, you're going to get fundamentals for the summer and fundamentals for the winter. And then, depending on market response, prices and the number of seats in each price range are going to come and go. So the obligation only to sell what you publish is still the fundamental. If you go too far down that road, remember the carriers that want to compete said the tougher you make it for them to compete, the less likely they're going to get into the market.

Mr. Joe Fontana: The only thing I can tell you, Valerie, is that Mr. Milton is absolutely correct. You're telling us to forget about trying to figure out whether or not prices are going up and whether or not the consumer is getting gouged, because nobody can figure it out. So in other words, he's partially right. He can raise those prices tomorrow and tomorrow and people would have to pay the price.

Where's the mechanism to say whether or not this monopoly person has actually been responsible with price increases? You're telling me there's no way of controlling it, and if we try to control it too much, people are going to say they're not going to get into the business.

Ms. Valerie Dufour: Mr. Fontana, if there are 20 fares on a single flight with 120 seats, or 17 options, depending on the conditions you want to accept for travel, what is it that we're trying, by your process, to fix? Essentially, there—

Mr. Joe Fontana: I'm trying to make it easy, Mr. Chair—

The Chair: No, Joe, wait a minute. Let's let her finish her answer here first.

Go ahead.

Mr. Joe Fontana: She doesn't have an answer, Mr. Chairman. She—

The Chair: We don't know if she has an answer because you're not letting her answer. Let her finish her sentence, at least, then, please.

Go ahead, Ms. Dufour.

Ms. Valerie Dufour: To a certain extent, we can't go backwards. We have to accept that all the carriers in the world have a living, dynamic pricing structure that's based on yield management. At any given time you're going to have fares, as I mentioned, and at no time do you know how many seats are available at any given rate. So the difficulty is trying to figure out what it is that you're trying to fix in time.

Mr. Joe Fontana: What I am simply trying to do is keep Air Canada honest. If it's difficult, I understand it. I've talked to travel agencies, I've talked to Air Canada people, I've talked to other airline people who will tell you they change prices on a weekly basis. Yes, it all depends, because in the plane there are 12 classifications of seats. At the end of the day, I want to be able to protect the public as best I possibly can. Perhaps that means that Mr. Milton should be asked to sign his name on a dotted line telling us what the average price increases have been over the past month or two months, because I want to protect the public. It's as simple as that.

I paid big money for bureaucrats to try to figure out how the details are supposed to work out. You don't expect me to do it. He wanted to deliver 20 boxes of prices to my office. Give me the staff, I'll monitor the prices.

My point is I want to protect the public. I don't trust a monopoly, and for the intervening period of six months, a year, or two years, until we've built competition in this country, until we bring new entrants into this...that people are not going to be shafted. Now, tell me how I'm going to protect it. And if I can simply put two words in a bill that says “Mr. Milton, every two months you write in and say that you have not increased the prices more than 2% or 3%”.... I want something more than what I have now, which essentially is diddly-squat, other than monopoly routes. On complaint and on notice we can do it, but that's about it.

• 1705

The Chair: All right, and that'll be it. You've made your piece. We've heard it all three times now. Ms. Dufour is going to answer what she can, and then we're going to go on to Stan.

Ms. Dufour.

Ms. Valerie Dufour: In terms of monitoring, Mr. Fontana, Statistics Canada will be monitoring pricing. The labour unions feel very strongly about pricing. Jim Stanford, who came and testified, is one of the best analysts in the country doing price monitoring. We will be engaging in monitoring, because we have a mission to provide an annual report on the behaviour of the industry. The agency will be doing the same, and I expect the passenger group that came to visit you will be doing it as well. The information will be there without regulating it by any means other than what we have now.

The Chair: Stan Dromisky, please.

Mr. Stan Dromisky (Thunder Bay—Atikokan): Mr. Chairman, I realize the complexity of the situation that our colleague here is presenting to the committee. The benchmarks that Joe is referring to will be the benchmarks of the three most prominent fares on any route: the first class fare, the business fare, and the full economy.

All the other fares in those 20 boxes he's talking about are fares that are beneath those three, and variations of them. In the Canada Transportation Act there's reference to basic fares. Those three basic fares that I mentioned become the benchmarks. Those benchmarks become a reality as soon as we get this damn bill passed. The day we get it passed, those three are the benchmarks and those are the ones that should be watched very carefully.

As far as trying to accomplish and satisfy Joe's quest regarding all the others is concerned, those change drastically from day to day depending upon the flight, the time of the flight, the size of the plane, the season, and a multitude of other factors. So I think we have to keep that in mind.

Mr. Joe Fontana: Okay, I'll take the basic fares then.

Mr. Stan Dromisky: Just as in some other areas of vital federal government operations, when any carrier raises any one of those benchmarks, not only should they notify the public, but they certainly must also notify and give a rationale to the Canadian Transportation Agency.

Mr. Joe Fontana: They don't need to do that now, though.

The Chair: Do they do that now?

A voice: No.

The Chair: Order, order! Let's let the officials answer.

Mr. Stan Dromisky: That's fine. That satisfies the—

The Chair: Now you guys are asking the questions and you become experts. Let's let the people tell us. Do they do that now through the CTA or any other agency?

Ms. Valerie Dufour: They have electronic filing of their fares, and whatever they file into the ATPCO, which is the fare and banking reconciliation, the agency sees all of that all the time.

Mr. Joe Fontana: But the public doesn't.

The Chair: Okay, let's listen. We've heard Joe's point.

Roy.

Mr. Roy Bailey: I appreciate, Ms. Dufour, the complexities—the timing, how long you stay. We have at least, as you mentioned, six agencies out there that are real watchdogs of this—it's going on all the time—and probably doing a better job than many of us realize as far as the rates are concerned.

I want to get to a question, though, that really has bothered me. What I always considered as being a little misleading or false advertising—and I've come across this on a number of occasions, not just from Air Canada but from Canadian as well—is where they take half a page out on certain fares, say, to London and they quote a price. The figures are in big black letters. You phone in and you find out about all of the little add-ons and curtailments and layovers and all you must do. To your mind, has anyone in the airline industry ever been charged for false advertising under the advertising council?

Ms. Valerie Dufour: Yes—

Mr. Roy Bailey: Have they? Is this what I'm talking about?

Ms. Valerie Dufour: It's the agency that has in fact taken action against carriers that, for all intents and purposes, didn't put in enough small print to explain just exactly what the lowest fare was. It used to be in the old days, in addition to that, subject to government approval. For international rates, it's—

• 1710

Mr. Roy Bailey: I haven't seen any of this deception for about a year. Maybe it's there. Maybe I haven't been looking. But previous to that, every weekend you'd see this ad in the paper and it wasn't correct. I was wondering how many times people had sued them because of that.

Ms. Valerie Dufour: There are lots of complaints that go to the agency on the basis of the difference between the published fare, the $329 to Vancouver, and what you actually end up paying, because they never put in that one the surcharge for NAV services and the AIF and the GST and the PST—

Mr. Roy Bailey: All the rest.

Ms. Valerie Dufour: —and the U.S. If you're going transborder, you have another bunch of U.S. charges. That's a game they've been playing for a very long time, and there's nothing anywhere in the world that requires them to say what is the total, total, total price.

Mr. Roy Bailey: There's a slight bit of deception out there, which is not easy to deal with. It's not easy to handle when you're trying to explain it to a mother who's 75 or 80 years old and she says “This is the one I want”, and they say “Wait a minute, I think there's something wrong.” And then they phone in and they get this information, and it's just a bad piece of advertising. I think it's bad business for the airlines.

Ms. Valerie Dufour: I shouldn't speak unduly for the commissioner, but the commissioner is not so much concerned about the add-ons as the bait-and-switch aspect of it.

Mr. Roy Bailey: Okay.

Ms. Valerie Dufour: If you put in a $329, and you call in and say “I'm sorry, that's all sold out, but of course I have this other one at $200 and $300 higher” and and blah, blah, blah, that's where he would be more vigilant that this is an inappropriate business practice.

Mr. Roy Bailey: Thank you.

The Chair: Charlie.

Mr. Charles Hubbard: Mr. Chairman, I agree with Joe. I think that if we don't do something and we have this occasion, we're going to regret it in the future.

I know of no other agency, or anything you buy, where you get 17...I thought there were 9, but when you talk about 17 different prices for the same commodity, it's a buyer beware situation. You go to a travel agent, and if you have a good travel agent he gets you price 14. If he's one who doesn't know much, it's price 12. If some little old lady, who Roy talks about, walks up to a ticket agency or to the Air Canada desk they pay an exorbitant price.

I had a case in my home constituency this past weekend of three people who, for medical reasons, had to fly from Moncton, New Brunswick, to Quebec City, and each of their fares, according to what they told me, was to be over $700, in terms of a flight that was only about 400 miles—300 miles maybe.

I think we should, as a committee, look at this and we should put something in these in terms of regulations, whereby, in terms of the basic fares, as Stan mentioned, they should be monitored by somebody within the agency. If we don't do that, we're subject in the future to really saying to a monopoly, do what you want.

And I'm really browned off, Joe, about this idea of 20 boxes. It's a threat to you. I didn't like the threat that Mr. Milton gave us at the committee last week. And, again, he used the 20-box threat, which to me is a little bit of—

Mr. Joe Fontana: They must think I have nothing to do with my time.

Mr. Roy Bailey: How big are the boxes?

The Chair: Colleagues, we've been at this for three hours. We're recessed for 20 minutes.

• 1714




• 1750

The Chair: We're resuming. Based on a conversation that Mr. Fontana had over the dinner hour with me and others.... Joe, I wonder if you could maybe reiterate the idea we had.

Mr. Joe Fontana: Mr. Chairman, in light of the fact that most of this information is deposited somewhere—I heard Statistics Canada or CTA is gathering all of this information.... Rather than putting it into legislative form or regulatory form, perhaps what we might do as a committee is have, as an attachment to the bill, a special note to the minister and/or the CTA that on basic fares—and we'll have to determine whether or not we pick 20 or 30 or 40 pairings—within six months from the passing of the bill, that the CTA, and correct me if that's not the proper authority, provide that information to this committee; and that this committee will undertake in six months a study strictly on pricing and fares, with that information that's going to be provided for us, so that it will be the accountable or transparent or public forum by which we ourselves can be satisfied that there haven't been any undue price increases by virtue of a monopoly and/or dominant carrier or so on.

So I think that would satisfy me. Hopefully that would at least give the public some assurance that while that information is being compiled by a whole bunch of agencies such as Statistics Can, CTA, and so on and so forth, at least we keep a note for ourselves that six months after the passing of the bill this committee be charged with getting that information from the CTA on basic fares. And we may pick 20 or 30 pairings of cities and towns and start to look at what has happened to price and fare increases over the course of the six months.

Could I ask the officials to whether or not that's doable, whether or not that information is available?

The Chair: We don't have to ask the officials. We, as a committee, have the powers under the Standing Orders to request information of whatever agency, the CTA or Statistics Can, you're requesting information from.

• 1755

So if this committee in two months' time, four months' time, or six months' time, says all right, I'd like to have all the information on business class, and full fare economy pricing of all flights on all airlines leaving a certain city pair, we can make that request for that information. Then as a committee we can sit down and look at these things, and I think just the dissemination of that information out to the airlines is going to keep the airlines on their toes. They're going to know that this committee is going to be seized with the information on those fares and everything else, and that we're going to sit down and publish a list of 10, 20, or 50 pairs and say here's what we've learned on the basic fares on these different airlines over the course of the last four or five months.

If that demonstrates that a particular airline, or possibly the dominant one, is out of whack with the competition that's flying between city pairs, it will be known. So then that takes away the need for any kind of legislative or regulatory mandate. We can do it ourselves.

Mr. Guimond.

[Translation]

Mr. Michel Guimond: Let's say that it will be a known fact but what will we do afterwards and what will the committee be able to do on its own initiative? It remains to be seen. The bill will have been passed. It will be in effect and the merger will be completed if a decision is not made beforehand. What power will we have when we have this information? We cannot propose amendments to the bill. I think it is time that the bill includes provisions to protect us.

[English]

The Chair: We also have the review process of this bill, correct? Isn't it at that review process that we're entitled to make amendments to the bill? That would be the opportunity to do something about it if we wanted to do something about it.

If we can't shame them into it, which I think we'd be able to do anyway, then we'll say, no problem, we're going to elect a bump-up review of the bill, and we'll review the bill and put in an amendment to the legislation.

I agree with a lot of what Joe Fontana has said, and I think we're all going in the same direction as far as consumer protection is concerned. But at the same time, I think none of us here want to over-regulate the industry, because it too has a licence to survive, whether it's a dominant or not. I hear all the reasons Joe's talking about the monopoly, but at the same time, these people are not fools. If they feel for one moment that we're going to humiliate them into showing how prices are completely out of whack, or that in fact we're going to say that because we've demonstrated they're out of whack, we are going to be prepared to re-regulate or make amendments to existing legislation because we have the power of review, I think it would be a big fool who would come forward with some kind of attitude or pricing schedule that would be contrary to what we are trying to accomplish.

Am I wrong on this?

Ms. Valerie Dufour: No, and I would add that you can in fact invite carriers that you feel are out of line to come and justify themselves before the committee, because you have a right to do that.

Second, in terms of the review, the standard five-year CTA review will begin in July of this year, and one year from now there will be a new parliamentary window, because the CTA act will be open again as a result. In fact, during that process, quite separately from anything you do, we may very well, in the context of the bill, and it as an addition to part II of the existing CTA, conduct other studies on other questions that are pertinent to the general environment we have.

So I've always felt that we have a double window. We have a piece of legislation we want to get passed quite quickly. We have transition observers we're holding off to see just exactly what they're going to be observing. There's a proposition now for dealing with individual complaints that's about to come on the table. You now have SCOT, which will do some review. In addition, we can open the legislative text again.

• 1800

The Chair: The committee has the power. And there are other acts like the CTA that are up for review within the timeframe we are very interested in, and that is one year.

I think we've resolved that so far.

Mr. Drouin, and Mr. Bailey.

[Translation]

Mr. Claude Drouin: As for Joe's suggestion regarding the 20 cities, would that be 20 large urban centres? I want a clarification because I would also like remote areas that might not be identified...

[English]

The Chair: Well, Claude, we're not going to get into the details of city pairs right now. That is something we'd do later on, whether it's 10, 20, 50, or 100, if you want. It depends on whatever representative sample would be determined by the committee.

Roy.

Mr. Roy Bailey: Mr. Chairman, I think this is a good idea, but I think we must be cautious because we're not going to be gathering this information. We're going to rely on other agencies. I would suggest that when we compile this information, we make sure they are well aware of what they're supplying to us. Otherwise, we could be a little bit off base too, and they may think we're a little bit nuts.

We have to make sure that with the different sources of information, we're comparing apples to apples. We would almost have to ask them on the side, with the great variables in fares, to look at certain routes. If we didn't, you would get a dog's breakfast in here. You wouldn't be able to figure it out.

Who's going to do that, Mr. Chairman? Are we going to do this in the course of this year, tell them we would like this information? Who's going to say to the different groups—the passengers group, Statistics Canada, and so on—could you provide us with this information over the next six months?

The Chair: Well, they collect this information anyway, Roy.

Mr. Roy Bailey: I know.

The Chair: It's only a matter of asking them to supply us with—

Mr. Roy Bailey: But we would have to ask them to be detailed and explicit about which routes were—

The Chair: Yes, because we don't want to get 20 boxes, as Mr. Fontana's suggesting.

Mr. Roy Bailey: I just want to make sure we don't get a—

The Chair: No. We'd be very specific, but we'd determine that at a later date. We're not going to get into that.

Mr. Roy Bailey: All right.

The Chair: Are there any other suggestions for clause 4, colleagues?

Mr. Ovid Jackson: I have another comment.

The Chair: Mr. Jackson.

Mr. Ovid Jackson: It's just a quick comment about our little discussion, Mr. Chairman. It's great, and I guess the difference is between good and perfect legislation.

The Chair: Thank you very much, Mr. Jackson.

Roy, did you have a closing comment?

Mr. Roy Bailey: We're talking about fares on monopoly routes. Can I just bring up a question that really has bothered me somewhat? I'm referring to the cost of air freight.

Most of the areas in Canada that rely almost solely on air freight are monopoly carriers, right? The carriers going out of...Athabasca Air Lines and all these various airlines going to these unique points across northern Canada are monopoly carriers. Is there a way this committee, or any group, could establish what would be a fair freight charge with these variable distances and conditions under which they fly? Are we interested in that? Is this bill actually interested in that?

Ms. Valerie Dufour: Mr. Chairman and Mr. Bailey, we have studiously avoided trying to put the agency in the position of making assessments based on a cost formula. Every city pair is a case in its own right. It has its own characteristics. There's no comparison between Athabasca's basic rate and First Air's basic rate, and Air Aklak further up, and so on.

The agency has always, even to the extent that they've had complaints now, taken their cases on a case-by-case basis and looked at the circumstances. There's distance, airport charges, the weight of the product, the type of product, dangerous goods issues—there's a tonne of them. Every case is different. We have tried to avoid giving them that approach. They've always had a case-by-case approach, and the onus is on the carrier. The whole construct of this is that the onus is on the carrier to demonstrate they have put together a reasonable price. If they want to produce cost justification, it's up to the carrier to do that. We don't want to create an obligation to review a cost-based formula.

• 1805

Mr. Roy Bailey: That's easy for me to understand in freight. I accept totally what you have to say. But I'm wondering if we won't get some kind of spinoff from the dominant passenger carrier of the same effect you mentioned, that is, all of the different types of fares, where you're going, and so on. It's difficult to measure the cost of 400 miles here and 400 miles there because of the intrinsic costs, which we don't see, even in the passenger fares.

Ms. Valerie Dufour: Again, that's why the agency has always looked at their cases on a case-by-case basis. It is why we put in some general criteria so people will understand that monopoly prices are compared to similar routes by the same carrier where there's competition, so there's some sort of a benchmark. And there's historical behaviour. I mean, if it spikes, then it's going to be hard to explain that this is consistent with their historical pricing when nothing else changed.

The Chair: Stan Dromisky.

Mr. Stan Dromisky: I don't think we should really be that concerned about the northern section of Canada, simply because I truly believe that competition in the north, as far as aviation service is concerned, is far healthier than it is in southern Canada.

Mr. Roy Bailey: In many respects.

Mr. Stan Dromisky: Just recently I was in British Columbia at a national conference of people who own planes. I was told that over 13,000 cowboys of the sky—most of them are bush pilots—registered in British Columbia alone. They have a fantastic network. They communicate with each other.

So the customers, the clients who want service in any of the remote areas in northern British Columbia, have access to a multitude of people who are willing to take their planes, which are very versatile—far more than Air Canada's—with skis, pontoons, or wheels, to deliver passengers or cargo at a very competitive price. They are constantly competing with each other. I thought it was just marvellous the way the competition is thriving up there.

The Chair: Okay, colleagues, I think we've beaten this horse. Does anyone have any other suggested amendments to clause 4?

(Clause 4 as amended agreed to)

The Chair: Now, colleagues, just before we go back to clause 2 and Michel Guimond's concern, the bells will ring in five minutes. If we pass clause 2, it leaves us eight clauses to deal with.

What is the pleasure of the committee? Do you want to come back afterwards? There are apparently four or five votes tonight, which will take about an hour, I guess, by the time we get back from a vote. Do you want to continue the work of the committee at 7:30 tonight, or do you want to adjourn until tomorrow morning at 9 o'clock?

Mr. Stan Dromisky: Adjourn until tomorrow, Mr. Chairman. I feel we should, because you know there are key representatives from the opposition who are not here.

The Chair: Well, I'm not too concerned about that, Mr. Dromisky. If they can't make their representation to committee during legislative process, then that's too bloody bad for that party.

Mr. Roy Bailey: Two important ones are here.

A voice: Michel and I are here. That's probably—

The Chair: Well, if we started at 7:30 and we went for an hour, it would give us only an hour. I suggest we deal with clause 2. Maybe we can get that done. Then we'll adjourn until tomorrow at 9 a.m. I think we're in room 701, La Promenade, tomorrow at 9 a.m. Is that agreed?

Mr. Stan Dromisky: So we'll come back after the vote?

The Chair: No. The idea is not to come back after the vote. What's the matter with this translation?

Okay, so we go back to clause 2 and see if we can get that done before the vote.

(On clause 2)

The Chair: Michel, you had a concern. We've had—what do you call it?—the agreement printed off and distributed. Where are the undertakings? There they are, okay.

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[Translation]

Mr. Michel Guimond: You can go on with your explanations Mr. Pigeon but I maintain that Air Canada is doing indirectly what the bill is forbidding it to do directly by committing acts that can lead to the bankruptcy of small regional and local carriers. I would like to know exactly where in clause 2 these carriers are well protected.

Mr. Jacques Pigeon: Mr. Guimond, first I would like to say that the undertakings that were provided by Air Canada both to the Minister of Transport and the Commissioner of Competition were provided for its subsidiaries as well and not only on its behalf.

As for the undertakings provided to the Commissioner of Competition, paragraph (1)c) where you will find the definition of Air Canada is of particular interest. You will see that this definition covers not only Air Canada but also the companies that are part of its group.

I wish to underline that in this context every time there is a mention of an undertaking provided by Air Canada, it must be understood that Air Canada committed not only itself but also the affiliates that are part of its group. The same is true for the undertakings provided to the Minister of Transport. You will see that the undertakings are provided not only for Air Canada, but also for its affiliates.

This is the preamble. Of course, we are talking about the undertakings as of December 21, 1999. Pursuant to clause 19, these undertakings are deemed to be terms and conditions.

Mr. Michel Guimond: Mr. Pigeon, I am reading the interpretation of the Department:

    Subsection 10.1(1) deems the proposed acquisition... There is always mention of proposed terms and conditions but clause 19 does not refer to Air Canada subsidiaries. In the definitions from the bill, does it say that Air Canada include its wholly-owned subsidiaries?

Mr. Jacques Pigeon: The undertakings, according to the text of the documents signed December 21, 1999, were provided by Air Canada. What I am saying is that Air Canada was committing not only itself but also every member of its group.

Ms. Valérie Dufour: According to the text.

Mr. Jacques Pigeon: According to the text. If you look at clause 19, you will see that pursuant to the new subsection 10.1(2) proposed all these undertakings are deemed to be terms and conditions of an order made under subsection 56.2(6) of the Canada Transportation Act. The goal, Mr. Guimond, was to allow the application... This is a reference to clause 2, the provision you asked a question about, but look at proposed subsection 56.2(9). When it is in effect, the Act will read as follows:

      (9) Every person subject to terms and conditions specified in an order shall comply with them.

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Therefore, there is a statutory obligation to fulfill the undertakings provided in the documents signed December 21, 1999 and sent to the Minister and the Commissioner. This is the link I wanted to make in answer to your question.

Mr. Michel Guimond: All right.

[English]

(Clause 2 as amended agreed to on division)

The Chair: [Inaudible—Editor]

Ms. Valerie Dufour: No, you asked that we stand clause 6 and clause 8 because you had indications from others of some desire to debate. I think on clause 6, it was actually Mr. Fontana who wanted to—

The Chair: We can't do anything with clause 6 right now. I had a request from Mr. Casey. He had a special dinner to go to and he has an amendment on clause 6, so we'll let that one go until tomorrow.

But we have a note on clause 8.

Why did we stand down clause 8? That's what I want to know.

Ms. Valerie Dufour: Because it touched—

The Chair: Joe?

Mr. Joe Fontana: It's hard to follow, with some other acts and everything else.

The Chair: Okay, we'll take our time. We're in no hurry.

Colleagues, thank you very much. We'll see you. We have eight clauses left. They're pretty heavy, but we'll see you tomorrow at 9 a.m., room 701, La Promenade.

Thank you. We're adjourned.