STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, April 5, 2000

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[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues.

Just before I begin, I thought I'd give a special welcome to students who are with the Forum for Young Canadians. They're with us in committee today. They've chosen our committee amongst the many to come and listen in on. We welcome you here to the Standing Committee on Transport, as it's known, and we hope you enjoy your stay and have a great learning experience while you're up here in Ottawa.

Colleagues, pursuant to the order of reference of the House dated March 31, 2000, this is a consideration of Bill C-26, an act to amend the Canada Transportation Act, the Competition Act, the Competition Tribunal Act, and the Air Canada Public Participation Act, and to amend another act in consequence.

We welcome this afternoon the Canadian Transportation Agency and its chairperson, Marian Robson. Joining Marian are Mr. Gavin Currie, director general, air and accessible transportation branch; Claude Jacques, director, legal services directorate; and David Western, director, accords, tariffs and enforcement. We welcome our witnesses to the Standing Committee on Transport.

I would assume it's Ms. Robson who will be making the presentation. When you're comfortable, please begin.

Ms. Marian Robson (Chairperson, Canadian Transportation Agency): Thank you very much, Mr. Chairman.

I'm very pleased to be here this afternoon with my colleagues from the agency. As you are aware, I was not originally scheduled to appear before the committee, but in light of the testimony yesterday and the focus that was given to the consumer protection issue and the interest of this committee in the role of the agency, I felt it was important to personally be here today. I'm here to respond to your concerns and to assure you that we at the agency attach a great deal of importance to these issues.

We have a short presentation for you on the agency's new role and our action plan. We've prepared a deck to guide the discussion, and I assume that's been circulated. I will just give some summary opening remarks and then I will ask Mr. Currie to follow me in the presentation.

As you're no doubt aware, in Bill C-26 there are five major areas of concern for the agency. The first is mergers and acquisitions, and this is really an expansion of our current role vis-à-vis Canadian ownership and control of airlines.

The second is discontinuance or reduction of service, and this is an area where the legislative provisions have been slightly expanded; however, the agency's role itself remains unchanged.

An important new element is, of course, domestic pricing. Here there's a new role for the agency designed to ensure that no price gouging takes place on routes served by only one carrier and that indeed an adequate range of fares is offered on those routes. Here we have significant powers, both on our own motion and on complaint.

The fourth area is domestic tariffs. Here we have a slight expansion of our current role on domestic tariffs, which will give us the power to require compensation for consumers under certain circumstances.

Last but certainly not least is terms and conditions of domestic carriage. This is a new role for the agency and a very important consumer protection issue. This will now give, on the domestic scene, a more close parallel to what is currently happening under international rules. Here we're talking about issues such as lost baggage. This would be a complaint mechanism, where the terms and conditions were seen in some way to be unreasonable or discriminatory.

I'll now ask Gavin Currie to review these issues in a little more detail.

Mr. Gavin Currie (Director General, Air and Accessible Transportation Branch, Canadian Transportation Agency): Thank you, Ms. Robson.

Dealing first with the new provisions on mergers and acquisitions, the agency has a role to play here. Basically, the agency must determine whether a proposed merger or acquisition would result in an air carrier that is Canadian owned and controlled. We already do assessments of Canadian ownership and control as part of our licensing process, so in a sense it's an extension of our current responsibilities.

[Translation]

I'm now going to say a few words regarding the discontinuance or reduction of service. When we say reduction, we mean the discontinuance of at least one weekly flight to a point. In such a situation, a carrier must give 120 days notice and consult with local officials, if it is the last or second last carrier at the point or if the discontinuance of a year-round non-stop scheduled service would result in reduction of at least 50% of the weekly passenger-carrying capacity on a route.

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In such circumstances, the Agency is empowered to take some action. First, the Agency can, on application, reduce the notice period. Also, if the required notice is not given, the Agency may order the service reinstated for up to 60 days, if possible. However, it should be noted that the Agency cannot prevent discontinuance of service. The relevant clause of the legislation prescribes only a notice.

[English]

Turning to domestic pricing, there are, as the chairman mentioned, a number of new responsibilities for the agency here and some limitations as to where the agency can operate.

I would stress first that the agency has power to act only in situations where there is a route within Canada served by one licensee and included in that licensee are any affiliated licensees. However, the agency can look at all fares on such routes, in contrast to the current situation with the current act, where the agency is limited to looking at basic fares only.

The agency may determine that there's one licensee on a route if it finds that every alternative service is unreasonable.

In terms of what the agency can do, if the agency determines on complaint or on its own motion that a fare rate or increase is unreasonable, it may disallow the fare rate or increase, it may order a reduction, or it may order a refund if practical.

Also, if the agency determines that the range of fares or rates on a route is inadequate—and “route” here again is a route with only one carrier—the agency may direct the carrier to publish and apply additional fares or rates.

In determining whether the price is reasonable or not, the legislation gives the agency considerable direction. The agency shall consider historical data and fares or rates on similar but competitive routes, as well as other information provided by the carriers or requested by the agency.

But it's clear here that the legislation expects the agency will do its determination of whether a fare is reasonable or not primarily by comparison: comparison to what existed before, in the past, and comparison with what exists on comparable routes with its competition, where presumably the competitive process ensures that fares are reasonable.

[Translation]

I will now deal with the issue of domestic pricing, in particular, with the conditions that apply to domestic service. Carriers must have a tariff which includes all fares, rates and charges, as well as the terms and conditions of carriage which apply, for example, to passengers whose luggage is missing or who are denied boarding. If carriers do not abide par their tariffs, the Agency may order a carrier to do so or order compensation for expenses. This is a new clause.

Regarding terms and conditions of domestic service which lead to a complaint, if the Agency determines that they are unreasonable or unjustly discriminatory, it may suspend or disallow them or substitute other terms and conditions.

[English]

So having talked about the main provisions of the act, I'll turn the microphone back now to the chairman, who will talk about our action plan.

Ms. Marian Robson: Thanks, Gavin.

I would like to give you a few details about the action plan we are currently working on to respond to this legislation when it receives royal assent. We are, of course, in the planning stages, and this is very much a work in progress. However, we have set up an internal project team drawing on the resources from various areas of the agency, with a mandate to plan for and manage the transition from our current regulatory regime to the expected new one. There's a lot of work going on now operationally in terms of planning how we would actually handle these new responsibilities.

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We are also planning an information campaign to inform Canadians about the agency's new role and their rights and recourse under the new provisions. Once royal assent is given, we intend to hold a press conference, do some regional media work. We're preparing posters and brochures for the travel industry; revising the agency's website to include provision for on-line complaints; and creating a new and improved 1-800 number, which I understand had some attention yesterday. We're going to be making use of a call centre initially, since we have absolutely no idea of what sort of volume to expect. We're planning for all contingencies in terms of the early stages of the new legislation.

We'll see how things go and whether an ad campaign at some point would be appropriate or whether in fact Canadians are aware through these other means of the new situation.

We're also expanding our complaints unit to deal with an increased workload. We're creating a new pricing investigations unit, developing and refining price monitoring and analysing techniques, training staff for new responsibilities, and expecting some modest additional resources for communications activities.

Our goal is to be ready to go on day one after the act is proclaimed. I think I can say the agency already has quite a well-established track record in dealing with consumer complaints and consumer issues with respect to accessible transportation. In that area, we are extremely active, and I think we are pretty well established with both the consumer groups and the carriers in terms of the services we offer to the disabled community.

I am confident we can build on that experience. We have an excellent group of people in the agency, and I'm confident we will be able to fulfil this mandate very well.

Thank you very much, Mr. Chairman.

The Chair: Thank you, Madam Chairman. We appreciate your presentation to our committee. We'll go right to questions.

Colleagues, we have until 4:30 p.m. for questions of these witnesses.

Val.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Yes. I know my colleagues will be asking you questions about the complaint mechanism, but I am interested, Madam Chair, in your final points in the agency's action plan, which were expanding the complaints unit to deal with the increased number of complaints and creating a new pricing investigations unit.

What I'm interested in is how many full-time equivalent positions you have now, what kind of growth you anticipate, and how large a unit you're talking about. And perhaps you could comment on how you see the airlines responding to that, not only Air Canada but the other smaller airlines that are going to have to deal with your agency probably on a more frequent basis. What is the cost likely to be to those airlines in meeting the comparable requirements from your new unit in investigating complaints and looking at various other regulatory issues that the minister is giving you through this legislation?

Ms. Marian Robson: That was quite a detailed question. I'll try to answer some of it, and I'll pass some of it to Gavin to respond to as well.

We are, as I said, at this point in a planning mode as far as our resources are concerned. We have taken a group from within the agency that have adaptable skills and have put them to work on developing the plans for the new work. We've tried to make some estimates as to workload, and that's a very difficult task because we simply don't have much in the way of data that would guide us there. So we are having to try to make some assumptions about the kind of staff requirements we'd have.

At this point, we don't have any firm numbers. We are in the process of developing a Treasury Board submission, which of course can't come until the legislation is in place. We're really in this holding pattern of a transitional team until we.... Now, we certainly have scoped out the type of work we see coming. Part of our problem is not knowing the volume or the complexity of the work.

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So at this point we really aren't in a very good position to be specific on FTE.

Ms. Val Meredith: Are we talking, though, about two positions or five? What size are we talking about for this new unit you're planning?

Ms. Marian Robson: Gavin, do you want to...?

Mr. Gavin Currie: I would say, in terms of staff, we're talking perhaps of ten people as opposed to two. We're not talking about 100 people. There's no great army being planned. As the chairman said, it's very difficult to estimate what resources are going to be required. It depends very much on what the response of the airlines is to the new situations, how good the service is, and how many complaints it engenders. It also depends very much on how often people want to complain. Until we get some experience with that, it's going to be difficult to tell.

Our approach so far, as the chairman said, has been to identify existing resources and move them on a temporary basis into this transition team. We certainly couldn't staff rapidly enough anyway. It's not possible in the government. And we do plan to be flexible.

The chairman did mention, for example, in terms of dealing with telephone calls—we expect that at the time the bill is proclaimed we could perhaps get quite a surge—we are planning to use a government call centre. They have the resources not only to handle a lot more calls than we could immediately, but they also, if necessary, can expand quite rapidly if the need arises. In other words, we're trying to ensure that we are building flexibility into our planning so that we can respond, as required, to the number of complaints we get.

Ms. Val Meredith: If the number of complaints are not there, do you foresee limiting the growth of this new unit to the work at hand, or are we going to see a make-work project, where they start going out looking for trouble that isn't there and putting an onerous burden on airlines to report and meet requirements that perhaps are not really necessary? Do you foresee reacting to only the level of complaints you receive on this issue?

Mr. Gavin Currie: We have two different roles here. One is a role to react to complaints, both in terms of consumer complaints and complaints regarding pricing. Certainly, we're not going to do anything to encourage them. I think people will complain as they want, depending on the kind of service they get. And in one sense, it would be great if there were no complaints at all. This would show that the industry is operating very well. Unfortunately, that hasn't been the case to date, and I'd be very surprised if the complaints were zero.

The other role we have, and it's important to recognize this, is a proactive monitoring role with regard to prices, and we are expected to monitor price changes on our own motion—in other words, on our own initiative. That would certainly go ahead whether or not there were complaints. That will go ahead quite actively to start with. If we find that there are no examples at all of situations where there are unreasonable price increases on monopoly routes, then I think the monitoring would be scaled down.

But certainly, I suppose the short answer—I've perhaps given a rather long one—is that we're not going to have people sitting around doing nothing. If there's no work to do, they'll be reassigned elsewhere in government.

The Chair: Thank you, Val.

Murray.

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

Lady and gentlemen, welcome.

I'm curious, in plates 5 and 6, “Discontinuance or Reduction of Service”, about the 120-day notice. Now, I understand the reason that's there. If a carrier has been there for a year or more and has set up the service and everything else, there should be some way for the community to respond to the situation if the carrier wants out. But I want to put it on its head. I want to look at it another way.

What about a new carrier coming in? They'll take a look at this, and as soon as they sign the papers to set up service, they're going to be hooked into 120 days. I'm wondering if they wouldn't think twice about that. In fact, if the service to that community is marginal, they may just say “Forget it, there's a 120-day impediment here. I'm not going to get into this.”

Mr. Gavin Currie: Yes, I think you're right. Right now, of course, it's not 120 days, it's 60 days. So the same impediment exists, but it's a somewhat shorter one.

We have had one situation that arose this summer where a carrier was planning to go in on a temporary basis to a new location. They were concerned about this, so they came to the agency and said “It doesn't make any sense for us to give 60 days' notice before we leave. Can you provide an exemption for it?” In other words, it's a situation where the carrier's going in for a specified period of time, and it doesn't make sense, really, to follow the provisions here. The agency has the power to allow the carrier to do something different by making it clear that the carrier is there for only a limited period of time and it's not caught by these discontinuance provisions.

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Mr. Murray Calder: Okay, because on plate 6 you make the statement, “On application the Agency may reduce the notice period.”

Does that mean to say there's still the basement floor at 60 days, and you can't go below that? Or could you go below that?

Mr. Gavin Currie: Yes, we can go down as low as the agency considers reasonable. In terms of deciding whether to reduce the notice period, the agency takes into account the circumstances of the situation.

Now, you were talking about a situation where a carrier is coming in for a period of time to try something out and wants to be able to leave after a certain period. That could be arranged right at the very start using the agency's exemption powers.

Mr. Murray Calder: Perfect.

Mr. Gavin Currie: The person therefore could be allowed to come in for that period of time and leave on a known date in the future. That is being done already.

Mr. Murray Calder: So the proper process, then, would be for the carrier to come in, contact the CTA, and say “I'm looking at establishing an air service; what about this 120- or 60-day?” He could come to an agreement with the CTA before he establishes a service.

Mr. Gavin Currie: If he's coming in for a short period of time, yes.

Mr. Murray Calder: Okay.

Thank you, Mr. Chairman.

The Chair: Thanks, Mr. Calder.

Michel Guimond, please.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré— Île-d'Orléans, BQ): Ms. Robson, your brief presentation was very clear, and my questions will follow those asked by my colleague, Ms. Meredith.

The role of the Canadian Transportation Agency is limited to the following: you can enforce Bill C-26 only as far as it deals with mergers and acquisitions, discontinuance or reduction of service and domestic pricing and tariffs. Am I right?

[English]

Ms. Marian Robson: And terms and conditions of carriage as well?

[Translation]

Mr. Michel Guimond: Yes.

[English]

Ms. Marian Robson: Yes.

[Translation]

Mr. Michel Guimond: Who will be able to act as a watchdog regarding the quality of services offered by a carrier? Who will monitor the frequency of services offered by a regional carrier, its punctuality, as well as the displacement of carriers which had contracts previously? Who will be this watchdog? Do you think it will be the Agency? The Competition Bureau? Who will monitor the quality of services, their frequency, their accessibility, the type of aircraft which is used, as well as the upgrades? All these issues are not within the jurisdiction of the Agency.

[English]

Ms. Marian Robson: There is a mix of things here, Mr. Guimond, so I think perhaps I should let Mr. Currie deal with this question.

In some cases the tariff provisions and terms and conditions of carriage do affect some aspects of quality of service, but in other areas, of course, we don't have jurisdiction.

Do you want to continue?

[Translation]

Mr. Gavin Currie: Yes, I can answer in part. We have jurisdiction in some areas, including the terms and conditions of domestic service. For example, we could act if a passenger is denied boarding. Whatever has to do with the frequency of service, the quality of the services offered or the quality of the meals provided on a plane has to be dealt with by the carrier's management and has nothing to do with the terms and conditions included in tariffs.

Mr. Michel Guimond: So, the Agency doesn't believe it has a role to play in these areas.

Mr. Gavin Currie: When we get complaints regarding the quality of services, we just forward them to the carrier.

Mr. Michel Guimond: So you'll act as a mail box.

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Mr. Gavin Currie: I believe it's more than that. We do more than act as a mail box. We also receive the carriers' comments. We are planning to publish a summary of the complaints we get, indicating their number and their nature. So we'll be in a position to give better information to the public.

However, we cannot do anything about flights frequency or the quality of meals. I believe that by publishing the summary of the complaints we get, we'll encourage the carriers to do something about their shortcomings.

Mr. Michel Guimond: For your information, the Committee has unanimously recommended the creation of a position of ombudsman. It's our Recommendation 42.

Mr. Gavin Currie: Yes.

Mr. Michel Guimond: When the Transport Minister appeared before us yesterday, he stated that he had no plans to appoint an ombudsman, because there will then be duplication with the work being carried out by the Department, the Competition Bureau and the Agency. Where would there be any duplication between the work of an ombudsman and that of the Agency regarding the issues I raised earlier, when you say yourself that you don't look after that kind of thing, except to act as a messenger or to publish a summary description of the complaints you get? This doesn't solve the problem. The people who live in the regions still don't get a good service.

Mr. Gavin Currie: I believe you didn't understand what I said. There are several types of complaints, including some dealing with the quality of the service. What we are talking about are complaints against carriers which do not abide by the terms and conditions of the tariff, for example. The Agency can deal with many problems regarding the terms and conditions of carriage, including overbooking or situations when passengers are denied boarding. However, monitoring the quality of meals is not within our jurisdiction. Some issues related to the quality of the services offered are the responsibility of the carrier's management. This is not something which is regulated.

Claude, do you want to add something?

Mr. Claude Jacques (Director, Legal Services Directorate, Canadian Transportation Agency): I certainly agree with what you just said. The Agency never had the authority to monitor the quality of meals and to decide that the coffee served was too hot or too cold. There are, however, many areas we can regulate, for instance, anything which has to do with the terms and conditions of tariffs, including the loss of luggage and overbooking. Even if the Agency is not empowered to do anything about some complaints, it is often successful in getting the carriers to compensate those passengers which did not get the service they deserve. Our role goes much further than just being a go-between. We can convince the airlines to compensate some passengers, even if they have no obligation to do so legally. Thank you.

[English]

The Chair: Thank you, Michel.

Lou Sekora.

Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): Thank you, Mr. Chair.

There's one thing I must say. I got a call from a 905 exchange this morning chastizing me for being so unkind to Air Canada. So if any news reporters are here in the House, please don't print word for word what I'm going to say—

Voices: Oh, oh!

Mr. Lou Sekora: —because you're going to make me look worse. But I'm going to say, word for word, what I have to say, because I'm just that kind of guy.

Yesterday we talked to the minister about discontinuing and cutting service, and I see in your plates 5 and 6 that there's something you can do about it.

Number one...and I'm talking about Penticton, which we talked about yesterday. Canadian Airlines and Air Canada almost discontinued their service in Penticton, but yesterday afternoon I heard they put the service back because the minister went after them. They put the service back because apparently it's against their regulation or whatever it is.

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They've put it back, yes, but what happens now is that they have a Beaver going to Penticton and coming to Vancouver in the morning, and in the afternoon they have a Beaver going from Penticton to Cranbrook. That's where it ends.

Can you tell me something about that? What kind of powers do you have on something like this? I mean, it looks totally like violation—not cutting more than 50% but cutting more than 99% of service.

A voice: What did they have before?

Mr. Lou Sekora: They had good service in there. They had three or four different planes going in, with two or three different services from both sides.

Then I have some more.

Voices: Oh, oh!

Mr. Lou Sekora: Well, I just wonder what kind of powers you people have.

The Chair: As long as it's within five minutes, Lou, you can ask all you like.

Mr. Currie.

Mr. Gavin Currie: I'm not familiar with the details of what's actually happened at Penticton, although we certainly have heard of that quite a bit over the past month or two.

In terms of the powers of the agency, if a service has stopped completely, then that service must be...but currently 60 days' notice given unless the agency grants a shorter notice period. If it's a reduction in service, then the agency powers come into play only if the reduction is to less than once per week. If the carrier changes from one type of aircraft to another, then there is no power under section 64 to deal with that.

So if it goes from a larger aircraft to a smaller aircraft but it's still going more than once a week, then we do not get involved.

Mr. Lou Sekora: I really have great problems with adding another ten bureaucrats just to be able to report lost suitcases. I'm sorry for being that bold, but I want to know exactly what this committee can do about a lot of things that are happening, and who we can....

We want an ombudsman who would have, I feel, some kind of power. Maybe somebody could create some interest in what's happening and work on something. But when I hear there are going to be ten more people, I mean, that's frightening to me. That's adding ten bureaucrats when, really, we're not accomplishing a whole lot.

Ms. Marian Robson: First of all, I'd like to clarify that we have not decided we're adding ten bureaucrats at this time, Mr. Sekora. We are looking at the potential workload and trying to make some assessments.

Frankly, I think there are some quite important new responsibilities here that are very much aimed at the consumer and protecting the consumer.

Certainly on the pricing side I think this is a very important role. It's going to look at each route on its own, each monopoly route on its own. It's going to look at the range of fares being offered and if those have been reduced in some way. It's going to look at the level of fares. We have the power, on our own motion—and that's partly why we need some staff—to be able to investigate routes in terms of both fare levels and fair distribution.

I think that's a very important economic consideration for consumers, so I don't think I agree that we have nothing very important to do. I think that's quite a significant—

Mr. Lou Sekora: At one point you or one of your people mentioned the fact that when you get complaints, you'll be writing or sending a notice to the company, whatever the airline is, by mail.

Is that what you're saying?

Ms. Marian Robson: No.

Mr. Lou Sekora: Would you be phoning them?

Ms. Marian Robson: Faxing, phoning, e-mailing.

Basically, what Mr. Jacques referred to earlier is true. We have a consumer complaints role now that is quite limited. We have very little power to be able to enforce the terms and conditions of carriage. Our staff members do it through either decisions and orders or, in many cases, moral suasion.

We've developed, I think, a very good record with consumers and carriers, and now we are going to have a much more expanded responsibility. I think you'll find that we already have a very well-established set of procedures in place with the carriers. We act very expeditiously on the complaints we handle now. We have a very good record on our whole accessibility area, where we've had a lot of experience, so I think we're going to be able to perform some of these new roles extremely effectively.

Mr. Lou Sekora: Thank you very much.

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The Chair: Thank you, Lou.

Bev, please.

Ms. Bev Desjarlais (Churchill, NDP): Actually, you indicated that you're here because of some of the discussions that took place yesterday and obviously because of the importance of how the health committee saw the CTA's role. I think that was a direct reflection of the minister, on numerous occasions, saying that will be the role of the CTA.

I think there was an impression that we were going to hear you come here today to tell us that you were going to have a plan in place to address a lot of the things we're mentioning, a lot of the things that consumers have been complaining about: delays on the tarmac; the overbooking; problems with reservations; problems with pricing; whether or not a piece of equipment...like when you sit down in your chair and the armrest is missing and you get a screw into your elbow; whether or not there's no notice of cancellation; whether or not your bags don't get there because the cargo is guaranteed but the bags with the passenger aren't; whether or not there are maintenance delays; and whether or not those things are going to be addressed.

So of all of those things I mentioned just now, how many of them are you going to be able to deal with? Delays on the tarmac...? Overbooking 10%...? That's standard practice: they overbook 10%. Whether or not reservations are being handled in a timely manner...? Pricing you're going to be able to deal with, I think you said. If there's equipment broken and stuff like that, are you going to be able to tell them they have to do those things?

Did you get the list? Do I need to go over it again?

Mr. Gavin Currie: I can respond to some of them, certainly.

With regard to delays on the tarmac, certainly we would not be dealing with that in terms of the agency. It depends on what causes the delays, of course. Is it a weather delay? Is it a delay caused by the airport services? Is it a delay caused by air navigation systems? Who causes the delay? We do not have rules requiring carriers to minimize the delays. That's not part of the regulation. That's looked upon as a surface issue.

In terms of broken equipment, it depends on whether it's a safety issue or not. If it's a safety issue it would be dealt with by Transport Canada. Certainly if someone got themselves hurt on the aircraft because the equipment was broken, and they complained to us, I'm sure we'd be able to deal with the carrier on that. There would certainly be a requirement to compensate someone who is hurt on an aircraft because of the equipment being broken. I'm sure we could deal with that.

In terms of overbooking, overbooking is one of the practices that does cause a lot of concern to people. The reason that it's done, of course, is that there are a lot of no-shows. The way the airlines deal with that is by having in their tariffs specific provisions for dealing with involuntary denied boardings, as they call it. If the person shows up and gets bumped, then there are certain things the airlines must agree to do in terms of providing service to that person. We can certainly handle that.

Certainly the alternative to overbooking, I suppose, would be to charge everyone who doesn't show up for a flight. That's a possibility. It's not the way the international airline industry works, so the question is, are we going to try to impose something here that is different from the standard practice across the world?

Baggage is something we can deal with. The question was about baggage being delayed...?

Ms. Bev Desjarlais: Actually—and I've seen this happen—often passengers' bags will be left behind because there's too much weight on the plane. The cargo that's on the plane is guaranteed cargo but the passenger bags aren't.

Mr. Gavin Currie: I'd have to look at the tariff to.... I suspect that the airline has a right to do that in their tariff, but I don't know. That's something we could look at. Certainly the way baggage is handled is something that's covered by the tariff, but if you had a complaint about baggage we could certainly look into that complaint, no question at all.

Ms. Bev Desjarlais: Is there any kind of standard for what types of services have to be on the plane? Let's say, for example, that if you have a one-hour flight you have to be guaranteed to get one glass of water, or if you have a four-hour flight you should get a meal and water or coffee. Is there any kind of standard to give passengers any kind of...?

Mr. Gavin Currie: We have no standards of that nature. These are things that are, again, within the purview of airline management as management issues.

Ms. Bev Desjarlais: Can I fit one more in, Stan?

The Chair: One more.

Mr. Gavin Currie: Did I cover them all off?

Ms. Bev Desjarlais: Pretty close—I think you got most of them in there.

There's another thing I wanted to ask about. You mentioned—and I know it was just a possibility—possibly ten staff being needed. As you heard, the committee was pretty adamant that we saw a need for an ombudsman, for obvious reasons: because the issues that I brought up and that others have brought up were major concerns that we heard about.

So right now, as the CTA, with what you've been dealing with related to the airlines, what number of complaints would you be getting that are airline related?

Mr. Gavin Currie: I think Dave Western has more details on that. I'll ask him to answer.

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Ms. Bev Desjarlais: Actually, if you have the details of numbers of complaints, types of complaints....

My other question is, what's your staffing allocation right now for complaints?

Mr. Gavin Currie: Dave, do you want to take that?

Mr. David Western (Director, Accords, Tariffs and Enforcement, Canadian Transportation Agency): Sure.

Mr. Gavin Currie: Roughly speaking, I think we had about 160 complaints last year. That is my recollection. I'll give you some numbers, which I think are right, until Dave finds it.

Mr. David Western: Yes, we're looking.

Mr. Gavin Currie: I think it was 160 or thereabouts. This year to date I think we've had about 70; that's in the first quarter of the year. These are written complaints.

In terms of dealing with complaints, if someone gives a complaint by phone, we then ask for something in writing just to confirm it. The written complaints are the ones we deal with.

So that gives you a feel for the level of complaints.

In terms of—

Ms. Bev Desjarlais: Just on the latter point, what types of complaints do you get? Just—

The Chair: Bev, we won't go on. You asked for the extra minute.

Ms. Bev Desjarlais: No. I did ask for that and they're on that page, so rather than flip that page—

The Chair: No. Bev, we could go for 10 or 15 minutes, so we'll just keep it to the questions you've asked so far and then we'll move on.

Mr. Gavin Currie: What questions am I allowed to answer?

The Chair: How many positions...I think that was the other one.

Mr. Gavin Currie: Right now we have a couple of people dealing with complaints.

Ms. Bev Desjarlais: A couple as in two?

Mr. Gavin Currie: Two.

The Chair: Thank you, Bev.

Charles Hubbard, please.

Mr. Charles Hubbard (Miramichi, Lib.): Thank you, Mr. Chairman.

I was following along with Bev. How many employees do you have now and how many of those people are assigned to the air transportation sector?

Ms. Marian Robson: The total is 250 people.

Mr. Charles Hubbard: Two hundred and fifty...?

Ms. Marian Robson: The air side is 90 on the air and accessibility—

Mr. Charles Hubbard: You have 90 already. On those 90 in terms of air, if you listed their five main duties presently, what would they be?

Mr. Gavin Currie: Their main duties would be in terms of administering the licensing system. We issue licences to carriers, both to Canadian carriers and to foreign carriers operating to and from Canada. As subsets of that we deal with verifying their insurance, and we deal, for Canadian carriers—and this can be quite complex—with their ownership and control.

On another area, we deal with tariffs, international tariffs. International tariffs are filed with the agency. There's a group dealing with that.

We have a group dealing with international agreements. We get involved in the negotiation of bilateral agreements with other countries and in the administration of these agreements. That's another group.

We have a group dealing with accessible transportation, that is, making the transportation system more accessible to persons with disabilities.

We deal with the issue of charter permits. We deal with thousands of charter permits every year for charter flights.

Have I done five yet?

Mr. Charles Hubbard: I think you have five. So of your 250—

Mr. Gavin Currie: We have others as well.

Mr. Charles Hubbard: —approximately how many of those would be with the air sector?

Mr. Gavin Currie: Around 80 to 90.

Mr. Charles Hubbard: When you have companies.... We talked about these charts, plates 5 and 6, dealing with companies getting out of service. For example, last fall Inter-Canadian certainly didn't serve any notice; they just simply stopped flying. In most relationships of providing service to an industry or to a government, there is a bonding mechanism by which a carrier or a business is forced to have a bond, which means they live up to the obligations.

Now, it was 60 days, but I think it was in less than six hours that they served notice: how did Inter-Canadian get around the former regulations?

Mr. Gavin Currie: Around which regulations?

Mr. Charles Hubbard: The regulation was, before this new act or new bill, 60 days' notice.

Mr. Gavin Currie: Yes.

Mr. Charles Hubbard: Their notice was less than six hours.

Mr. Gavin Currie: That is correct.

Mr. Charles Hubbard: I'm saying, how did they manage to do that and still exist within the act and the regulations that we had previously?

Mr. Gavin Currie: They didn't. They clearly did not respect the act and regulations.

Mr. Charles Hubbard: So you're saying that really it doesn't mean a whole lot if the companies go into economic or bankruptcy types of protection. They simply can exit at any given time without any responsibility. So there really is no bonding in the system.

• 1615

Mr. Gavin Currie: There's no bonding domestically. To return to what you indicated very briefly, the remedy in the act is that if someone does exit without appropriate notice, then the agency can require that the service be reinstated for up to 60 days, if it's practical to do so.

In the case of a bankrupt carrier, frankly it's not practical to do so; you can't force a bankrupt carrier to fly. However, it does make quite a lot of sense if a carrier is—and we have done this in the past—a healthy carrier serving lots of places in the country and it does discontinue service at a point without appropriate notice. Then the agency can order the carrier to go back into that place it exited without appropriate notice, and we can make that stick. We have the power to do that and we can make sure the carrier does that. But that's only because it's feasible to give that order and to make it happen.

So it works for a carrier that's basically a financially viable carrier that stops at a particular point. We can require them to go back to that point. If a carrier is bankrupt, giving an order isn't going to do much good. They've already broken the law, they're going to break it again, and really we can't do much about it unless the government is prepared to say, “Go back and we'll pay you to do it”. That's a different matter. We don't have the power in the agency to provide a subsidy, but that would have been another option.

Mr. Charles Hubbard: But to follow this through, Inter-Canadian worked as a type of subsidiary of Canadian. They took over a route that was previously run by Air Atlantic, which had a long relationship with Canadian. Was there a fly in the ointment in terms of how you allowed that system to develop where a company can be spun off, spun off, spun off, and then eventually have no responsibilities?

Canadian have said—and I guess Air Canada have said after taking over Canadian—“We don't want to assume the responsibilities of Inter-Canadian”. But between Air Atlantic and Inter-Canadian, they operated in Atlantic Canada for about 25 years. Certainly, with that history and with that connection to Canadian, it seemed very unfair and unjust that suddenly they could say one night to their people, about 800 or 900 employees, tomorrow we're all done.

Is there a flaw in the legislation past or presently presented that would avoid that type of situation?

Mr. Gavin Currie: I won't try to go through the whole history of Inter-Canadian or Air Atlantic here, but certainly Inter-Canadian was a completely separate company from Canadian Airlines. They did have a code-sharing agreement with them that allowed them to use the CP code and provided certain passenger transfer features. But Inter-Canadian was a separate company. It wasn't part of Canadian. Neither was Air Atlantic. Air Atlantic was a separate company as well. It may be that at some time in the past Air Atlantic was partly owned by Canadian, but that's going back quite a few years. It's certainly going back more than five years at least and perhaps further.

So if you are to allow the business environment to have different entrepreneurs develop companies in different places and operate them, then you're going to have to, I suppose, allow companies.... You give them the power to enter the market, but you also give them the right to exit as well if they fail. It's the right to succeed, the right to fail—it's the marketplace.

It's very tough on the people involved, and I'm not suggesting it's a good situation. But I'm not sure how you avoid it if you are prepared to allow new companies to develop.

Canadian got out of Atlantic Canada, as I understand it, because they didn't want to be there. They got out by—going back several years now, as I understand it—selling off the company to another organization.

The Chair: Thank you, Charles.

Mr. Charles Hubbard: Mr. Chairman, maybe I'll have to come back on the next round.

It mystifies me that you talk about your agency and how they permitted that to develop. This could be a serious problem for any of the airlines in the future, where you allow a major carrier to simply spin off and spin off and dissolve itself from any connections with it and then suddenly have the newly established company go bankrupt. I'm concerned.

But, Mr. Chairman, maybe we can go back to that later on.

The Chair: Thank you.

Bill Casey, please.

Mr. Bill Casey (Cumberland—Colchester, PC): Thank you, Mr. Chairman.

Following up on my colleague Bev Desjarlais' request for those statistics on the types of complaints they've had, Mr. Western has a book there that he referred to. I wonder if we could have a copy of that book of charts. Could we have those tabled and sent around to each member?

The Chair: If it's permitted by the agency to be released.

Mr. Bill Casey: We'd like to have that.

The Chair: It can come to the committee clerk and then it will be distributed. Thank you.

Mr. Bill Casey: Mr. Currie, a couple of times in this debate or this session today my colleagues have brought up an issue and you've said, that issue is under the purview of management, so you wouldn't deal with those. The minister said yesterday that you would be dealing with those issues. He said either his office, the Competition Bureau, or you would deal with the issues and there was no need for an ombudsman. So if you don't deal with those issues that are under the purview of management, and they have a monopoly and they can maintain an unsatisfactory situation...who do consumers turn to if you don't deal with it?

• 1620

Mr. Gavin Currie: I think it depends what issues we're talking about. If we're talking about the quality of food on the aircraft, is that something you want the government to regulate? The answer is, we don't.

Mr. Bill Casey: You mentioned, though, there were several issues that were under the purview of management. The point is we've now given an airline a monopoly. If they have an unsatisfactory situation, like the lineups—I've had complaints in my office about lineups, that people line up so long they miss their flight—you said earlier that comes under the purview of management. If that continues and management refuses to do it, do we as consumers just have to live with that because there's no place to turn? Who deals with it?

Mr. Gavin Currie: The agency can only use the powers that are given to us to deal with it. We can't extend and say we will now deal with lineups at airports unless something is done to say that lineups at airports are something the government wishes to regulate and asks the agency or an ombudsman or someone else to do that. It then becomes a decision as to how far the government wishes to go in regulating the quality of service.

I'm not saying we couldn't regulate lineups at airports. I'm saying we currently don't have the power to do it. I'm not saying whether it's a good thing or a bad thing. I'm just saying that we can only operate within the powers we're given.

I think there is clearly a balance here in deciding what kinds of things are really essential to regulate in a monopoly and what kinds of things are still going to be left to the carrier in terms of the service they provide to the public. It's always a judgment call, and it's a fine line between.... I think everyone agrees that on certain things like pricing on a monopoly route, in a monopoly situation, there should be some control there, and at the other end of the scheme, the kind of coffee provided probably is not worth regulating. Maybe there's somewhere in between where you have to draw the line. The question is, where do you draw the line?

Wherever the government decides to draw the line, then we will administer the line as best we can, but we really can't decide where the line is. We can tell you where it is or isn't right now; we can't decide where it should be. That's really up to the government to decide.

Mr. Bill Casey: I don't mean to be saying that, but what we're trying to point out here as a committee, I think almost on every side and with every point, is there is a hole that is not being addressed in relatively low-level customer complaint problems.

I don't believe the Canadian Transportation Agency should deal with long lineups at airports, but it is a problem for people. If you go to this airport right here now, you're probably right this very minute faced with an hour lineup to get your boarding pass. That's not your purview, but somebody should deal with that, because it's been consistent for months now, since the merger. We passed a recommendation unanimously that there would be an ombudsman to deal with low-level complaints that you shouldn't deal with, the Competition Bureau shouldn't deal with, and the minister shouldn't deal with.

It sounds like you would even confirm there is a hole there that isn't being addressed and has to be either addressed through increased powers to you or an ombudsman.

Ms. Marian Robson: If I could make one addition to that topic, I think we did refer earlier to the fact that we will no doubt be getting complaints with which we can deal under our jurisdiction and those with which we can't, some of the things you're talking about. One mechanism we feel is important, although it doesn't necessarily solve the immediate problem, is we feel we have a very good reporting system in place now, and we will certainly be building on that in the future. We feel that we will be able to provide really accurate reports, first of all to the carriers to say this is what's happening here and here are some trends that are developing, or here is a situation that we already know is there. We'll have all those complaints analysed and passed on to the carriers. As well, we plan to have some sort of reporting mechanism to government of what goes on. It doesn't necessarily solve all these situations, but I think it would give a lot of good information that could lead to further action either by the carriers, the minister, Transport, or by us.

Mr. Bill Casey: In my opinion, there are circumstances out there now in the form of delays, lineups, cancellations, things like that. A business would not survive with that level of service if there was competition, because people would just go to the competition. That's my point. And I don't believe the CTA should deal with all those issues.

• 1625

I have one more question I want to ask.

The Chair: Sorry, Bill, your time is up.

Roy Bailey, please.

Ms. Marian Robson: I'm sorry, I took some of your time.

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

I thank the guests for being here. As you know, you're pretty brave. You weren't so brave, you sent the minister first. I would like to think that you missed some great things yesterday.

Ms. Marian Robson: We don't do the sending, Mr. Bailey.

Mr. Roy Bailey: Right. I understand.

This bill, Bill C-26, is an act to amend a number of agencies, which includes yours, and it's already been mentioned that this group yesterday, this committee, was quite emphatic about what we recommended in the transport committee's report about the ombudsman. And I want to make it abundantly clear that what we were looking at was to have something, an agency, that would move quickly and honour the complaint and deal with it within a relatively short space of time.

Your agency, from what I hear today, seems to have been given that role of being the ombudsman. This seems to be the case, that you're going to take on what is traditionally thought of as the ombudsman's role, and I must admire you for being so confident in being able to play that role up without moving it around to other departments. I want to have some assurance in my mind that the change in this legislation will in fact bring a quicker response to the complainant. I'd like your comment on that.

Ms. Marian Robson: In terms of your comments about the ombudsman, we are at a little bit of a disadvantage in not fully understanding this committee's views about what the exact role of the ombudsman would be. But we think part of our role could be described as an ombudsman in the sense that we would be receiving complaints on a whole range of matters, some of which are within our jurisdiction and some of which aren't, and therein lies a difficulty.

The government has not decided, in its wisdom, to give these blanket powers to anyone with respect to what I would call quality-of-service types of issues. So we have a limitation on what we can do by the legislative provision.

We will be very active, and fast and effective, in the areas within our jurisdiction, and in those areas where there are complaints that don't fall within our jurisdiction, we will be in a monitoring and reporting function, and an assistance function where we can. We already, as I say, have quite a bit of expertise in getting at the root of some of these issues as people complain, but some of these problems that have been discussed today we're not going to be able to necessarily solve.

Mr. Roy Bailey: So, first of all, we understand that the change in this act is bringing new responsibilities to you. That's a given.

My concern is, and I suggest it is a concern of this committee, that while your responsibilities will increase with the act, how quickly and how efficiently are you prepared to handle these in what this committee thinks an ombudsman would do in rapid order? I think I'm saying what the committee feels, and that's why we put it into the legislation.

I might add that the minister—he may be right—was quite confident that these additional powers would in fact serve the need of what this committee was saying to your agency. And somehow I'd really like to believe that, but I just can't get my hands on it yet.

Ms. Marian Robson: I can repeat that we would handle complaints in a very expeditious manner. This doesn't sound like fast, but we have a 120-day maximum on any complaint that comes before the agency, whether it's a huge corporate thing or whether it's an individual complaint. We obviously are much faster than that on individual complaints. But we do have a fairness and a legal process that must be followed, which is that you do have both sides responding to the other. That all takes time, so it's not an overnight fix-it kind of approach.

Mr. Roy Bailey: Thank you, Mr. Chairman. I was very kind, by the way. Some of the questions that follow may be a little more to the edge.

The Chair: Thank you, Roy.

• 1630

Colleagues, I have to remind you we have another set of witnesses that will start at 4:30. I have Stan Dromisky and Joe Comuzzi on the list, and now I have Bill Casey on the list, so let's try to keep it short if we can.

Stan Dromisky.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): I had two questions, but I'll drop one of them and just deal with one area.

I'm a little bit concerned about the kinds of concerns that have been raised at the meeting here and the kinds of expectations we have of your agency. I wouldn't be too happy if we were heading in the direction where this agency is going to manage the airlines by the demands being made of the members of the House of Commons or even the general public. The next thing you know, you'd be coming to us and asking us for an increase in salary comparable to Robert Milton's, and I don't think our budget could handle that.

Voices: Oh, oh!

Mr. Stan Dromisky: Many of the problems you will be dealing with and are dealing with right now are simply because people don't have the proper information. This is a very, very serious concern. People don't realize why the ticket costs so much money.

What are the costs that are passed on through the user-pay policies we have and that the passenger eventually finds immersed in his ticket? Whose responsibility is it to let the public know why the rates are going up? Whose responsibility is it to let the public know routes are changed or a route is dropped or there are major changes in the types of planes being used and so forth?

I find most of the air carriers don't carry that type of responsibility, and the passenger suddenly finds himself in a certain situation, with a plane or without a plane or with a different-size plane, or suddenly facing a huge increase when he goes to the travel agent, no matter what the increase might be in the fare.

Education could solve many of the concerns from the general public. If they are knowledgeable, they can react to it in a very rational way. They may not like it, but they'd face reality, because most Canadians can, in a very rational way. Whose responsibility do you feel it should be to educate the public?

Ms. Marian Robson: When it comes to issues such as changes in aircraft types and fares and so on, again, unfortunately we are being repetitive—

Mr. Stan Dromisky: Yes, I know. It's not your—

Ms. Marian Robson: —but essentially it's the carrier's responsibility.

For proposed discontinuance of or reduction in service, a consultative process with the local elected officials in communities has been included in our legislation. That is an important new addition. But in general terms, we don't have that direct role.

We do have an educative role when it comes to the issues we are responsible for, and we're going to be very aggressive in a communications program to make sure Canadians understand their new rights and to make sure the carriers understand their new responsibilities. We're going to be quite aggressive in communicating, once the act is passed.

The Chair: Thanks, Stan.

Mr. Stan Dromisky: Okay.

The Chair: Mr. Comuzzi.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you.

Hi, Ms. Robson and gentlemen.

Let me ask a couple of questions at the outset. I don't expect an answer now, but when I finish, I'll wait for the answer.

First off, what is your agency empowered to do now about the predatory pricing that's happening between Thunder Bay and Hamilton? What action have you taken to ask Air Canada to cease and desist in that predatory pricing presently in existence? That's number one.

Number two, I understand with your previous legislation you had some control over the pricing policy of airline tickets. Through our last set of hearings and through my research, I found you only dealt with and handled fewer than ten complaints about the pricing of tickets in over a three- or four-year span. Yet every time I went to an airport, everybody would come up—well, not everybody, but many people—and show me the price of the tickets and the increase in the fares and so on.

• 1635

That leads me to the third question, which has been my concern. This legislation really is a bit scary. How does the average Canadian—and I'm not talking about the person who lives in Ottawa...? We have a whole bunch of people in this country who are having trouble getting access to their old age pensions, their CPPs—things that affect their lives on a daily basis. Please tell me how you think your agency, whether you hire ten people or a hundred people, is going to be able to deal with this Garden of Eden we're setting up, or that we're supposed to be trying to set up, through this legislation. It just, in my judgment, can't work. I'm willing to listen.

Those are my three questions.

Ms. Marian Robson: I'll ask Mr. Currie to respond on the Hamilton-Thunder Bay route.

Mr. Gavin Currie: It's the Competition Bureau that has been given responsibility for dealing with predatory pricing, so we don't have any role in that area.

Mr. Joe Comuzzi: But you have roles with the airline fares. Did anybody come to you on that in the last month?

Mr. Gavin Currie: Right now a person can only come to us if it's on a monopoly route. Are you talking about Toronto to Thunder Bay or...?

A voice: Hamilton.

Mr. Gavin Currie: Oh, Hamilton to Thunder Bay.

Mr. Joe Comuzzi: It's not Toronto. It's Hamilton to Thunder Bay. There are two routes.

Mr. Gavin Currie: Hamilton to Thunder Bay being—

Mr. Joe Comuzzi: WestJet.

Mr. Gavin Currie: Yes, WestJet.

If we got a complaint on that, it would be that the fare was unreasonable or that the price increase had been unreasonable. Provided the agency determined it was a monopoly route—and I guess there is only one carrier on that route, although I haven't checked it carefully—then the agency could look and decide whether the increase was unreasonable.

We haven't had a complaint, and without a complaint, we can't act on it.

Mr. Joe Comuzzi: So you don't police or monitor these types of things?

Mr. Gavin Currie: Not under current legislation, no.

The second question I think dealt with pricing complaints and the fact that we had very few of them. That is true, and I think that's partly because the pricing complaints can only be made to the agency on monopoly routes. In other words, if there's only one carrier, then a complaint can be lodged. Of course on most routes across the country, there's more than one carrier, so there are very few where it is in fact possible currently to lodge a complaint.

Your third question was a more general one: How are we going to handle things in the Garden of Eden, as I think you described it? It's very difficult to decide just how many complaints we're going to get and what the nature of these complaints will be. We've tried to make a reasonable estimate of what it might be on an ongoing basis. We expect a surge to start with, and we are taking steps to try to make sure we can deal with an initial surge of complaints, especially by telephone. Really then it's a question of trying to adapt what we're doing and our resources to the number of complaints we get. If we're overwhelmed, then we'll certainly go and seek more resources on a short-term basis first, and then on a longer-term basis.

Mr. Joe Comuzzi: But if you're overwhelmed, that tells you the system isn't working.

Mr. Gavin Currie: If that is the case, if we're overwhelmed.... We're hoping we will not be. We're hoping the situation will not lead to an overwhelming number of complaints, but it may do.

Mr. Joe Comuzzi: But my question, sir, is how does the average Canadian access the Canadian Transportation Agency—the average person out there who doesn't have an idea about what Ottawa is all about? How does he access you folks? It's easily said, but it's hard to do.

Ms. Marian Robson: It is hard to do, Mr. Comuzzi, but that is a major goal of ours in this new legislative framework, because now we do have some very clear consumer protection powers and the authority and ability to correct some situations, which we didn't have before.

So we are going to be getting out there, and our emphasis is very much going to be on average Canadians across the country, not just in the big urban centres. A lot of the monopoly route situations are going to be, as you well know, in some of the smaller and medium-sized communities. So we are going to be doing, as I mentioned before, a very serious communications program, which will include members of Parliament, and we're going to be doing major media work in all of the regions.

We're going to be targeting travel agents in particular with information on the agency and its new powers and on people's rights and how they can complain. We're going to be having complaint forms electronically for e-mail. That's not necessarily for average Canadians, but we're going to be doing everything we can to reach the public across the country.

Mr. Joe Comuzzi: Thank you.

The Chair: Thank you, Joe.

• 1640

We have Charles and then—

Mr. Charles Hubbard: That's okay.

The Chair: I thought you wanted to come back. You don't want to now?

Mr. Charles Hubbard: Well, we're short on time.

The Chair: That's all right. I'll make allowance. If you want to ask your question, go ahead, Charles. Then we'll have Bill Casey and that will be all.

Mr. Charles Hubbard: The question I was asking was in terms of the new legislation. We still have really no consumer protection in terms of how a company might be started, be spun off, or be involved in the industry and suddenly say it had no money to continue. Would that be true?

Mr. Gavin Currie: I can respond to that. I will try to respond briefly. When a new company starts up, there are financial requirements that must be met, and the agency does check to make sure the financial requirements are met at that time. It involves enough money to roll start-up costs plus three months of operation without any revenue. All that means is that when a carrier starts, it does have the financial resources to give it a chance at success.

We do not monitor financial fitness on an ongoing basis. If a carrier makes poor management decisions, is very unlucky, doesn't manage to get the passengers it expects, then it can fail fairly quickly. That has happened a few times in the past.

Generally speaking, the carriers that start off with those kinds of resources manage to keep going. We've had a few examples such as you've given where it hasn't happened, but in the legislation now—and this will be in the new legislation as well—there are the financial requirements, which do mean there is some basic financial capability when a carrier starts off.

Mr. Charles Hubbard: My point, Mr. Chairman, is that a major carrier, for example Air Canada, could spin off a route or several stops to a newly created carrier. When the new carrier suddenly goes whatever way, not able to continue, is there a responsibility for Air Canada to come back to pick up what that carrier can't accomplish?

Mr. Gavin Currie: No. There's no responsibility. Right now there's no control over who flies what routes. That's up to the carriers to decide.

Mr. Charles Hubbard: It's my understanding in terms of this legislation, in terms of our report, that a route cannot be abandoned. In fact, the smaller communities are guaranteed transportation from a carrier for a given period of time. Is that not true?

Mr. Gavin Currie: This is something—

Mr. Charles Hubbard: What I'm asking is whether a current carrier, whether it be Air Canada or another, can spin off a route to a new carrier and suddenly absolve itself of all responsibility in terms of that new carrier going out of business.

The Chair: To get around this.

Mr. Charles Hubbard: To get around this legislation. That's what I'm asking.

Mr. Gavin Currie: I'm not the best person to answer this. It probably should be answered by Transport Canada. My understanding is that Air Canada made certain commitments to the minister to maintain service to all communities served by either Air Canada or Canadian for three years from the time of the commitment, which was in December. My understanding is that there is a commitment from Air Canada to do that. I don't think that could be disposed of by spinning off.

The only exception is that there is a requirement, I believe, for Air Canada to put Canadian Regional up for sale. If Canadian Regional is spun off and has certain routes, then I think the routes go with Canadian Regional.

Really I'm not the right person to answer that question. It is part of the commitments of Air Canada. You might check with Mr. Milton perhaps or with Transport Canada. That's my understanding of it.

Mr. Charles Hubbard: Thank you, Mr. Currie.

The Chair: Thank you, Charles.

Bill Casey.

Mr. Bill Casey: What is the definition of a monopoly route? How many are there? Will you maintain an updated published list so people can know what routes you deal with?

Mr. Gavin Currie: In terms of the definition of a monopoly route, the agency makes a finding as to whether there's only one carrier on a route or not. It's up to the agency to decide. There are a number of criteria laid out. In a situation where there's a major carrier and some alternative service, the agency can decide whether that alternative service is in fact sufficient to be considered to be a reasonable alternative service or not. So that's a decision by the agency.

How many are there? I don't know yet. We're working on it.

Mr. Bill Casey: Do you have any idea?

Mr. Gavin Currie: No, I don't. One of the things we will be doing in the near future is looking at that, probably starting with the major routes across the country and working down in terms of volume, and deciding whether the routes are a monopoly or not.

One of the main reasons for doing it is that then it provides a way of separating the complaints on pricing right at the start. If it is not a monopoly route and a pricing complaint comes in, then we simply send back a letter saying politely that we can't deal with it. We certainly intend to do that and do it soon.

• 1645

This of course will change over time. Each time a complaint comes in, we'll have to check to make sure that the basis on which the decision was made that a route is a monopoly route is still valid.

Do we intend to publish this? We hadn't planned to, but I suppose there's no particular reason we can't. It would probably be useful.

Mr. Bill Casey: You really should, because the consumers wouldn't know what they can access and what they can't.

Mr. Gavin Currie: We could provide it and update it from time to time, yes. I would think we'd be looking at the major routes across the country—not every route across the country, but the major ones.

The Chair: Mr. Currie and Ms. Robson, if a list is created by you and called the monopoly route list, may this committee have a copy of that list when you have it complete?

Ms. Marian Robson: Yes, certainly.

The Chair: Thank you.

Ms. Robson, Mr. Currie, Mr. Jacques, and Mr. Western, thank you very much for appearing before our committee. If we have further questions we may need to call you back. I think we've been pretty thorough on what we've needed to know. We appreciate your presence before us. Thank you.

Colleagues, we'll take a two-minute break and then we'll invite representatives from ATAC to appear before us next. Thank you.

• 1646

• 1652

The Chair: Colleagues, can we resume please? We have a single presentation, but we have two witnesses before us from the Air Transport Association of Canada, Mr. Mackay and Mr. Everson. Gentlemen, welcome back to the committee. We also have Mr. Harvey Friesen, who is president and CEO of Bearskin Airlines. We look forward to your presentation. Questions will follow.

Mr. J. Clifford Mackay (President and Chief Executive Officer, Air Transport Association of Canada): Thank you very much, Mr. Chairman.

Let me first introduce Mr. Harvey Friesen and Mr. Clifford Friesen, who are the leadership of Bearskin Airlines, a major carrier in the northwestern part of Ontario. I think you know Mr. Everson and me.

I'm not going to take a lot of time because of course we've been here before. I certainly know that this committee has spent many hours on airlines. Let me start by just saying a few things. Then I want to make a few very specific points and turn to questions.

To begin, we believe this legislation should do two things. First, it should try to promote fair airline competition in the country. Second, it should protect consumers from excessive price increases as a result of the restructuring. We don't oppose those objectives at all; we subscribe to them. Therefore, we are not in opposition to this legislation in any general sense.

Having said that, though, we think there are a lot of dangers in trying to do too much all at once. Once you start limiting markets and market forces in one place, it's always tempting to try to add another 35 problems to the list and start limiting it in other places.

This bill gives quite sweeping powers to various officials and agencies. In so doing it runs the risk of crossing that line and creating a situation where you push the industry back into a highly regulated environment. That's certainly not what we would subscribe to.

There are tremendous dangers if we go too far down that road, for both consumers and the industry as a whole. So we very much want the committee to take on the task of making sure that, in reviewing this legislation, that does not happen and there is a balance. We would like you to look very carefully for what we call unintended consequences of the legislation. I'm sure you will hear about some of these unintended consequences from some of our members in other hearings as the committee does its work.

• 1655

One is First Air. I'm sure they'll be appearing before you at some point in the future and will speak to you about that. There are a number of areas where we are in danger of causing some problems that I don't think were ever intended in the legislation.

So with those general points, let me very quickly, because I don't want to take much of the committee's time, turn to a few very fundamental points that we think you should think about.

First, and by far the most important, are the provisions that are contained in proposed section 66 of the bill. These provisions, as you know, really relate to the ability of the Canadian Transportation Agency to take on new powers to review prices.

We suggest you look at those provisions carefully from a number of points of view. Just to give you one example, the agency, under these rules, will have the power to review a range of fares, as opposed to a benchmark fare that was in the old rules, in monopoly route situations.

I should tell members of the committee that on any given day in North America there are over 12,000 price changes in our industry. It is a highly complex business. On any given flight, I'm sure all of you are aware, there can be anywhere up to 15 or 20 price offerings, depending on the size and nature of the route. So the ability of an agency to actually inquire into one price point on one day on one route and try to determine whether it's fair and reasonable, against some other comparable route, frankly, gentlemen and ladies, is highly difficult.

One of the things we suggest you think about, to make it a little easier, is looking at the range of fares being offered as a package, rather than trying to look at the price point. Then maybe the agency can look at that relative to some practices on other routes and try to make a determination as to whether it's fair and reasonable. We suggest that for your consideration, as a means of trying to hopefully arrive at a more balanced approach in struggling with this matter of prices.

Most importantly, we would make the point that with regard to the provisions of proposed section 66, the committee should demand that both the agency and the Competition Bureau table clearly what their guidelines are, prior to the implementation of this legislation. Uncertainty in this area will cause untold problems. We must know what the rules are up front.

Mr. Casey previously asked about the list, and we strongly advise that you also ask that the list be published and updated periodically, so everybody knows what playing field they're on. Without those kinds of clear and transparent guidelines and lists, you will have a situation where many of our members will simply not know whether they are a monopoly service provider or not, or whether or not what they're doing might be straying across the line, etc.

I can tell you the general response to that will be to be safe rather than sorry. You will have a long lineup of people, at the CTA or the bureau, seeking pre-approval of various things. That will put us back into a world we don't want to live in, where nobody will make a decision unless the government makes a decision first. I don't think that's how you want a vibrant and growing industry to operate. That's the most important point I wanted to make.

A more minor point, but something that deserves some of your attention, is that proposed subsection 66(6) provides the agency with an ability to initiate their own investigations for the first two years, and then some ability to proceed. We're somewhat concerned that puts them in a position of being not only an investigator, but also the judge at the same time. We're frankly somewhat concerned that they're going to find themselves in a conflict position, or at the very least, some people are going to start impugning their credibility in the process.

We're not sure why that's necessary. This particular legislation and what's been going on in our industry is certainly very well known to the public, so we're not sure why you need to have these further provisions. If people have a complaint, I don't think they're going to be shy—they're going to make it, so I'm not sure that's an issue. Our view is that this is a bit of overkill.

• 1700

The third point I'd like to make to you very briefly is that the legislation in section 66 makes provision for similar pricing review of cargo rates. Candidly, we have had great difficulty in having anybody tell us what the problem is. We've asked the agency, the Competition Bureau, our members. We've asked a number of people, and we're just not aware of a major problem or concern on the cargo side.

That, in addition to the complexity of even trying to figure out what a fair and reasonable price for cargo would be in this context, leads us to make a very simple recommendation to you. That is, that cargo should simply be struck from the bill. The fundamental focus should be passengers. Cargo, in most cases, is a residual product, and in almost all cases, there are numerous other modal opportunities for cargo, including air. So we just don't understand why it's there.

The last point I want to make to you—and I would encourage some of my colleagues to comment on this one—is the provision in the bill to extend the notification period for cessation of service from 60 days to 120 days. We do not object at all to the intent of that provision. We fully subscribe to the need to ensure that small communities have as much certainty as possible for these sorts of services.

But our concern is that the remedy may not achieve what you want to achieve, and in fact may do the opposite. If you tell a small service provider that in going into a new community and trying on a market they automatically commit themselves to 120 days of service, you put a significant business risk in front of them in making the decision to go in and try that market. I don't think that was the intent. I think the intent was to provide certainty at the other end. If you have a service provider, you don't want them pulling out suddenly.

Our view would be to ask the committee to consider a different way of accomplishing the same thing, and rather than forcing it at the front end, say that any service provider that has been serving a market for more than a year must give 120 days' notice before they can pull out of that market. That certainly protects all the existing communities, because the current provisions between the government and Air Canada cover off all of that for at least three years. Also, in most cases, many of the other small service providers have been in their routes for a year, and it provides lots of flexibility at the front end for people to try new markets, for local economic development agencies to try to attract new and different services into their communities, and so on.

What we would like to commend to you for your consideration is a way by which you achieve the certainty on the other end, while putting no market barriers in the way of people wanting to try to promote new air services into their communities.

That is our brief. You have before you a much longer version, but I know time is of the essence and I wanted to hit the high points.

Thank you very much, Mr. Chairman. We'd welcome any questions.

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

Roy Bailey, please.

Mr. Roy Bailey: Thank you, Mr. Chairman, and thank you, gentlemen, for coming.

If I recall, the previous time or times you've been here, you always provided us with some challenging information. No doubt you have heard that this committee, in our report, kind of had the same thoughts as you, Mr. Mackay, in that we don't think they should be the judge and the jury and everything else. That's why we wanted somehow to have an independent agency to which our complaints would flow.

The minister assured us yesterday that by giving increased powers to the transportation agency, that's going to be handled that way. You are suggesting something that I really believe this committee has to re-examine before this bill can be brought forward.

You are suggesting the elimination of the freight concept of the bill. Because we have representation here from Bearskin Airlines in particular, I would like to ask you, with flying into the remote areas, how is an outside agency going to compare or make an analysis of the freight rates, and so on, in the various parts of Canada? We have planes lining up here with nothing but freight—freight, passengers, and so on.

• 1705

I think maybe I have to agree with you on that issue, but let me ask you your personal reason why you'd like to see that part pulled out of the bill completely.

Mr. Clifford Mackay: There are two reasons—and I'm going to ask Mr. Friesen to comment too.

One is precisely for the reason you just said. We just don't see many situations where there is much monopoly in freight. There are very many providers. You have dozens of different options, even in smaller communities, everything from trucking to rail, to air, and so on.

The second point is that most freight in Canada today flies in the bellies of passenger airplanes, and it's essentially a residual product. If you can put more people on the airplane, you will take the freight off, and so the price tends to be one that is fairly residual. It's not cast in concrete. Sometimes there are longer-term contracts, but sometimes there aren't. It's very difficult to arrive at any kind of common pricing strategy when it comes to freight, and trying to compare things is even more complex.

We just think the agency will be asked to take on an extremely complex set of issues, and we're not sure what the problem is we're trying to fix.

Perhaps I'd ask Mr. Friesen to comment.

Mr. Roy Bailey: Okay. I have one more question, but go ahead.

Mr. Harvey Friesen (President and CEO, Bearskin Airlines): While we agree with the ATAC stand on freight, we don't feel that there is a problem. There is competition in the marketplace with freight.

Mind you, there are two types of freight. There is the courier service, the small package freight, and of course the freight you mentioned, which goes into remote communities.

I think it's easier to achieve a competitive price if you open the marketplace and leave it flexible for small carriers and large carriers to go in and compete, and I don't see where there would be any problem as long as the marketplace is free and open to compete.

Mr. Roy Bailey: This is my last question. You people represent the Air Transport Association. Do you represent all the airlines currently operating in Canada today?

Mr. Clifford Mackay: With the exception of about three that I can think of that are very small, the answer is yes.

Mr. Roy Bailey: So you are the spokesman for the dominant carrier as well as the smaller carriers, except those three?

Mr. Clifford Mackay: Yes. Air Canada, Canadian, all of the charters, all of the cargoes, and almost all of the tier two and tier three airlines are members.

Mr. Roy Bailey: So you can tell us distinctly that their message that the Air Transport Association brings to this committee is the same message you bring here today?

Mr. Clifford Mackay: I can tell you that the message I've given you today has been...among our members, and they all agree with it.

Mr. Roy Bailey: Thank you very much.

The Chair: Before we go to Joe Comuzzi, I just can't let something go by.

Mr. Mackay, unless you have some kind of a crystal ball that I don't have regarding the purpose of the legislation—and I hope your members have been properly informed of what it is they're agreeing with when ATAC makes its presentation—what we're dealing with here is not the government, through its agencies, going out and trying to change pricing or monitor pricing to the degree that in some way they would start to do the actual pricing of the industry or anything of that sort. The whole idea behind it, and the idea behind our study, which preceded the legislation, is to ensure that because we are going through a change, because we could be faced with a monopoly airline in this country, we want to be able to have the tools, through our agencies, and in particular the agencies, to act and act quickly and responsibly with those airlines or the airline that might take advantage of consumers or the people who work for the airlines, and so on. That's why we want to do this.

There is no hidden agenda. There is no government wish to intrude on the way business is carried out by business. That is first and foremost. It's the reason we are ensuring that if we do go to a monopoly airline in this country, and it looks like we're going to, we are going to make sure the consumers are protected. That's why this legislation exists and that's why the clauses are in it.

• 1710

On the subject of cargo, coming from Hamilton, I can tell you that cargo is the most important product moving out of the Hamilton area. If I thought for one moment that the government had some hidden agenda to not just monitor, but to start to decide how much airlines should charge for cargo, I'd be sitting there instead of being here making sure my voice was heard.

But, again, the fact of the matter is that we could be faced with a monopoly airline in this country, and because cargo flies in the bellies of those passenger jets—you said it yourself—we're here to ensure that whether it's in the belly of passenger jets or by Purolator or any of the other companies involved, those people who use the system of air cargo, the customers, are protected. That is the reason behind it. In three years' time, if there then seems to be no problem, that's it. Whatever happens after that, happens.

That's why this legislation is created. There is no hidden agenda. There is no watch. There is no ambition on the part of the government to suddenly decide who charges what for what, whether it's passengers or cargo. It's there as a protection mechanism for the people.

Please go ahead.

Mr. Clifford Mackay: The first thing I would say is that I probably wasn't strong enough in my opening remarks. We do not oppose this legislation. I will say that again.

Our concern, Mr. Chairman, is not with what you've just said about protection. Our concern is about what we refer to as unintended consequences. The minute you move down the road to providing regulatory powers to semi-independent organizations like the CTA and the bureau, with all the good intentions that are there, we would just simply want to counsel the committee that you look very carefully at the nature of the powers you are providing them and the scope you are providing them. These are complaint-based systems. Once they start, you can't simply always control them. That's the point we're trying to make. It's certainly not the point that it isn't prudent for governments to look at the protection of consumers as this industry evolves, etc. We do not disagree with that for a moment.

The only other point I would make, Mr. Chairman—and there are a number of ways you could make this point, but I'll just give you one factoid in order to give you the sense of it—is that there are about 200 airports in this country that have scheduled air service. Air Canada and Canadian serve less than 50 of those airports.

The Chair: That's why I'm puzzled as to why you would want to give a one-year grace period. We're trying to protect these regional areas in terms of the air service that they currently enjoy. If someone has started up only eight months ago, or nine months ago, or ten months ago, you're saying that if they crash, we shouldn't worry about them because we're only going to pick it up if they've served the community for more than a year.

Mr. Clifford Mackay: No.

The Chair: Who are you protecting here?

Mr. Clifford Mackay: What I'm trying to do, sir, is provide protection to the community in those places that have air service and maximize their ability to attract new service at the same time. If an investor is going into a small community—perhaps there's a new resource development in the area or something and it looks like there could be greater service necessary, so the local community is trying to attract more service—you say to the investor or the service provider that he has to remember that the first day he lands there, he's there for 120 days no matter what happens. That's difficult, sir.

The Chair: Well, we'll agree to disagree.

Mr. Comuzzi.

Mr. Joe Comuzzi: Thank you, Mr. Chairman.

Perhaps I could just make an observation. Perhaps during the rest of these hearing processes, when you're talking about a business failure, you shouldn't refer to it as a “crash”.

Some hon. members: Oh, oh!

An hon. member: Pardon the pun.

The Chair: Point taken.

Mr. Murray Calder: Good one, Joe.

Mr. Joe Comuzzi: I want to thank Mr. Bailey for drawing to our attention something that we heard at the last session. The folks who are in front of us are from the Air Transport Association of Canada, representative of all airlines in Canada. I had forgotten that. I think we canvassed the area of how the larger airlines have representation. At the end of the day, though, they speak on behalf of all the airlines when they come before us. Thanks, Roy. That was a very valid and good point.

• 1715

Also, Bearskin Airlines, with both Friesen brothers here—and this isn't political, please—provides a service in northwestern and northeastern Ontario. They land in places that you've never even heard of, Stan.

The Chair: No, I've been to a lot of them.

Mr. Joe Comuzzi: Yes, but there are a lot that you haven't been to.

I always compliment them. They are the real asset that we have in the business. These folks fly in the God-darndest conditions that you've ever seen in your life. How they do it is beyond me, so I compliment them. The only thing I'd like them to do is land back in Marathon. It would make my life a hell of a lot easier, and I think you guys should consider that, because it's an area that isn't serviced.

I'll get to the point. The last time you folks were here, Mr. Mackay, you told us you represent all the airlines, and you wanted us to know that you were here because only 10% of the airline industry in Canada was in difficulty. What you were trying to do is correct something when 90% of the airlines are operating satisfactorily.

Mr. Clifford Mackay: I think 10% is a bit low, but that's okay.

Mr. Joe Comuzzi: It's in and around 10% or 15%. But now we're faced with the problem of how much of the airline industry could be in difficulty. There have been substantial changes, so how much would you say now? What kind of difficulty do you see us in now?

Mr. Clifford Mackay: To try to answer your question, sir, I have to put it in a different context. In the short term, assuming that all of these myriad changes that we're living through at the moment happen—and it's mindboggling how complex all that's going on right now is—in general I think the industry will be in better shape than it was twelve months ago.

In the long term, the big questions are whether the market will keep growing and whether there will be lots of vibrant competition on the domestic side in the tier two and tier three service providers. Then, internationally, will Air Canada be strong enough to go nose to nose with huge international airlines like American, like British Airways, like the big Asian carriers and others? That's the big question. Will we have a dynamic domestic service going on inside the country, and will Air Canada be big enough and strong enough to compete internationally? If it can't compete internationally, then we're all in trouble, frankly.

To some degree, all you can do is point to history. For a country our size, we have an enormous aviation community, when you think about it. It's very large and it's generally profitable—not every year, but most years. I think we have a pretty good track record, so as long as the market continues to grow and develop, I think we're okay and will have a relatively prosperous future.

The thing that worries us to some degree is that it's fragile. It has always been fragile in Canada. We may think we're big, but by international standards we're a relatively modest market, frankly, so we always have to be careful that we're walking that tightrope of not inhibiting the market to the point where we start to hurt the viability of the service providers. At the same time, the chairman's right, particularly in a situation that seems to be evolving and in which we're going to have one dominant carrier. You have to protect the consumer's interests in this.

So the short answer to your question, sir, is that I'm an optimist, not a pessimist, about the future market. I do think it's going to grow, and if you look around at economies that are growing right now, Newfoundland's a good example. The industry there is doing well, and it's growing quite nicely.

Mr. Joe Comuzzi: This is my last question, Mr. Chairman.

How do you foresee your industry? We are all afraid of the non-competitive factor. Maybe it's something we shouldn't fear—I don't know—but we are all concerned about and afraid of things that could be developed. How do you foresee, through your organization, more competition? Is there anything we haven't addressed that would bring more competition into the marketplace?

• 1720

Mr. Clifford Mackay: There are a number of things, and I don't want to take a lot of the committee's time. For instance, on the infrastructure side, and I've said this before in other contexts to the committee, the cost of infrastructure is critical to our industry—the cost of airports, the cost of air navigation services, this sort of thing. We are concerned that the cost of airports is too high. Part of that problem, frankly, is the government. You're taking too much money out of airports. You're taking well over $200 million a year now out of airports, and you're not putting anything back. That's not the whole problem, but it's part of it.

There are some tax issues that would go a long way to helping particularly the smaller users. We pay fuel taxes. Big companies actively pursue strategies to try to fuel in places that minimize taxes. Small companies don't have those choices. They have to fuel where they operate. They pay taxes, and they're not getting anything back for that. It's not like somebody in the public is building roads or things like that. They're paying for all it.

So there are a number of things government can do. But by far the most important thing I think governments can do is make sure the framework's right. Make sure we have a growing economy. If we have a growing economy, our industry will grow and prosper. That, and try to minimize the barriers for people to come in and try to take advantage of market opportunities.

Mr. Joe Comuzzi: Thank you.

The Chair: Thanks Joe.

Bev Desjarlais.

Ms. Bev Desjarlais: On page 3 you talked about WestJet and you said this company is “taking risks and moving fast. It's important that the government not restrict its expansion”. I was trying to sort out exactly what within the legislation would necessarily restrict WestJet's expansion.

Mr. Clifford Mackay: I should say that I think Mr. Smith is probably going to appear before you, so I don't want to put words in his mouth. But, for example, WestJet is very concerned about the 120-day provision. They've said that to us directly. They are constantly looking at new markets to go into. They will take risks and go into a market. But if you tell them they're there for 120 days, they'll look at it a second time before they take that decision. They are very concerned about that.

I can tell you that by their estimation, they think they currently operate 14 monopoly routes. Now, we'll have to see whether they do, because it depends on what the CTA says to them. But they are very concerned that they're going to end up spending time and money on lawyers and other things, coming down here and arguing various things, if some particular person takes umbrage to some particular price they charge on some particular day.

Ms. Bev Desjarlais: Okay, so it's the pricing as well as the fear about the 120 days. There's always been the 60-day notice in place.

Mr. Clifford Mackay: Exactly.

Ms. Bev Desjarlais: And it's always been that when you come into the industry, you have to have so much money set aside initially.

Mr. Clifford Mackay: That's not an issue.

Ms. Bev Desjarlais: Okay. From my understanding there hasn't been—at least we haven't heard it—any big issue where anybody had a problem with the CTA's ruling. Actually, they commented today that somebody did come to them and they got a reduction in it, because they understood the need for doing that.

So are there particular problems that were there that just haven't come forward, or is this just a hypothetical “we think this might happen”?

Mr. Clifford Mackay: Well, I'm not sure how hypothetical it is. In the case of WestJet, they've been adding a new route to their system about every two or three weeks. So I don't think they'd see it as hypothetical. But the fundamental—

Ms. Bev Desjarlais: Yes, but have they had a problem?

Mr. Clifford Mackay: No, they haven't had a problem, because 60 days is a very short period of time.

But the fundamental point they make to me is why they would want to go down and have to argue in front of the CTA for something like this when they should just make the business decision and get on with it.

I mean, what value-added is there to just getting on with it? You know, they're quite happy to see the protection on the other end. They've been flying into Kelowna for a while now. If they decided, for whatever reason, they didn't want to fly into Kelowna, nobody would object to having to go and sit down with the city fathers of Kelowna to go through the process and justify their business decision. But they're concerned more about their ability to be nimble and quick to make decisions and get on with it at the front end.

Ms. Bev Desjarlais: Could I just sneak one more in there?

In the area of the cargo, again, I did question the CTA on some of the things they could intervene on, because I have seen situations—and maybe this is why this is in there—where a passenger's baggage was not allowed on the plane because of the weight, or where passengers were asked to come off the plane because the cargo was guaranteed but the passengers weren't. The CTA person said he would have to check the tariffs and see what's what.

• 1725

I'm wondering whether we couldn't have situations where maybe the competitiveness or the issue of the passengers' fares in relation to what's happening with the cargo could have some connection. And I've seen this not just once; it's an ongoing thing that happens. I don't know why, and the CTA person said he'd have to check the tariffs, so I can certainly tell you I don't necessarily know whether it's allowed or not. But it certainly has been a problem.

Mr. Clifford Mackay: Do you want to talk to that?

Mr. Harvey Friesen: Could I just say a few words on your previous question? In regard to the 120 days, we're very concerned about this when dealing with small markets. As Mr. Comuzzi said, we go into markets that have perhaps only 200 people and we go into markets that have a million people. So we need the flexibility, when we look at routes, so that we won't have to stay in a small market and bleed for 120 days. We find 60 days sometimes quite difficult to deal with. Being a small airline trying to get into and provide service to small communities, sometimes things just won't work out.

We do a market study. We try to do our homework, but it sometimes doesn't get into the planes what we were told we would get. So we need the flexibility to try it and then the flexibility to get out as quickly as we can. I think a lot of small airlines need that flexibility. And when you talk about competition, if a large airline decides to vacate a market, I think you'll have airlines like us, airlines perhaps like the connectors of Air Canada, and airlines smaller than us getting into those markets to provide service. We could get in and provide service and make money, whereas an Air Canada would not be able to do that at all. We and companies our size are very keen and interested in getting into these markets.

So I don't think the concern about markets being vacated should be as big a concern as you think it might be.

Ms. Bev Desjarlais: How do we avoid the Inter-Canadian situation where we still have communities with no air service? We literally overnight had people not able to proceed with their plans and numerous employees were out of work. How do we ensure we're protecting everybody in the system?

Mr. Harvey Friesen: Well, I'm not aware of any communities that we vacated overnight. I've never heard of any myself.

Ms. Bev Desjarlais: I was under the impression that happened, but....

The Chair: Thank you, Bev.

Stan Dromisky.

Mr. Stan Dromisky: Thank you very much. I have to apologize first. I had to rush out and make a couple of calls before 5 p.m., and my question may have been answered already while I was out.

First of all, I'd like to thank you for coming. I'm very pleased with the direction in which you're going with one of your recommendations, one that pertains to getting clarification, educating all the people who are involved and all the partners who are involved.

You heard my question in the last presentation pertaining to responsibility regarding educating and informing the public. I get people complaining to me about the high cost of flying, but when you stop and break it down for them and give them in general terms the areas the money is going to, what the airline companies and owners have to pay, and all the different user fees and taxes, you name it, the list is very extensive.

Whose responsibility is it? Would you as an association assume that responsibility to inform your public why the price—whatever the price may be—is as it is, or do you want the government to do that?

Mr. Clifford Mackay: No, I think we do have a responsibility to do that, sir. We've been trying to do it. I'm not sure we've been doing it as successfully as we'd hoped we could. But we as an industry collectively certainly have a responsibility to try to tell our consumers just what our pricing is all about. I think that is one of our responsibilities.

I don't think the government has no responsibility in this area, though, because in some cases they are a part of the pricing, and that needs to be explained and communicated to people.

• 1730

I think the short answer to your question, sir, is that it's the industry's responsibility to explain their prices to their customers.

Mr. Stan Dromisky: My general impression of the aviation industry in Canada at the present time is a pretty healthy one. Sure, we have some problems and we could end up with a monopoly major carrier. There's no doubt about that. But as you've already indicated, Mr. Friesen, wherever a vacuum is going to be created, we have people who would be quite willing to fill in that vacuum immediately, practically overnight, and take advantage of a market and expand their services.

Flexibility is very critical, and you've already mentioned that. I definitely agree with you. We have to be so careful that the laws and regulations and conditions of operating your business, whatever they might be, aren't so stringent that they'll suffocate you. Do you understand?

I agree with you because you have very unique problems in serving the remote parts of this country—very unique. They can change from day to day. We always have to keep that in mind when we're sitting here in Ottawa making rules and regulations on how you people have to operate and behave and what kind of service you have to provide in the wilderness of this country. You're doing a fantastic job.

Mr. Harvey Friesen: Thank you.

Mr. Stan Dromisky: I'm going to now turn to a statement that's in your document here. You may have addressed it already, Mr. Mackay. You state here that the government wasn't thinking of Bearskin Airlines when it wrote this bill. I have to disagree with you. We were thinking of Bearskin Airlines because we have two people on the committee who come from Thunder Bay and many times refer to this aviation industry. Bearskin Airlines has a good rapport with Aeroplan, and that's still in operation, right?

Mr. Harvey Friesen: Yes.

Mr. Stan Dromisky: In this period of change, is there anybody in the association, any member, who is having great difficulty in coping with the changes that are taking place at the present time, before the dust settles?

Mr. Clifford Mackay: The short answer, sir, is that some members are having some concerns. I mentioned First Air.

Mr. Stan Dromisky: You're saying concerns; I'm talking about difficulties.

Mr. Clifford Mackay: Oh. Well, again, I don't want to put words into their mouths, but I think when First Air appears before you they will say they are having some difficulties. The difficulties really relate to the nature of their relationship with Air Canada and how it may change as a result of all this.

I hesitate to get into the detail because I really think it would be inappropriate. I think you should hear directly from Mr. Davis and others from First Air on these matters.

Mr. Stan Dromisky: Okay, very good.

I'd like to finish the sentence that's in the document here regarding Bearskin Airlines. It states “but Harvey's company could be seriously affected”. Maybe both members of the Friesen clan can indicate to me how Bearskin can be seriously affected by the proposed legislation.

Mr. Harvey Friesen: As you mentioned, one area is the costs. I guess this is in reference to the potential regulation governing the fares we file. We do file numerous fares. We have many fares in our system, and almost daily we're refiling fares to different communities. If we are to now file these with the CTA, if have to provide very specific feedback as to why we did that and then perhaps make presentations to the committee to justify our increases, that would put a tremendous burden on our company. We're not a large company. We don't have the resources to hire many lawyers and file clerks and representation to do this. So that is one very distinct area.

The 120 I spoke about earlier takes a lot of flexibility away. If we operate into small communities, we need the flexibility to go in and try it and to vacate that market if in fact we don't have the ridership we anticipated having. This will probably take away the flexibility, and we won't be going into new markets that we may have tried if this legislation weren't that restrictive.

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Mr. Stan Dromisky: Very good. Thank you.

The Chair: Thank you, Stan.

Val.

Ms. Val Meredith: I'm going to follow up on a number of things. I'd like to thank you all for appearing before the committee. I'm going to follow up on something the chairman said and something Mr. Dromisky referred to.

The chairman sort of went on a discussion—I'll call it a discussion—on a hidden agenda. He seemed to imply that there was this unrealistic fear that the government was going to be doing things that were inappropriate. I'd like to respond by saying my experience has been that government often may overreact to a situation, or their intention isn't to create this humongous department or agency, but it ends up becoming that. That's why I asked the questions I did of the agency before you appeared. I don't know if you were here.

What exactly are the numbers you're talking about, and do you plan on cutting it back if the complaints aren't there?

What you see with government is that they start an agency. I anticipate that there will be an immediate impact from the monopoly carrier and then it will dissipate, because no business is going to turn customers away. There will be an attempt to look after the customers. The need for that particular issue is going to dissipate, but the people are still going to be part of that agency and they will be trying to create work for themselves to justify their position. We see this all the time when you get into government agencies. I can say that because I used to belong to a provincial government agency where I saw that happening.

I also see where government can overreact. I have had conversations with Bearskin over a ban to an approach regulation where I would suggest government overreacted, or potentially overreacted, to a situation in Fredericton. The Inter-Canadian thing, this whole issue of 120 days, really is an overreaction to what happened with Inter-Canadian and the cargo. There may be a government overreaction to what's happening in Iqaluit, where they don't have other ways of getting cargo up there so perhaps they're paying a little bit more.

Rather than dealing with issues in isolation, you tend to come up with a regulatory framework. I share your concern, and that's why I asked the agency if they are committed to stepping back if the need dissipates.

One thing this legislation doesn't have is a sunset clause. It doesn't have anything that indicates that. It talks in terms of two years and then an expansion of two years or three years on some of the issues, but it really doesn't talk about the government recognizing that this may be an interim situation. There are sunset clauses put in place to make sure we aren't creating another bureaucracy.

It wasn't Bearskin that brought the issue to my concern, Stan. What the government will do by creating this monitoring by the agency...the reaction is going to cause a reaction from the airlines. In other words, if they have ten people working on this, how many people are going to have to be on each airline to counteract the additional concern? This is something Bearskin has raised here. What is their demand going to be for adding extra staff to deal with the new regulatory features? That cost will be passed down to the consumer, to the passengers. What is that additional cost going to be to the travelling public because of these sorts of things?

I don't discount what you have said, that we in government really have to look at this and make sure our reaction to what is happening is appropriate for the time and that the reaction is limited to a period of time at this transition.

I don't know if you want to take this opportunity to comment about this ban on the approach regulation, where the government has made a regulation that really is not appropriate for remote northern communities. That might be a safety factor on its own. Yet trying to get that message across to government agencies is not that easy.

Mr. Clifford Friesen (Bearskin Airlines): Not only that, but we also serve one-industry communities, which could have a really negative impact on us when there's a shutdown of either a mill or a mine. They may not give anybody the 60 days or the 30 days. As Ms. Desjarlais would say, that announcement is overnight. So that has an impact on us. To try to operate now for another 120 days would be very difficult.

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The other thing I was going to say could have an impact on it—and we're pleased that it is being addressed—is the Competition Act, predatory actions on the part of, say, what you perceive to be a monopoly carrier.... That certainly may help a lot of the smaller airlines or other airlines to compete.

For us, we're looking at an airline that has just started a flight right over top of us up in Dryden, where we were all competing at different times. Certainly one carrier now has gone right up on top of us, so we have what other people call “wasteful duplication”. We're all leaving at the same time. However, at one point there were three to four flights at different times. Now there are four flights, but at the same time.

The Chair: Thank you, Val.

One of the nice things about being chair is that you can always have the last word on the opposition.

Ms. Val Meredith: Just like the media.

The Chair: I just wanted to come back with a couple of things. One is that this is the reason we have hearings: so that we can get input from the industry. When people come before us I try to at least get a single nugget out of whatever it is a witness has offered us in order to make for change—if that change is necessary.

Contrary to what Val might think, the government does demonstrate flexibility—and is now demonstrating it and has demonstrated it in the past—when it comes to their legislation. There have been many bills I've been involved with that have received government amendments to respond to what the witnesses have told us. Some of them made the witnesses very happy. Some of them went the other way and displeased the witnesses. But at least there was the flexibility there.

On the 120-day matter, I'm just wondering if it makes any difference to you. I'm not sure if you're aware of it, Mr. Mackay, or whether your members are aware of it, but, for example, the CTA, the Canadian Transportation Agency, was just before us.

Mr. Friesen, you raised a very important matter. You have a small community up north that you may think you can provide a service to. That community may have a mine in it. You are not sure if that mine is going to be successful a year from now, but you want to fly into that community and provide the services and maybe even just cargo to that community. But unbeknownst to you, the mine may not cut it; it may close down. That puts you out of business, but the government says, sorry, Mr. Friesen, but you have to operate for 120 days. I see your point there.

But are you aware of the fact that when you ask to fly into that northern community that has a mine in it, you can go to the CTA and explain to them the circumstances of your flights into that community? You can explain that you're reliant on that mine in that community and you can actually make an application to the agency for a reduction in the amount of time on the notice period.

So it's not as though we're saying “120 or nothing”. If you can demonstrate to the CTA that your trip there is reliant on that mine staying open, so therefore can you get some relief from the 120 and bring it down to 60...? The CTA can respond and will have the authority to say to you that they understand the situation, no problem, that they'll make you 60. Does that give you a better comfort level?

Mr. Harvey Friesen: Well, I guess in some cases it certainly does provide a level of comfort. However, I guess I have to ask the question: Have there been problems created by the 60 days that are in existence right now? Is there a need to change it? I know we do have—

The Chair: Just to set you straight on that, extraordinary circumstances require some extraordinary measures, and that's where we're at today with the possibility of a monopoly.

Look, the 120 days is probably geared—let's make no secret of this—to the big boys, to Air Canada and the virtual monopoly airline. If they want to start playing in small communities and then pulling out, hey, they're going to have to pay the penalty of 120.

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But the CTA does have the provision to make sure that you, on application, say, look, we're going to try this because the community needs us to fly in there, but we want 60 or less, not 120—and the CTA says fine.

Mr. Harvey Friesen: I guess it certainly does give us a level of comfort for small communities, small airlines. Obviously we have a lot less capital to play with. If we were stuck in a 120...that could perhaps bankrupt some companies of our size or smaller than us. It certainly would be a significant decision as to whether we are even going to try that route and develop it.

The Chair: Well, I can assure you that aside from the CTA's provision of allowing you to make the application for 60 or less, I think we will certainly raise it with the minister and say that maybe we can make a provision that says if you're only flying a certain size of aircraft with so many people in a week or whatever it is.... We can set some criteria that, say, give the smaller airlines the opportunity to provide service to remote communities and that will maybe even provide competition amongst two smaller airlines into a small community, on the rare occasion that exists—and not have to worry about the 120 at all.

At least you know that the CTA does have that option for you.

Mr. Harvey Friesen: Okay.

The Chair: Sorry to interrupt.

Joe Comuzzi.

Mr. Joe Comuzzi: I really see this in a different light, and I thank you gentlemen for talking about that 60 days and 120 days. I think our reason when it went in was to protect the small communities from withdrawal of service. I think Charlie put that forward.

But we forgot one thing. We forgot that the same reason may take away the initiative from private entrepreneurs to go in and test the market. What is it? I think that's a very real consideration that maybe we've overlooked. That 120 could be a detriment to testing a market.

I'm going to suggest that—with your permission, Mr. Chair—you draft something for the committee that would take care of the safety for the small communities and would also not take away the entrepreneurial spirit to go out and test the market. There'll be conditions.

Just off the top of my head, I'm thinking that Bearskin has a hell of a good track record. Maybe if someone's going to go in and test the market and a particular area of service, they look at the fact that Bearskin.... It's not ABC company that's coming in, starting up tonight, and hasn't got 60 days of cash to operate. Bearskin would have the reputation to put on the table, and you want to test the market. Maybe there should be some consideration given for those types of people in this type of situation, along with the protection for the community.

Would you mind?

Mr. Clifford Mackay: I'd be very happy to do that.

Mr. Joe Comuzzi: Could you distribute that to the committee?

Mr. Clifford Mackay: We'll send it to the clerk. We'll try to get it done for you in the next couple of days.

The Chair: Thanks very much, Mr. Comuzzi.

Gentlemen, thank you very much for your appearance before the committee. We appreciate the input.

Colleagues, thank you very much. We will resume tomorrow morning at 9 o'clock.

We're adjourned.