Proceedings of the Standing Senate Committee on
Transport and Communications
Issue 15 - Evidence, February 5, 2013
OTTAWA, Tuesday, February 5, 2013
The Standing Senate Committee on Transport and Communications met this
day, at 9:32 a.m., to study emerging issues related to the airline industry.
Senator Dennis Dawson (Chair) in the chair.
The Chair: Honourable senators, this morning we continue our study
on the Canadian airline industry. Appearing before us today is John McKenna,
President and Chief Executive Officer, Air Transport Association of Canada.
He is accompanied by Michael Skrobica, Senior Vice-President and Chief
Financial Officer. Gentlemen, it is a pleasure to welcome you again.
Mr. McKenna, the floor is yours.
John McKenna, President and Chief Executive Officer, Air Transport
Association of Canada: Thank you and good morning. ATAC has represented
Canada's commercial air transport industry for almost 80 years. We have
approximately 170 members operating in every region of Canada that provide
services to a majority of the more than 700 airports in the country.
We appeared before this committee in 2010 to talk to you about the
long-term viability of the Canadian aviation industry. Our message was that
a major change in the Canadian government's attitude towards air transport
was needed. Your report clearly reflected our concerns and our desire for
the Canadian government to start seeing our industry as a vital economic
enabler, instead of simply as a revenue stream.
We appeared before you in 2012 to address specifically the issue of
aviation in the Canadian North. Our main message to you then identified that
the North requires special economic and political consideration and that the
popular one-size-fits-all model simply cannot be applied to that region. We
promoted three ideas we would like embedded in the Canadian policy affecting
the North: First, the user-pay concept does not work in the North. Second,
more infrastructure is needed in the way of paved runways and for improved
navigation and communication aids. Third is the need for a support-the-North
policy. We encourage you to include these ideas in your next report.
We are quite happy with the work accomplished by this committee so far.
We feel this committee believes in aviation and the vital socio-economic
role it plays.
Today we will speak to you about the need for greater supervision of
airport governance and Transport Canada's responsibilities towards airports
since the creation of the National Airports Policy.
Our intention is not to question the dedication and professionalism of
Canadian airport authorities. It is to ensure that the Canadian people can
rely on the fact not only that their assets are being managed properly but
also that the Canadian government has mandated someone or some agency to
oversee the governance of this important element of Canadian heritage.
In the 20 years since the management of airports was first privatized,
governance standards have been reviewed in all major sectors of the Canadian
economy. Banking, telecommunications and international trade have all had
their standards in management and financial ethics reviewed to better
reflect Canadians' changing expectations. Much like large Canadian
corporations managing national resources, Canadian airport authorities must
become more accountable to the public regarding their governance.
Airports are a key element of the Canadian transportation system, a vital
economic tool, a lifeline to the North, a crucial link to the international
community and a major Canadian asset. Your report supported that statement
with solid, empirical evidence. From a financial point of view, the net book
value of the top eight airports alone has gone from $1.2 billion in 1996 to
$11.4 billion in 2011. This growth in value, resulting largely from
continuous investment, has been paid for almost entirely by the travelling
Ever since the Canadian government divested itself from airports in the
1990s, Canada has retained only a safety and security mandate. No one
answers the phone at Transport Canada when someone calls with a concern over
airport management decisions. Airlines and other air operators — fixed base
operators, and maintenance and cargo service providers, among others —
signed long-term leases with the federal government dating back before the
divestiture of airports. These companies rent land on the airport grounds
and invest in buildings, equipment and other installations to operate their
When problems started arising a few years ago over the fact that some
airport authorities were increasing rents by up to 200 per cent, tenants had
no one to turn to but the courts to address their disputes. Tenants had been
assured that it was going to be business as usual for them after the
privatization. Unfortunately, that has not been the case. While the airport
authorities took over the leases, Transport Canada is still the signatory on
the deeds. However, tenants cannot speak to anyone of authority at Transport
Canada on airport lease interpretation and other related matters. Under the
National Airports Policy, NAP, the federal government maintains its role as
regulator but has changed its role from airport owner and operator to that
of owner and landlord.
The NAP states that the federal government will retain ownership of the
26 airports identified as part of the National Airports System. However,
under the NAP they will be leased to Canadian airport authorities. These
local operators will be responsible for financial and operational
The airport authorities do not own these national assets; the Canadian
people do. The problem lies in the fact that many of the airport authorities
do not feel accountable for their management decisions to the government, to
the public or to the industry that is reliant upon them. The Canadian people
have been asked to blindly trust the local airport authorities to manage
these assets, as they see fit, for leases of up to 60 years. In accordance
with the NAP, the operation, management and development of the 26 airports
considered most essential to Canada's air transportation system and in
forming the National Airports System were transferred under long-term lease
agreements to Canadian airport authorities.
The privatization of Canadian airport management was meant to enhance the
viability and competitiveness of airports by allowing them to operate in a
more commercial and cost-effective manner, and to provide levels of service
commensurate with local demands and resources.
While relinquishing its role as operator and financier of the National
Airports System airports, Transport Canada retained its mandate to ensure
that the certified airports continue to operate in a safe, secure and
effective manner. In its role of safety regulator, the federal government
continues to set safety and security standards for all airports. Airports in
the National Airports System are governed by a board of directors who in
turn appoint a president and a CEO. The National Airports Policy goes on to
say that Canadian airport authorities must be not-for-profit corporations
guided by a local board of governors, that the board members will be
representative of the local community and will not include government
employees or elected officials, and that there will be federal and
provincial government representatives on the board of directors.
Unfortunately, there is very little air transport expertise on any of
these airports' boards of directors. Community involvement is very
important, but knowledge of the industry you serve is critical.
The National Airports Policy also says that the annual general meeting
will be open to the public, that Canadian airport authorities must establish
community consultative committees, and that the public will have access to
Canadian airport authorities' key business documents.
The reality is that there is little or no transparency whatsoever in the
management of airports. The Canadian airport authorities are currently
managing these public assets for their own benefit. Other than a succinct
annual general meeting, many of the CAAs do not exceed the minimum
transparency requirements of the National Airports Policy.
All the administrators are required to do is submit audited financial
statements at the annual general meeting. Information supporting the
financial statements is hard, if not impossible, to access. For example,
senior management salaries and travel expenses are not released. Investment
projects are overseen only by the internal management team. The public is
not consulted about major infrastructure projects but simply informed of
them, although those projects are in large part funded through the airport
improvement fees paid by the passengers.
The maintenance of infrastructure has to be financed by the operating
budget of the airport. The greater the investment in infrastructure, the
less efficient the airport becomes unless it can attract new traffic. This
results in greatly increased landing fees, higher parking fees and higher
rents for airport and terminal tenants. All of these budget items end up
being paid for by the travelling public.
The National Airports Policy also requires that the Canadian airport
authorities must have a performance review conducted by an outside reviewer
at least once every five years. Our experience is that these reports are
extremely difficult to obtain and are not available under the Access to
Information Act as the CAAs are exempt from the law, being private
Although we are convinced that most airports are managed with high
ethical standards, the fact remains that the government shies away from its
responsibilities and now predominantly sees airports simply as a revenue
This raises a problem particular to the Canadian North. While the
government remains the owner of the National Airports System, it has given
all of the airports in Nunavut, Yukon and the Northwest Territories to the
territorial governments. These airports are essential to the very livelihood
of the northern regions, yet they benefit little from financial support from
the Canadian government. This means that the small communities and other
airport users are the sole supporters of the northern airport system. Given
that there are no other modes of transport, unlike in other provinces where
the federal government supports the transport infrastructure, we strongly
believe that the government should offer financial support to sustain the
Another major concern is that many airports outside the national airport
system are often key to their region and must be protected. These airports
are often either satellite airports to larger airports, or strategic because
of their mission or location. Ownership of these airports has been
transferred to regional and municipal governments, local airport
authorities, the private sector or other interests. These airports are often
very valuable and offer great appeal to real estate developers or city
administrators more interested in the tax potential than the economic
potential of an airport. Short-term gain can lead to huge long-term economic
ATAC proposes the following five recommendations.
First, the government should appoint a national supervisory body or
person to oversee the long-term management decisions of the Canadian airport
Second, the Minister of Transport should hold a national summit or, at
the very least, stakeholder consultations on airports to (a) review the
privatization experience 20 years later, and (b) implement changes to the
National Airports Policy in view of the foreseeable needs of Canadian
airport authorities and of the airline industry for the next 20 years.
Third, any significant proposed change in the use of airport lands
divested to local governments or other interests must be subjected to public
consultation and subsequent approval by the federal government.
Fourth, there should be two representatives from the aviation industry on
the board of directors of each of the 26 airports in the National Airports
System, one appointed by each of the two national associations representing
airlines: the Air Transport Association of Canada and the National Airlines
Council of Canada.
The federal government should strike a better balance between airport
expansion projects and the need to respect users' business models and offer
financial support to sustain the operations of the northern airports.
I thank you for your attention. We would be happy to answer any questions
you may have on this presentation or on any other aviation-related material.
We look forward to reading your final report.
The Chair: Thank you, Mr. McKenna. So do we. We are hoping this
will be one of the last public meetings before we get into the preparation
of this report.
Because of that, I would welcome everyone to ask any questions they think
have not been addressed so far that the association could address for us.
Mr. McKenna, I appreciate that you clearly made recommendations. That is
our objective from witnesses — not only an analysis of the situation but
some proposals for change.
Before giving the floor to Senator Doyle, I would like to introduce our
colleague Senator MacDonald from Nova Scotia, more precisely Cape Breton.
Senator Léo Housakos from Montreal, Senator Eggleton from Toronto,
Senator Merchant from Saskatchewan, Senator Mercer from Halifax, Senator
Greene from Halifax and Senator Doyle from Labrador — I sometimes call him
Senator Unger from Alberta.
Senator Maltais from the Quebec City region and Senator Boisvenu, who is
joining us this morning.
Senator Doyle: Change it around; it is Newfoundland and Labrador.
The Chair: It is the same mistake as when I call you Tremblay.
Senator Doyle: Mr. McKenna, you made a submission a couple of
years ago to the competition review panel in which you recommended the
elimination of all industry-specific input taxes, fees and charges, which
hurt investment. Instead, you said taxation probably should be limited to
the output of business activity, profits and wages. Could you talk a little
bit more about that and be more specific as to what you meant by that? I
think it was the competition review panel back in 2008. I am going back to
something I saw online.
Mr. McKenna: That predates my arrival. I will ask Mr. Skrobica to
answer that question.
Michael Skrobica, Senior Vice-President and Chief Financial Officer,
Air Transport Association of Canada: At that point in time we believed,
and we still believe, that the taxation of inputs is inappropriate. It runs
counter to the argument that led to the establishment of the goods and
services tax. We believe that the goods and services tax is appropriate. It
taxes the net increase in the service delivered to the consumer and is
appropriate for the airline industry.
Let me give you some examples of taxes with regard to the taxation of
One of the key ones that we have is fuel excise taxes. These are charged
on our fuel, and they are not a recoverable tax. They are paid, and on top
of that you have other taxes: provincial sales taxes and provincial excise
taxes. Again, those are not recoverable by the airlines. They are a tax paid
and, as a consequence, they have a tendency, because they have to be
recovered by for-profit enterprises, to be recovered from the public. This
puts our operations at a disadvantage to other jurisdictions, most notably
the United States of America.
Senator Doyle: Following up on that, do you think that the air
transportation industry, for instance, maybe should be taxed on a more level
playing field, say with bus or rail or maybe with its international
Mr. Skrobica: From our perspective, we believe it really should be
done vis-à-vis our international competitors. We have seen a major transfer
of passengers in areas that border the United States to American airports
because it is cheaper to travel from a border community, be it Buffalo or
other communities that border Canada, to other communities inside the United
States. It makes our industry less competitive.
Senator Doyle: I was just wondering about something. Regarding all
of these airport fees, rents and what have you, how would you feel if
government decided tomorrow to eliminate all of those industry costs and
have them funded through general taxation, as they do, say, in Amsterdam? I
think they do it that way there.
Mr. Skrobica: We were supporters of the GST, and presumably are of
the HST as it continues to evolve across Canada. We felt that the GST was an
appropriate means of taxing our industry. We feel that industry-specific
types of taxes, such as the fuel excise taxes, discriminate against us
vis-à-vis our international competitors.
Mr. McKenna: If I may add to that, it is something that would be
very desirable, but we consider it probably unlikely, as the federal
government takes in about a billion dollars a year from our industry,
outside of GST and all of those things. It takes in about $100 million in
excise tax, about $600 million in the Air Travellers Security Charge, and
$350 million or $300 million from the airport rent. That is a billion
dollars a year in the government's coffers, and I do not think the
government will sort of let go of that revenue; we are being quite realistic
in thinking that is not about to happen.
However, there are other ways the government could help us become more
competitive, but we do not think that airport rents and all those things are
very high on the government's agenda.
Senator Doyle: Okay. Thank you.
Senator Merchant: Good morning and thank you. Many of the things
that you said this morning we have heard more than once. The chair
introduced me as a senator from Saskatchewan. For places like Regina and
Saskatoon, which are the two major centres, we do not really have very good
service. Do you have some ideas as to how we could get better service? By
that I mean that from Regina, for instance, which is the capital of our
province, we cannot fly directly to very many places. We have to go through
Toronto, Winnipeg or Calgary.
Non-stop flights are difficult to get. There is a flight that they added
from Saskatoon and a different one from Regina, for instance, that flies
directly to Ottawa and then, I think, carries on to Montreal. However, it is
available only during the summer months — mid-May to mid-September — because
those are when there are more travellers.
What is the solution for people like us and business people who are
coming in and out of Regina? Our province has more activity because of all
our resource industries. What are your suggestions? To whom can we appeal
for better service?
Mr. Skrobica: You are right to note that you get more services as
more people travel, and you have that generally in the summertime. Some of
the things that we are talking about with regards to the reduction in the
taxes would help lead to reductions in airfares. With that, the airline
industry uses a rule of thumb that a 1 per cent reduction in airfares
generally results in a 1 per cent increase in passenger traffic. With more
travel, there will be more choices automatically because the airlines will
serve their needs on that basis.
In the short term, without the reductions in the industry-specific taxes,
I cannot offer you much hope for an immediate increase. The best that we can
do is to see smaller-gauge or smaller aircraft serve more direct routes. We
now do have small aircraft that can serve longer routes and, as a
consequence, provide you with more direct service.
Mr. McKenna: You can console yourself with the fact that most of
your colleagues around here, be they from Quebec or Newfoundland and
Labrador — did I get that right?
Senator Doyle: Yes.
Mr. McKenna: — are in the same situation. Ask the senators flying
out of Quebec City; there are very few direct flights out of there to any
other major airports in Canada, other than Montreal, of course. It is very
difficult for the airlines to balance that. You are not alone in that
Senator Merchant: I understand that, but Canada is a vast country,
as you know. Therefore I do not feel so bad for people who live in the
triangle because the distances are smaller. Even if they have to make a
change, I still think they have more frequent flights. However, I think
there are only two or three flights a day out of Regina, one in the morning
and one in the evening.
It takes longer to get here. Sometimes it takes six or seven hours to get
from Regina to Ottawa. I do not think it would take six or seven hours for
my colleague from Quebec City to get to Ottawa. You could drive it, as well.
We are farther away. It is frustrating. We complain a lot, but we do not
know to whom we should complain; we just complain to each other. Thank you
Senator Mercer: As the chair has mentioned, if this is not the
last hearing we will have then it is one of the last hearings, but it was
worth waiting for. I want to thank you for one of the best reports and best
presentations that we have seen. You have given us five very serious and
very doable recommendations. Perhaps when the government considers your
recommendation no. 2 — that the Minister of Transport hold a national summit
or at least stakeholder consultations — the minister might even consider
charging this committee with that responsibility sometime in the future,
since we are already halfway down the road and familiar with the topic.
Now I will ask my questions. It strikes me that airport governance is a
bit of a shell game; it talks about moving the blame around, but the blame
never rests with them. I notice that certain airports — one of which might
be within 10 kilometres of where we sit — have signs up now in the baggage
areas that baggage delivery is the airline's responsibility. Everything is
somebody else's responsibility other than the airport authority's. I would
suggest that the running of the airport is the airport's responsibility,
whether it be from the time I come in the front door or from when I come in
at a gate. The airlines are a part of that, but I find that very curious.
You talked about AGMs, and this is the first time we have talked about
this in this report. They are supposed to be open to the public. I try to
pay attention to what is happening, and I do not remember seeing a notice in
my community to attend the annual meeting of the Halifax International
Airport Authority. Are AGMs supposed to be published? Are airport
authorities supposed to invite people?
Mr. Skrobica: Generally, the airports publish it in the newspapers
in advance of an annual general meeting, and generally they are public. I
can speak to the Ottawa airport, which regularly publishes it in both of the
two major local papers.
The unfortunate fact of the matter is that very few people attend these
Mr. McKenna: If I may add to that, I have seen too many instances
where notices were published 48 hours before the AGM. In other words, "We
are telling you to be there but we do not want you to be there."
Senator Mercer: I think this goes to your other point that the
National Airports Policy says that the Canadian airport authorities must
have a performance review conducted by an outside reviewer at least every
five years. Then you go on to say that you cannot get copies of these
reviews. It is a bit silly to have the review if the major stakeholder, or
two of the major stakeholders, do not have access to that. The principal
stakeholder is the public, who are paying in that they are either paying
through their ticket price or through their taxes.
It should be a definite recommendation that we make that these reports be
made public in due course, though not necessarily immediately as they are
presented. Would that sit well with you?
Mr. McKenna: Not all airports have the same policy towards those
things. Some people are much more open and transparent than others. However,
these reports are paid for by the federal government. Therefore, they should
be available through the ATIP process, but there is a dispute there. If you
try to speak to the Transport Canada people about that, they draw a blank.
They refer back to the airport, and the airport says they are not atypical,
so take a long walk off a short pier, basically.
Senator Mercer: As an opposition member, it would be easy to say
that the government should get rid of the fees, but as a realist, and as
this is the Senate, not the House of Commons, we are supposed to think about
things with a little more detail. If the government were to remove some of
these burdens on airports, airlines and thus air travellers to generate
extra travel that we know is going south of the border, do you have any idea
where we could supplement that income? The government, as you said in your
own presentation, cannot give away $1 billion worth of income without
knowing that in some form there will be $1 billion generated in taxation
somewhere else to offset it. The government is running a huge deficit as it
Mr. Skrobica: There is one area that we could look to. There are
approximately 4.5 million to 5 million passengers that travel from south of
the border. If we could encourage those people to travel from Canada, all of
those tickets are eligible for GST or HST, and that would make up a large
chunk of the revenues foregone by eliminating some of the direct taxes and
would make the pain of giving up, for example, a fuel excise tax more
palatable to the government.
Mr. McKenna: The Canadian Airports Council claims it is closer to
7 million people who cross the border. The problem lies in the fact that the
government does not believe that any of those savings will be passed on to
the passengers should it cancel airport rent. That is a viable fear. One can
be afraid of that. If you do that, you must have a mechanism to ensure that
the savings are transferred to the passengers. It is easy to say it will not
be transferred and therefore we are not doing it. However, the mechanism can
be set to ensure that it is transferred.
Senator Mercer: I think you are right on. One of the issues is
that we talk about removing these things but without any guarantees that the
consumer gets a cheaper ticket price in the end. Whatever we do, we have to
address that issue, and that is where I come from, ensuring that consumers
have an opportunity to have a reduced price so they can travel more and at a
more economic rate.
Senator Boisvenu: Mr. McKenna, Mr. Skrobica, thank you both for
your report and brief, which were very thought- provoking.
In your report, the words "lack of transparency" come up often. The
complexity of the issue lies in the fact that municipal or provincial
organizations are managing airports, but they are doing so as if they were
private. I feel that the situation is somewhat contradictory. Our municipal
or provincial governments are managing taxpayers' money, and they usually do
that in a very transparent manner. Canadians want to know where their taxes
When it comes to airports, since a large amount of tax is involved,
Canadians obviously want to know where that money is going. Have I
understood your brief correctly?
Mr. McKenna: Of the 700 Canadian airports, 26 are still the
property of the federal government, the airport management system. The
government is still the sole owner of those airports. We are talking about
leases of 60 years and over, whose management is being transferred to
regional entities. Other airports, such as the Saint-Hubert airport in
Quebec and northern airports, have been transferred either to municipal
governments, private companies or commercial corporations.
In the case of the Saint-Hubert airport, for instance, the government
included a clause whereby the owners must use it as an airport for ten
years. After that, they can do whatever they want with the land. That
ten-year period is ending next year, and I am willing to bet that, in three
or four years' time, the Saint-Hubert airport will have been sold off to
entrepreneurs and will no longer exist. That is one of my concerns. I have
written several articles on the topic and would gladly send them to you. The
government has washed its hands of those airports, and I am saying that
someone should be held accountable. Those airports are actually managed by
municipal or other entities.
The 26 national system airports I identified earlier are subject to the
regulations, the board of directors and public general meetings. Those
airports, which serve over 200,000 passengers a year, are the most strategic
So we are concerned about them because they are key airports. Other
airports are also a source of concern for us because some of them are
strategic and important to regional development. We do not want a municipal
administration — which does not believe in aviation — to suddenly want a
specific sector of its region to develop more and to decide to get rid of
that airport because, once the airport is gone, it will be too late. So
those are our concerns.
Senator Boisvenu: Do you suggest any particular model when it
comes to airport management, regardless of who is charge? Are you more
inclined toward a privatization approach or a public-private partnership?
Mr. McKenna: The administration of the 26 national system airports
was privatized. Those airports remain the property of Canadians. The
government clearly has a responsibility to ensure their sound management.
The situation should be monitored more closely.
Regarding other airports, the government could simply establish some
guidelines, set the course to follow, without necessarily getting involved
in the management.
Senator Boisvenu: Billions of dollars are being spent at airports,
especially at those 26. For instance, the amount of money spent at the
Montreal airport is huge. Perhaps infrastructure was built that cannot be
Mr. McKenna: Exactly.
Senator Boisvenu: That places tremendous pressure on ticket sales
and makes those airports unable to compete with American airports. We must
break this vicious cycle, where a great many Canadians go to the United
States to fly. That puts even more pressure on Canadian airports.
Mr. McKenna: The model must be reviewed. Most of the time, an
airport's biggest source of revenue is its improvement fee. Airports,
especially those in the national system, are all not-for-profit; they cannot
make profit and must therefore reinvest money. That is an amazing source of
revenue. Those people are investing more and more. However, the revenue from
those airport improvement fees cannot be used to support operations, but it
can be used for capital investments. The problem is that large airports,
which are expensive to maintain, end up increasing other fees, thus becoming
Senator Boisvenu: You say that the government has delegated
airport management to private organizations that are not accountable to
Canadians. They must ensure that the investments made are in line with
travellers' ability to pay without constantly increasing the gap between
ticket costs for Canadian and American travellers. How do we find a way out
Mr. McKenna: In our brief, we say that the government must assume
some of those responsibilities.
Senator Greene: Thank you very much for coming. I have been
enjoying your presentation. With regard to your first recommendation, that
the government appoint a national supervisory body or person to oversee the
long-term management decisions of the Canadian airport authorities, I like
your intent very much. I agree with Senator Boisvenu that these are mainly
provincial or municipal businesses, and it seems to me they are more like
public utilities in a way. Your recommendation would lead to a little more
bureaucracy. What are your thoughts regarding having provincial utility
review boards manage them?
Mr. McKenna: Regardless of how it is done, our first intent is to
ensure that these assets, which belong to the Canadian public as far as the
26 major airports are concerned, are protected. The government needs to
As for those airports that have been transferred to other authorities and
other interests, guidelines could be established for how this management
could be done without necessarily getting involved in the management.
However, if a city, for example, that owns an airport decides they do not
need this airport anymore because they make more money by selling off the
land and building complexes, that is an important asset to that region; that
is one sacrifice that is gone for good.
We are saying that the government should establish some kind of a
supervisory role or a process by which this decision can be made and
approved by the federal government. I am not telling the federal government,
by any means, certainly not Transport Canada, that it should get involved in
any of the management of these things. We have problems enough as it is. All
I am saying is that these people should be told, "We have given you an
asset to manage or to own, but we expect you to do so in the proper manner,
and if you are going to change the mandate or the mission of that territory,
you just cannot do it overnight; it must go through a process."
Senator Greene: Would you think that provincial utility review
boards would be equipped to handle that?
Mr. Skrobica: They would be, in the case of airports that are not
Canadian airport authorities. Canadian airport authorities are still owned
by the federal government. There is a role for the federal government to
play, obviously, with respect to those 26 airports.
For the smaller ones that have been transferred to provincial control or
municipal control, yes, an oversight mechanism that is administered by the
provincial government would be entirely appropriate.
The Chair: I have a supplementary.
The Chair: Mr. McKenna, Quebec has no board in the pan-Canadian
sense of the term. If you have a problem with a Montreal airport and one of
your members has a problem with the airport's manager, where will you go to
appeal in the case of an impasse, where negotiation is not an option?
Mr. McKenna: Before the courts.
The Chair: There is no system either at Transport Canada or at the
Quebec department of transportation. So your members automatically have to
go before the courts.
McKenna: That was the example I gave earlier. A number of airport
authorities increased their rent by up to 200 per cent. People knocked on
Transport Canada's door and were told that the department was closed. Those
people had to turn to the courts or arbitrators to try to resolve the
issues. No authority deals specifically with airports.
Senator Unger: My questions have been already asked. Thank you,
Senator Maltais: Mr. McKenna, you said earlier that many Canadians
go to the U.S. to fly. It is clear that this is a matter of cost for them.
However, Canada collects a tax passengers are uncomfortable with. I refer to
it as "prisoner's tax."
When we get off the airplane and enter the airport, we are asked for $25
or $30 for airport improvement. I went to Vancouver, and I thought the
airport was very nice. I did not see why I had to pay, but I did not have
any choice if I wanted to come back to Montreal. Once in Montreal, I had to
pay again. I am thinking that, if they do not have the means to maintain an
airport, they should tell us, so that we can take the train.
That tax is difficult to swallow because, when we buy a ticket, we are
not told about it. It is the little things that anger consumers. They are
informed once they are already in the funnel and cannot turn back. When
travelling to Cuba, we are told that we must pay a tax to exit the country;
that is clearly indicated by travel agencies. However, when we travel in
Canada, we are trapped. Consumers tell themselves that, if Canada steals
from them, next time, they will use American companies. That is one of your
problems because the "prisoner's tax" is hurting you.
If you cannot afford airport repairs, tell us, so that we can launch a
fundraising campaign and make the repairs or not, but at least we will know
in advance. There is nothing worse than falling into this trap.
Mr. McKenna: You are referring to airport improvement fees, which
should normally be included in the price of your ticket. It may not be
specified, but those fees are included in the price you pay for your ticket.
You are not supposed to be asked to pay an additional fee at the airport for
that. However, if that is the case, you are being had for a second time.
When you buy your ticket, the airport improvement fees are automatically
added, and the amounts vary from airport to airport. The airport decides
what the amount will be. It may vary between $15 and $30, each way,
depending on the Canadian airport.
Senator Maltais: How many consumers know that they are paying that
notorious tax? I cannot grasp the fact that the company you are flying with
not only collects other taxes, surcharges, a counter tax and baggage fees,
but also collects an airport improvement fee. I should not be paying to
improve the Vancouver airport if I go there once.
Mr. Skrobica: You are referring to not just the airport
improvement fee but also all the other ancillary charges. Recently, the
Canadian Transportation Agency promulgated new regulations with regard to
airfare advertising. All airlines that operate in Canada are now obliged to
include not just the airfare but also the ancillary charges. If you purchase
your ticket by way of the Internet, you will get a breakdown, generally, of
the various charges before you press the button to purchase your ticket.
With regard to the airport at Vancouver, they undertook two series of
very extensive additions and renovations at that airport. They borrowed
significant amounts of money. We are talking hundreds and possibly a billion
dollars overall. That will be paid off over time and it will be paid by way
of the airport improvement fee.
If you travel in the United States, there are similar charges to the
airport improvement fee. It is called a PFC in the United States, a
passenger facility charge. It is less, and it is less because the American
government invests in their airports, whereas in Canada the Canadian
government takes more than $300 million out from the airports. There is a
consequence to that, and it is your prisoners' tax.
Senator Maltais: You should advertise to explain this to
Canadians. You should tell them what the real cost of a plane ticket
consists of. Canadians may prefer to use the services of Canadian airlines.
Currently, Canadians compare the prices between the United States and Canada
and do not really care about improving your airport. What matters to them is
what is left in their pockets. You have a duty to inform Canadians of what
the cost of a plane ticket includes. Taxes, costs, improvements, glasses of
water paid between Montreal and Washington must be accounted for. Those
types of things discourage Canadians.
Mr. McKenna: We agree with that.
Senator Boisvenu: Does the migration of Canadian travellers to
American airports result in greater economic losses than what the federal
government receives in taxes?
Mr. McKenna: That is difficult to gauge. But we do feel that, by
becoming more competitive, Canada's aviation industry will attract more
travelers. We think that, in the medium term, the government will compensate
with a more viable and profitable industry that will generate more revenue
for the government in taxpayer dollars. However, I could not tell you
whether there is an automatic one-to-one cost.
Senator Boisvenu: Has your industry calculated the cost of
Canadian travellers migrating to American airports? I ask because, if we
mean to convince policy makers to reduce taxes imposed on travellers, we
will need real figures to determine what kind of losses are stemming from
the current taxes. Without that information, we could end up working with
Mr. Skrobica: We have not conducted an economic study on the loss
of passengers who go south of the border to travel. However, the Canadian
Airports Council has a study with numbers on the economic loss to Canada.
That would provide support to any Senate recommendations dealing with this
The Chair: I asked the clerk to contact the association to ask
that it provide us with the current figures on the number of transborder
I do have another question. We know that the reason passengers cross the
border is not the service or the desire to go to the United States. They do
it because they expect to save money. But when four million passengers have
gotten used to crossing the border — going to Burlington, Plattsburg,
Buffalo or Bellingham — even if the taxes are abolished and airport fees
reduced, do you think all those passengers will easily come back to Canada?
Mr. McKenna: It is easier for someone living in Windsor, Ontario,
to cross the border than to get to Toronto to catch a flight. Certainly, we
will not be able to regain all those passengers, but on the flip side, there
are Americans who cross the border to take direct flights, and we have few
statistics on that category of passengers.
Last year, the Canadian Airports Council released a study on a so-called
missing Canadian airport. According to the report, Canada's lost passenger
traffic was equivalent to an average-sized Canadian airport. The Council
released a slew of figures that you can consult. I just cannot remember them
off the top of my head.
The Chair: The example they used was that the 4 million passengers
in lost traffic — and this was 18 months ago — represented the volume of an
airport the size of Ottawa's. Canada's fifth largest airport is across the
border. And what bothers me about the introduction of these airport service
fees and rental fees is the fact that they are all for minor things. When
the dollar was at US$1.35, people did not cross the border because there was
no parity. But now, with the dollar at par, people have every reason to
The government has to find a way to capture the fact that it is
encouraging Canadian passengers to cross the border and that, eventually,
those passengers will not come back. We will not be looking at a temporary
financial loss, but a permanent one, and I have to tell you that worries me.
There are no further questions. We will have our final meeting tomorrow
night with Éric Lippé, President and Chief Executive Officer of the
Association québécoise du transport aérien. We have no other requests for
witnesses, so that will probably be our last meeting with witnesses. After
that we will begin preparing our report.
Senator Greene, if between now and tomorrow night the Minister of
Transport would make good on his acceptance to appear before the committee,
we would be more than happy to have him as a witness before writing the
report. However, since we have not had an answer, I leave that in your
hands, as my capable deputy chair. I believe it would be better to have him
here, but if not we will have to go forward with preparing our report, which
I hope we can do in the next two or three weeks.
On another subject, Bill C-52, which deals with railways, is presently in
the House of Commons and will be sent to the Senate in the next few weeks.
We will deal with that before working on our report.
Senator Segal has requested a study on Radio Canada International and
that has been referred to this committee. I will be conferring with Senator
Segal today on the options for dates. I will talk with the steering
committee about when we will have our first meeting on a draft interim
report and about developing a timetable for making it public.
Senator Mercer: Over the break I emailed the chair about a news
story that I think raises an issue of great concern to the Canadian economy
and that falls directly under the purview of this committee, and that is the
water level in the Great Lakes and the effect that will have on transport
from Western Canada, Central Canada and through the Port of Montreal. I
would ask that the steering committee have a look at this issue for a
potential study. I do not know that it would require as lengthy a study as
our airport study has been, but it is an economic issue with effects today
as opposed to in the long term. Water levels have dropped significantly. If
something does not happen soon, we will have problems with getting ships to
the canals let alone getting them through the canals. This will affect the
economies of Western Canada, Ontario and Quebec. It is important that we
The Chair: The steering committee will be more than happy to study
all recommendations on further studies.
Mr. McKenna and Mr. Skrobica, thank you very much for your testimony.
Mr. McKenna: If you do a study on the railways, you will likely
get a request from us to appear before you in order to plead for a level
playing field among the modes of transport in Canada.