THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
EVIDENCE
OTTAWA, Tuesday, February 27, 2018
The Standing Senate Committee on Transport and Communications, to which was referred Bill C-49, An Act to amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, met this day at 9:30 a.m. to give consideration to the bill.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Transport and Communications. We’re examining Bill C-49, the transportation modernization act.
We have two panels today. In the first panel, I would like to welcome Mr. Greg Northey, Director for Industry Relations at Pulse Canada; Dan Mazier, President of the Keystone Agricultural Producers of Manitoba; and Cam Goff, Second Vice-president for Operations at the National Farmers Union.
Thank you for being here. I invite Mr. Northey to start his presentation, followed by Mr. Mazier and then Mr. Goff.
Greg Northey, Director, Industry Relations, Pulse Canada: Thank you, chair and members of the committee, for the opportunity to discuss Bill C-49 with you. In my time here, I’d like to provide a bit more detail on a key legislative amendment, the pulse sector and our industry partners. I believe you would have received a joint letter from a lot of different industry groups — asking the Senate to consider.
Pulse Canada is a national industry association that represents over 35,000 growers, and 132 processors and exporters of peas, lentils, beans, chickpeas and especially crops like canary, sunflower and mustard seeds. Canada is now the world’s largest producer and exporter of peas and lentils, accounting for one third of all global pulse trade. The value of the industry’s exports exceeded $4 billion in 2017.
The market for pulse and special crops is highly competitive, and maintaining and growing Canada’s market share in the over 140 countries to which the sector ships are top priorities for the industry.
Pulse and special crops are the most multimodal grain crop in Western Canada. Forty per cent of the sector's exports through Vancouver are through using containers. Efficiently managing the logistics and the supply chains drives competitiveness of the sector. Increasingly, predictable and reliable rail service is central to ensuring this competitiveness and economic growth.
Unfortunately, predictable and reliable rail service is not what shippers have received this year. In the most recent report of the Ag Transport Coalition for grain route 29, which was two weeks ago, CN provided 17 per cent of the cars that were ordered across the Prairies. More specifically, 6 per cent of the cars ordered in Manitoba, 12 per cent of the cars ordered in Saskatchewan and 26 per cent of the cars ordered in Alberta were provided in that week.
For pulse and special crop shippers, this unreliable, unpredictable rail service — sometimes not receiving cars for several weeks in a row — comes at a time when the sector is facing significant market access challenges in India, Canada’s largest pulse market. The lack of on-time service, or any service at all, is compromising Canada’s competitiveness in end-use markets, significantly impacting both farmers and shippers.
The service issues the sector has been facing are not a surprise. As early as September, CN weekly grain reporting and the Ag Transport Coalition reporting indicated that CN was already beginning to ration shipper demand at a much higher rate than in previous years. It was clear then the capacity was not able to meet demand of shippers, and it was clear this was a systemic issue.
Those warning signs in September have now become a full-blown service disruption that appears to be spreading to both railways. Pulse shippers who today are shipping less product as a result of market access issues at lower prices are experiencing the worst service since 2013-14. In that year, government invoked section 47 of the Canada Transportation Act to step in seven months after the disaster to get grain moving.
Farmers and shippers are asking themselves at this moment: Is there a better way to do this? Is it possible to address issues that are clearly systemic earlier and not have to wait seven months before something is done to limit significant economic damage?
For small and medium shippers that comprise much of the pulse and special crops sector, the existing provisions in the act and some of the proposed ones in Bill C-49, while having potential, are often too expensive, not timely enough, accessing them potentially exposes them to subtle forms of retribution and doesn’t necessarily address service issues.
In the face of systemic service issues, the only tool available at the moment in the Canada Transportation Act are sections 47 and 49. Those require the need for political reaction that comes after an extraordinary disruption to the supply chain.
It is time to change that. With the detailed data and information now available on the supply chain, and with more to come through Bill C-49, there is no reason early action cannot be taken to address systemic issues before they become disasters. It’s time to provide the CTA with its own motion ex-parte powers that will ensure Canadian farmers, processors, exporters and their customers, importantly, know that Canada will not wait until there’s been an extraordinary disruption to the supply chain to take action.
Canada cannot limit its ability to respond by providing relief for one shipper at a time, especially in a systemic issue we’re seeing now. As detailed Pulse Canada’s written brief that you should have, this amendment was proposed by the CTA review panel — the Emerson panel — and is being requested by the Canadian Transportation Agency itself and its annual reporting. Why wouldn’t an amendment that has achieved consensus from the review panel, esteemed experts in the field, shipper groups and the regulators themselves not be acted upon?
Canada’s competitiveness on the world stage is predicated on our ability to deliver on a promise of reliability and to deliver a product on time. It’s time for Canada to hold the supply chain accountable for making good on that promise. Thank you.
Dan Mazier, President, Keystone Agricultural Producers of Manitoba: Thank you, Mr. Chair and members of the committee, for allowing me this opportunity to speak here today.
Keystone Agricultural Producers of Manitoba is Manitoba’s general farm organization. I represent over 7,000 farm families. I am a grains and oil-seed farmer, northeast of Brandon, Manitoba near the village of Justice.
The 2013-14 grain transportation crisis is estimated to have cost Western Canadian farmers approximately $6.5 billion. When shippers, grain buyers, are unable to reliably move their commodities to port, they will begin offering farmers lower prices for their products. So although farmers are not actual shippers ordering the railcars, farmers are the ones who end up bearing costs of poor rail service.
!!In 2013-14, the railways were not providing reliable service to shippers, and farmers suffered substantial revenue losses — to be clear, billions of dollars — as a result of the service failure. Many international buyers also began to look at other markets for commodities they had been buying from Canada, because they could no longer count on those commodities being delivered in a timely fashion.
It seems the ghost of the 2013-14 shipping season is again looming large as two major railways are once again stumbling to provide reliable service to shippers this year.
According to the Ag Transport Coalition data for Manitoba, CN, in particular, has been performing exceptionally poorly this year. Five weeks ago, in week 26, they filled 19 per cent of the orders placed by shippers in Manitoba; in week 27, they filled 6 per cent. In week 28, they filled 14 per cent; and in week 29, two weeks ago, they once again dropped to a 6 per cent order fulfillment rate in Manitoba. With numbers like these, I’m sure you can understand the anxiety farmers are currently experiencing.
For this reason, I want to make one point very clear: We need Bill C-49 to be in effect for June 2018 for the crops that farmers are going to plant in 60 days’ time. We need the shipper protections it offers, the accountability it places on the railroads and the competitive measures it puts in place.
It’s not perfect but the bottom line is we need legislation on the books to address these types of issues. The class 1 railways must face repercussions if they fail to meet acceptable service standards. CN’s current performance is clearly demonstrating the need for this.
Since the Fair Rail for Grain Farmers Act expired this summer, shippers can no longer access interswitching beyond the standard 30 kilometres. The benefit of the 160-kilometre extended interswitching option was that it forced railways to compete for shippers’ business. However, now that the Fair Rail for Grain Farmers Act has expired, this competitive measure is no longer available to shippers.
The transportation modernization act claims to offer an even better option in the form of long haul interswitching. However, we are concerned that the way this provision is currently constructed is problematic. The current design of the long haul interswitching option in Bill C-49 is overly restrictive in terms of which shippers are eligible to apply. Currently, a shipper is not eligible if it is within 30 kilometres of the interchange with another carrier or its facility is dual-served. This is problematic, because such restrictions will prevent shippers from accessing long haul interswitching, even though the carriers they can access may not be going in the desired direction to reach the load’s final destination.
They may also be limited by the fact that the carrier they can access is not able to haul the full distance to the final destination.
Therefore, we encourage you to consider amendments in proposed section 129. If the long haul interswitching provision is not broadened in the terms of which shippers are eligible to apply for it, then it will likely prove ineffective as a competitive measure.
Another item we would like to see introduced is the addition of soybeans to the Schedule II list of grains eligible to be covered under the maximum revenue entitlement.
In Manitoba, soybeans represent the third-largest crop by area, just over 1.6 million acres. Currently, the transportation costs for soybeans are as much as 40 per cent higher than the MRE, maximum revenue entitlement, covered grains with still no promise of getting cars. You can pay for it, but you still are not going to get the cars. This has the potential to create a disincentive to growing this crop in the future.
Finally, in light of the current railway performance situation we are faced with, we would like to suggest that you consider amendments to Bill C-49 that would empower the Grain Transportation Agency to initiate investigations into service issues when it becomes aware of them and mandate solutions when necessary. The CTA has the tools to identify oncoming problems in the rail system before other stakeholders; therefore, it should be able to investigate and act on such issues before they become crises.
The economic well-being of Western Canada is critically tied to rail transportation. If agriculture is to grow and make up a larger part of Canada’s exports in the future, it must have a modern and updated legislation in place to ensure our agricultural commodities can get to port. We need to realign the Transportation Act to address today and tomorrow’s issues and allow Canada’s economy to grow to its full potential.
Thank you very much for your time and attention.
Cam Goff, Second Vice-president, Operations, National Farmers Union: Good morning. My name is Cam Goff. I am part of a family grain farm operation in Hanley, Saskatchewan. I’m the Second Vice-president, Operations, of the National Farmers Union, which is a voluntary direct membership organization from farmers and their families across Canada.
Basically, I’m just going to be presenting a synopsis of the brief which you have in front of you. I would like to, of course, express our pleasure at being able to come before you to answer any questions you may have.
The NFU believes, from a farmer’s perspective, this bill is deeply flawed. It opens up Canada’s farms to even more economic exploitation than they currently face.
Basically, the loosening of the common carrier obligations removes the railway’s current duty to provide a duly loaded car, a direct access in a timely manner from the origin to destination. That’s a relatively straightforward way of going about things at the moment, but the new bill introduces so many factors and variables into the equation that it’s almost impossible for the railways to be found to have failed in their obligation, regardless of how shoddy the service is they provide.
Captive shippers, such as grain farmers, are going to be the first to suffer as are all small or remote shippers. These are the things they’re going to face from possibly non-existent service.
The cost and difficulty of launching a level-of-service complaint eliminates that option for pretty much everyone except the largest organizations or customers of the railroads.
While the NFU does appreciate the fact that the maximum revenue entitlement provisions were retained in this bill, we feel it’s imperative that a full railway costing review be implemented and the MRE formula be adjusted as necessary.
This review would increase the transparency and fairness in light of the significant structural changes which have taken place in the sector over the last 20 years since the last full costing review was done.
It has been estimated the railways are overcharging farmers tens of millions of dollars annually from moving their grain, compared to what they would be able to charge were a costing review done today.
Producer cars are another issue we feel is very important. They were basically established over 100 years ago as a check on the power of grain companies and railroads and would allow farmers to basically have a direct access to the pipeline to get their product to port, or customers who are at other places than port, local or national customers.
Changes since 2012 had basically eliminated producer cars’ usefulness and even the ability of farmers to order them. This has to be addressed.
The National Farmers Union believes a rail transportation system must be operated in the public interest. The rail companies must promote the economic interests of the entire Canadian economy. They should not be considered as engines for private enrichment.
We also feel it’s imperative the government not allow the voting share membership for CN to be increased from 15 to 25 per cent because that basically puts more power into fewer hands, which is not good for the country.
Governments must embrace their legitimate role in ensuring railroads are actively regulated and governed as the vital infrastructure they are.
The rail system must be prioritized to increase Canada’s energy efficiency and regulated to connect and support the communities all across our country.
Thank you. I look forward to answering any questions you may have.
Senator Griffin: I’m looking at the National Farmers Union brief. Thank you, all three of you, for being here. The service for moving agricultural products is very important to me as I’m now chairing the Senate Agriculture and Forestry Committee. I find your presentations extremely interesting.
For the National Farmers Union, you’re recommending Bill C-49 be amended so that it does not remove government hopper cars from the interpretation section and that the federal government pursue renewal of the government hopper cars’ fleet as a publicly funded infrastructure project and to maximize public benefit. There are a lot of “publics” in there. Could you encapsulate that for me, please?
Mr. Goff: Basically, we feel that the ownership of the grain car fleet by the public, whether it be through the provinces or federally, because there’s a history of both those levels of government providing railcars for the transportation of farmers’ grain, is a very important valve, if you will, that makes sure that the necessary rolling structure is there for grain to be moved.
We are not comfortable with the private sector having complete control over that. Because once they do that, they’re basically allowed to charge whatever they feel they can get away with. Unless there are regulations and the ability for the government to be part of that, and a part that actually has a lot of skin in the game, I guess, is the usual term used, farmers would be worse off.
What people are hoping the agricultural sector will provide to Canada’s balance of trade is really important that the federal government stay very much involved in the whole process.
Senator Griffin: That’s interesting. Because when I worked for the Government of Alberta in the 1970s and 1980s, the Alberta Heritage Savings Trust Fund was used to provide cars. I see them still on the rails.
Mr. Goff: There are some still there.
Senator Griffin: The blue ones. I was quite amazed they are still there.
Keystone — and this may be of interest to all three of you — but soybeans being added to the Schedule II list of grains, which I support, but then some others are saying to me, “Why just soybeans? What about mining products or other products?”
What would your answer be when I hear that response?
Mr. Mazier: Right now we’re trying to develop a soybean industry alongside the other industries that are well established. So this is an agriculture issue.
Having a non-schedule or adding other things to the schedule, go ahead. If they want to start being part of the MRE, I guess that’s a discussion for a different time, but we’re talking about a specific agriculture commodity that’s been left out to hang to dry.
We can’t develop it with a shipping disadvantage in Manitoba of up to 40 per cent. We’re growing more of those beans; it’s becoming a major commodity. I think that’s what has caught everybody. We could never grow soybeans before, but genetics and climate change are the reasons why can grow it. The next crop to come along is going to be corn.
If we start exporting it — and the thirst for soybeans from the east, or the west in this particular case — we need to get it on that schedule so it can be a competitive crop and give us a viable alternative as farmers.
Senator Bovey: Thank you all. I think some of the points you’ve been making we’ve heard before, which increases the depth and significance of the points on the table.
Mr. Mazier, you mentioned that we need Bill C-49 to be in effect by June 2018. By my calculation, that’s just a few months away.
With the number of amendments being proposed by people who come before this committee, what’s more important, having all the amendments looked after or having the bill through in June 2018?
Also, if you were told you could only have one or two amendments, which would they be?
Mr. Mazier: One or two? I only asked for four.
Senator Bovey: Any amendments we make have to go back to the other place and the conversation starts going. Again, I’m looking at the calendar. June is not very far away.
Mr. Mazier: I viewed my counterparts. They were here, I think, a couple of weeks ago, and there was quite a discussion about when you want it passed. It is imperative to get it passed as quickly as possible. There was discussion about how much it would be delayed, and there was a senator who did comment to the tune of “Don’t worry about the delays. Get your ass in, and then let Parliament and everybody else” — we’ve heard that from different MPs as well.
We’ve taken that approach. It’s better to ask for it now. We’ll follow our due diligence right now, but we do need it passed. I can’t express that enough.
This is another crop year. We just witnessed this back in 2013-14. It took us two years to get rid of that crop. The same thing is going to play itself out in 2017, 2018 and 2019. We are going to have a massive carryout of this crop. That is another looming problem.
Right now, the system is operating in purgatory, basically. We’re operating under legislation that was established I don’t know how many years ago for the 30-mile interswitching. So we need to address that, and we need those amendments. However the amendments are, have it open-ended enough that we can talk about it in regulation, but we need move forward here. We can’t afford another $7 billion hit. That’s quite a bit to our Canadian economy. That’s what it’s holding up. Amendments or no amendments, it needs to be passed before the house rises again.
I’m marketing my crop here. I just talked to my grain buyer on the way to Ottawa. In 60 days’ time, I’m going to start marketing that crop for next fall. Shippers are going to start organizing those cars this summer as that crop is growing. That’s why the time something very important. Next fall, we lose another year. That’s why it’s very important to get it on this side of the cycle.
Mr. Northey: When this discussion on this bill started with the consultation before the bill was introduced, the bill was always presented under the premise that this was meant to be a long-term fix. It was meant to set up Canada to be able to export effectively and be competitive in the world markets to 2030. We are seeing unfortunate disruption right now. From Pulse Canada’s perspective, we’ve always looked at that as the outcome.
This bill is not an emergency measures bill. The provisions within it are nothing like Bill C-30. They are going to take time to implement once they’re passed. There’s nothing in here that’s an emergency measure piece. Bill C-49 is a long-term piece of legislation.
Our vision and the way we’ve always thought about this is around the outcome. We have some key amendments — and I discussed a really important one for us — that we think are going to set us up for 2030. A lot of other people think that as well. So while I do understand the tension around the speed of getting this passed, we need to think about what the point of the bill was in the first place.
On these amendments, if we got really legitimate policy reasons or good policy discussions about why on-motion power doesn’t make sense — we’ve never heard that; we’ve never heard back why this has never been adopted — then we would probably back off it, because we don’t want to hold things up, or present something that isn’t effective or useful. We and many people do believe this would be effective.
We just need to be told, in an effective way, why this can’t happen — this agency-on-motion powers, for instance.
Mr. Goff: Yes, currently, given how deeply flawed we feel this bill is, we would rather have a good deal rather than a fast deal. If it’s not a good deal for farmers, it won’t be a good deal — as Mr. Northey was saying — for decades, possibly. We have to get this right at this time.
The problems we’re dealing with have been around with us for decades, and we can’t afford to try to push this through just in order to meet what I consider to be an artificial deadline.
As far as the two things that I think are most important, it would be the full costing review, because that would save farmers tens of millions of dollars a year, and although it’s only talked about tangentially in our brief, we need independent bodies to both regulate the movement of grain and to basically regulate disputes in a timely fashion. Right now, they can drag on for months or years. They’re very difficult.
Another thing that’s very important is farmers have representation on those bodies. And they have to be independent. I do not believe that putting it on to the CTA is a good idea. Separate entities should be brought forward to deal with those issues.
The Chair: That seems to be the feeling among all the people who have come before our committee — that it’s a long-term project. There are only three groups that don’t want any amendments: CN, CP and the Government of Canada. We’ll see how all of that goes, at the risk of being a little partisan here.
[Translation]
Senator Boisvenu: First of all, thank you very much for your testimony, which was very powerful. The situation you describe seems to be having a terrible impact on your sector. My first question is for Mr. Northey. Between this bill unamended and the status quo, which would you prefer as a long-term solution?
[English]
Mr. Northey: The amendments.
[Translation]
Senator Boisvenu: That was not my question. With an unamended bill, we run the risk of not having . . .
[English]
Mr. Northey: Bill C-49, as it’s now coming from the house —
[Translation]
Senator Boisvenu: There will be some discussion between the opposition and the government. It’s possible that no recommendations will be made for any changes. Between the status quo and an unamended bill, which would you prefer?
[English]
Mr. Northey: This bill without amendments.
[Translation]
Senator Boisvenu: My second question is for Mr. Mazier. I see this as a very serious situation in terms of the quantity of grain you can’t ship. Do you have any other options for shipping your products or do you depend entirely on rail transportation?
[English]
Mr. Mazier: Interestingly enough, I just phoned. We’re closer to Thunder Bay in Manitoba than we are actually to the West Coast. I phoned Thunder Bay to see if I could take my truck down there, and there are no dumping points in Thunder Bay right now; at least the two I phoned have no way of unloading a truck there.
[Translation]
Senator Boisvenu: So you depend entirely on rail for the economic success of your sector.
[English]
Mr. Mazier: For export. We don’t know where that grain is going to go. But for our oilseed processors and their products, we do also. Anything that’s going to go for export, we do depend on the railways.
Mr. Northey: It depends a lot on the amount of financial pressure a shipper would be under. Take a pulse processor, for instance, and they haven’t been getting cars for three weeks or they literally cannot fulfill contracts. Is it better to keep the process going within your plant so you can keep people employed and take a hit on the product and just try to target something by trucking it? They may have to make difficult choices around that, but it is never the ideal option.
[Translation]
Senator Boisvenu: You can’t ship everything by rail. Do you suffer economic losses at the end of the year, or do you manage to ship all of your product?
[English]
Mr. Mazier: As a grain farmer, my grain buyer actually orders the cars. But you can imagine if you’re buying that product and you don’t know if you’re going to get a railcar, what’s going to happen to the cash bid price? The price you get at the end of the day is going to be discounted because he’s taking on more risk. The grain buyer is taking on more risk, so his price will reflect that. If you’re landlocked and your cheapest portion ability is by rail and that’s the way you’re set up, the bid is going to reflect that. So what happens is it’s called “basis.” It starts to get better. It can be anywhere from $20 to $100 a tonne sometimes. So is that losses? Some say no, that it’s just the marketplace doing its thing.
You also miss the opportunity. There are other crops being grown in the world right now. Meanwhile, our buyers are trying to market that grain, get that grain in there before the other crop grows. We miss all those opportunities when things like this happen. The opportunity cost is real and I think we lost that in 2013-14, when we’re talking about billions of dollars taken out of the Canadian economy, not just agriculture.
Mr. Goff: Basically, I guess from the National Farmers Union’s viewpoint, we would rather have the current legislation than the one before the house right now. We feel if they pass this bill, unless it’s amended to a larger amount than we can foresee, we’re better off to keep the pressure on government and industry to come up with a good deal. Once again, farmers are not considered shippers anymore since the Canadian Wheat Board was destroyed in 2012. Farmers are no longer shippers. So we no longer have a place at the table. We’re allowed there basically on sufferance. We need to have a place at the table when these decisions are being made.
In regard to basically exporting our grain, the bulk of Canadian grain is exported, even the stuff that goes overseas, of course, but quite a bit of the stuff that moves around in the country is also transferred by rail. We’re very much affected by the current issues that are facing us, and we’d like to try to do a good job of making sure the product we end up with is the best one we possibly can.
Senator McIntyre: Gentlemen, thank you for your presentations.
Mr. Goff, the focus of your presentation is on six amendments, including the government hopper cars. That’s the one that really drew my attention.
As you’ve indicated, the hopper car fleet should remain a funded public infrastructure project, and this would maximize a public benefit. There’s no question it’s very important for short line and mainline railways to continue to move agricultural goods to export positions and that investments need to be made to ensure their long-term sustainability.
The hopper car fleet is aging. As I understand, the fleet is expected to be fully retired by the year 2044. What investment in railcars will need to be made between now and 2044?
Mr. Goff: I would say basically you look at what we have now for rolling stock and that entire amount, by that time, will have to be replaced. When to start? The time to start is probably now. They certainly made improvements. The newer cars can haul more grain at a faster speed than the older cars can. In order to spread out the investment, getting started on that is critical. And it’s not that we feel that the private sector, if you will, the grain companies, can't certainly buy some rolling stock and supply it, but it would be a mistake to have them supply all of it. We think the government, when they are owners of cars, will have a far better idea of all of the actual costs involved and the factors that go into these cars being used than if they basically hand it all over to private companies to basically manage for the maximum profit they can get out of the industry.
Senator McIntyre: Mr. Northey, I’d like to go back to the recommendation you’ve made. As you’ve indicated, Bill C-49 clarifies the minister’s power to direct the agency to inquire into issues relating to the rail system. That’s not the problem. The problem is it does not restore the agency’s own motion authority. The former national transportation agency had the power to make interim ex parte orders. Own motion authority is not an exceptional power in Canadian economic regulation. In your paper you talk about the own motion authority that has been given to the national transportation agency, and that agency could determine on its own motion anything concerning a licence or permit issue.
So in your presentation, it is clear that we should go back to the old days of the national transportation system. Is that how we understand it?
Mr. Northey: Yes. They used to have those powers and many other regulatory agencies in Canada have those same powers. It’s very common practice within regulatory agencies to discharge their responsibilities; they would have this ability. The Canadian Transportation Agency is no exception. They’ve asked for it. It’s not just for things to do with freight rail. They’ve asked to be able to look at accessible transportation, for instance, which is also a big issue, where they’ve asked for own motion powers on that. So it’s not a reach by any stretch of the imagination.
You would imagine when something is happening that’s systemic in the system, like what we’ve seen, right now it requires the minister to make a decision to have the agency investigate, which makes it very fraught. It makes it very political and it makes it a very difficult decision. Having the agency, who are experts in the field, they wouldn’t just investigate something if they didn’t think it warranted it. It makes a lot more sense than having some sort of political process to get in between addressing the systemic issue that we saw in September when we could have had a discussion on it and the issue we’re facing now could have either been dealt with or would have had clarity on how bad it would be so people could plan ahead of time. For us, it makes sense if you’re going to be developing a transportation system for the long term.
Senator McIntyre: So own motion authority is very important for the agency?
Mr. Northey: Yes. In their annual reports they specify that as one of the tools that they’ve requested of Transport Canada to provide back to them.
[Translation]
Senator Gagné: My question is for Mr. Northey from Pulse Canada. Senator McIntyre mentioned the recommendation regarding the Canadian Transportation Agency’s own motion authority to conduct investigations. I understand that the farmers you represent have concerns about possible reprisals if they file a complaint. We heard this from you and some of the other witnesses. Would an organization like yours want to file a complaint regarding these systemic issues? Would you raise this as an issue with the agency?
[English]
Mr. Northey: Yes. I think this is where a good data set comes in. Ultimately, you could have organizations across the country, agricultural organizations and farmers, raising this as an issue. Ultimately, we’re very much an evidence-based organization. We have a data set right now that is showing that these are common systemic issues, and we saw them in September. Ideally, decisions are based on data. Right now we’re seeing a huge number of issues coming from farmers and shippers around what’s happening right now. Ultimately, however, it’ll be the data that drives that decision. Bill C-49 has a much better data regime. We can always do better. However, we view it as data, in conjunction with people raising it as an issue. A lot of the time you don’t know what’s happening, but the agency will know. If they have the appropriate data, they will see what’s happening. Shippers can let the agency know what’s happening as well. Regarding the idea of fear of reprisal, I would characterize it more when you rely 100 per cent on a railway to be able to have a functioning business, you want to have the best relationship possible with that system. It’s a no-brainer. As much as shippers may go to the agency now and there are tools available to you to deal with service, you automatically come into a clash situation. Shippers don’t want to do that. This avoids that and it’s proactive.
When a shipper is facing zero cars for three weeks in January, they’re already in trouble. If we have data that’s telling us this is a systemic issue in place months ahead of time, it’s better to take care of it at that point.
Senator Patricia Bovey (Deputy Chair) in the chair.
The Deputy Chair: With our time, I’ll ask you to make the questions and answers short so we can get as many in as possible.
[Translation]
Senator Cormier: My question has been answered for the most part, but I still have one quick follow-up. Why is the government so reluctant to give the Canadian Transportation Agency these powers? What are the motivations behind its reluctance to give the agency this capacity?
[English]
Mr. Northey: There are potentially jurisdictional issues that come at play. For instance, the development of policy, in our opinion, is in the purview of Transport Canada, 100 per cent. The agency should just be discharging whatever regulatory responsibility they have and using the tools at their disposal given to them through regulatory processes. There may be some concern that by giving the agency its own motion powers for freight rail or for accessible transportation, for instance, they may venture into the policy realm too much. But that can be dealt with. That is not something to prevent this. It is something that you develop your regulatory system or you clarify within how you structure your regulation to make sure that doesn’t happen. We haven’t been convinced that that is a legitimate reason. Another reason may be the belief that maybe the agency will start to become too activist, which no one wants either. In that case, Bill C-49 has developed a data regime. We have clearly set metrics on how to assess it. Potentially that’s a reason.
Ultimately, I think it’s a great question for Transport Canada, and potentially the agency, to explain why they get pushback on a request they’ve had on several issues.
Mr. Mazier: It’s changed. We have a new reality when it comes to moving products in Canada right now. We have the technology and we have bigger locomotives. We have 10,000-foot trains now and they put locomotives in the middle of it. It’s amazing what they can move. What I can’t get over is we’re still talking about old legislation. We have changed as a nation. We have changed what we’re doing. This legislation does modernize a lot of things. At least we can start having a modern-day discussion. If that requires the CTA to have more powers, which the industry is telling you we need, it keeps the government out of it and it keeps it a lot more nimble. I think it’s probably the government is resistant to it in general because it’s such a massive change. It’s going back.
We have with the ability to monitor things a lot better too. Greg talked about data recovery. We couldn’t have this conversation in 2013-14. We were scrambling. That’s why the emergency legislation went in. I really do think it is a different time in Canada right now and we need modern legislation to help us grow the economy.
Mr. Goff: As I mentioned earlier, we feel there should be third-party people regulating these things, not the CTA, because we feel that’s too close to government. I guess our take on why is the government so resistant to some of these changes is possibly discomfort, but don’t forget you’re dealing with the railroads, which are two of the largest businesses in the country, which have almost unlimited lobbying power to be able to talk to various government officials, along with the shareholders of those corporations being some of the wealthiest men in the world, Warren Buffet and Bill Gates. Any commercial organization, rightly so, is looking after its own interests and that’s what drives them. It’s not what’s best for farmers or the country. It’s what’s best for their bottom line. I think that’s why we have so much pushback against government.
Senator Mitchell: Thanks very much to each of you. Mr. Northey, I’m interested in the own motion power. First, you’re convinced that’s data. That’s good and if CTA has it, transportation probably has it.
Is there nowhere right now that somebody isn’t using this data to anticipate there will be problems with railcars? And is the problem we’re having with railcars because somebody didn’t anticipate it or because farmers, shippers, others, don’t have the powers like reciprocal penalization, which is in this bill, that would give you some power to fix this problem now? Is it just that no one was analyzing and anticipating?
You’re anticipating that if the CTA had this power to go out and do proactive research, they would also have the authority, the regulatory power, to force the railroads to get trains somewhere? Why can’t they do that now? We know we have a problem right now, so why don’t they have the authority just to force that? How would proactively studying this be the panacea that you seem to be saying it will?
Mr. Northey: On the last question, the agency has many tools at their disposal, but they can only be brought to bear with a level of service complaint from an individual shipper. Right now they can’t bring those tools to bear.
Senator Mitchell: Nobody is complaining?
Mr. Northey: It’s a formal process. You need lawyers and in a year from now it may be appealed you may get a hearing. It’s a long-term process that doesn’t address issues now. So you may start to see some level of service complaints from the shipping community to be brought into place, but it will not address problems now. It will address them later. They need a shipper to come in and activate a regulatory process, which takes time and money and is not an immediate piece.
As far as analyzing and anticipating, we have been analyzing and anticipating for three years as an ag industry. We recognized this in early September. But there’s a difference between us analyzing, anticipating and assessing it and a very different thing to then ask the minister, with the powers he has now, to decide, because it takes a huge leap for him to decide: Yes, I’m going to start to analyze you because I see a systemic issue emerging.
In 2013-14, it took until March before we saw action from the minister on it and that’s just too late.
Senator Mitchell: You make a good case, but I’m being the devil’s advocate here. What I’m saying is a year ago, we had the data. We could have anticipated — perhaps we could have; perhaps we couldn’t, because some of this is unknown — that there’s going to be a train shortage, a railcar shortage at critical times.
You’re saying to us that the CTA, a regulatory body without policy or political accountability, would have the power to force railroads to get those trains there eight months later but the minister wouldn’t. I don’t see why we are cutting Transport Canada loose in all of this when they’re the ones that are politically accountable. They’re elected.
Mr. Northey: I’ll use 2013-14 is an example. There was an order-in-council, and they brought down minimum volume requirements. It was as strong a regulatory response as you can get that is within the minister’s remit. The agency has a series of regulatory things they can do, and it’s not always about getting trains there. Last year at this time, CN was doing extremely well. They had the capacity to move a lot of carloads, not just in agriculture but in everything. Between then and August, something happened.
So it’s not necessarily about the agency. When you see a systemic issue, there’s potentially nothing they could have done to have CN address the systemic issue in early September. But it would have resulted in being able to have hearings. We would have had a clear understanding of what was coming at us. We could have had shippers, not just in grain but in every commodity, understand that, yes, there will be capacity shortages, and we may hit a period now where there are zero cars being delivered, but we can plan and our sales programs can adjust to that. We can think about what we will do in November and December to adjust our sales programs accordingly, because we know there will not be capacity.
We ended up with a situation where we kept believing that more capacity was going to come online and things were going to get better, and they just never did.
Senator Mitchell: Mr. Goff might argue the Canadian Wheat Board would have solved some of those problems.
Mr. Goff: Certainly the Canadian Wheat Board had the ability to basically discipline the railroads. It was the only organization that ever took them to court and won. They didn’t have any physical assets in line. A definite problem that Mr. Northey mentioned was that the railways, if they don’t like you, will certainly let you know they don’t like you, and you will pay a price for that.
Senator Mitchell: And you have no protection right now because you don’t have the Canadian Wheat Board.
Senator Dawson: The railroads need clear rules for the future to know how much they will be investing to bring more modern cars on the market. That’s why we need this legislation. We have had 50 requests for amendments in the last five months. I’ll be happy when we get to the amendment stage and start debating.
With all due respect, I didn’t hear anything really new this morning that makes my decision-making process that much easier for when we get to the amendments. I understand the divisions between what some of you want. I’d rather have this bill without amendments than go back to status quo. You would rather have the status quo. We have to decide.
You understand that if we don’t pass this bill, you won’t get new hopper cars because the companies will not invest if they don’t have clear rules on how they invest. To make those decisions, you need to make a decision pretty soon because it takes a long time between having the rules and building the cars.
Mr. Mazier: There is no shortage of hopper cars. The Alberta fleet, I think it was mentioned before, is going to fall off first; it’s the first one to do it. The problem is a lack of power and staff. That’s what happened in 2013-14, and both railways decided to do it that year. Last year, it was actually CP that was misbehaving in the southern part of the country, and this year it’s CN. CN stood in the fall of the year in front of a function and said, “We have good news and bad news. We didn’t realize the Canadian economy is growing by 12 per cent. The problem is we only estimated it was going to grow by 2 per cent.”
They didn’t see this coming. They didn’t see the economy growing by this amount. Their solution is to ration movement of all products, not just agriculture. We’ve got a problem, not only in cars but in power. We talk about capacity, and we use those interchangeably. They don’t have enough power to move these products around, and they don’t have enough staff. That is why things aren’t moving around right now.
They proved to us the last couple of years that they can move the product. They’re not that far off of what they could move it, but this time of year, they don’t have the capacity. They don’t have the power or the staff to move it.
[Translation]
Senator Maltais: I am surprised to hear that you are still having this problem. I am a member of the Standing Senate Committee on Agriculture and Forestry, and every year farmers, transportation companies, CN and CP are there. It has become a pendulum. When it’s not CN, it’s CP, and so on. When both are at the table, the Port of Vancouver is to blame, because the port can’t make room for railcars.
Even if Parliament were to pass legislation, we wouldn’t have any direct influence on those companies. It’s more cost-effective for CP to send their railcars to the United States. CN is starting to do the same thing. There’s always a shortage of railcars at the same time. What’s the problem, and how can it be fixed?
Is there any specific financial benefit for those two companies to get out of Canada and go to the United States from August to November? How can the government fix this problem?
[English]
Mr. Mazier: I’ll repeat that it’s not cars; there are cars all over the place. It’s the power. It’s the locomotives. They mothballed too many of them.
They need more power to move cars. In wintertime — I understand that. But they’re just too short. They cut back so much because they want maximum —
[Translation]
Senator Maltais: I’ll stop you there; that’s the fourth reason. When it’s not the United States, it’s not Vancouver, it’s not CP, it’s not CN, then it’s the locomotives. There’s always a reason. Once there are enough locomotives, people will say the track is worn out.
[English]
Mr. Mazier: True.
The Chair: I’m not that pessimistic.
Mr. Northey: It’s very likely we’ll be back here in three years discussing a new piece of legislation — or maybe next year, potentially. Ideally, this is supposed to be the fix to 2030, but it’s not —
Senator Dawson: This one.
Mr. Northey: This one is supposed to be the fix.
When you’re dealing with two monopolies with tremendous market power, this is not something unique to Canada. Any time you have that situation in any kind of economic jurisdiction, this is what you have. You’re just trying to create a situation where you can mimic market forces.
What we’re always after with any of these amendments is competition. Right now, if the railways don’t have enough capacity to serve someone, it doesn’t matter to them, because we will be there two months from now with our grain, ready to move. It just does not matter.
For sure, they have to plan their capacity, and they clearly don’t want to have a ton of resources not sitting around. But within the agriculture sector, we build extra capacity into our elevators and farmers build extra capacity in their farms to store grain. We sink more money into capacity. For the railways, they’re not really there, because they don’t want to have that slack capacity. They want their operating ratios low.
This is the reality we live under in terms of how railways operate. That’s why, unfortunately, we have to look at legislation and regulation. It’s a constant turn at this, really.
Mr. Goff: I’d just like to reinforce what my companions are saying. Basically, the problem is the railways face no consequences for their actions. Our grain will be there in a year simply because rail is the only way to really move our product to our customers. Unless the Government of Canada provides the regulation and the discipline for that industry, we’re never going to solve this problem. That is why the National Farmers Union feels we’re better off to just ditch this bill if it can’t be amended properly and keep the pressure on to get it right, because we’ve been over 100 years on this.
Every year, every couple of years, we have problems.
Having laws is great. Having police is great. But if the police just stay in their barracks or maybe drive around the block a little bit but never get out of the cars, those companies are going to do whatever they want to.
Senator Griffin: Do you know why soybeans weren’t included in Schedule II?
Mr. Northey: We haven’t really gotten a clear indication. In Transport Canada’s briefing that they gave on this, it was indicated all the other things they brought into the bill would be fine for people who are shipping soybeans, but it’s such an integrated industry. That’s never been an evidence-based policy decision we’ve understood.
Potentially, there’s higher level concerns about NAFTA or something with soybeans that we don’t view as an issue either. Certainly, for Schedule II, chickpeas are also missing there and in our sector — you know, ideally Schedule II would not require regulatory update to change. You would actually have it flexible enough to adapt to new crops in Canada. We don’t want to have to keep going back and asking and getting consistently rejected trying to get a new crop under Schedule II to get under the MRE. We’d like it to be flexible enough where you keep putting new crops underneath it.
We haven’t actually received something where we looked at it and said, “You know, that makes sense. Let’s not keep it there.” We haven’t seen that. We’d be happy to see that and have a policy discussion on it, but we’ve never seen that from Transport Canada.
Senator Griffin: Thank you.
Senator David Tkachuk (Chair) in the chair.
The Chair: I’m going to thank the witnesses.
I’m not sure if I’m right about this, but I don’t think anybody wants to defeat this bill, so this bill is going to pass; it’s just whether it’s going to pass with amendments or not.
I also don’t think that if we agree to amendments that it will hold up the bill. It may hold up the bill for a day or two. That’s about it. It will go through the Senate quickly and it will go through the House, I think, just as quickly with amendments.
Just so that everybody understands, I don’t think there’s anybody in the Senate that’s going to, or at least in our party. So long as the government party is keen, I think this bill is going to pass.
Thanks for that. I’m going to thank the witnesses before us. Thank you for your time and your presentation.
Honourable senators, to continue our study on Bill C-49, I’d like to welcome George Petsikas, Senior Director, Government and Industry Affairs, Air Transat; and Andrew Gibbons, Director, Government Relations and Regulatory Affairs, WestJet; and David Rheault, Senior Director, Government Affairs and Community Relations, Air Canada.
With that, thank you for attending. We’ll start with Mr. Petsikas and a four-minute presentation and then Mr. Gibbons and then Mr. Rheault. Please proceed.
[Translation]
George Petsikas, Senior Director, Government and Industry Affairs, Air Transat: Thank you very much and good morning to everyone. Air Transat is grateful to have been invited to appear before your committee in the context of your study of Bill C-49, and we hope to hereby contribute positively to your deliberations in this regard. You should have a copy of our corporate brief, which we filed late last month with the committee clerk. I would like to use the few minutes I have this morning to focus on the issue of the proposed ministerial approval process for airline joint ventures.
[English]
Transat believes that the proposed airline joint venture approval process outlined in Bill C-49 is problematic for ensuring fair and sustainable competition in our industry over the long term and, ultimately, for protecting the consumer interest while ostensibly achieving a balance with broader public interest objectives.
We would therefore like to reiterate the following points.
First, we are mindful that the current process may not allow for sufficient consideration of legitimate public interest and air transport development objectives.
However, rather than attempt to achieve an appropriate balance in this regard with competition policy and consumer interest considerations, as indeed current law does in the case of formal airline mergers, Bill C-49 has swung the pendulum to the other extreme and pre-empted, in our view, a vital surveillance and law enforcement process in favour of a strictly political solution.
[Translation]
Furthermore, there must be no doubt that the consolidation of critical functions such as route development, capacity deployment, fare-setting, revenue-sharing, schedule coordination, and so on between airline joint venture partners that remain nominal competitors is nothing less than the de facto merger of their respective commercial operations on affected routes.
[English]
Indeed, past commissioners of competition have expressed serious concerns regarding potential anti-competitive behaviour by these types of airline joint ventures, especially in cases where they have already established and maintain high concentrations of market share.
To this end, we have attempted to demonstrate, in the analysis contained in the appendix to our brief, the worrisome trends that are emerging in several of Canada’s key transatlantic air transport markets, where the existing dominant joint venture operates, including the establishment of fortress market shares in many cases and upward pressures on fares.
The solution to the above, in our humble opinion, is very simple and does not require any major redrafting of the bill. Designate the aforementioned de facto mergers, i.e., joint ventures, as reviewable transactions as per sections 53.1 and 53.2 of the act and subsequently subject them to the more balanced, fully transparent and parallel review mechanism by the Minister of Transport and Commissioner of Competition prior to any recommendation being made to the governor-in-council for approval.
[Translation]
Thank you for your gracious cooperation. I look forward to your questions.
[English]
The Chair: Thank you very much. Mr. Gibbons, the floor is yours.
Andrew Gibbons, Director, Government Relations and Regulatory Affairs, WestJet: Thank you, Mr. Chair and honourable senators for the invitation to speak with you this morning. I am the director of government relations and regulatory affairs at WestJet.
On behalf of over 13,000 WestJetters, we are pleased to participate in your deliberations with respect to Bill C-49 and the critical role that companies like us play in connecting the economies and people of Canada to each other and to the rest of the world.
Our investments and growth over the last 21 plus years have led to lower airfares for Canadians, overall market stimulation and incredible job creation in many sectors of the economy, including aerospace, tourism and regional economic development. Our success in a very tough, low-margin industry is a testament to our frontline employees who strive every day to provide our guests with quality service.
Our award-winning culture of care and guest service is a source of tremendous pride. It’s not just what we do, it is who we are, and it influences our approach and our respect for the obligation we have to ensure our social and economic licence is strong. We are in the midst of an extraordinary evolution from the carrier that launched in February 1996 with 200 employees, three aircraft and five destinations all in Western Canada.
Last year, we carried out 24 million guests. Getting these guests where they need to be, safely and on time, is a logistical and operational challenge. Things will go wrong. When they do, we do our best to get it right. Operating approximately 690 flights a day, over 66,000 guests daily, a WestJet plane departs approximately every two minutes.
In April 2016, we became the first Canadian carrier to move its social media team to a 24/7 operation, 365 days a year. We took this step in recognition of the fact that more and more consumers utilize social media to communicate with companies in real time. Our social media response team now sits in the operations control centre to respond to guest questions and concerns in the moment. The operations control centre is responsible for all facets of our operations, including flight schedule, crew scheduling, maintenance, responding to weather, operational delays as well as guest services.
These improvements are consistent with our goal of ensuring our guests receive appropriate information and in a timely manner. Taking care of our guests is both a source of innovation and investment at WestJet.
With respect to Bill C-49 dealing with passenger protection, we support the provisions in the bill and the broad framework that it sets to create.
I do want to note for committee that WestJet currently has enforceable penalties for many of the areas for which the legislation calls for enhanced regulation. These include lost and damaged baggage, delays, cancellations and tarmac delays. Our obligations are outlined in our tariff, is fully accessible online and searchable and is used by both us and our regulator, the CTA, to resolve complaints. Bill C-49 will bring uniform standards to these issues and we are supportive of that action. But I do want to stress for senators that our guests have rights and we are proactively providing information as to what they are.
Within the context of rights and obligations, I would like to encourage senators to more broadly examine the role of our partners in the travel supply chain. This should include airports, air traffic control, border, immigration, aviation security, as well as Transport Canada. Our performance is scrutinized by Parliament and the public, and rightly so. However, all these organizations should have the same requirements as far as reporting on performance and overall accountability for the services they provide.
We support, in principle, the Government of Canada’s approach to airline joint ventures, which proposes to allow the Minister of Transport to approve certain applications, notwithstanding objections from the bureau. Partnerships are a critical component of WestJet’s business model. We do not belong to an international alliance. What we do have is 45 codeshare and interline partners which are all offering greater choice and flexibility for our guests. Transferring the approval of certain ventures from the Competition Bureau to the minister is an important policy decision for the Canadian airline industry as well as customers.
With respect to foreign ownership in Bill C-49, these changes are already in effect with exemptions granted to potential ultra-low-cost carriers. Our policy preference with respect to foreign ownership was that any changes and limits should be on a reciprocal basis, particularly with respect to the United States. The government has opted for a unilateral approach. We respect their decision.
I would also like to remind senators we have recently announced the creation of our own ultra-low-cost carrier named Swoop. This was done without foreign investment or any proposed policy change by the government. The objective is straightforward: Provide Canadians with more choice for their travel dollar. I’m happy to say Swoop will begin flying in a few short months.
Finally, with respect to the provisions that allow small airports to purchase CATSA services and large airports to top up services, we consider these measures to be stopgap. Delays caused by factors such as passenger screening are becoming more and more frequent in our operations. This is a disturbing trend, but unfortunately is unsurprising.
We have recommended comprehensive reforms to the funding model and governance of CATSA. We urge the committee to recommend all money collected from the air traveller security charge be allocated to screening services at Canada’s airports.
To conclude, WestJet recognizes that the bill has the potential to benefit the aviation industry and Canadian consumers. We look forward to participating in your sessions in order to improve the overall travel experience of Canadians.
[Translation]
David Rheault, Senior Director, Government Affairs and Community Relations, Air Canada: Good morning Mr. Chair and honourable committee members. My name is David Rheault and I’m the senior director of government relations for Air Canada. I thank you for the invitation to testify before your committee today.
In 2017, Air Canada transported over 48 million passengers to 200 destinations on six continents and launched 30 new routes. Of our 30,000 employees, 3,000 were hired in the past three years.
[English]
We have shared with you the submission tabled before the House of Commons in September. Today, I will focus on three issues, joint venture, foreign ownership and passenger rights. We respectfully propose changes to ensure the bill meets its policy objectives.
On foreign ownership, Air Canada supports the increase to 49 per cent with the condition that a cap be set at 25 on any single foreign entity and on foreign airlines. The language in the bill, however, makes a distinction between the restriction applicable to foreign entities and foreign airlines. That could undermine its very policy objective.
While a foreign entity may not own more than 25 per cent, directly or indirectly, the bill does not apply this condition in the very next line that pertains to foreign airlines. Due to the principle that every word of legislation has a meaning, the omission of the words “directly or indirectly” with respect to foreign airlines causes a serious risk of judicial misinterpretation.
We urge the committee to clarify the bill and add these words to the second paragraph of subsection 55(1)(c).
[Translation]
This amendment is quite simple and fundamentally logical. It aims to ensure that foreign ownership restrictions be drafted in a coherent manner, and that this bill does not retain an unnecessary risk of misinterpretation. We have distributed some scenarios that are not currently covered by the language of the bill, but this amendment could help prevent them.
Let’s now look at the issue of joint ventures. The airline industry is complex and highly competitive. In addition to Canadian carriers, there are about 70 foreign air carriers in the Canadian market. Passengers’ needs change as the economy becomes even more globalized. Canadians want to be able to access more destinations and in a more efficient manner. Given the size of the Canadian population, the development of new international routes must tap into traffic from large markets like the United States, China and Europe.
[English]
In this context, joint ventures, or JVs, are critical. By greater integration between partners, JVs achieve economies of scale so that airlines can provide passengers with increased access to flights, a greater inventory of seats, more destinations, more routings, better connectivity, enhanced service and more competitive pricing options.
Bill C-49 provides for a new process for the review of JVs that accounts for the broader public interest and promotes Canadian transportation policy objectives.
We support this provision and submit amendments to ensure that their benefits are realized. It is important the process provides for a sufficient level of certainty to encourage partners to commit the resources to a JV. The bill provides for a two-year authorization period from the date of the minister's authorization before it could be subject to review. We propose this period be extended to three years and start from the actual date of implementation.
As well, the sanctions provided in the bill should reflect the commercial nature of JVs. In particular, the sanction of imprisonment could dissuade a potential partner from considering a JV and our employees to work on these business projects.
[Translation]
Joint ventures are key to the success of Canadian carriers in the international market. They are beneficial for passengers, essential for supporting the growth of our air carriers, and contribute to our nation’s competiveness.
In closing, I would like to discuss the issue of the passengers’ rights plan. It is important to define clear standards for all carriers without, however, imposing an undue financial burden or limiting the capacity of air carriers to distinguish themselves through their respective policies.
[English]
That said, the collaboration of many stakeholders — CATSA, CBSA, NAVCAN, fuellers and de-icers — is also instrumental to the overall experience of travellers.
While the bill would require carriers to provide data, we would also submit that these agencies and organizations be equally accountable and also submit data in a public and transparent manner.
[Translation]
In an economy that is ever more globalized, air transportation is a key industry for Canada’s economic success. We are proud of our contribution and we welcome your questions.
[English]
I thank you for your attention and will welcome your questions.
The Chair: Thank you very much.
[Translation]
Senator Cormier: I am particularly interested in passengers’ rights. I will be asking my questions in French. Under clause 19 of the bill, the minister may issue directions to the Canadian Transportation Agency to make a regulation regarding obligations between the carrier and passengers.
The fact is, the list is not exhaustive and seems to overlook certain obligations, especially with regard to providing service in both official languages. Although the Emerson report recommended that the Canadian Transportation Act include a provision to ensure service delivery in both official languages at airports, by airlines for example, there are no recommendations along those lines in the legislation.
My question is for all three of you, and particularly Air Canada, which has a duty with respect to official languages. What would Air Canada’s position be regarding the idea of adding a provision to the bill making it possible for the Canadian Transportation Agency, in consultation with the minister, to create a regulation requiring all Canadian companies to deliver services in both official languages on domestic flights?
Mr. Rheault: Thank you for your question. First of all, with respect to official languages, we are very proud of commitment to official languages. At Air Canada, roughly 50 per cent of our employees who serve the public are bilingual. That proportion is higher than within the federal government.
We have always supported the principle that Canadians should have access to service in both official languages, regardless of the carrier they choose, wherever there is sufficient demand. So, yes, we would be willing to engage in this discussion.
Senator Cormier: What are the other companies’ views on this?
Mr. Gibbons: Thank you for your question. I will answer in English, if I may.
[English]
Thank you very much for the question, senator. With respect to official languages, it’s in our business interest to provide services in the language of our guests. We’re confident in the investments we’ve made in that regard. For example, we’ve had a bilingual mandatory hiring policy for flight attendants for many years. That has expanded economic opportunity for French speakers and francophones all across the country.
In 2017, we announced expanded services in the province of Quebec, including our first point-to-point flight between Montreal and Quebec City, and we’ve improved overall connectivity for Quebecers through our investments.
Finally, in late January we announced direct service from Halifax to Charles de Gaulle airport in Paris. These flights were so well received by the community, and whether it’s recruiting francophone immigrants to Atlantic Canada, whether it’s the college recruiting foreign students in that part of the world or the business community, we’re very proud to hear stories of how those investments are improving the lives and business opportunities for French speakers in Atlantic Canada.
We do not support expansion of the Official Languages Act. That is a holdover from our competitor’s privatization. That’s an issue between them and the government.
[Translation]
Mr. Petsikas: Our airline, which serves national and international markets, was founded in Quebec, by francophones, over 30 years ago. Bilingualism is in our DNA. We have been doing this on board all of our planes, on all of our routes across Canada, for 30 years now. We therefore have no concerns about entering into the debate you are proposing.
Senator Cormier: Thank you. I have a second question specifically for Air Canada. In the brief you submitted to the committee in the other place, you point out an inconsistency in the wording used in clause 15. You mentioned it today. Could you elaborate on that to give us a better understanding of the difference in the terminology and its impact?
Mr. Rheault: The new section 55 in the bill establishes limits on foreign ownership. The first paragraph on foreign entities uses the expression “directly or indirectly.” However, these words are omitted in the paragraph outlining the limits on foreign airlines.
[English]
The fact these words are omitted in the very next line, it seems to us there is a real risk of misinterpretation because there is a basic principle in law that every word of legislation has a meaning.
[Translation]
If the same wording is not used in two paragraphs that are essentially formulated in the same way, the courts will interpret the paragraphs differently. Of course, there is the notion of affiliation, which is also mentioned in these paragraphs. This morning, we showed you some examples of scenarios that would not be covered by the notion of affiliation, but that would be covered if the notion of “indirectly” were introduced.
In essence, the notion of affiliation refers to a corporate relationship. One company must hold shares in the other company. The notion of “indirectly” is broader. It could cover arrangements on voting rights, even if the two companies were not part of the same group.
[English]
They’re not in affiliation, according to the act.
[Translation]
There could be an arrangement on voting rights that would result in the airlines having more than a 25 per cent interest. For that reason, we believe that this amendment is appropriate in order to ensure clarity.
[English]
Senator Bovey: I have a question on joint ventures and one on passenger rights.
Mr. Rheault, you mentioned the two-year period for review after the joint venture, and you’re recommending it be lengthened to three years. I wonder if you can tell us why.
Mr. Rheault: Thank you for your question.
First, this is the period under which there will not be a review. This is like on the launching period that we need to look at to make sure that the JV produces its effect.
We are asking that the period be extended for two reasons. First, once you have the authorization, you’re not starting the JV. The authorization allows you to exchange information so you can complete the contractual discussions.
Second, when you look at two years, in the airline business, it doesn’t necessarily mean two full years because we’re in a very seasonal business. So you cannot compare month after month.
You have to compare on a seasonal basis.
In that way, two years might not give you a good portrait of the evolution of the JV. That’s why we believe three years, starting from the actual implementation of the JV, would be a better period to assess the impact.
Now, this is important because, as an airline we have to convince international airlines to enter into joint venture discussions with us. On this matter, we often compete with global carriers, such as the U.S. carriers, so we have to make sure we have a tool that provides, at the outset, the certainty to convince partners to start discussions with us. We feel these amendments would improve that tool.
Senator Bovey: Thank you. Do you have the same concerns as WestJet or Air Transat?
Mr. Petsikas: We don’t have a particular problem with extending it to three years. Our interest is transparency. Our interest is an active review mechanism. Our interest is to ensure that what has been promised in exchange for lifting or protecting that joint venture from fundamental consumer protection law is delivered.
I might point out, for the committee’s information, that right now in the United States they’ve had an antitrust immunity process on the books for more than 15 years. They’ve immunized about 20 joint ventures down there, except for one small problem: They don’t have a public process for determining whether those joint ventures are delivering in terms of the promised benefits for consumers.
In fact, I was speaking with an airline last week in the United States and they literally have asked the Department of Transportation for copies of the reviews they conduct with the joint venture partners on a regular basis — but in confidence, behind closed doors. They’ve asked for those and the Department of Transportation in the U.S. says, “Take us to court. We’re not giving it to them.”
This is obviously a real problem and there has to be a reason they’re doing it. That’s our interest here. Three years is not a problem.
Mr. Gibbons: We’re comfortable overall with the joint venture provisions. We think they strike the right balance of certainty and consistency, which is something we look for as a major airline. We’re not opposed to extending it to three years, but we’re not the ones proposing that amendment.
Senator Bovey: Just a quick one on passenger rights. We all have our experiences, and it’s dangerous to bring them up. In the last ten days, I’ve been on five aircraft and none were on time. In two situations, there was no information until I got on a plane from Vancouver to Winnipeg the other night, when the pilot came on and said, “I don’t know why we’re late, but thank you for your patience.” It might have been because we were waiting for a larger aircraft because the flight was oversold.
I appreciate the convenience of needing to get aircraft from point A to point B, but had we known that an hour and a half before, I know it would have helped a lot of passengers with young children going off and getting time for dinner.
I wonder about passenger rights. I’m not talking about monetary compensation at this point; I’m talking about the honesty of information. What are the practices in rights of information to passengers?
Mr. Rheault: I thank you for your question. Obviously, it’s difficult for me to comment on a situation.
Senator Bovey: I’m not asking for comment on one specific incident. I know I’m not the only passenger who flies across this country who’s been in that situation — and I didn’t name the airline.
Mr. Rheault: It cannot be Mr. Petsikas.
It’s very important that the crew provide the information to passengers. Of course, it’s not always perfect and there is room for improvement and we acknowledge that. Delays might be caused by many factors. A lot of them are not under the control of the airline, but I do agree with you that sharing information with the passengers or clients is important.
Mr. Gibbons: Technology is having a huge impact on this, senator. I hope you and other regular guests have the WestJet app on your iPhone. What we’re doing in terms of emails, the information that’s contained in them, what our rights and obligations are and when you should receive information is always going to be a challenge. When we talk about moving 24 million people and the challenges of winter operations, it is difficult, but it is our cross to bear. We have to have a strong social licence with our guests and we endeavour to do that.
Also, Twitter and social media investments are having an impact. Our guests are able to reach us on Twitter 24-7. The days of a 1-800 number open 9-5, when you’re stuck at an airport at 10 a.m. and you don’t know what’s going on, are gone for our guests. You can get real-time information on any of the challenges you have, and that has been well received by our guests and we’re proud to initiate that.
Senator Dawson: The reality is we’re tweeting right now, and all three of you are concerned by some of the comments that are being made on Twitter. But I won’t repeat them because it would take too long. Actually, it would be too long if we wanted to have a full meeting with Air Canada; I guess we could be here for a few hours talking about Aeroplan points and what that means.
Since that’s not the objective for today, I can guarantee you one thing: the minister’s office is listening to us and I would hope the minister will address your suggestions for amendments, because somewhere down the road in the next few weeks, we will have to deal with amendments.
Amendments will be proposed, some of them will be rejected and some will be accepted, and if it’s a reasonable one and if we’re opening up the bill for modifications in the other place and we want to get them through here — and I’m happy to chair — everybody agrees we want this bill. So it’s not a question of our wanting it approved, if possible, but we want it.
I can assure you I will ask the minister that your amendment be addressed, because it does sound reasonable. But like I said, if we open up the bill and it stays in the Senate long and then goes to the house and stays there a long time, we’re not getting a bill. Everybody agrees it’s a balanced bill and it should be passed.
[Translation]
That said, I would like to ask you a question about the incident that occurred in Ottawa. There are a number of comments on Twitter and Facebook about what happened between you and the agency.
[English]
Whatever the rules are, if you are fined by the agency and you are appearing on a television show and say, “Let’s make a deal,” why should people have confidence a charter of rights will be useful if deals seem to be made between the airlines and the transportation agency?
Mr. Petsikas: I’m sorry. For clarification, when you talk about a deal —
Senator Dawson: In the Ottawa incident, a fine was given to you and a fine was withdrawn. Why should people think that —
Mr. Petsikas: The fine wasn’t withdrawn, senator. I’m sorry. I’m not sure if I’m following you here.
We were fined a certain amount by the CTA for that incident to which you refer pursuant to a number of our CTA tariff obligations. What happened was that the CTA offered us the ability to pay compensation to the passengers affected on the two flights — which are part of the public inquiry — in exchange for credits against that fine payable to the treasury.
So the fine was not withdrawn. What happened was they gave us the incentive, if you will, and we had already offered compensation to our passengers shortly after the incident took place. But as a result of this, all we did was we sort of topped that off and the agency accepted that as credit against the fine.
I should mention at this point I can’t comment any more on that because we are currently before the courts. Unfortunately, there’s someone who took exception to how that was done by the CTA, and as such we’re currently before the Federal Court. I’m going to stop right there.
Senator Dawson: I just wanted it to be put on the record. We’ve had these criticisms. I wanted you to give a chance to state your claim.
I know you want an amendment, but I think you want the bill, so somewhere down the road we will have to decide as a committee how much we will be opening up this bill and how much we will be accepting to propose the above mentioned amendment.
Mr. Rheault: Can I have a word on this, senator? I understand you have work to do and the bill needs to be passed at a certain point. The only point I want to make in that respect is once the bill is approved, we have to live with it for a long period of time. We have proposed many amendments before the house. We really reduced the number of amendments here to have amendments that do, in fact, improve the bill and seek for it to reach the objective.
[Translation]
We are proposing amendments that are consistent with the intent of the legislation and that would help the Senate improve this piece of legislation and ensure that it benefits airlines and passengers.
Senator Gagné: I have a comment about Mr. Gibbons’ response. According to the most recent census, there are 2.7 million people outside Quebec who speak French. I want to point out that French is not spoken just by people living in Quebec and immigrants in Atlantic Canada. I am from Manitoba and, as you can appreciate, I am a francophone.
My question is about the passenger bill of rights. According to the bill, a third party will not be able to file a complaint with the Canadian Transportation Agency about passenger rights protected by this future charter. In fact, a complaint may only be filed by the person adversely affected.
Does this really make a difference to you if, after an alleged violation, a third party, such as an advocacy organization, rather than the person actually affected files a complaint?
Mr. Rheault: It is important that this legal concept of interest be present. In other words, the plaintiff must have an interest in filing the complaint. It is important because it ensures that the person who files the complaint was actually the person involved in the situation, and this prevents abuse of the process.
I would remind you that, according to the proposed bill, the Canadian Transportation Agency can somewhat broaden the scope of a decision and apply it to other passengers on the same flight.
We commented on this matter, and I must reiterate that the presence of the concept of real interest, a concept recognized in law, is important to us.
Mr. Petsikas: We completely agree with Mr. Rheault. I will stop there.
[English]
Mr. Gibbons: We’re aligned as well. Obviously, our contract is with our guests who paid money, and our contract of carriage is with them. That’s something we respect, and that provision excluding third parties is something we support. The House of Commons committee was told by IATA, our international partners, about these cottage industries in Europe that have popped up seeking claims and damages.
There’s a lot of difficulty with third parties, but we’re comfortable with where the bill is on that.
[Translation]
Senator Boisvenu: I would like to welcome our three competitors. It is interesting that your opinions of Bill C-49 are quite similar.
My question is for Mr. Petsikas. In the last paragraph of your introductory remarks, you mention a more balanced, fully transparent and parallel review mechanism. Could you please expand on this?
Also, in reference to joint ventures of airlines, what are the advantages and disadvantages for passengers and citizens?
Mr. Petsikas: As I mentioned earlier in my remarks about the United States, we are faced with the following situation. In the United States, the administration decided to lift the application of a law — I believe we all agree on this — that serves to protect the interests of consumers. I am referring to U.S. legislation known as the antitrust laws. Unfortunately, there is no requirement to publish the basis or the reasons for the decision or to make public the analysis or review of the results and benefits of the joint venture. As I also mentioned earlier, we want to avoid this situation in Canada.
We are of the opinion that the Competition Act is fundamental and we agree, as my Air Canada colleague said, that there are good reasons for allowing joint ventures. We also completely agree that consumers could benefit greatly from joint ventures.
Air Canada is by far the largest airline in Canada. It is part of some very interesting networks and it can fine-tune what it offers to consumers. However, one question remains: Should we ignore the considerations and application of the Competition Act in this context and for this purpose? We think not.
Why not apply the existing regime to mergers? At present, two small Canadian airlines could apply to the minister to merge. Under current provisions, the Commissioner of Competition would examine this merger and consider the impact on consumers. The impact on air policy and other factors would be examined and, in the end, the matter would be referred to the Governor in Council for a determination. This is an example of two small companies that perhaps might serve 500,000 passengers per year.
With respect, the joint ventures we are talking about here concern airline companies such as United Airlines, Lufthansa, and Air Canada. With 1,600 aircraft in their fleets, this could affect millions of consumers every year. All of a sudden, we are told that the Competition Act is not all that important, proposals are to be brought to the minister, and he will make the decision. I believe that this is not the right approach.
With regard to the implications for consumers, our analyses, which are found in the appendices of the brief, already show that with this joint venture a dominant market share is emerging in Germany, Switzerland, Austria, and Belgium.
Furthermore, according to public data available, prices are rising. Why? It is simple. Two or three months ago, our colleagues with us today made an announcement — which I unfortunately do not have with me so you will have to take me at my word — about deeply discounted fares for European destinations, such as $600 to travel to Paris or Lisbon, and so forth, while the fare is $1,000 to travel to Frankfurt. At some point we need to ask ourselves why, and the answer is simple: They do not have competition and they dominate the market because they have a joint venture. Is this good for consumers? In this case, I would say no.
Mr. Rheault: Allow me to provide a different perspective. There is one fundamental thing we need to understand. My colleague says that the government wants to set aside the Competition Act with the proposed new joint venture approval process. That is not true. The proposed regime and the proposed bill retain a key player for the analysis of the competition. The Commissioner of Competition will be consulted and the guidelines for serving the public interest will be published. The minister, the Competition Bureau, and the Department of Innovation, Science and Economic Development have said so. Furthermore, representatives of the Competition Bureau, who appeared before the House of Commons committee, confirmed that they would continue to do robust analyses.
Senator Boisvenu: But it will not be robust.
Mr. Rheault: They confirmed that they would continue with their roles. This is a new regime that reflects what is done in other jurisdictions, such as the United States, where elements of competition will continue to be taken into consideration. However, the public interest will also be examined, as is the case for mergers. With the merger of airline companies, it is true that the issue of competition is important, but it is not up to the Competition Bureau to make the final decision.
What the representatives of the Department of Innovation, Science and Economic Development have said is that the process to be put in place seeks to mirror the process for mergers, bearing in mind that they are different transactions.
We are talking about large joint ventures, but there are smaller ones as well. There can be joint ventures on one or two routes on a seasonal basis. The process established and the flexibility to adapt to the scope of the transaction will be studied.
In any event, the competition analysis aspect will be very much a consideration. I also mentioned that amendments were proposed to make decisions and summaries of decisions publicly available so stakeholders can express their views as part of the analysis of the process.
I would also like to point out that, in our testimony at the House of Commons committee, we said that it was an Air Canada request and no other company was involved. In December, we found out that WestJet had been in talks with an American carrier to set up a joint venture. This really is a common industry model worldwide for carriers that want to expand their network, but Air Canada is not involved in a joint venture.
Senator McIntyre: My question is related to the one Senator Boisvenu asked about joint ventures. If I understand correctly, a number of European and American carriers are involved in joint ventures that cover their transatlantic routes.
Mr. Rheault, in your presentation, you talked about the Canadian regime for the review of joint ventures. How does the regime proposed in Bill C-49 compare to those of other countries?
Mr. Rheault: That is a very good question, Senator McIntyre. The Canadian regime for the review of joint ventures is similar to the American regime. Input is requested from the Department of Justice, but ultimately, it is up to the Department of Transportation, which is like Transport Canada, to make the final decision. The Department of Transportation has the expertise to deal with competition issues as well as the public interest issues related to joint ventures.
For example, Bureau of Competition representatives say their analysis focuses mainly on where certain flights take off and land, but public interest can have to do with the connectivity enabled by joint ventures.
For example, this year, we’ve been talking a lot about trade relationships between Canada and China because this is the Canada-China Year of Tourism. Air Canada offers flights to Beijing and Shanghai, but Canadian entrepreneurs want to explore markets such as Chongqing, Shenzhen, Hangzhou, Chengdu and many others. A joint venture with Air China would provide access to those markets. Our partnership means we can coordinate our schedules, which promotes tourism and access to markets because we can’t develop all of those markets directly at the same time.
Mr. Petsikas: I’d like to add to that if I may.
[English]
Mr. Petsikas: Yes, the proposed mechanism is very similar to what they have in the United States, where the Secretary of Transportation is the one who makes the decision, with input from the Department of Justice’s antitrust division.
However, let me say something totally outrageous at this point. Canada is not the U.S. Canada is one tenth the size of the U.S. air transport market. The U.S. air transport market, with all due respect to our very dear friends at WestJet, is a much more competitive, less concentrated market than Canada. You have far more robust, low-cost carriers, such as JetBlue, Southwest, super low-cost carriers and major alliance competitors.
One of the key factors the United States government takes into consideration is whether there are market factors that will discipline the behaviour of this joint venture they are now immunizing and exempting from the application of antitrust law. This is essential in the U.S. as a consideration.
We don’t have those same market disciplinary factors. In fact, I must say this, and I’ve said this before — and it’s not a comment on the policy, because we do support the policy — but in the United States, it is incomprehensible you would have policy impediments to competition to these immunized joint ventures. We have policy impediments decided by the Government of Canada against certain major international airlines that operate into Canada that could be vigorous competitors, especially across the Atlantic, to an immunized joint venture here in Canada. Those competitors, by policy, are not allowed to compete more than a few —
I am not commenting on whether that’s a good or bad idea; in fact, we’ve publicly supported that for other reasons. But in the context of what we’re doing here, that has to be taken into consideration.
Senator Mitchell: Gentlemen, thanks very much. Clearly, the problem you confront with competition is you’re between this rock, which is that you have to be Canadian, which is to protect Canadian interests in their own airlines, and on the other hand, there’s an international world that’s creating a great deal of competitive pressure that you have to get into in an effective way if you want to serve Canadians.
Clearly, the insertion into that is an assessment of public interest. I happen to have confidence an elected, accountable politician like a minister of transport would be pretty well placed to be responsible in doing that.
But could you itemize several of the specific things that will promote the public interest? For example, we’re going to get more international reach into China, where we’re doing, hopefully, more and more competition, and more and more enterprise and business. Are we going to get more simplicity in our ability to travel?
Mr. Rheault: China is a good example. We’re working now to finalize a joint venture with Air China. When the joint venture is in place, we can have better coordination of our schedule, our pricing and seat inventory. If we want to travel Canadians to cities we don’t serve directly, because there is no market with which we can serve them directly, we have better coordination with the partner to make sure the connection is convenient and the price is consistent.
In a world where mergers of airlines is complex due to foreign ownership restrictions that have their place in the law, joint ventures are a way to extend the reach of our network and keep the control of the airline Canadian. So that’s a very efficient manner.
It’s not unique to Canada. My friend commented on the fact there is a market share between Canada and Europe, but you also have to look at the market share between North America and Europe. We compete with North American joint ventures — big ventures such as American Airlines and British Airways; KLM, Air France and Delta. These are huge competitors as well. They also seek to travel the Canadian public to their U.S. hubs. That’s part of the equation as well. That will be taken into account when the minister makes his review.
That’s another thing that needs to be distinguished here: We’re not asking the bill or the Senate to approve joint ventures. We’re asking that a process be in place. This is a new business model that was not taken into account when the law was drafted, because it has only developed in the last few decades. Now the system, with the new proposed regime, as Industry Canada said, is intended to mirror the provisions for the merger so that we can now look at these transactions.
The Chair: Give me an example. You fly to China now, don’t you?
Mr. Rheault: Yes.
The Chair: So you fly Vancouver to where? Shanghai?
Mr. Rheault: Beijing and Shanghai.
The Chair: And what about Air China? Where do they fly?
Mr. Rheault: Air China will do Vancouver-Beijing and Montreal-Beijing, which we don’t serve.
The Chair: So what kind of joint venture would you have?
Mr. Rheault: The joint venture for us will make sure that, first, we can have discussions so the pricing on these routes is similar.
The Chair: What do you mean “the pricing is similar”?
Mr. Rheault: The pricing is coordinated.
The Chair: Isn’t that monopolistic?
Mr. Rheault: No. First, there are other carriers on the market between Canada and China.
The Chair: I’m sure there are.
Mr. Rheault: I think there are seven Chinese carriers.
Second, the timing of these flights will be coordinated so they can provide for enhanced connectivity. I’ll give you an example. If you want to add a flight between Toronto and Beijing, you might add at the same time as your partner because it’s prime time. If you have a JV, one can do the morning and the other can do the afternoon, so travellers have more options. We share the revenue on those flights.
It’s really the partners who put together their assets to offer prices and schedules that are more convenient and offer more options to passengers.
The Chair: But if you can fill two planes, and Air Canada is filling one at night, wouldn’t Air China say, “I’ll do it in the morning and fill that one”? Why would they both compete for the same time?
Mr. Rheault: The traffic patterns may depend on the time of the flights. You might have a traffic pattern for a business traveller. If you want to have better options for customers, if you coordinate your schedule and share the revenue, then you can offer more options to passengers, and you will share the revenue on those two flights. Those are the optics of the joint venture.
The Chair: I’ll believe it when I see it.
Mr. Petsikas: Mr. Chair, your reaction before with respect to the fare coordination was what I call a real world reaction. We like to make fun of ourselves sometimes in the business by saying there’s the airline business and now the real world and how things work. And in the real world, we know competitors are not supposed to coordinate pricing that the consumer pays for because, of course, they don’t maximize the efficiencies that they should normally for the benefit of the consumer.
All we’re saying is we understand there are potential benefits here, but let’s bring a little real world reality in here and a real world check. That’s the competition law and the competition commissioner has to have his or her say in this process.
I understand, before the comments about yes, he or she can be consulted, but let’s be clear. It’s an analysis, recommendations, thank you very much, it’s put on a pile and we’ll decide how we wish. The current merger provisions allow for a fully transparent parallel process to the cabinet. And the cabinet will decide. If the cabinet believes that it’s a good idea, that’s fine. If the cabinet thinks that the Competition Commissioner has serious issues that have to be looked at, then they will have to go back to the drawing board.
Mr. Gibbons: The senator asked about public interest and what would be in the public interest. I think that ensuring our company remains profitable and entrepreneurial is very important. When we look at the trend lines in aviation, fares are at a six-year low according to Stats Canada. In my remarks, I talked about social and economic licence. We feel we’re meeting that on behalf of Canadians and we have a lot of pride in doing that.
For our company, it’s our profitability that allows us to buy 10 — and an option for an additional 10 — 787 Dreamliners. It’s our entrepreneurship and profitability that allows us to expand from six Canadian cities to London, Gatwick on a service that everyone told us was the most saturated service around.
So competition and that entrepreneurial profitability of our company is what is bringing that choice and competition and the downward trend on fares in Canada. That’s what’s in the public interest.
The Chair: Don’t you think, Mr. Gibbons, the reason the fares have gone down is because you’re now a more aggressive competitor to Air Canada?
Mr. Gibbons: Competition is good.
The Chair: Exactly. That’s my point.
Mr. Gibbons: Five years ago we launched our regional airline called WestJet Encore. We will have the third-largest fleet of Bombardier Q400s in the world, and those have some of the best aerospace jobs in this country. But what those planes are doing is bringing down the price of regional travel. So it shouldn’t cost you as much to fly from Halifax to Sydney as it does from Montreal to Paris. We’re trying to meet the needs of Canadians in the markets where they demand those services.
The Chair: I’m sorry, senators, but I have broken my own rule. I’ve gone on and on here. It was the only time that I asked a question.
[Translation]
Senator Maltais: I’m going to ask three quick questions in a row, and then you can answer them.
The idea of a travellers’ bill of rights is a very good one, but I would like to speak on behalf of the silent majority, the people who never complain. You represent Canada’s three major air carriers, and you are appearing before us today.
Here’s something a lot of people hate. When passengers check in, they can bring a little suitcase to put in the overhead bin on the plane. Lots of people don’t follow the rules though. They bring their little suitcase plus three or four other bags. Flight attendants repeatedly ask them to sky-check those bags, but nobody listens to them. I’m talking about domestic flights, not international ones. My colleagues and I are often on those flights, and people’s bags take over the place. We pay the same fare, but we don’t bring the entire contents of our houses on the plane.
Second, does Air Canada plan to replace its DASH fleet in their short or long term?
And third, is there still a pilot shortage?
My questions are for all three witnesses. Anyone who wants to respond can jump in.
Mr. Gibbons: Thank you for your question.
[English]
Your first question is with respect to baggage policy. That is a challenge in the winter. It’s a challenge with space. I can say the new aircraft we’ve purchased have very generous bin space. Are you specifically asking about carry on versus checked bags? It continues to be a challenge.
Our goal is always to provide as much option and flexibility for our guests as possible. That’s always the goal. Believe me, no one wants to be on time with our departure more than the pilot and crew of our aircraft. It’s our business to be on time. So any impediment to that and any solutions to facilitate that movement of the aircraft is something we would welcome feedback on.
Surprisingly, I won’t comment on their fleet.
With respect to the lack of pilots, it’s something that is certainly on our radar. We have been closely watching the flight and duty time regulations. That will have an impact on pilot supply. I think you’re going to hear that from many groups, although it’s not in Bill C-49, but it’s not something that we are extremely seized with at the moment. It could be an emerging issue.
[Translation]
Mr. Rheault: I won’t repeat what my colleague just said. I’ll answer the question about Air Canada’s DASH 8 fleet. Right now, we are redoing the aircraft interiors to provide a more pleasant experience for passengers. Those planes have less capacity. Some have 37 seats and others have 50 seats.
Senator Maltais: Are you talking about the DASH 100s?
Mr. Rheault: I’m talking about the DASH 100s and DASH 300s. Those planes allow us to serve markets that larger planes can’t get to. They really serve a purpose. We announced that we will extend our agreement with Jazz to keep those planes active in the coming years. I can’t say any more than that about longer-term plans right now.
Senator Boisvenu: Families have been contacting my office for years to tell us what happens when a loved one dies abroad. Do you think this bill could be more specific about the service airlines provide to families to bring the remains or ashes back to Canada, or is it already your policy to provide that service for free?
Mr. Rheault: I’d have to check, but I think our fare rules cover that. I’ll find out and get back to you.
Senator Boisvenu: You can send us that information?
Mr. Rheault: Yes. We have fare rules for that, and I imagine every company has its own rules.
Mr. Petsikas: I agree with Mr. Rheault. I would have to check our rules too. Right now we handle it case by case to help customers who might be struggling with this.
Senator Boisvenu: Or to give them the information they need.
Mr. Petsikas: Exactly. The point is to decide if there should be something in the act about that. That is a whole separate issue. I would say no. We can deal with it in our regulations or address the issue in our fare rules.
[English]
The Chair: Thank you.
Senators, I want to remind about our clause-by-clause consideration of the bill. We’ve all agreed on March 27. If you have amendments, contact the law office, the law clerk so that we don’t have to do it after the fact, to make sure the amendments fit what’s proper, and then if it’s past that day, it’s a done deal.
We’re going to send a memo so that everybody gets it as well so we can move this process along.
(The committee adjourned.)