Proceedings of the Standing Senate Committee on
Transport and Communications

Issue 8 - Evidence, April 3, 2012

OTTAWA, Tuesday, April 3, 2012

The Standing Senate Committee on Transport and Communications met this day at 9:30 a.m. to study emerging issues related to the Canadian airline industry.

Senator Stephen Greene (Deputy Chair) in the chair.


The Deputy Chair: I would like to declare this session of the Standing Senate Committee on Transport and Communications open.

This morning we are continuing our study of the airline industry particularly with regard to its performance and long-term viability, its place within Canada, its business relationship with its passengers and its important economic effect in Canadian communities.

With us this morning we have Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre, and his associate Ms. Laman Meshadiyeva.

Michael Janigan, Executive Director and General Counsel, Public Interest Advocacy Centre: Thank you for extending the invitation to me and my organization to attend today.

The Public Interest Advocacy Centre is a national non-profit organization based in Ottawa that attempts to provide representation, research and support for the position of the ordinary and vulnerable consumer in the marketplace, particularly with respect to public services. At the time of the transfer of control of Canadian Airlines to Air Canada, PIAC became engaged in the policy debate associated with the restructuring of the industry through its participation in a coalition of organizations, under the title of the Canadian Association of Airline Passengers. PIAC was later part of a coalition of consumer groups the travel industry formed in 2005 and styled as the Travel Protection Initiative, or TPI. It was dedicated to a number of consumer protection goals including all-in pricing for airline advertising, improved financial monitoring of airlines and maintenance of publicly available performance statistics.

We have made some progress on that agenda as the government has initiated a long overdue process to put in place all-in pricing for airline advertising that will result in airline advertising rules similar to those in existence in the United States and Europe. It will also level the playing field by imposing the same responsibilities on airlines that have been in existence for travel agencies for most of the decade.

The mandate of this committee's study is a large one and our resources and expertise cannot address all of the components. We will try and concentrate on the subset of issues that fall under part (c) of the mandate: the business relationship of the airline industry with its passengers. There are a number of timely issues to be addressed under this general heading.

First is the issue of basic service. The last decade has seen a winnowing of those elements of the passenger experience that were formerly provided with the purchase of a ticket at the economy or lowest fare. From withdrawal of ancillary items such as complimentary food service, blankets and pillows to the imposition of baggage fees, seat election fees, as well as the curtailing of responsibility of passengers in transit, it is difficult to set out exactly what is the package of rights and privileges a passenger is purchasing when boarding an aircraft.

This makes comparability of fare pricing a difficult exercise for passengers and leaves open the possibility that the pared down level of service obtained is not what the customer expects.

Transport Canada's Flight Rights Canada 2008 document is not much more than a recitation of airline policy with minimal rights or remedies for passengers. A definition of basic service is urgently needed that addresses minimal passenger expectations and provides a floor that protects consumers from airlines cutting corners.

A study published in the January 2002 report of the Federal Reserve Bank of San Francisco showed that, unlike the United States where airfares dropped 40 per cent during the restructuring of the airline industry, Canadian airfares had not been reduced by the exercise and the Canadian market showed about one third of the percentage growth of its American counterparts. Today, Canada's average domestic fare as of quarter one of 2011 was $188.30 while the average domestic fare in the first quarter of 1983 was $119.80.

The figure based on CPI measured inflation would be $249.20, showing that price performance across the board had been sufficient to halve the expected rate of inflation.

However, as noted above, average domestic fares in the first quarter of 2011 cover a reduced package of services compared to what existed in 1983, and there is a likelihood that any price benefits have flowed largely to more travelled city pairs. Indeed, some of the pricing for less competitive city pairs, such as Charlottetown to St. John's, seems too based on Ramsey pricing principles intent on capturing revenue for discounts made elsewhere.

There seems to be an official ambivalence to this phenomenon, which I do not believe is matched by the customers. The fact is, saving for some possibility of competitive entry and occasional resort to other forms of travel, there is little price discipline for air travel between city pairs where insufficient competition exists.

Finally, given the country's geography, where there are vital routes that are uneconomic to serve at reasonable fares, a system derived subsidy, similar to local service telecommunications, should be used to achieve the transportation objective. It should be available to a provider on a competitive bid basis.

There are also loyalty programs. The time has long past when these programs are regarded as a frill bestowed upon customers at the sole discretion of suppliers. The accumulation of points redeemable for airfares or other products has become a driver for purchase decisions. While such points are part of the consideration flowing to the customer, they have been characterized by the merchant as inherently valueless for the purpose of monetization.

The increasing use of accumulated points and credits to tie consumers to particular buying practices has a large potential impact on the range of choice that might be available to consumers and the ability of new entrants to penetrate existing markets with better prices and products. As well, the unilateral right to change aspects of such programs gives rise to the suspicion that customer's loyalty has been given in exchange for hollow promises. The retreat from regulation in many industries has meant that consumers are reliant on competition in the market to provide value and choice. If their choice has been induced by a perception of value that is not there, the program is both subversive of healthy competition based on efficient delivery and a bad bargain for consumers. These are not idle concerns. We note that Aeroplan was frequently cited as the reason that Canadian Airlines failed to penetrate Eastern markets in the 1990s.

We suggest that basic rules be put in place that disclose the number of reward seats available on potential travel involving loyalty points, providing a minimum notice period for changes, and measures to ensure that any changes do not diminish the value of existing points.

Financial monitoring and compensation fund: One alarming aspect of Canada's regulatory framework is the non- existent financial monitoring of airlines after the initial approval period. If a major carrier fails, the advance payments of customers will not be protected by any Transport Canada governance model. In fact Transport Canada does not have access to the basic tools of assessment, such as the profit and loss and balance sheet to assess the prepaid liability versus cash on hand.

While the industry relies on fewer advance payments, with sector fares and little lead time requirements for advance booking than it formerly did, the government's failure to put in place a program of financial monitoring or insist that airlines participate in a national passenger compensation scheme will again be called into question in the event of a large failure.

I note that the remarks of Mr. Bussières from Air Transat to this committee previously touched upon some of these issues.

Can we rely on the credit card processers to pick up the tab for charge backs in this case? Provincial travel agency regulators such as the Travel Industry Council of Ontario, TICO, do protect the failure of an end supplier air carrier up to $5 million per event, notwithstanding the fact that the airlines do not contribute to the TICO fund. However, the losses may be greater than the limit, and only passengers using agencies in Ontario, B.C. and Quebec will be eligible to be reimbursed.

I will now speak to performance statistics. There is little point in relying on competition to discipline the airline travel market and then fail to collect and publish information that would enable a carrier's superior performance to be rewarded with higher market share. The U.S. Department of Transportation and the Federal Aviation Authority publish extensive information concerning on-time arrivals, lost baggage, tarmac delays and cancelled flights. The U.S. Department of Transportation provides financial disincentives in the form of fines and other formal penalties to carriers exhibiting poor practices.

Canadian customers need this information to make the best choices in the market. The regulatory framework needs the enforcement of service quality to ensure that the reasonable expectations of passengers are met.

I will now move on to the complaints commissioner. The incorporation of the complaints resolution process inside the Canadian Transportation Agency has not been successful. Despite the promises made by Transport Canada officials when the Office of the Air Travel Complaints Commissioner was discontinued in 2007, there has been significant publicity concerning this function of this agency, with most of it directed to discouraging its use. The window on airline customer practices, opened when Air Travel Complaints Commissioner Bruce Hood and his successor were in office, has closed.

Airline passengers and the industry itself need a complaints commissioner with the power to handle customer disputes and to impose solutions when agreement is impossible. Similar to the situation in telecommunications, where more robust competition exists, there is a need for an independent ombudsman to mediate and resolve customer disputes. As well, a commission can call attention to generic service problems and suggest possible solutions.

The CTA's formal procedures are not attuned to passenger needs and are designed to establish formal rules based on existing regulations in a quasi-judicial fashion. Most passenger difficulties do not need or reach that level of adjudication.

Regarding passenger involvement, airlines were an early experiment in deregulation and their governance is reflective of the prevailing ideology of the time: All that was necessary was to stand back and let the market work. The government lacks the information and the means to appropriately assess the state of customer satisfaction and consumer protection. Transport Canada has been distressingly disinterested in devising any metrics of airline performance and the monitoring and enforcement of the same.

Outside of some academic studies, which are mostly geared to airline financial performance, there is a dearth of empirical studies designed to shed light on what is actually working. The position of the airline passenger in the market is mainly defended by a ``scream threshold'' triggered when airlines design some cost-cutting measure that is injurious of the passenger experience.

There is a need at a minimum for an airline users council to provide pushback on behalf of consumers and to make inroads into what appears to be state of bureaucratic lethargy or regulatory capture. While the finances of airlines are less than robust, the record appears to indicate that customer dissatisfaction is hardly a recipe for financial success in the long-term.

Thank you. I would be pleased to take your questions.

The Deputy Chair: Thank you. We will begin questions, then.

Senator Zimmer: I have two brief questions. First, Canada has negotiated a number of open sky agreements, the most important of which are with the EU and the United States. In your opinion, how effective have these agreements been in benefiting Canadian travellers, and should these agreements be expanded to allow for cabotage?

Mr. Janigan: That is a good question but, unfortunately, we have not done any empirical studies looking at the benefits that flow to consumers as a result of the agreements. I think in general terms, consumers benefit from open skies agreements and by having access to services in a mutually reciprocal, fair fashion.

However, unfortunately, I am not in a position to comment in terms of the overall success.

Senator Zimmer: Second, when looking at the question of fostering competition in a Canadian airline market, it has been suggested by some of the industry that foreign ownership limits should be raised. Do you believe this is a viable option for increased domestic competition and, in your opinion, do competitors have to be Canadian owned to serve Canadians best?

Mr. Janigan: We have generally been agnostic in relation to the ownership question associated with consumer benefits across the board, regardless of whether that industry is telecommunications or transportation or whatever.

I would say first and foremost we should look at the regulatory framework that currently exists to see whether we can improve that before proceeding to a situation where we open it up to foreign competition. I think too often, when we have difficulties with a market, we always reach for the ideology that ``Well, this is not working, so let us open it up to foreign ownership and see what happens then.''

There are some clear things that can be done to try to establish better conditions for both airlines and consumers in Canada first before we go looking for solutions elsewhere.


Senator Boisvenu: I have a few questions. How is your organization funded?


Mr. Janigan: We are a non-profit Canadian corporation that is also a charity, organized back in 1976. We provide legal and research assistance to consumer groups and other groups across the country.

We obtain our funding largely in two ways. First, we are in tribunals, such as the CRTC or the Ontario Energy Board, where we receive cost awards for our participation there in representing the interests of consumers. Second, we try to parlay the knowledge we have gained in some of these tribunals and in representing consumers into research that is sometimes funded by way of policy contracts from the government — it could be the federal or provincial government. We have can occasionally done stuff in tandem with private sector groups and have funded reports from the EU, as well.

Our funding is a bit of a hodgepodge. We try to mesh our work to what might be available in terms of resources. We have been successful since 1976 and have stuck around.


Senator Boisvenu: Do you have a board of directors?


Mr. Janigan: We do. We have a national board of directors that meet and determine policy. We have a small administrative staff of four lawyers located here and in Toronto.

Primarily, our point of focus is important public industries, such as telecommunication, energy, broadcasting, financial services, and transportation, to some extent. Back in the late 1990s, we were brought into the airline deregulation question simply because we were one of the few organizations that had experience in dealing with public utilities, the regulation of public utilities and this sort of thing. We have been there since, although everything else we do subsidizes this area.


Senator Boisvenu: What is the relationship between the consumer and the airlines?


Mr. Janigan: I want to clarify that a little bit. When you say ``relationship,'' what do you mean?


Senator Boisvenu: Do you serve as an ombudsman? Do you act as a representative for the consumers or for the airlines? Where do you stand in terms of your business?


Mr. Janigan: Nothing as formal as that. We primarily engage in attempting to research and gather information about the airline industry and the position of the consumers in the industry and try to reflect that in whatever venues are available to us to do so.

For example, the recent initiative to bring about the implementation of all in advertising, we have been participating with the Canadian Transportation Agency along with other members of our coalition in the travel industry in order to bring about rules which we think will make advertising much clearer to consumers. However, we do not have a formal relationship with it.

One of the difficulties about this particular area is there are very few avenues to be able to present an informed and resourced position on these different issues. Transport Canada by and large is of the view that they are not in the consumer protection business. The Canadian Transportation Agency is willing to do it but has a limited mandate. Much of the time our only avenue is through publicity.


Senator Boisvenu: When a consumer wants to complain about the quality of service, who do they contact?


Mr. Janigan: He would do it through the Canadian Transportation Agency. They are set up to receive those complaints and to attempt to adjudicate them. The difficulty by and large is their mandate is fairly narrow in terms of what they can adjudicate.

When you read the act and the regs, it is very difficult to deal with or to be able to bring forward complaints on things like unreasonable fares given the restrictions on what they can do.

Unlike Transport Canada as a whole, the Canadian Transportation Agency is by and large interested in asserting its responsibilities and attempting to do what it can within its limited mandate to police the airlines.


Senator Boisvenu: We visited the Montreal airport. We are people who fly frequently. In an airport, there are many different services, many airlines and many subcontractors. Is there an organization that oversees all of this, or are all these people left to their own devices?

I will give you a fairly common example, to do with an unfortunate experience I recently had in connection with luggage weight. All the airlines have their own scales. When I go to fill up my car, there is a label saying that the gas pump's accuracy is certified by Transport Canada or some other authority. Who is there to tell me that each airline checks its scales to make sure they are legal?


Mr. Janigan: I would think it would be Measurement Canada, a division of Industry Canada that is responsible for weights and measures and checking scales of this kind.

For example, in one of the more public cases they go out and measure the accuracy of things like gasoline pumps, whether they are accurately recording the amount of gas used, and I would think that the same thing would apply in the circumstances of the scales.


Senator Boisvenu: You would be surprised to hear that when I asked the head of the Montreal airport, he told me the scales used in airports are not verified. Each airline is responsible for maintaining its own equipment.


Mr. Janigan: Unfortunately, it is indicative of a system-wide problem. When we backed off regulation 20 years ago, there was not a sufficient structure put in place that covered issues like this, and we briefly had a complaints commissioner to deal with these kinds of problems. I do not think Transport Canada liked it very much and had it abolished, promising to do the same thing with the Canadian Transportation Agency. It does not exist. At the minimum, we need engagement to enable consumers to think they actually have a voice and are able to affect things in the airline industry.

The Deputy Chair: Our next questioner is Senator Doyle from Newfoundland.

Senator Doyle: Do you advocate on behalf of individual provinces that might have complaints in their own particular jurisdiction that may not necessarily be common to national problems? Does your mandate allow for that, to advocate on behalf of the complaints of individual provinces?

Mr. Janigan: In terms of the consumers within those provinces that have complaints that effectively go to the root of the consumer experience either within that province or across Canada, we would be interested in those particular issues.

Senator Doyle: However, you would not necessarily advocate on their behalf.

Mr. Janigan: No, the provincial governments are well resourced and represented.

Senator Doyle: You hear a lot of complaints about points, and you mentioned it in your presentation about the airline industry and how it regards points and what have you.

Have you had any complaints or do you have a lot of complaints about the difficulty in accessing flights that are points related? You hear people trying to get from Ottawa to New York that might be rerouted through Vancouver to get there. What is the overall attitude of the airlines toward points?

Mr. Janigan: There are a number of different chronic complaints. One is that notwithstanding the fact that the accumulation of points is one of the key features of some of the airlines, the availability of loyalty rewards seems to be rather doled out with some parsimony, and it has become a situation where passengers complain that they cannot get access at all, or if they do get access it is through their premium credit card service which allows them access to flights but at a higher rate.

We have always regarded this as sort of an annoyance in the past and something that would be sorted out in the competitive market, but really it goes beyond that. It is a situation where effectively part of the purchase decisions of the customer are based on the accumulation of those points. When you have circumstances where suddenly all the conditions are changed or the amount of rewards that have been claimed on those points are changed, then fundamentally the initial bargain has been altered in some fashion. This is something the provincial governments are interested in, not simply from the airline standpoint but across the board. Everywhere you go people are trying to give you points, but their value sometimes is effectively suspect.

I do not recommend that we start getting into policing whether or not somebody can get a flight to Boston, but there are basic rules in terms of transparency and the way in which a points program operates that can be put in place to give some comfort to passengers that whatever they are getting is not diminishing in value simply due to an airline's financial performance.

Senator Doyle: Do you think it is legitimate when you have a flight on points and you try to change the flight for the airline industry to charge an exorbitant amount to change it?

Mr. Janigan: At a minimum, that has to be disclosed up front that these are the points and this will be the change fee and you would be aware of that. Most of the stuff is discovered after the event. As well, you would have an ability to compare between airlines to see which one is more likely to fit your travel needs.

As I said, the Aeroplan was fingered by many analysts as the reason why Canadian airlines could not penetrate eastern markets. I think they ended up getting only 19 per cent of the market share in the Eastern markets, notwithstanding that most studies done showed that Canadian Airlines was the more efficient airline between the two. It was one of those situations where ordinary business sense failed.

The other factors, such as Aeroplan and other things, intervened to cause one airline to effectively be more successful and one to fail.

Senator Doyle: You said there is, at a minimum, a need for an airline users' council to provide pushback on behalf of consumers. Is it not your role to provide pushback in any way?

Mr. Janigan: It is, but we need the forum to do so. We need something that provides formal advice, that is listened to, that reports to the minister and deals with these kinds of issues, where things like loyalty programs can be brought forward and discussed.

Many times it is a circumstance where, because everything is done now in sort of a black box kind of arrangement, no one knows what is going in or going out. It may well be there are solutions that airlines, consumers and other users can arrive at if they had an opportunity to sit in a forum where these things are actually discussed and determined.

I was interested in reading the transcripts from the different airline spokespersons about the problems associated with airport transfer fees, rents and this sort of thing. It occurred to me that, to some extent, airlines and consumers have a lot in common. In fact, we are not necessarily well served by the current governance model for both airlines and consumers.

Senator Doyle: My colleague mentioned the level of cooperation between the airline and the consumer. What about the level of cooperation between the airline and your group? Does the airline view you as part of their problem because you provide complaints on behalf of the consumer? Do they look at you as part of their problem or part of the solution to keeping the customer happy?

Mr. Janigan: I hesitate to speculate on what they think about us. I think the difficulty is that these are difficult times for Canadian airlines, in particular for the dominant airline. To some extent, I think we may be viewed as a bit of an impediment to accessing more of the customer's wallet.

That said, we are certainly acutely aware of the economic importance of the airline industry in Canada and are prepared to meet with them at any point in time to look at solutions to what we think are persistent consumer problems.

Senator Doyle: If we had more competition in the domestic airline market, would your job be easier?

Mr. Janigan: Yes, in large part. Although I think there is a need for some basic rules to be put in place across the board that govern every airline in terms of the treatment of passengers and what passengers can expect, I do not think that is necessarily something the competition would shake out.

What you find in Canada is you have certain city pairs where probably pretty close to adequate competition exists. You have other city pairs where almost no competition exists.

Senator Doyle: What do you mean by ``city pairs''?

Mr. Janigan: People travel from one city to another. When you look at the airline market as a whole you have to look at it from the standpoint of flying from Ottawa to Toronto.

If you have a city pair that is non-competitive, then effectively the airline flying there has the ability both to set a price that will not be driven down too much by competition, unless it is intermodal, and the only threat would be potential competitive entry. If you are a large airline like Air Canada, you have the ability to make back the discounts you are offering on Ottawa to Toronto, for example, or Charlottetown to St. John's, by charging more. That is a real problem. What we have done is made the whole system competitive and deregulated, whereas we have pockets that are not subject to competition. Consumers in those areas are largely bereft of protection.

Senator Doyle: What are Ramsey pricing principles?

Mr. Janigan: Effectively, if you are in a competitive market, and we have products in a competitive market and a non-competitive market, you will slash prices in your competitive market and make up for it with price increases in the non-competitive market.

Senator Eaton: Mr. Janigan, I happen to love airline points. I am one of those people who fly my kids and everyone on airline points. I love them. However, what gets me is all the nickel and diming they do. When you talk about pricing, you seldom see airfare with a price for bags, a price for a headset and a price for one drink. You do not see that. Should we be making recommendations in this report? It is $600 now to fly between Toronto and Montreal. Porter always pretends they are cheaper, but then you see the taxes.

When you talk about pricing, are you saying that for one price you get a bottle of water, a glass of Clamato juice, and you can check two bags and choose your seat?

Mr. Janigan: Yes, I would probably try to make the set of expectations under ``basic service'' as general as we possibly can, at the same time protecting the customers' interests.

Being able to have access to rebooking within a reasonable period of time —

Senator Eaton: That is a real killer; you change your flight and all of a sudden you are hit with a huge cost.

Mr. Janigan: I remember coming back from Hurricane Floyd in New York when I was travelling to JFK and I had to get over to LaGuardia, everything had closed and all we were left with was a 1-800 number, which was jammed.

I think customers should have the right to a reasonable expectation that they should be able to rebook in a reasonable period of time, or have the right to choose your seat.

There are some things that were mooted, particularly by Ryanair, trying to differentiate between classes of travel, which were relatively alarming and hopefully will not spread over here, with washroom privileges and things like that. That is the extreme.

One of the things we should have established now is what you get when you pay your money to fly on any basic service aircraft. It may be that you expect more if it is a long flight, however we do not have this in place. Transport Canada is not the least bit interested in this aspect of consumer protection. They think the market will look after everything. I think the most important thing this committee could do is to engage Transport Canada. Effectively, you cannot just stand back and let things run in the airline industry; you have to impose some level of order and have rules in place to allow realistic competition to exist. The first step is becoming engaged. Up to this point in time there has been little interest in anything else except safety issues by Transport Canada.

Senator Eaton: Perhaps you could send the clerk a list of basic recommendations and we can kind of embarrass them into it in our report. You never know; hope springs eternal.

As you have seen, quite a few of our witnesses have talked to us about competitiveness. From a passenger-consumer point of view, they have also said with the ground rents you pay and all the taxes — security tax, airport improvement tax — there is no guarantee that if those were lifted or changed somewhat that any of those savings would be passed on to the consumer. Is this something you have thought about?

Mr. Janigan: Particularly in the Air Canada testimony, I noticed that effectively it did not seem to indicate that all of these savings would result in consumer benefits.

In theory, from an economic stand point, if you make changes upstream, you would be reflective of the downstream costs at some point in time.

Senator Eaton: That is the theory?

Mr. Janigan: Yes. The question is whether or not there is sufficient competition in the market; that one of the competitors decides to take advantage of that by offering price cuts. The difficulty in Canada is those price cuts will only flow to those city pairs where there are competitive airlines, so you may wait forever to get a discount on your flight from Moncton to St. John's, for example.

Senator Eaton: What about cabotage between our major hubs?

Mr. Janigan: It is certainly an interesting prospect. It may be a significant inducement to our airlines to reduce prices on routes and possibly increase level of service.

Senator Eaton: One of our witnesses suggested cabotage. He then also said with that, you might think of subsidizing people's air tickets to isolated places, which in this country is a very real problem outside the major hubs.

Mr. Janigan: That is something I touched upon in my opening remarks, using the experience of telecommunications as a model. Right now in telecommunications, there is what is called a high-cost serving area fund. In order to provide local service, for example in the North and some isolated communities throughout the different provinces, NorthwesTel or Télébec, are the ones providing the service and have resorted to the fund in order to provide local telephone service at a reasonable price.

In the past we have had a nod and a wink to Air Canada to say you can do what you like someplace else, but make sure these routes are covered. I do not think that is the appropriate model. I think you price everything appropriately, look at the actual cost and say to airline providers, ``At what price can you provide this service, and we will provide the subsidy to whoever provides us with the best bid?'' For those services to Iqaluit or Goose Bay or wherever service and airline transportation is a must, we would be provided, in a competitive fashion, with a subsidy. That is the way we should deal with these kinds of questions.

Other than that, we would hope that competitive markets might provide some benefits for consumers provided there are basic rules in place that give them some measure of consumer protection.

Senator Eaton: It all seems so obvious, does it not, sitting around this table?

I have one last question. Do you deal with airports? Certainly in Toronto it is nothing like what happened in London last year — but you never know with terrorism, weather, freak snowstorms — where people were literally trapped for days in a London airport. Do you have anything to do with, or are you involved in, talking with airports? If, for instance, the Toronto airport or Vancouver airport shut down during March break, is there anything that says that airports have to provide enough food and water and medical things, or is that a loss leader?

Mr. Janigan: I frankly do not know whether Transport Canada has regulations in place that airports have to abide by in relation to passengers.

I know, for example, that in Europe when things like the —

Senator Eaton: Heathrow.

Mr. Janigan: When the volcanic cloud occurred, airlines were responsible for those individuals and had to put them up at the time.

Senator Eaton: That is not considered an act of God, then?

Mr. Janigan: The way the consumer protection rules work in Europe, that is what had to take place. I am not necessarily advocating one way or the other, but in Europe, anyone stranded in that fashion is treated a lot different from someone stranded in North America in circumstances like snowstorms.

Senator Eaton: Is that something you look into or care about? Is that part of your mandate when looking at transportation?

Mr. Janigan: It is. The main difficulty right now is trying to get them engaged. It is like their Precambrian Shield when it comes to consumer protection. We do not do that. We are not in the consumer protection business; we are in the business of licensing airlines, and that is effectively where it lies.

The comments of Air Transat are very apt in terms of things like financial monitoring. If we have a major failure of an airline, there will be huge fallout in relation to things like the travel compensation funds across the country in the three major provinces, and you may have a step back by the credit card issuers.

Wearing another hat, I am an Ontario government appointee to the Travel Industry Council of Ontario. I am currently the chair. If that rolls into us in that fashion, it will have a major impact on the fund and travel agencies in general. The reaction is, frankly, we do not do that anymore. We do not get involved in that anymore; it is not our job. We do not have it there. There is an absolute fear of getting more responsibility.

Senator Eaton: The bottom line, Mr. Janigan, is that we should encourage Transport Canada to become involved in consumer protection.

Mr. Janigan: I would say that is my main message today.

Senator Zimmer: That actually happened to me a couple of years ago. I landed in Toronto in a lightning storm. There was a plane at the gate, so we were 300 yards back. They would not even open the door because I guess they figured lightening would hit you. They would not provide any soft drinks or water. The door was closed, and we sat there for two hours. Then the lights came on in the building. They go off. A couple minutes later, a couple of people show up. The guy takes the gas hose, looks at the wing, and says ``Gee, maybe it goes there.'' The lights go back on and then out they go. Four and a half hours later we are still there. The lights go off again and then we wait almost an hour. Even the pilot says, ``I do not know where they are.'' Then they finally come out. Who do we complain to, the airline or the union?

Mr. Janigan: The Canadian Transportation Agency would field those complaints. The question is whether or not anything would enable them to adjudicate, apart from putting some moral suasion upon the parties that were concerned. Once again, it is a situation where the information is not being collected in a systematic fashion and there are no systematic rules to deal with many of these circumstances. In fact, in many of the cases, the airlines or the airports have developed rules that negate liability in that circumstance, when there are storms or whatever; they are given immunity on that level.

It is not a pretty situation. Unfortunately, your account matches that of many travellers in the last 20 years or so.

Senator Zimmer: When we got off, no one even said ``sorry'' or that they might make retribution. It was just ``get off the plane.'' It was not a nice situation.

Senator MacDonald: Mr. Janigan, I am just curious if you could give us some insight into how consumers are treated in other countries. There are countries that stand out with regard to consumer rights. Are they treated noticeably better? Are consumers better supported in other countries? Is there a template out there that we should be adopting?

Mr. Janigan: By and large, the European Union has put in place consumer rights that are significantly more advanced than what we have. The United States has performance statistics on airlines — things like on-time arrivals and cancelled flights — that enable consumers to judge between airlines and how they want to fly. As well, they have started handing out fines and penalties for those airlines that run afoul of what are considered acceptable standards in that regard.

That being said, U.S. airlines are hardly paragons in terms of how they treat consumers. I would not necessarily recommend them as being entirely accurate, but if you look at rating agencies like Skytrax, you will find that most of the North American airlines have three stars, which is the same as Air Jamaica, Egyptian Air and that sort of thing. They are not necessarily in the big leagues in relation to the way they deal with passengers.

There are aspects of the U.S. experience that, if imported here, would help, particularly in terms of a competitive model and having performance statistics. There is an old maxim: If you want to get something done, measure it first. If you do not measure things, how do you know you are getting better at what they are doing? There has been a complete reluctance on the part of Transport Canada to get involved in this in a fashion that would be useful, from a governance model but also from a consumer model where consumers can say, ``I will fly with an airline that does not cancel flights as regularly as this one.''

Senator MacDonald: I am assuming the mechanism used in the European Union would be different than what would be applied in the U.S. I am curious if you are familiar with those mechanisms and how they use them.

Mr. Janigan: They have a much more circuitous method of keeping aviation statistics; they seem to be all over the place, on a country-wide basis. I think the European Union provides that they have to keep those statistics, but they are kept on a country-wide basis.

They have also put in place consumer protections for things like treatment of passengers in transit, which is important in the European Union where you could be in four different countries within an hour. Their emphasis is quite a bit on treatment of passengers in circumstances where there are problems in getting them to the final destination.

Some of it is remarkable in terms of generosity when it comes to airline problems. For instance, I cited the situation of the Icelandic volcano a few years ago. That caused a lot of problems. I think it caused problems for Canadian Airlines that were over there flying from destinations in Europe that had to put up passengers under that same circumstance, if I am not mistaken.

Senator MacDonald: If I use the term the ``Western world'' or ``advanced world,'' where would Canada fit into that picture?

Mr. Janigan: I always give the same report card, regardless of the industry I am in front of. It is usually right in the middle. Mediocrity of performance always disturbs me. We do not necessarily have to be mediocre; we have a lot of natural advantages that we have let go by the wayside in things like telecommunications and the airlines, for example. We should be doing much better.

By and large, it has been a mediocre performance. Our performance with respect to safety on airlines has been pretty good, on our level. With respect to the whole aspect of competition, the treatment of customers and consumer protection, we are in the middle; ``mediocre'' is how I would put it.

The Deputy Chair: Are there any further questions for our witnesses?

Do you have any concluding comments you would like to make in addition to your testimony?


Senator Boisvenu: Do you receive a lot of complaints each year? Is there a log kept somewhere to document consumer complaints?


Mr. Janigan: The Canadian Transportation Agency keeps track of complaints. Unfortunately, the amount of publicity given to that complaints procedure is fairly minimal, and most airline passengers are not aware of the fact they can make complaints to the agency. If you go on the agency's website, a lot of the time devoted to talking about complaints is to tell customers they should first and foremost go to the airlines to complain.

In the era when they had a complaints commissioner, things were much different. The amount of complaints was also much different. The level of engagement was higher, particularly with the first commissioner, the NHL referee Bruce Hood. He was a very engaged and vociferous proponent of consumer protection.


Senator Boisvenu: If a passenger makes a complaint to an airline and the airline's service quality is indeed questionable, what recourse is available to a Canadian to go above the company when it decides not to deal with the complaint?


Mr. Janigan: The complaint can be made to the Canadian Transportation Agency. Unfortunately, that is something within the discretion of the airline to provide. Its policy might not make any sense but that is its policy. It is not something that is subject to the regulations or that is governed by the regulations of the Canadian Transportation Agency. That is the end of the exercise, with the exception of the potentially bad publicity associated with it.


Senator Boisvenu: If I understand correctly, a customer files a complaint with the airline and the airline decides not to deal with it and says the customer is wrong. A complaint is filed with Transport Canada, which does not just go and check with the airline, the airline might say the customer is wrong. So the person goes around in circles. There is no forum in which to arbitrate the complaint and decide whether the person is right or wrong. Is this the current situation?


Mr. Janigan: The CTA will attempt to see if they can resolve the complaint as best they can. They will investigate the circumstances and will say, ``Do you think you can do this, that, and the other thing?'' However, when it comes to effectively adjudicating, they cannot do anything in that regard.

One of the phenomena we find in things like telecommunications is that having a separate complaints commissioner is good because, internally when there is a complaint against the company, management and those people looking after it will feel they have an obligation to support their staff, even though they may be wrong. Sometimes they have a lot of emotional investment in the issue, so they will support the position of the company rather than coming out with a resolution.

An independent person, on the other hand, coming in and saying ``No, you are offside on this and this person should get their money back'' is a lot easier to sell to the people within the company. ``This is the way it is done and we will go ahead and do it.'' It is a lot easier to accept in the corporate culture when you have a complaints commissioner to deal with things like that.

The Deputy Chair: Thank you very much. Do you have anything you wish to add, such as a parting comment?

Mr. Janigan: I do not think so. Thank you very much.

The Deputy Chair: That is great. We will now bring this meeting to a conclusion.

Before we go, I ask the committee to stay behind for a quick five-minute in camera meeting.

(The committee continued in camera.)

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