Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 8 - Evidence, March 27, 2012
OTTAWA, Tuesday, March 27, 2012
The Standing Senate Committee on Transport and Communications met this day at 9:29 a.m. as part of its study on emerging issues related to the Canadian airline industry.
Senator Dennis Dawson (Chair) in the chair.
The Chair: Honourable senators, I call to order this meeting of the Standing Senate Committee on Transport and Communications. This morning, we are continuing our study on issues related to air transportation.
I would like to inform the audience and honourable senators that contrary to what was announced in the notice of the meeting, we will not go in camera. Following the witnesses' presentations and question period we will remain in public to discuss and adopt the committee's budget for the upcoming months.
Today, on behalf of the Canadian Airports Council, we will hear from Marilynne Day-Linton, Chair of the Board, Greater Toronto Airports Authority, Jean-Jacques Bourgeault, Director, Board of Directors, Aéroports de Montréal, Mary Jordan, Chair of the Board, Vancouver Airport Authority. Thank you for taking time to talk to us. Mr. Bourgeault, the floor is yours.
Jean-Jacques Bourgeault, Director, Board of Directors, Aéroports de Montréal, Canadian Airports Council: Mr. Chair, my name is Jean-Jacques Bourgeault, and I am a member of the Board of Directors of Aéroports de Montréal. In my career in the airline industry, I have worked for Québecair, Air Canada and eventually the IATA. At Air Canada, I held several positions, including that of vice-president, marketing and sales, executive vice-president and chief operating officer. I want to begin by thanking you for your interest in air transportation and your willingness to listen to us.
Another member of the Aéroports de Montréal board and I were appointed at the suggestion of the airlines. Neither of us represents any air carrier in particular. We were appointed owing to our knowledge of the industry. I think it is worthwhile that I begin my presentation by reiterating the nature and the mission of Aéroports de Montréal.
The airport authorities are bound to the federal government by a long-term lease. The rent they pay rent to the government is calculated based on a percentage of revenues. The Government of Canada retains ownership. The local airport authorities are financially responsible and are managed as commercial business entities. They are not NGOs.
At ADM, we manage sizeable assets. Our investment programs are self-funded, and we issue debt securities. Of course, we have obligations toward the holders of those securities, and we are monitored by the credit ratings agencies. From the federal government's standpoint, the Airports Divestiture Program has helped transform a financial burden into a source of revenue.
The program has also empowered local communities, which have equipped themselves with airport facilities that meet their specific needs. That is a very important and, in my opinion, very positive aspect.
ADM, as a local airport authority, has a duty to serve its surrounding community — the Greater Montréal region. Our mission is quite clear in this regard. We are an important economic development tool for the region. We also coexist in harmony with the surroundings, especially when it comes to environmental protection.
So, when it comes to soundscape management, for instance, ADM must sometimes make decisions that are not necessarily compatible with the interests of air carriers. It is all about balance.
Our governance rules are stipulated in our letters patent, and they are compliant with the terms of our lease with Transport Canada and with applicable legislation. In 2008, clarifications were made to the method of appointing members to the board of directors. For instance, air carriers can now propose candidates.
Pursuant to that method of appointment, two members are appointed by the Government of Canada, and 11 members are appointed by the board, based on lists of candidates received from the Government of Quebec; the Communauté métropolitaine de Montréal, Montreal's metropolitan community; the Board of Trade of Metropolitan Montreal; and, finally, the air carriers operating at Montréal-Trudeau, who appoint two members. With the exception of the president and CEO, all the board of directors members are independent of ADM management.
It is also important to understand that each member must meet specific criteria. They must not be elected officials or active employees of a nominating entity or an air carrier. They also must not have any interests that could be perceived as infringing on their ability to act in the best interests of ADM.
In addition, the board members must collectively possess a set of key skills that the board requires to carry out its duties. The board is responsible for the management of the corporation, as well as for governance and accountability. It is not, however, involved in ADM's day-to-day management, which is performed by a senior executive team and fully qualified employees.
ADM accounts for its management transparently, using a variety of mechanisms — including the annual report, the annual public meeting and yearly meetings with the nominating entities. ADM is also the subject of a performance audit every five years.
Besides its commitment to transparency, ADM consults its stakeholders on an ongoing basis. Here too, we have specific mechanisms in place, such as the Community Advisory Committee, the Airlines Consultative Committee and the Airport Soundscape Consultative Committee. There are also ad hoc consultations, for example, concerning the master plans for the two airports.
I would like to conclude, if I may — in the capacity of a former airline executive — by saying that ADM manages its airports most effectively and is today recognized as an experienced, respected operator.
Giovanni Bisignani, the former IATA Director General and Chief Executive Officer, liked to use ADM as an example of an airport with excellent co-operation between the air carriers and the airport authorities. In its most recent report on airport lease monitoring, Transport Canada noted that, and I quote:
The results of the monitoring report show clearly that Aéroports de Montréal is managing, operating, maintaining and developing Montréal-Trudeau and Montréal-Mirabel international airports in a safe, skilful and professional manner. This opinion is shared by all departments of Transport Canada that contributed to producing the report.
Generally speaking, the local airport authorities are fulfilling their respective missions well. Canada's major airports rank among the best and most modern in the world. In recent years, the authorities have invested heavily in the airports. Our surveys also indicate that Canadian airports are appreciated by passengers.
In addition, the Canadian system ensures fair treatment of air carriers. They are treated as customers, and I frankly do not see why, or under what principle, they should have any direct involvement in the governance and management of ADM.
It may be concluded that there are no issues with airport governance. We sincerely believe, however — and the airlines fully agree — that the Government of Canada should instead be focusing on the real issues. I am talking about the amount of rent, and the burden in taxes and various obligations that must be borne by Canada's airports. That spending is undermining their competitiveness compared with U.S. airports.
Thank you very much for your attention. I now yield the floor to my colleague, Mary Jordan, Chair of the Vancouver Airport Authority board.
Mary Jordan, Chair of the Board, Vancouver Airport Authority, Canadian Airports Council: Mr. Chair and honourable senators, thank you for inviting my colleagues and me to contribute to your deliberations on Canada's airline industry.
Each of us has had long careers in airlines before we joined airport authority boards. Indeed, our quick calculation is that we comprise 75 years of airline experience and 20 years of airport authority board experience. We have observed and participated in making the fundamental decisions that have transformed the three largest airports in the country.
For my part, I was an airline executive in several interesting and challenging circumstances: with American Airlines, adjusting to deregulation in the U.S., as the CEO of a low-cost carrier, and as a senior vice-president with both Canadian Airlines and Air Canada after it merged with Canadian.
With that background, I would like to offer my views on the unique governance model Canadian airports have, how it has allowed Vancouver to become a competitive gateway to Asia, and how we can strengthen our competitive position into the future.
The Canadian governance model for airports — locally controlled, not for profit, private sector — has allowed us to focus on longer-term, broad economic factors and not be driven by quarter-to-quarter results.
When our board considers proposals, we take into consideration five factors to arrive at the best decision for the airport and the community: safety and security, economic, environmental, social, and governance. An example of this balanced approach was the decision of YVR to invest $300 million in local mass transit, supporting the Canada Line, connecting the airport to downtown Vancouver. While this project did not produce a financial return on investment, it greatly benefited the community, the environment and the long-term success of the region.
I can also state without equivocation that the needs, interests and concerns of airlines have been fully and carefully considered in the authority's decisions. Airlines differ in their views of the priorities of the airport depending on their business models, which vary greatly, and we must create balance to deliver value.
Another example of the need for a broad and long view would be our board's recent strategic decisions, designed to keep the airport and B.C. competitive in the battle for position in the Asian portion of the global economy. We chose to freeze airline landing and terminal fees for five years at their total 2010 costs, thus making every additional flight free, in an exchange for a commitment for future growth. We combined this with a request that the provincial government reduce its tax on fuel used for international flights, a request that the province included in its most recent budget.
We are using the airport improvement fee to build much faster connections for passengers and baggage. My own experience has taught me well that it is not just the cost of an airport but its operating efficiency that makes a big difference to airlines. After all, aircraft do not make money while they are sitting on the ground, and nothing is harder on passengers than unnecessary distances, delays or procedures when travelling. That is another reason YVR worked so intensely with the airline community in the design, construction and operation of the airport.
In the end, like all businesses, it comes down to meeting the growing competition by improving the value proposition to airlines and passengers. In Vancouver's effort to be a gateway, we compete not just with Seattle, San Francisco and Los Angeles for Asian gateway traffic but, due to longer-range aircraft and new air navigation technology, cities like Chicago, as well.
The Canadian model has resulted in a balanced blend of user fees in the form of airport improvement fees, airline charges in the form of landing and terminal fees, and commercial revenues raised through the retail sale of goods and services to passengers. I think the governance model is also balanced in terms of utilizing the best of private sector expertise to serve public purposes, making each airport competitive in its own unique circumstances.
From the perspective of British Columbia, the area of government aviation policy that has the biggest effect on competitiveness is the granting or withholding of rights for foreign carriers to come to YVR. In our view, international air policy should open the country to trade and tourism from around the world.
Finally, I will conclude my remarks by saying that the excellent results of the past 20 years proved the value of the unique Canadian governance compromise and are the strongest evidence they will serve Canada's interests well into the future.
With that, I will turn the floor to my colleague, Ms. Day-Linton.
Marilynne Day-Linton, Chair of the Board, Greater Toronto Airports Authority, Canadian Airports Council: Thank you very much. Mr. Chair and honourable senators, on behalf of the board of directors of the Greater Toronto Airports Authority, thank you for undertaking this review of Canada's airline industry and for the opportunity for us to appear before you today.
I am a chartered accountant by trade. I got into the industry in the 1980s. My industry experience includes airlines, tour operators, and telecommunications and distribution systems for the travel industry. I am proud to be a part of the governance of the GTAA and Toronto Pearson's role in supporting our Canadian aviation system.
In accordance with best governance practices, and in order to provide appropriate oversight of the management of the airport, the board must have the necessary skills and experience across a broad range of expertise. For example, in the redevelopment and operation of Canada's largest airport, we absolutely require construction and engineering expertise and planning. As we fund our capital expansion through the capital markets, we must have expertise in debt financing, securities law, financial accounting and corporate governance. Other areas of expertise required to provide the strategic oversight are environmental, customer service, retail and, of course, aviation and travel industry experience.
Airport authorities have had and will continue to have airline expertise on our boards. I refer you to the Canadian Airports Council survey of airline expertise in Canada's airport authority boards, which I believe was distributed earlier. All of our board members bring their respective areas of expertise to provide necessary and valuable oversight of our strategy and the management of our airports to ensure our debate is robust, our decisions are sound and, most important, that our strategy and decisions balance the needs and interests of all of our stakeholders, taking into account financial sustainability and risk.
In his presentation to you in November, our CEO, Lloyd McCoomb, identified the stakeholders we are responsible to: the passengers who use our airport every day, air carriers, the communities that surround us and are physically impacted by our airport operations, businesses in Canada that are dependent on air transportation, and the various levels of government.
In our deliberations, board members balance all of these competing interests and come to decisions that are in the best interests of the corporation and our stakeholders.
As a significant issuer in the debt markets, we must also abide by the guidelines and regulations established by the Toronto Stock Exchange and the Ontario Securities Commission. These guidelines and regulations establish rigorous standards for transparency, appropriate internal controls and governance, which serve to reassure the investment community that we are being governed to a high standard.
We want the input of our stakeholders, including the airlines, in the planning and development of our airports. At the GTAA — and you have heard that other airport authorities have this — we have an airline consultative committee in which the input of the airlines is sought and valued and is taken into consideration on such topics as capital projects, rates and charges, and operational matters. In fact, air carriers can actually halt a capital project for a period of time if they do not think it is appropriate in the circumstances. To the best of my knowledge, they have not had to avail themselves of that remedy.
Our board has made it a practice of inviting the CEOs of Air Canada and WestJet — our largest customers — to our board meetings so that we can hear directly from them their views on our strategy and the management of the airport to ensure that we are meeting their needs and to discuss areas of improvement and further collaboration. Our board committees have meetings with other stakeholders, such as safety and security providers, for the same purpose.
We are proud that the GTAA was awarded the 2010 IATA Eagle Award for Most Improved Airport, as voted by the airlines themselves. We believe this reflects the efforts that we have made to reduce our fees and work better with our airline partners, and it is working. This year, 2012, represents the fifth year that the GTAA has reduced its fees to its carriers, further proof of our commitment to improve our competitiveness.
Success of the airport authority governance model is measured by whether it is achieving the mandate to provide safe and efficient aviation services for the benefit of the communities while being engines for economic growth. Canada now has the best aviation infrastructure in the world, capable of meeting the growing needs of the communities we serve. Airport World recently identified Toronto Pearson as the second fastest growing hub in North America. We have created thousands of jobs. The current airport authority governance model is a success.
Your committee's work is critical and timely. We must maximize the opportunities our airport infrastructure provides and enhance Canada's ability to compete on the world stage to ensure the long-term growth of Canada's economy and to generate jobs. Canada needs a national aviation strategy that will guide airports, airlines and governments in making those decisions we need for a strong and robust air transportation system for Canadians.
We urge broad stakeholder involvement, including airports, air carriers, government agencies such as finance, tourism and trade and other interested stakeholders. There will be trade-offs and compromises, but such a comprehensive strategy for the industry will ensure that we capitalize on the investments that have been made.
Emerging markets like Asia and Brazil offer opportunities for Canada that we must not miss. Worldwide competition for these opportunities is aggressive and often backed by their respective governments.
Focus on a national aviation strategy will drive the improvements we need for a sustainable Canadian air transportation system. The growing linkage to U.S. airports is a symptom of the reality that Canada's competitive position is being eroded.
Canada's airport authorities stand prepared to participate in developing that vision for Canada that will underpin our strategies so that we can best support the economic interests of the people and the regions we serve.
The Chair: Thank you, Ms. Day-Linton. Before I give the floor to senators, I had the opportunity last week to participate — Ms. Day-Linton was there — at a conference in Toronto called ``One of Our Airports is Missing.'' It was basically the air travel edition of the cross-border shopping challenges for Canada.
If you could ask the authorities that made those presentations to provide a bilingual executive summary, I think senators would appreciate receiving as much information as possible. There was very strong debate about the growth of border airports, and I think it would be interesting for senators to receive this information. I was happy enough to be there, but I was hoping you might address it more than you did in your remarks. You talked about the border bleedings at the end of your statement, but I think this issue is probably one about which senators need as much information as possible from you.
Senator Doyle: Thank you for your presentation; it was very interesting. You mentioned Mr. McCoomb and his presentation. I believe he was here sometime in November. I note that everyone talks about rent when they come here. He said he did not object to rents all that much because government should get a fair return on its investment.
What he did object to, and I believe I have it here, is the fact that the current system requires the airport authorities to pay rent on investments that were made by the airport after the transfers. What exactly did he mean by ``after the transfers'' and the fact that rent must be paid on that?
Ms. Day-Linton: At the time the assets were transferred, all the various airports received certain assets. Toronto, for example, was a fairly run-down facility at the time. In fact, it was a privatized airport in Terminal 3. Those were the assets we received on the transfer of the assets.
From that point in time, the airport authorities decided on how to develop those assets further. In the case of Toronto, the board looked at what needed to be done and decided that we had to increase our infrastructure. Mr. McCoomb was referring to the fact that the rent is based on a calculation that involves our cost of doing business at Toronto Pearson. Right now, our costs include controllable expenses like salaries and wages and the costs of actually running the airport, but they also include rent and payments we make to the local governments as well as debt service.
I think Mr. McCoomb was saying we do not mind paying for the assets we were transferred; however, since that time, we have paid and paid for those again, and we are actually now paying rent on how we finance the new build. In our mind, it is almost double.
Senator Doyle: You have to pay on new infrastructure that you build?
Ms. Day-Linton: Yes. Not only do we have to pay rent on the existing infrastructure, but also we have to pay rent on our costs of operation, which include the debt service to refurbish the airport.
Senator Doyle: He mentioned as well that Toronto Pearson needs help from government in a number of areas, such as improved security and improved customs and immigration and help in accommodating traffic on non-traditional flights and what have you. What kind of help is he referring to there? Is he talking about financial help?
Ms. Day-Linton: Mr. McCoomb was referring to financial help, if that is available. There is no doubt that if our costs went down, we would be able to provide a more competitive service.
He was also talking about how we as a gateway airport can process passengers faster through our airport so that if someone is coming from South America landing in Toronto and then going on to Asia, for example, the processes involved are smooth. There are a bunch of tasks the management team have in order to make those operations smoother so that passengers choose to come to Canada, to Toronto.
Senator Doyle: You made some interesting points as well that we do not have a national strategy to maximize the benefits of our superb aviation industry. He said our committee should be looking at perhaps coming up with a national strategy. Would you agree with that?
Ms. Day-Linton: I absolutely agree. I believe that air transportation for Canada is critical to our long-term economic success. Our population is spread across the border from coast to coast, and we are competing with a fairly feisty competitor in the United States. We believe that a national aviation strategy would take into account how the air transportation system feeds into longer-term economic growth for Canada, which includes competitiveness in reducing our costs. How can we reduce our costs? We want to stimulate traffic and make it easier for those passengers from other places in the world, international destinations, to come through our Canadian airports because the jobs are where the airports are.
We have infrastructure that we want to actually make the most of, so a national aviation strategy would in my mind — I think in all of our minds — help set the broad road map for the way that all of the airport authorities, airlines and governments make their decisions, which we think would be much more efficient.
The Chair: Ms. Jordan, did you want to add something?
Ms. Jordan: I would say I agree with most of that. I think a national focus on how Canada's airports and hubs, particularly the gateway airports, can be more competitive with other gateways in the world is critical. Airports and aviation drive tourism and trade, trade probably being even more important, and the economic impact that has is extremely significant.
Cost is also an issue. In other places, such as the U.S., the focus is really on not taxing the infrastructure but rather on the results of the economic benefits that come from the infrastructure. That is probably worth consideration, whether that should perhaps be more the focus.
As I alluded to in my remarks, I think Canada is lagging a bit behind in terms of air policy and creating opportunities for more international carriers to serve Canada. This has to be a balanced process and a balanced negotiation, but to the extent that, for instance, the U.S. has been more aggressive in terms of opening up the U.S. to foreign carriers, they will choose to fly to those gateways as opposed to Canada.
There really are some issues with respect to overall air policy that are very much worth considering in order for Canada to keep competitive on the global stage.
Mr. Bourgeault: Senator Doyle asked an interesting question regarding the fact that there are other players aside from air carriers and airports involved in air transportation. Things are going relatively well, even though there is currently much talk about the relationship between the airline companies and the airports. The truth of the matter is that the relationship between those two stakeholders is fairly good. For instance, both the airline companies and the airports know what they need to do to be able to compete with U.S. airports, and they are trying to work together. However, customs — the security people — are not co-operating in the same way. They do not have the same kind of awareness when it comes to passengers' airport experience.
When passengers arrive at the Toronto airport, they go through a series of steps that are not always coherent, but they could be. If all those units were brought together, I think the air transportation experience would be greatly enhanced.
Now, the fact still remains that we must recognize the absolutely ridiculous situation that the airline industry is in. Anytime an airport comes up with a clever new way to bring in a bit more revenue, whatever it may be — through a new concession or restaurant or a higher airport tax for passengers, for example — the airport must immediately give the Government of Canada its share, no questions asked. A percentage is automatically attached to that revenue. So instead of having the freedom to invest all of that money into infrastructure, the airport has to feed the federal government. After the airport does that and manages to invest the remaining money, local governments, municipalities, obviously reassess the airport and raise its taxes automatically. So whenever we make an improvement, we have to pay more taxes.
In 2011, the Montreal airport paid out $56 million in wages and salaries. Conversely, it paid the Government of Canada $80 million in rent and taxes for Montreal and Dorval. This is a real predicament, a serious problem.
Senator Mercer: Mr. Bourgeault, in your initial presentation, and your colleagues agreed as well, you talked about the difficulty with the rent and taxes that are driving up the cost of running the airports, and those charges of course are passed on to the airlines and then passed on to the passengers. Some of our ultimate concern around here is what the passengers pay.
Mr. Bourgeault, you also talked about the amount of money the Montreal airport authority spends in wages, et cetera. I think what we need from you and from the rest of the airport authorities across the country is a business case that tells government that it is good business to reduce the rent and taxes.
This Thursday we will have a budget. I have no idea what is in the budget. Some of my colleagues may know, but I certainly was not consulted. However, I suspect we will not see a reduction of taxes at airports, I suspect we will not see a reduction of rents at airports. We have been hearing now for some time that it is probably a good idea to reduce rents and reduce taxes at airports because of the competition that we are getting, particularly from those airports along the border.
Is there a way for you and your colleagues collectively to demonstrate a good business case that shows government it will forego this income but will gain it back because of the business that will be generated?
Mr. Bourgeault: I certainly think we can do that. It is being done elsewhere, and I believe that it is entirely possible to put all that together. It could make sense.
Ms. Day-Linton: A lot of that work has been done, and the conference last week shows that there have been many studies. That is why we would encourage a multi-stakeholder approach, have the best brains of the airports, the airlines and the various groups of government get together. So many studies have been done on this. We have to pull it together in a comprehensive document that is the strategy as opposed to the various interests. We have to ensure we meet the needs of all of our stakeholders, and there are important stakeholders that should be at the table. A lot of that work has been done, so we would absolutely be happy to drive that process.
Senator Mercer: We would appreciate it. I should have said at the beginning, I am an admirer of all three airports you represent. I am critical of airports when I think they need to be criticized, but generally speaking, all three airports are doing a good job, and the good news is you are the three biggest. It helps in the system because we all end up going through one of your airports on occasion.
Mr. Bourgeault, you talked about consistent and logical contact points needed to be coordinated. When I go to the United States, I normally fly through Toronto only because of scheduling and because of where I live. Last week I flew through Montreal. It was a different experience than flying through Toronto, and I have to say it was a better experience.
Ms. Day-Linton, the big difference is I checked my bag in Halifax and did not see it again until I picked it up in Washington. This is a flaw in the system in Toronto. When we visited Montreal a few weeks ago, we saw the very elaborate and sophisticated system behind the scenes that handles baggage for connecting flights. Having seen it and then having to go through it myself, I realized what was happening to my bag in Montreal. I did not have to touch it. I got on the plane and then got off at Reagan National in Washington and there was my bag. Had it been lost, it would have been the airline's fault, I know.
Do you talk about these simple things? There is another issue in airports where you fly in from outside of the country and you are connecting that you have to go outside of security to go back into security, and if you happen to have bought something duty free at your last airport of departure, then you are standing there with the duty-free item that cannot be carried on. Frequent travellers are aware of it, but I have seen infrequent travellers standing at the Toronto airport outside security saying what do I do with this now?
My question is, is there coordination?
Ms. Day-Linton: You are speaking very much about what Senator Doyle was referring to of those processes where we have to work with the various stakeholders, be it customs, security, and we also have to deal with U.S. customs and security, USCBP. Those are the types of systems and processes. We are working hard at ensuring that they are implemented in our process so that it is seamless to our passengers because that is how we will get people to choose to come back to Toronto Pearson.
I think many of the initiatives that my colleagues can speak of are working in some smaller airports. We are working on implementing them in our airport as well, but that guest experience is important for us. Those are items that Senator Doyle was referring to, which we have on ask, and we are working with those stakeholders to make them happen as fast as we can.
Ms. Jordan: If I could add to that, Ms. Day-Linton, one of the cornerstones of the gateway strategy that Vancouver has embarked upon is this very issue that you speak to, namely, the international connecting passengers having to go through full customs out into the non-secured area, pick up their bags, re-clear security, check in again, and so forth. From an airlines perspective, these are the published minimum connecting times. For an airline to schedule a connection, you have to know what that connecting time is for the particular gateway. It is a very competitive issue.
Right now, Vancouver airport is not competitive on its connecting times. We are probably at 90 minutes at least for an international connection. We want to reduce that to under an hour. We think to be competitive in the world, we need to reduce it. We need two things. First, we need process improvements such that passengers do not have to reclaim their bags, go through customs, and so forth. They can stay in the secure area and if there is a need to see the customer's bag, the bag can be produced; otherwise, they only see their bag at destination. Second, we need to build the facilities to allow passengers to easily connect and for the bags to be easily transferred from one gate to the next. It is a two-part initiative.
The airport can do one part in terms of designing and building the facilities; with the other part, we need help. We need help in new processes and ways to improve that connecting experience. Having those connecting times will simply put Canadian airports kind of in the game in terms of being a connecting hub.
As I said in my remarks, airlines only make money when planes are flying. They will look for hubs where they can connect passengers and bags quickly and efficiently.
Senator Eaton: I would like to hear you all comment on this. This comes from testimony that Air Canada gave us. Air Canada proposed that a review of the NAP should focus on improving cooperation between airports and airlines and reforming the airport authority governance model to include more opportunities for formal consultations of airport stakeholders, particularly with regard to the airport spending priorities.
Would you like to comment?
Ms. Jordan: Speaking from Vancouver's perspective, the governance model works well.
Senator Eaton: I am just quoting what the airline said.
Ms. Jordan: I understand. However, in terms of airline consultation, it happens at multiple levels. As my colleague said, at Vancouver, Air Canada and WestJet CEOs come to speak to the board about their long-term strategic priorities, which is important to us in terms of long-term planning to have some insights into that. We also have multiple levels of consultation at the airport itself, through the airline consultation committee, on any major capital decisions and on a daily basis down to operational considerations.
We really do take into full consideration the needs of the airlines in all of the decisions that we make. In many cases, at the end of the day the decision is a far better one and the board recognizes that.
If I could give a quick example — and this is not an Air Canada one, it is another customer of ours in Vancouver — Vancouver recently completed a ground run-up facility. I think it is the first in Canada. This is a facility located on our south side with the intent to reduce noise in the community. When airlines do maintenance on their engines at night, often, for safety reasons, they are required to do a full run up of the engine to test it before the airplane can fly. This creates noise in the community. We built a $10-million investment to contain the noise at night. These are mostly turboprop operations on the south side of the airport. We consulted extensively with the carriers that would be using this, initially from the perspective of reducing noise. Through those consultations, Pacific Coastal, which is one of the largest operators in our south side, said, ``As long as you are digging a hole in the ground and building this facility, we could really use this for de-icing. It would help us very much because we would not have to taxi all the way over to the main terminal to be de-iced.'' We thought it was a great idea and we built that into the plan. We now have a facility that not only reduces noise but also creates efficiency from the point of view of the air carriers in the south terminal for their de-icing operation. It saves time, fuel, et cetera. It is a real win-win situation.
The board recognizes that this type of consultation on major projects is extremely valuable. It goes on with every decision we make.
Senator Eaton: I wonder why they would say that to a Senate committee if it was not a valid remark. I see your point, but that was a remark that is in the testimony.
Mr. Bourgeault: When I hear Air Canada say they want more consultation, I pay attention. I think it is important. I do not think there is any level of consultation that will be sufficient. We should always keep in mind that we need to work hard at consulting with the other players in the industry.
The senator was alluding to the fact that his experience with the connection in Montreal was a good experience. That happened because we were lucky enough to be able to invest in the transborder operation in Montreal. In so doing, we did extensive consultation with the American airlines, as well as with Air Canada and the customs officers in the U.S. To my great surprise, U.S. customs accepted to be a part of the consultation that came up with the solution that we have right now in a brand new installation, where, when you go to the U.S. customs officer, he has the picture of your bag right there. That system exists only because U.S. customs decided to make a major concession and accept that we could check our bags before they had a look at them because they trusted the system so much. That was thanks to Air Canada and to the U.S. airlines that operated. There is never enough consultation, and I think we should be aware of that.
Ms. Day-Linton: From our perspective, Toronto Pearson is obviously a large plant and there are a lot of people who participate in the operations of our plant. We have 1,100 employees; 38,000 employees work there. We have to consult. We have to talk to people and ensure that we understand their operational and long-term needs. I am with Mr. Bourgeault; we have to continue to be better and better, but it is necessary for us to run the plant that we have.
Senator Boisvenu: I want to begin by thanking you for being here. You actually represent almost all air traffic in Canada, the three biggest airports. The subject is so vast and so interesting that we will probably have dozens of questions for you.
Mr. Bourgeault, I read your brief, and I think you gave us a pretty accurate description of ADM's role. However, you do not provide much in the way of recommendations, other than those regarding the fee structure. Have you contacted James Cherry?
Did he speak with you about possible recommendations to improve the report we will soon be presenting to the Senate? Did you have any such discussions?
Mr. Bourgeault: Yes.
Senator Boisvenu: There is something I am wondering about. It has to do with the fact that while Montreal has indeed lost some traffic to Burlington or Plattsburgh as a result of the fee structure, so has Toronto, which is in the same boat and subject to the same conditions as Montreal.
How do you explain the fact that, in addition to losing passenger traffic to the U.S., you have also fallen behind when compared with Toronto, even though you are both on a level playing field?
Mr. Bourgeault: Basically, it is all about the market. Keep in mind that you are speaking to someone who is clearly representing ADM, but who spent a long time making decisions for Air Canada when determining whether to have more flights out of Toronto or Montreal. Can you take a non-stop Montreal-San Francisco flight or do you have to go through Toronto? It is all about the market. Toronto's market is huge. It has the fourth largest airport in North America. That is something that hurts us, and I would say it has been hurting us since the Mirabel catastrophe, when the market was split in two and prevented from growing for a number of years. We are still paying the price for that to some extent. Toronto is a mecca for business people, and Air Canada knows that it has to have connections through there. That hurts us. What matters to us and what Mr. Sherry often says is that we and Air Canada both have the same customer. If it cost the customer a bit less to travel, it might increase the presence of airlines in Montreal, and motivate larger carriers to offer flights and more often. That is what would make Montreal more competitive vis-à-vis Toronto. Toronto is still superior in that regard.
Senator Boisvenu: Do airports have any flexibility left in terms of finding efficiencies and improving productivity? I understand relying on the Canadian government to lower fees, but we must also be careful not to repeat what happened when the loonie was at 80 cents with business living off artificial advantages.
Mr. Bourgeault: Yes, in two ways. Another reality of aviation is that airports must engage in collective bargaining, so they can never stop working on those relationships. In ADM's case, we were able to convince our unions to accept changes to the employee pension plan so we could cut costs and improve productivity. The best way to improve productivity, however, is by rallying all the stakeholders around a shared objective, in other words, improving the passenger's airport experience. Obviously, cutting the cost for passengers is important, but improving their airport experience is especially important; they need to know that when they come to the airport, not only can they access adequate services and restaurants that make sense, but they can also expect processes that shorten wait times and ensure they are treated well, like customers.
Senator Boisvenu: Ms. Jordan, you mentioned opening up opportunities for trade from around the world. I am not sure whether that recommendation is intended for the government or for airlines, but I would like to know what you mean by that.
Ms. Jordan: When I talk about opening up opportunities for increased travel and trade from around the world, I am largely talking about changes in air policy and liberalization of air policy. This is a complex issue and there needs to be balance. Our view is that Canada is lagging behind other countries in the world, particularly the U.S., in terms of liberalizing air policy. There are carriers who would like to fly to Canada today — use our hubs, create economic benefit and jobs for Canada — that choose other gateways because they do not have the authority to fly to Canada with the frequency they would like to, or into the markets they would like to fly.
When we talk about leakage across the U.S. border, from Vancouver's perspective, we have two kinds of leakage. One involves airports like Bellingham, which is 30 minutes to an hour's drive across the border, depending on where you live. It is very close. There is a low-cost carrier that started service there and offers very inexpensive flights to places like Las Vegas and Palm Springs. That is one kind of leakage. There are some cost issues and other issues associated with that.
What is even more concerning is the fact that we have Seattle — a major U.S. gateway with which we compete — which is a very short distance away from Vancouver as well. There are carriers who have had a desire to come to Vancouver and start service, have not been able to, and now offer that service in Seattle. Now that the Seattle market is growing, we may not see that carrier come to Canada or Vancouver in the future.
For instance, for a passenger who wants to fly to Paris non-stop, Air France would like to offer a service from Vancouver. Air policy did not permit that. Air France has started in Seattle, and it is an attractive connection to fly to Seattle and then to Paris. A passenger who wants to go to, or connect through, Dubai would go to Seattle. This is quite concerning. Worthy of consideration, in terms of overall policy, is how we make Canada more competitive in order to attract international carriers into our gateways, bringing the economic benefits and jobs to Canadians.
Senator Greene: I am also interested in international competition. I thank Senator Boisvenu for asking the initial question; I thought initially he was taking all my questions. How open should open skies be? Does increased competition include cabotage? Could you also elaborate a little more on what your industry would look like if we allowed open competition, and what the impact might be on Air Canada?
Ms. Jordan: I will start and I am sure my colleagues have comments, too.
I would say that with air policy it is always a balance. We would look for a balance that produces benefit for Air Canada that is reciprocal to a benefit for the foreign carrier. It should be a win-win to offer this. Air Canada should have an equal access internationally as foreign carriers have to Canada.
Occasionally, I think these negotiations get tied up with various trade issues and so forth. Separating trade issues — around beef exports or whatever the particular issue is — from air policy, is helpful. I think we would advocate a very careful look at where there are opportunities to create a balanced approach, to open up more competition into Canada and to keep Canada competitive with what the United States is doing, for instance. You do not see cabotage in the United States today, but you do see a greater liberalization in terms of authorities to use U.S. gateways and access to the U.S.
Senator Greene: In what respect do you mean liberalization in the U.S.?
Ms. Jordan: It means granting more authority for foreign carriers to serve the U.S. into multiple gateways or gateways of their choice with daily service or increased frequency. That would be in exchange for the same rights for U.S. carriers. That is the approach we think Canada should take a more careful look at. We need to determine where those opportunities are, particularly in growing regions like Asia, to ensure that Canada does not lag behind in trade and tourism opportunities.
Ms. Day-Linton: From our perspective, the air policy must support choice for the Canadian passengers. In order to make a route viable, there must be traffic both ways; to Ms. Jordan's point, it has to be reciprocal.
When we are looking at market opportunities in Toronto, we look at what markets are served, what markets need to be served and what markets we need more frequency to. We have scarce resources; we only have so many gates and we can only put so many airplanes out. Therefore, from our perspective, we want to ensure our passengers have a wide range of destinations with reasonable frequency.
We would support a policy that looks at all sides of the equation.
I would like to stress here that the health of the Canadian airline and aviation system is really important in order to ensure that Canadians do not have to go through the United States to connect elsewhere. I would also like to point out that there are a lot of opportunities. Toronto has had growth, as I mentioned, in connecting traffic out of the U.S. into other parts of the world. There are lots of opportunities. Asia, South America, and others provide great opportunities for Canada but we have to be cost competitive.
Mr. Bourgeault: We are right now. Cabotage, the idea that American airlines or foreign airlines would be allowed to fly between Canadian cities, is an interesting idea. Air Canada, historically, has always supported the idea that this could be done if it is reciprocal — if Air Canada is also allowed to fly between several cities in the United States. If that happened, Air Canada has always felt that it could solidly compete against the U.S. airlines between cities in the U.S.
The U.S. has always steadfastly refused and that is essentially because of labour issues; labour organizations have always held a strong line on that. Yet that situation could be brought about.
Right now we at least have an opening where any airline can operate any flight between any city in the U.S. and any city in Canada. That is a first step. Do we want to go the other way? I suggest that the Government of Canada should hold on to its principle that it should be both ways. There would be nothing wrong with that.
The Chair: Supplementary?
Senator Eaton: I want to follow up on what Ms. Jordan said about Air France. Why did Air France not come to Vancouver?
Ms. Jordan: They did not have the route authorities to serve Vancouver from France.
Senator Eaton: Route authorities?
Ms. Jordan: Per air negotiations, they were not granted the authority to serve Vancouver.
Senator Eaton: Who conducts those negotiations? Was it part of a trade deal? Why were they not given the route authorities?
Ms. Jordan: I cannot speak to why.
Senator Eaton: Who would decide that — Transport Canada?
Ms. Jordan: It is at the federal level.
Senator Merchant: Thank you for your presentations. I have a further question to the many that have been asked. You are constantly making multi-billion dollar decisions as to the improvements that you need to make in order to make your airports competitive. At the same time, you really are not quite sure what will happen; you talk about competition, but you are not really quite certain what will happen with opening competition to other airlines.
How do you make those decisions? When you are expanding right now, I presume that you are passing all the costs on to the airlines and they pass the costs on to the passengers. We complain about very high ticket prices in Canada. I am talking domestically now — domestic competition — and perhaps because of our population, can we support two major airlines in Canada? Those are the kinds of things I would like you to comment on.
Ms. Day-Linton: With respect to the decisions we make on an ongoing basis for capital, airports by nature are infrastructure businesses and we have to build for the future. We have to consult with the airlines to understand what their plans are. Our biggest ones right now are Air Canada and WestJet. When we are looking at how we have to expand capital, we look at all the options, but we also look at those processes that we were talking about before, because airports are very much about flow. You have to try to remove the bottlenecks, be it at security or whatever the case might be, by working and collaborating with those stakeholders. Hopefully, by getting some improvements on how we can process, we do not have to spend the capital as soon.
It really is the collaborative process that we talk about. We do not want to spend money unless we need to, because we do have to pass it on, and we know the competitive industry we are in. Therefore, we do rely on good consultation with all our stakeholders and we even listen to the passengers and surveys to see what kind of retail and services they want.
It is a big planning exercise, for sure. Since we do pass those costs on, we do not want to build unless it is necessary. Yet we must have the vision to ensure that we can deal with future growth when it comes to us. I think that is one area where the Canadian airports are very well positioned to deal with growth.
With respect to the two Canadian airlines, I have in my history dealt with quite a few of the ones that did not survive as individual entities. From my perspective, we are in a very unique position to have two competitive airlines in Canada. Due to the nature of our geography, that domestic competition is outstanding. In order to support that industry, we do need to ensure that we are attracting some of this business from outside of Canada in order to support those two airlines.
I cannot stress enough that the health of our airline industry is very important to Canada and to Canadians, because they need to have choice. I think we should be doing everything we can to remove those barriers so that those two airlines can compete.
Ms. Jordan: I would add that you mentioned domestic competition and choice. Regarding Ms. Day-Linton's point, we are fortunate to have two strong competitors and some strong regional players, domestically. International traffic really supports domestic traffic because international passengers who come to one of the gateways often want to connect on to other parts of Canada. To the extent that we attract those customers into our gateways, they will then also strengthen the domestic system, as well, and offer more choice and more options for domestic Canadian travellers. It is a real win-win situation.
Ms. Day-Linton: The domestic market has reached its saturation point, to a certain extent. The growth that Toronto Pearson has seen has been in international traffic, by far, and I would argue most of the airports have seen the international traffic grow. We have to be able to continue that trend, because the domestic market is finite. We want to see growth from international destinations and transborder.
Senator Merchant: When the Consumers' Association of Canada appeared before us, they said that we have a $16- billion deficit in tourism traffic. Sometimes our connections from city to city in Canada have long wait times. It is alright if you are going from Toronto to Vancouver — some of the major airports — but for people who want to see Canada and see different places in Canada — for instance, I come from Saskatchewan in the Prairies — it is very difficult to get connecting flights. Once you arrive in Toronto from an international flight, you might have a five-hour wait in Toronto. For instance, I think there is a flight to Regina at four o'clock in the afternoon and the next one is at ten o'clock at night. That is what I am talking about — whether there is enough domestic competition or availability of flights to encourage people to visit not just Vancouver, Toronto and Montreal but the rest of Canada, especially the northern parts of Canada.
Ms. Jordan: To the extent there is increased demand for those flights, it is a bit of a volume situation. To make a flight work, you must have a certain volume, with both connecting passengers and the local market. To add to those flights, you just need more volume coming in to increase the demand, and the airlines will respond; they will absolutely respond to demand if they think a flight can work.
That is why the gateway focus is so important because that is where the growth is. That is where the future opportunities are, and it will have the effect of strengthening the domestic market. If there are three flights a day to Regina, with increased traffic there could be five, and that will help the domestic passenger as well because it is more choice and more convenience for them.
Senator Unger: Thank you to everyone. Your presentations were so interesting.
Ms. Day-Linton, you mentioned a while ago about the health of the industry. I would like to ask about the health of passengers, and this is a question for everyone. I am wondering what processes are in place for a serious health risk or disease outbreak. Recently in Edmonton there was a passenger who had travelled from India back to Edmonton, and her health issue was measles, so there were warnings on the radio about it.
I am also wondering, as another thought, if there have been any major security breaches at any of your airports. I would like to know if you have had any, and if so, what was done about them. I know both of these things would dramatically affect costs if it was a serious issue.
Ms. Day-Linton: I can speak to the health of passengers and to a certain extent the security, but please appreciate that I am on the board of directors and not absolutely familiar.
However, with that said, all airports, definitely the major airports, have very significant plans — and I think Lloyd McCoomb mentioned them in his testimony — for just about everything, from air crashes to issues of illness. In the instance of illness, SARS was a great eye-opener for everyone, hospitals included, to make sure we have the processes in place.
As a board member, we question the fact that we have those processes. We know management tests them. They do tabletop exercises and every year they do certain mini exercises to ensure we are testing those backup and safety and security plans.
I am sure the management of the airports would be happy to get into greater detail, but from a board member's perspective, we do believe, especially through our committees, that we test the soundness of and ensure that backup procedures are in place and working.
With respect to security breaches, there have been no major security breaches at our airport, that is for sure.
Senator Unger: Any other comments?
Mr. Bourgeault: As far as security breaches go, we have been rather fortunate. We had one several years ago where a journalist decided to test the system by trying to pass a revolver through, and security immediately tightened around that. It permitted us to correct some inadequacies, but nothing has happened since.
Ms. Day-Linton: If I may just add, Toronto Pearson had a similar situation, and what came out of it was we went back and looked at our procedures for the north end of the airport; we implemented those procedures and we tested to make sure our operators up there were working.
I think the key with security is the goal of wanting to get better and better.
Ms. Jordan: I would certainly agree with that. The issue of a health emergency is a great example of where we have multiple stakeholders working together, where airports would work with the airlines who work with the Public Health Agency of Canada to respond in the case of SARS, for example, or any other emergency that may present itself.
As Ms. Day-Linton said, all the major airports, Vancouver included, do regular testing of various scenarios to ensure processes are in place, and we are constantly looking for ways to improve them.
Senator Verner: My question picks up on those from Senator Mercer about the need for a business case.
In October 2010, ADM joined forces with the National Travel and Tourism Coalition, which issued a white paper containing a series of measures to help and improve the airline industry's competitiveness.
Mr. Bourgeault, at the end of your brief, you make your priorities clear, stating that the real issues are the amount of rent and the burden in taxes and various obligations. When you worked with the National Travel and Tourism Coalition, did you examine how much those proposed measures to help the industry would cost?
We are waiting for the budget to come down this week, and everyone expects that they will have to do their part. At the time, did you look into how much those measures could cost Canadian taxpayers?
Mr. Bourgeault: It is important to keep in mind that when you marry airport operations, security and international requirements with the need to increase tourism in Canada, the matter becomes quite complex.
The issue goes beyond the simple fact that we do not have that many connections in all the regions across the country that should be better served; also at play is the fact that doing so is expensive. Canada is a very big country whose population is scattered all over. Providing the necessary service does not come easy or cheap. That may be why we do not have a true competitiveness strategy for the tourism industry in Canada. People are working on it, but a real solution has yet to be found.
Senator Verner: Still, though, a whole slew of measures were proposed, including doing away with rent and assigning the revenue from the excise tax on fuel to airport infrastructure. I was wondering if you had attached dollar figures to those measures.
Mr. Bourgeault: The costs vary by year, but we did calculate them. We discussed our current airport competitors in the U.S. Ultimately, if you think about it, the only reason they are able to compete with us at all is money. Why does someone decide to go through Burlington to fly to Miami or Los Angeles? The only reason is low cost.
Against that backdrop is the whole burden we have not stopped talking about. Rent is one thing, and we do not want to stop paying rent to Transport Canada. Our dream is to freeze rent levels to have a bit of breathing room. There is more than just what the federal government collects in rent; the Province of Quebec has tacked on a fuel tax. Even though it would normally not be allowed to do so, it does, without consulting anyone.
Once again, it all comes back to this whole phenomenon of no consultation. All these taxes are tacked on separately, without any consultation or discussion, and the result is that it has become too expensive to travel. What is more, the cost continues to go up every year. So the findings we came to then are only worse today. I have not seen a recent overview of what the measures would cost, but we could figure that out pretty quickly.
The Chair: Just a comment. A few weeks ago, the British Columbia government eliminated its tax surcharge on aviation fuel. If you want to advance that idea with the Quebec government, they can take it as a positive sign that it was done just recently.
Senator Greene: It might have been the Calgary airport or Edmonton airport authority, I am not sure, but one of your colleagues suggested that a way to end rents is to translate them into a rent-to-own model or a lease-to-own model where the rents are capitalized over time and in the end they disappear. Could you comment on that?
Ms. Day-Linton: There are lots of potential options with respect to those types of deals, privatization, rent-to-own, those types of things. Each of the especially major airports is quite unique in its own way. We have $7.7 billion worth of debt. There are lots of issues that would have to be considered at the time. From Toronto's perspective, we have absolutely been focused in on ensuring that we are doing the best we can to maximize our investment to date and continue to do that. If that happened, of course we would deal with it. We have looked at it; we have considered those options.
Senator Greene: What is your view of that, though?
Ms. Day-Linton: My view is it would depend very much on the circumstances. Right now the model, with the exception of costs, is a pretty good model because if you look at —
Senator Greene: That is the whole point, the cost.
Ms. Day-Linton: I am sorry?
Senator Greene: No, no, that is okay.
Ms. Day-Linton: I am an accountant, so I would want to look at the situation at the time. Right now we are focused very much on improving the utilization through our airports and building Toronto as a gateway. That to me is not a priority from my perspective. I would prefer an aviation strategy that ties in for all of the players, be it airports, airlines, what Canada needs from a transportation policy perspective and strategy perspective so we can look at any opportunities like that under that umbrella of what makes sense for Canadians.
Mr. Bourgeault: I would certainly react positively to such an idea because we are grasping for an answer. I think most of the players and the observers agree that there is an issue, a problem that needs to be addressed. How should it be addressed? Your suggestion could be a good one. Maybe that is the way out.
Essentially, we need to make sure, and that should be part of a national strategic policy, in my view, but we have done the first step. We have divested the airport to the communities, and the communities have done a pretty good job in taking hold of them and making them even better than they were before.
What about the next step? Is the next step going all the way? It could very well be a good approach.
Ms. Jordan: If I may, from Vancouver's perspective, I certainly acknowledge that every airport has a somewhat different circumstance on this issue. It is something we all, though, agree is an important one, the issue of cost.
Certainly we would be interested in the potential for a lease-to-own type of program; it is interesting. Worth exploring probably would be a prepayment option with a discount rate. We would probably have the ability to finance that through the capital markets, also interesting. That would create more long-term certainty, and certainty is a good thing. We talked about long-term planning earlier. Certainty of costs is a key element in doing effective long-term planning, so having a real visibility and certainty around costs over the next 10 or 20 years would be extremely helpful. We are very interested in those ideas and think they are worth exploring.
Senator Boisvenu: The question I was going to ask in the second round actually ties in better with what Senator Mercer and Senator Verner were talking about.
First of all, is there really a study that clearly shows the undeniable benefits to the airport industry of restructuring the regime for the taxes or levies paid to the federal government?
Second, do your three authorities agree unanimously with the findings of that study?
Third, is that study available?
Mr. Bourgeault: I think I will let Ms. Day-Linton speak to that since she mentioned it earlier. I know we have all the pieces necessary. Do we have a comprehensive study? Ms. Day-Linton can comment.
Ms. Day-Linton: Many studies have been available, and we would be able to provide information on what we believe are the benefits to the airport industry, but again we are just one stakeholder. I think the honourable senators have seen how complex the issue is. There are a lot of moving parts and very important issues to deal with and many stakeholders to deal with.
When it comes to looking at the costs, there are some numbers we know and some we do not. We absolutely can provide the numbers that impact us, and we can provide information as to what we think the economic benefit lost is or whatever the case may be, but we are one piece of the puzzle. From a competitiveness perspective, you have to look at the industry to ensure that you are making the right decisions for the right reasons.
Senator Boisvenu: Many studies call on the federal or provincial governments to give a $100-million break because it will generate an economic spinoff of $200 million for culture and sports. Take the Olympic Games, for example. We go ahead and cut by $100 million, and it generates a spinoff. But at the end of the day, you often find out that you are working on things that have no real teeth.
That is why I am asking whether the study you mentioned provides the proof in the pudding, so to speak. If, for instance, we reduce the fees imposed on airports by $100 million, will the impact on revenue, tourism and international passenger traffic outweigh what is being taken away in airports? That is the proof we need to see. Otherwise, we are just working from assumptions.
The Chair: I will send you the presentations that were made last week in Toronto dealing with cross-border.
There is one issue I would like all three of you to address. There is a fantasy article in all your leases that theoretically in a number of years — I do not know if it is 10, 12 or 15 — you are committed to giving your airports back to the federal government. With 49 or 50 years left and $7 billion worth of debt, you are supposed to say that at the end of that lease you will give it back to Transport Canada. I do not think anyone believes that, but we continue to keep that on the books and do not address it. That is something our committee could address saying, ``Let us finish the joke here,'' and admit this will never happen, certainly not for the three biggest airports in Canada. How can one imagine that in year 40 of the lease — there are 15 years left — you are supposed to be debt free — that means you do not reinvest in upkeep, on security or keeping the airport at a serious level — and then give it back to the government debt free?
Which one of the three of you is committed to that part of it? I am quite sure none of you are committed to being there in 40 years to do it, but the fact is that we continue to have this mythological issue on paper, on the books, saying we will give it back debt free. There is one thing we should recognize if we can face reality. That is one reality we could probably agree on. I would like three comments, if I may.
Ms. Jordan: If I could kick off, I am sure my colleagues will comment as well. To add to that issue, it absolutely does relate to the rent issue and some of the options that might be considered to create more certainty.
One of the issues where that really does come into play — certainly Vancouver has experienced this — is looking for a partner to do a land development project. When you have this finite lease and so forth, land developers look for longer-term certainty to come into a partnership. It is definitely adding some constraints to opportunities the airports have for other sources of revenue from the assets we have, and seeking to balance the burden on the airlines from alternative sources of revenue. If that can be added to the discussion around rent, it would be a very productive discussion from our perspective.
Ms. Day-Linton: From our perspective, that is absolutely something that is critical to us. As we start to negotiate, as Ms. Jordan says, with people who will be leasing our airport space — and you are backing up against the tail end of that uncertainty of whether or not we have to hand it back or whether we get to run it for a little while longer — that is something that should absolutely go away.
With respect, I would like to make a minor adjustment to what you said. Not only do we have to hand it back debt free, but we have to hand it back in first-class condition, so we cannot stop maintaining our airport. That adds a little bit of the absurdity.
Mr. Bourgeault: It is a charade, as I see it, made all the more outrageous by the fact that ADM's board of directors asked management to initiate a very serious study to examine the Montreal community's options in the 1950s. In 40 or 45 years, we think that Dorval-Trudeau could be overburdened and that we will have to look at our options. We feel it very prudent to start that process immediately, in other words, identify a location for the Montreal airport in 2050. We have started working on that. As you can imagine, there is some preparation involved. If, on top of that, we had to seriously consider the option you are talking about, I do not think it would be taken too seriously.
The Chair: It was more an editorial than a question, but since we now have to deal with minor budgetary issues we will have to finish this part and go into a meeting based on adopting our own very modest budget.
I want to thank our three witnesses.
In my BlackBerry, I have the presentations that were done last week and I will forward them to members. If members have questions either to me or to people on the council on these presentations, you will see they are very informative in terms of where transborder airport shopping is concerned.
Mr. Bourgeault, thank you. It was a pleasure to see you again.
Ms. Day-Linton, Ms. Jordan, thank you for your presentation.
Long story short, the trip that we were supposed to do in Toronto was cancelled. Since the fiscal year is finishing this week, the clerk, deputy chair and I went to the Standing Committee on Internal Economy, Budgets and Administration last night to make a presentation to make a request for a budget to go to Toronto, Buffalo, one overnight; very exciting for those from Toronto to visit the Toronto airport twice in one week.
At the same time we took the opportunity to make the request for the preliminary report, and sometime down the road we will print out the report on airports. We asked for that budget at the same time. For the professional and other services for publishing the report it is $22,700, but you have it in front of you. For the visit to Toronto, it was $21,476. I am quite optimistic that since that had already been agreed to at the Standing Committee on Internal Economy, Budgets and Administration, that should be confirmed as quickly as possible. I have spoken to the people from Toronto and they will bend over backward to accommodate the committee as quickly as possible. They, like us, want this report out, and we cannot seriously do a report if we have not been to one of Canada's major hubs.
If someone is ready to make a proposition —
Senator Boisvenu: So this is the third time we have tried to plan the trip to Toronto?
The Chair: One time, it had to do with the fact that a bill was being voted on, and the whips had prohibited us from travelling that week. The time after, the airport's senior management had changed hands, and they could not accommodate us. But we had the chairman and CEO and the chair here today, and they said they would try to accommodate us as quickly as possible.
Senator Boisvenu: If not, we could find another airport, if need be.
The Chair: Yes, but the advantage of going to Toronto is that it is really Toronto, Buffalo and Toronto Island.
Senator Boisvenu: Okay.
The Chair: Proposed by Senator Greene, and moved that the special budget application for the fiscal year ending March 31, 2013, be approved for submission to the Standing Committee on Internal Economy, Budgets and Administration.
It has been moved by Senator Greene that the following budget application for a special study on the Canadian airline industry for the fiscal year ending on March 31, 2013 be approved for submission to the Standing Committee on Internal Economy, Budgets and Administration. Shall the motion carry?
Some honourable senators: Agreed.
The Chair: Carried.
(The committee adjourned)