THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
EVIDENCE
OTTAWA, Wednesday, June 10, 2026
The Standing Senate Committee on Transport and Communications met this day at 6:45 p.m. [ET] to examine and report on such issues as may arise from time to time relating to transport and communications generally; and, in camera, to consider a draft agenda (future business).
Senator David M. Wells (Chair) in the chair.
[English]
The Chair: Good evening, colleagues, guests and honourable senators. I call this meeting of the Standing Senate Committee on Transport and Communications to order. My name is David Wells. I’m a senator from Newfoundland and Labrador. I’d like to ask my colleagues to introduce themselves.
Senator Simons: Paula Simons, senator from Alberta, and I live on Treaty 6 territory.
Senator Wilson: Duncan Wilson, senator from British Columbia.
Senator Mohamed: Farah Mohamed, Ontario.
[Translation]
Senator Cormier: René Cormier from New Brunswick.
[English]
Senator Arnold: Dawn Arnold, also from New Brunswick.
[Translation]
Senator Quinn: Jim Quinn from New Brunswick.
[English]
Senator Manning: Fabian Manning, Newfoundland and Labrador.
[Translation]
Senator Aucoin: Réjean Aucoin from Nova Scotia. Good evening.
[English]
Senator Dasko: Donna Dasko, Ontario.
The Chair: Thank you, colleagues.
I’d like to welcome everyone with us today as well as those listening to us online on the Senate’s website at sencanada.ca.
Today, we’re meeting to discuss the impact on airfares of temporarily suspending the federal fuel excise tax on aviation fuels.
With that, I would like to introduce our witness for today: from WestJet, John Weatherill, Executive Vice President and Chief Commercial Officer. Thank you for joining us today, Mr. Weatherill. We recognize you were unable to join us last week, so we appreciate that you were available this week.
Mr. Weatherill will provide opening remarks of approximately five minutes, which will be followed by a question-and-answer session with senators.
I will now invite Mr. Weatherill for his remarks.
John Weatherill, Executive Vice President and Chief Commercial Officer, WestJet: Thank you, Mr. Chair. Good evening, honourable senators. It is very nice to be with you here today. I apologize for not being with you last week. Unfortunately, I was travelling. I appreciate the opportunity to be with you today.
[Translation]
Thank you for the opportunity to appear before you today.
[English]
My name is John Weatherill. I serve as WestJet’s Executive Vice President and Chief Commercial Officer. WestJet is very proud to be Canada’s second-largest airline. We were founded in 1996 in Calgary. Since then, WestJet has grown from a small regional carrier into a national airline serving 46 Canadian airports and employing 15,000 Canadians.
We connect millions of travellers each year to communities, businesses, families and opportunities across Canada and around the world.
In a country as large and geographically diverse as Canada, air travel is essential for connecting Canadians to work, health care, family and opportunity.
We recognize that rising costs resulting from the conflict in Iran and broader global instability are having a real impact on Canadians.
We appreciate the federal government’s recent decision to temporarily suspend the federal excise tax on aviation fuel. This was a constructive step that acknowledged the extraordinary pressures facing both travellers and the aviation sector. However, the scale of these pressures remains significant.
Fuel typically represents 20% to 25% of an airline’s operating costs. Since the war began, the cost of jet fuel has nearly doubled. This increase adds approximately $40 in cost per one‑way journey.
While the temporary excise tax pause was welcome, it reduced fuel costs by less than $2 per guest and could not materially offset the broader cost impacts stemming from geopolitical instability.
Airlines operate in an intensely competitive environment and are continually incentivized to offer the lowest possible fares. Airfare pricing is driven primarily by supply and demand but, in the medium term, also reflects system-wide operating costs, including fuel, airport charges, navigation fees, labour, taxes and regulatory requirements.
In recent decades, Canadian airlines have been very successful in operating more efficiently and in passing cost savings on to Canadian travellers.
In the 30 years since WestJet was founded, from 1994 to 2024, average domestic airfares paid to airlines have declined by 50% in real terms — inflation-adjusted terms. Unfortunately, third‑party fees and taxes have increased over that period by 65%. As a result, Canada remains one of the most expensive jurisdictions in the world in which to operate an airline, and the industry has little ability to absorb the fuel spike from the war fuel in Iran.
The average domestic flight generates a profit per passenger in line with what some pay for a cup of coffee at Starbucks. With single-digit profits and fuel costs increasing by approximately $40 per guest, there is simply no ability to absorb the shock. Airlines must, therefore, increase fares and reduce capacity, but that alone will not be enough.
The resilience of our industry is undermined by policies such as costly Air Passenger Protection Regulations, or APPR, that work directly against the worthy objectives of improving affordability, connectivity, unity and economic opportunity for Canadians.
The cost burdens on aviation are well known, and they have been repeatedly documented by governments with the same conclusions reached in the 2012 Standing Senate Committee on Transport and Communications report, the 2016 Canada Transportation Act Review, the 2025 House of Commons Standing Committee on Transport, Infrastructure and Communities report and the 2025 Competition Bureau aviation market study.
Each of these studies found that excessive costs, fees and regulatory barriers undermined the affordability and competitiveness of Canada’s aviation sector.
In this regard, WestJet commends the government’s focus on aviation in Budget 2026 and the Spring Economic Update and encourages action on the cumulative impact of regulatory frameworks, such as APPR, as well as other regulations, taxes and fees that increase costs and restrict air access to the detriment of Canadians. Now, more than ever, Canada should consider a national aviation strategy with key objectives and aligned policies to strengthen the sector’s competitiveness, affordability, connectivity and resilience in the face of global challenges.
WestJet remains committed to working constructively with government and industry partners to support a safe, affordable and reliable air transportation system for Canadians.
I’m very happy to be with you today. Thank you for allowing me my opening remarks, and I look forward to your questions.
The Chair: Thank you very much, Mr. Weatherill. We appreciate your comments.
I would like to recognize that Senator Miville-Dechêne has joined us.
Senator Simons: Mr. Weatherill, thank you very much for joining us today.
I had questions arising from the set of questions we asked the previous witnesses. They are around how confident you are that we will actually have enough fuel to get us through the summer.
When we last held our hearings, there was greater hope that things at the Strait of Hormuz might be opening up, but there seems to be no sense of when that relief might come. Your rivals and colleagues told us that there was enough refinery capacity in Canada for jet fuel, but my concern was also about foreign markets where you fly and how reliable supplies will be there.
I wonder if you could talk a little bit about the reliability of fuel supply and what that might mean for your summer and fall schedule.
Mr. Weatherill: Thank you for the question. It’s a question I’ve had from my neighbours and friends, as well, who have summer travel booked.
There are two issues: The first is around the supply of jet fuel and other fuels and energy sources. Second, there is the cost. At this point, our concern is primarily with the cost. We work very closely with fuel suppliers here in Canada and around the world.
At this point, we don’t see a reason for concern about the physical supply of jet fuel. Some jurisdictions are potentially more constrained than others, but at this point, we don’t have any concerns about the supply of fuel, at least as far as we’re being given guidance from our suppliers.
For us, at this point, it’s really a question of cost rather than supply.
Senator Simons: Then my question is this: Up until now, all the airlines have held prices relatively stable, and I know this because I make my own air bookings and can track the price.
Is there an expectation that if things don’t start to resolve, prices may spike toward the end of the summer and into the fall? Fall is often when prices are their lowest.
Mr. Weatherill: Yes. That’s a good question.
We have taken a number of pricing actions to this point. Now, you may not see that reflected, necessarily, in fares because each market and each flight is different.
Just to give some context around the complexity of aviation pricing, we file fares on about 7,000 city pairs. Ottawa to Edmonton is one city pair, but Halifax to Tokyo is another city pair. There are about 7,000.
We have about 3 million filed fares in the market at any given time, and on any given day, we make changes to about 150,000 of those fares. About half of those changes go up, and about half of those changes go down. We’re always trying to match pricing to what the demand in the market is. It may be counterintuitive, but the way to maximize the revenue on a flight is often to reduce the fare so that more people can stimulate more demand, and more people can afford to fly. It’s very difficult to say on a given route or on a given flight whether we’re seeing the fuel costs reflected in the ticket price.
We are working hard to try to recover some of the fuel costs, because it is a very expensive cost item for us. As I mentioned in my remarks, the profit margins in the industry are very thin. We don’t have the ability as an industry to absorb that type of cost increase, so we do need to see some increase in pricing as a result.
To this point, we haven’t been able to recover all of the cost of incremental jet fuel.
Senator Simons: So the answer is yes?
Mr. Weatherill: Well, the answer is that it’s very difficult to say, unfortunately. I wish I could predict the future better than I can. We just don’t know what’s likely to happen.
If the supply of fuel becomes more constrained, then, certainly, prices could go even higher than they have been for jet fuel, and that would be reflected on airfares. At this point, we just don’t know. We see so much fluctuation that it’s difficult to predict.
Senator Simons: Thank you very much.
Senator Quinn: Thank you, Mr. Weatherill, for being here this evening. I have a couple of clarifications, if I may.
We heard last time that the cost of fuel increases, and WestJet charges $50 more per ticket for fuel-related issues, but it only makes a $2 difference in the actual cost of the fuel. I was just trying to figure that out.
Two days ago, the government announced a new program. It’s Liquidity for Airline Sector Resilience, and it’s directly tied to fuel. Will that have any impact on the $50 surcharge that you folks charge the passenger for fuel? Because they’re paying $50, and now the government has given access to a loan for $150 million per airline.
Mr. Weatherill: Yes.
Senator Quinn: How does that impact the decision model that you folks have for the fuel charge that you charge customers?
Mr. Weatherill: Thank you for the question, senator. I’ll start with a clarification on the first point, and then I’ll address the second point.
I was able to listen to some of the testimony from last week from my industry colleagues. On the reference to the $50 fuel surcharge, we do have a $50 surcharge on vacation packages that we’ve put in place since approximately mid-April, if I’m getting my dates right. That’s on a vacation package through our tour operator division, Sunwing Vacations and WestJet Vacations. We have a surcharge that goes onto the vacation packages. The $2 is when we have different surcharges and price increases on our air-only seats on scheduled air services.
The average cost increase that we’re seeing on a domestic flight is about $40. That is a $40 incremental cost for fuel to fly one guest on one domestic flight.
The excise tax relief that has been granted through the temporary suspension of the excise tax translates into about $2 per guest in cost savings to us.
The way we view it is that we have to try to recover a $40 cost increase. This helps with $2 of that $40, but there’s still quite a gap that the industry needs to try to recover. I’m putting it in per‑passenger terms, but in aggregate terms for WestJet, we typically spend about $1.5 billion per year on jet fuel. This year, given what’s occurred, we expect our fuel bill to be anywhere between $500 million and $1 billion higher than it is.
So if we take the midpoint of that — let’s say that’s a $750‑million expense that we expect to incur that was unplanned for this year — the fuel excise tax savings from now through September would be worth about $13 million to us, so there’s still quite a gap there.
With regard to the $150 million of emergency financing that the government has announced, each airline will have to make their own determination about whether they take advantage of that financing. Again, the scale, $150 million is still just a portion of it, relative to the size of the incremental fuel bill that we’re trying to work with, which is $750 million.
I don’t believe we’re inclined to take advantage of that financing. Others may, but it’s one of the mechanisms that have been put on the table.
Senator Quinn: Last week, when we had our other witnesses here, I was trying to narrow it down that the fuel charge that passengers pay — in your case, $50 — that’s strictly for fuel. Everybody has mentioned the other increasing costs, which I understand: landing fees and all the airport things that come into play. Those are separate from the fuel subject.
Mr. Weatherill: Absolutely right. That $50 fuel surcharge we put in place for tour-operated packages is related to the spike in fuel costs.
Our tour-operated packages, unlike domestic flights, some of those are quite long distances, down deep into the Caribbean, Mexico and so forth. The average cost per customer for incremental jet fuel is higher than the $40 I quoted for domestic.
The challenge is that even when we put through a price increase on a ticket, whether in the form of a surcharge or a price increase in the filed fares — one of those three million filed fares we have in the market — we don’t distinguish between those internally at WestJet because, ultimately, we advertise all-in pricing to our customers, including all fees, taxes and everything else.
However, whether we put in a price increase of $20, $30, $50 and so on, we’re always monitoring to see how the pricing is being absorbed in the market. If we begin to see customers are not booking because prices become too high, we lower the price. So it may be the case, and we have seen this with our tour operator, we put a $50 surcharge on the tour-operated package. But if the bookings don’t come, we may reduce the cost of that package, and that offsets some of the potential benefits from that surcharge.
Senator Quinn: And on the passenger load trend from April 1, which is when the fuel rebate started, what are your loads? Is it too early in the quarter to talk about or give an indication of whether loads are up or down?
Mr. Weatherill: We are a privately held company, so we don’t disclose the specific details of our load factors. What I will mention is the impact on booking trends, which is a combination of factors; there is a lot that impacts booking trends. Part of that is the cost of fuel, the increased prices, partially offset by the fuel rebate or the excise tax suspension, but also macro factors that impact demand for air travel.
For example, we are still facing a major deficit in demand for Canadians travelling south to the United States, which we have been dealing with now for 15 months following the tariff and takeover news from the U.S. President in February of last year. That is a portion of demand that simply no longer exists.
In February of this year, the Cuban market effectively evaporated, and it was a significant market for WestJet. At the beginning of February, we were flying 100 flights a week from Canada to Cuba; at the end of February, that was zero.
Shortly after that, we had violence in Puerto Vallarta, Mexico — cartel violence that you might have read or heard about. That impacted demand for bookings across all of Mexico, not just Puerto Vallarta.
So there are many different factors that all conspire to determine what the booking velocity — as we call it — the booking trend looks like, and whether load factors are keeping pace with previous years or our expectations.
We see huge differences region by region and flight by flight. It is just too difficult to —
The Chair: Okay, Senator Quinn.
Mr. Weatherill: That was a long-winded answer. I apologize.
Senator Arnold: Thank you, Mr. Weatherill, for being here with us today. First, I want to say kudos to WestJet for the measures you put in place to reduce fuel consumption while your planes are in port — or whatever you call it.
I wanted to know whether some of those things you put in place are effective. Will you keep them in place afterward? Why did you not do them before?
Then I have a question about sustainable aviation fuels, or SAFs, and if you are using those currently. And if not, why not?
Mr. Weatherill: Thank you, Senator Arnold.
The question around the methods and procedures for reducing the consumption of jet fuel: There are a number of things that we, as a company and as an industry, are doing to reduce the consumption of jet fuel. Obviously, we are highly motivated to minimize our fuel consumption because it is our largest cost item as an industry.
There are things we have been doing over the course of the past several decades, and I’m proud of the progress the industry has made. In the last 20 years, average fuel consumption per passenger in our network has been reduced by 50%. The consumption per — we call them revenue passenger miles, but using the unit of demand we have, the consumption has been reduced by 50% due to a lot of things: changes in air navigation procedures, significant improvements in engine technology and changes to the airframe of the aircraft, including winglets that you see at the end of the wings, which reduce drag and help make flying more efficient.
As well, there are procedures we perform internally at WestJet. Our pilots will taxi aircraft in and out from the gate to the runway using a single engine in order to reduce fuel. We have a fuel savings program that we use to actually slow the aircraft in flight. We will fly more slowly to reduce fuel burn when fuel is very expensive. We don’t do it all the time because there’s a trade-off with guest experience; we want flying to be faster than taking a car.
We do all of those things. Most of them we do whether fuel has spiked or not; some of them we’re paying more attention to now.
And to your question on SAF, we do use SAF. We don’t use it in North America, generally, because it’s not widely available and, effectively, is not being produced here in Canada, but we do use a portion of SAF loaded into our fuel in Europe. Last year, we used about 1.5 million litres of SAF.
Senator Arnold: Would you use more if it were available?
Mr. Weatherill: There are two questions on SAF, just like there are two questions on conventional jet fuel: supply and price. They are the same two questions.
At the moment, the supply is not there. My understanding, and I know my former colleague from WestJet, Geoff Tauvette, and current executive director of Canadian Council for Sustainable Aviation Fuels, or C-SAF, was here last week. I defer to him. He’s the expert. WestJet is a founding partner of C-SAF, and we support the work they’re doing to create a path for production of SAF at scale in Canada.
SAF is the clearest path we have to decarbonizing aviation. It is very important, but it is going to require some type of incentive for production to scale to the level where the cost is not like today’s conventional jet fuel, where we’re facing a cost crisis impacting affordability.
[Translation]
Senator Aucoin: If, for example, you wanted to launch a new airline or a new flight from point A to point B — I have something here that lists some of the fares, but can you review the fares you need to consider when setting the price of a ticket for a commercial flight from point A to point B?
[English]
Mr. Weatherill: Thank you for the question regarding what goes into consideration for setting airfares for a new flight in our network between two cities.
There are a number of considerations that go into that. We currently have, by virtue of the fact that we’ve been around for 30 years, a large and established network and millions of filed fares in the market. It usually means we have some proxies in the market for what pricing we would put in place on a new route.
We also have access to a centralized clearing house of pricing for all airlines on all markets, so we can see what the established pricing is in a market. That gives us a sense of what the demand market competitiveness looks like.
We then have to do an analysis — which is not within our pricing team but within our network planning team — around a new service into a given market. This was the analysis we did in the case of Calgary to Sydney, Nova Scotia, as we were talking about earlier. We had to determine this: If we put that flight in, do we believe we can attract enough demand and fill enough seats, at a price we believe the market will bear, to cover our fully allocated cost of operating that service? If we feel confident, then we put the service in place; if we don’t, then we have to make a different and more difficult decision.
Unfortunately, through the fuel crisis we are now experiencing, we’ve had to reduce frequency in certain markets because that equation has come out of balance.
[Translation]
Senator Aucoin: You talked about the national aviation strategy. What will it look like? You said that the government “should” do certain things, and you referred to a number of studies and reports. I would like to hear more from you on that.
[English]
Mr. Weatherill: Thank you for that question regarding what a national aviation strategy should entail. I will tie it back to my response to the previous question.
Every day, the entire industry in Canada is doing that calculation, the evaluation of that formula we discussed: Can the market generate enough revenue to cover the cost of air service? For many airlines in this country, that formula comes out negative. Part of the reason for that is because we have structural cost challenges that impact the viability of the industry in this country.
As I mentioned previously, some are regulatory. We have challenges with the funding mechanism for aviation in Canada. We have an almost entirely user-pay system in this country. In fact, in some cases, users pay more than the cost of delivering the aviation service. Ultimately, that ends up costing consumers more to fly. We know aviation is price elastic in our country. If the airfare goes up by 10%, we expect that demand, the number of people buying tickets, will drop by more than 10%. That is the history of aviation in this country.
It is very important for us to work as hard as we can as a country to bring the core cost of aviation services down. We think a national aviation strategy could be very helpful in doing that.
The first step in a national aviation strategy is establishing the key objectives and success criteria we have as a country. Do we want more flights or more affordable flights? Do we enable more people to travel? Would we measure success based upon the number of passengers in the country and so forth? Once we know what we are working toward, we can establish policies aligned with delivering that.
Without that national strategy and a clear objective, we have policies that work at odds with one another. I will give you a great example.
The Air Passenger Protection Regulations, on paper, seek to protect passengers in the event of disruption. Airlines are already entirely motivated to minimize disruptions. We have entire teams and departments who work hard every day to minimize disruption. There are consequences to that legislation. It increases costs for Canadians. Punitive compensation requirements, actually, in some cases — in thin markets like Calgary to Sydney, Nova Scotia, which we fly just a couple of times a week on a seasonal basis — undermine the formula we are looking at. A single delay on a route like that could wipe out two years of profitability if we were required to pay compensation.
Remember what I said: The average profitability is the price of a cup of coffee, so if you have to pay someone $1,000 for a delayed flight, you wipe out 100 times the profit that you earn on that route. If we fly a route like that 30 or 40 times a year, it is easy to wipe out a couple years of profitability.
We have regulations and policies in the country that are not aligned with one another. If we can align them, then I think we’ll be more successful.
Senator Aucoin: My sister-in-law came to Ottawa yesterday or the day before. They were offering her or another passenger $2,000 if they wanted to delay their flight. Are you saying that’s not two years of profit for that airline, for that flight, but four years?
Mr. Weatherill: That is a bit of a different story. I won’t speak for other airlines, but I think that, in your sister’s case, she was on an overbooked flight and was being offered compensation to voluntarily give up her seat on that flight. WestJet does not overbook our flights. Unfortunately, she was not flying with WestJet but —
Senator Aucoin: On the $2,000, what is the margin with that? Would that equate to a lot of money saved? Is that what you are saying? I’m trying to understand.
Mr. Weatherill: I should probably have answered the question more clearly. That airline — and we will not name them — their algorithm calculated, given a certain historical no-show factor, that they could oversell the flight by a certain number of seats, then some people wouldn’t show up and it wouldn’t be a problem. Every once in a while, everyone does show up and it is a problem. No airline wants to be in a position of forcing someone to give up their seat.
What we have seen happen in the industry — again, WestJet doesn’t do this — is that airlines will offer significant incentives for a customer to voluntarily give up their seat to solve the problem. It happens in a small number of cases. It is a one-off, as opposed to Air Passenger Protection Regulations, which, despite the strong on-time performance in the industry, happens to an entire aircraft at a time. In the case of a thin market like Sydney to Calgary, one delay can wipe out a year or two of profitability on that route.
The Chair: Thank you.
Senator Manning: Senator Aucoin took a couple of my questions, so I will —
Senator Aucoin: I’m good.
Senator Manning: I think that you are reading my French notes here.
Talking about the national aviation strategy, has the airline industry looked to or lobbied government to ask for the strategy in the past? If so, what has the response been from the government?
I’m sure it is not something that just came up this morning.
Mr. Weatherill: No, it didn’t just come up this morning. No, we work very closely with stakeholders across government and around the industry, in fact, to try to align recommendations on what such a strategy could look like. There is a joint white paper between the National Airlines Council of Canada and the Canadian Airports Council to provide recommendations on things we believe could be beneficial for the industry.
The government has, through the studies I referenced, come to many of the same conclusions regarding some key steps that could be impactful and beneficial to improve the structural health of the aviation industry in Canada.
It is one of the critical challenges we face. Every industry has its challenges. I think we have had our fair share in aviation, starting pre-COVID with delay deliveries and certification challenges with aircraft from our suppliers. COVID, of course, has been hugely impactful on the entire country and for aviation in particular. I mentioned we’ve had challenges with the U.S., Cuban and Mexican markets. Now we have the fuel price increase with respect to Iran.
It is an industry that has, over the course of the past decade, lost much of the resilience to buffer against these types of shocks. Part of that has been the undermining of the structural health of the industry by some of these types of regulations that we have talked about and the fundamental funding system and methodology for the industry. If we could address that, it would make the entire industry more resilient, healthier and better able to weather these shocks so we do not have to talk about emergency loans or temporary federal fuel excise tax suspension. That is really what we’re hoping to achieve.
Senator Manning: To follow up on the federal fuel excise tax exemption, in your remarks, you mentioned that the increase in cost this year could run between $500 million to $1 billion. If you average that out, it’s $750 million, but with the exemption they brought forward, you are saving $13 million. Now, $13 million is not pocket change, but at the same time, how do you plan to address an extra $750 million or close to it in fuel charges when that will drive the prices up to an extent where people will stop travelling?
Mr. Weatherill: You’ve hit the nail on the head. We are working hard to try to recover as much of the incremental costs as we can through pricing adjustments and some, at this point, limited and tactical capacity reductions. However, we know it will be difficult to pass through the entirety of that cost because it works out to about a 20% to 25% increase in the price of tickets to try to recover the entirety of the cost, and we know that the market cannot bear that. Canadians are struggling with affordability in all parts of their lives.
A 20% or 25% increase in the price of aviation being accepted without impact on demand is highly unlikely. That is why it is important to use the opportunity we have now with the industry focused on coming together to address some of the structural issues that we think could make the industry more resilient. It would bring down costs.
This is an industry that has done a great job of bringing down costs for three decades. It would bring down costs for all players, and that would mean we would have more ability to absorb shocks without a massive increase in the price of tickets for consumers.
Senator Wilson: Senator Manning takes the cake because he read my scribbles and my questions from across the room, so I will ask a different question.
As a clarification — you mentioned APPR several times. I do not know what that is.
Mr. Weatherill: I apologize. “APPR” refers to the Air Passenger Protection Regulations. If we had a few more hours, I would go into all of the details. I will say, essentially, what APPR is —
Senator Wilson: That’s okay. Now that you explained that acronym, I’m good. We understand that.
In your remarks, you spoke about user pay and more than user pay. Is that NAV CANADA? What are you paying into that is —
Mr. Weatherill: There are many costs in the industry that are funded directly by the users of the industry. The first is the Canadian Air Transport Security Authority, or CATSA. Aviation security is funded through the Air Travellers Security Charge, or ATSC. There is a fee for customs services if you are flying internationally. There is a fee that we as the airline pay to NAV CANADA for air traffic control services. For example, the air traffic control system in Canada is not funded by the federal government; it is funded by the airlines that use the system.
As well, every time you travel, on your ticket, you will see there is an AIF charge, which is the Airport Improvement Fee. Airport infrastructure in this country is largely funded by airports, and that infrastructure investment is recovered through an Airport Improvement Fee that shows up on the price of your ticket.
There are some very limited exceptions — small airports that receive some government funding — but this is largely an industry that is funded entirely by users of the industry as opposed to through general revenues or taxpayer funding.
Senator Wilson: I have one more question, if I could.
One of the things that I can appreciate is being in your situation must be challenging, and I would be interested to hear your perspective on how this actually plays out. Obviously, being WestJet, you have great access to government. You meet with regulators and ministers. However, you are also in an industry that is highly public and one misstep and you will have public outrage, which then creates things like the Air Passenger Protection Regulations, or the APPR, for example.
Mr. Weatherill: Yes.
Senator Wilson: To Senator Manning’s initial question, how are you finding government responding to you in the context of that weird, difficult public exposure that you, as an airline, face?
Mr. Weatherill: That is a very good question.
It is a very public industry. Almost everybody has been on a flight and had an experience or has a friend or a sister who has had an experience. I have neighbours and friends who have had experiences. It is a very public industry, and everyone has an opinion on it. It is up to us to ensure that we provide the best possible guest experience that we can. We are investing heavily in improving our guest experience.
I represent 15,000 “WestJetters,” and I can tell you that they are all very focused on delivering the best quality of service and getting our guests to where they want to be as safely and quickly as we can. That is on us to do.
As far as how the public nature of the industry translates into discussions we have with various levels of government and so forth, we get very candid feedback from government. But we have productive working relationships with all levels of government across the country.
There is, I believe, a recognition of the critical and essential nature of air travel in a country like ours where, for much of the country, there aren’t other options to get around.
As I mentioned in my remarks around the Spring Economic Update, we are seeing that there is, at the federal level, an interest in evaluating ways we can make the industry more structurally healthy.
Senator Wilson: Thank you.
Senator Dasko: Thank you for being with us. Listening to the conversation, it is hard to conclude otherwise that if you look at the impact of suspending the federal fuel excise tax, there are very few benefits for consumers. It appears that the net benefit is very small. At the same time, the government coffers are taking a hit because the government has lowered taxes.
On balance, what do you think about this policy? This doesn’t seem to be a very good policy, I would say. I wonder what your thoughts are about whether something like this is of any value. When I look at it, your company gets it, but nobody else does, if I can put it that way.
Mr. Weatherill: Yes.
Senator Dasko: Consumers don’t. Taxpayers take a hit and the government takes a hit. Where do we end up in the end?
Mr. Weatherill: I understand where the question is coming from. Thank you for the question. As I have tried to frame, the actual relief from the fuel tax is relatively small compared to the size of the mountain of challenges that we face. It is not accurate to say that the consumer does not receive benefit, because to the extent it reduces the cost base somewhat, that is an extra couple of dollars per guest that we do not have to recover through increased pricing. That is where the consumer benefits.
From my perspective, this policy is a good one. It is a small step, but it is a step in the right direction. Making the industry structurally healthier requires a number of small steps in the right direction. This is one of what I hope will be a number.
Senator Dasko: Why is it a good policy?
Mr. Weatherill: It is a good policy — and it goes back to the question that Senator Aucoin asked earlier as well as my response to that question. The industry faces a very delicate balance of providing service to Canadians at a price they can afford that allows airlines to make some money. Airlines do not make a lot of money. We’re a private company, so we do not disclose our finances. However, at a global level — I just came back from the International Air Transport Association, or IATA, Annual General Meeting, and the Director General said that last year, across the globe, airlines had, on average, a 3% profit margin. As I mentioned, the average domestic fare in Canada is about $200, so 3% of $200 is $6, which is why I say the profit margin is about the price of a cup of coffee. The margins are very thin. Those margins are now non-existent when you take into account the increased price of fuel.
If we think about what happens if the industry is out of balance and losing money providing air service, eventually air service has to be reduced, and that has a huge net negative impact on Canadians to the extent that happens because air travel is the connector of our country. Not only is it the connector, but it is one of the most effective economic development catalysts that we have in the country. If you can connect a region in the country with other regions of the country, with fellow Canadians and allow people to do business, work and visit friends and relatives, the economic benefit that is returned on that is many times greater.
I think it is a very good policy for the benefit of Canadians. On its own, it is not enough, but it is a step in the right direction.
Senator Dasko: I want to get back to your comment in your opening statement that in this country, air travel is among the most expensive in the world. I expect that you would say it is because of all the fees that we have to pay, all the fees users pay, the costs and so on.
Is there an issue with technology adoption in the industry? Is that partly why we’re expensive? Are we not adopting technology that might help us become less expensive? Is that an issue in terms of the positioning of the industry and the cost structure compared to other countries?
Mr. Weatherill: I do not have a fulsome answer for you on that. I will say, just for context, IATA — whose annual general meeting I just returned from — ranks Canada as 101 out of 119 countries in air travel affordability. So we really are near the bottom of the list, and that is not where any of us want to be. To the extent that technology adoption plays a role in that, the industry itself is a pretty technology-forward industry. There are many use cases at airlines and airports. You see it when you go through CATSA with the screening technology they have. NAV CANADA have some staffing issues that slow things down, but they are seen as one of the more advanced air service providers around the world.
We advocate for the modernization of the aviation system. That includes things like biometrics, for example, screening at gates and at airports to make the system more efficient. There will be a role for that. In my view, it is not the critical issue of the day.
The industry and the pieces of the industry are doing a pretty good job of advancing technology initiatives and innovation on their own. That is probably not where we need to see some level of integrated planning, with the exception of biometrics. It is really around some of those costs that are holding the industry back.
[Translation]
Senator Miville-Dechêne: Mr. Weatherill, first of all, unfortunately, I was late, so I missed your presentation. If my question is redundant, please let me know.
You opposed the federal government’s new program that provides loans to businesses. However, you have had to reduce your number of flights by about 6% because of the crisis in the Middle East. Don’t you see a contradiction there? Could the loan program have enabled you to maintain the same level of service? Did you find the cost to be unacceptable?
[English]
Mr. Weatherill: Thank you for the question.
We did state our opposition to the new loans program, not because we don’t believe liquidity is required in the industry; we believe the structure of that program has the potential to distort the market, which we’re concerned about, given the fragility of the industry today, as we have discussed.
Senator Miville-Dechêne: Distorted in what way?
Mr. Weatherill: Distorted to the extent that it’s possible that loans for certain companies ultimately become forgiven, which has occurred in past —
Senator Miville-Dechêne: — your competitors?
Mr. Weatherill: Potentially. That could result in a taxpayer-funded subsidy, effectively. That was our concern with it. We do believe liquidity is needed in the industry. We’re working to seek that liquidity through other sources.
Is it contradictory to the fact that we have made some reductions? To this point, the reductions we’ve made have been very tactical. We consider many factors when looking at how we adjust our capacity, taking into account, for example, potential impacts on our guests. If you take a look at where we’ve cut our capacity to this point, we haven’t exited any markets — we haven’t pulled out of any markets — but we have focused on reducing frequency in some markets where we have a high level of frequency so we can accommodate our guests to the best extent possible and minimize the disruption. That’s where we’ve focused so far.
Senator Cormier: I had 15 questions, but they all asked the questions I had. I wanted to talk to you about AI, but my colleague has that question. I’m not a thief, so I won’t take it.
Senator Mohamed: He didn’t read my notes, either.
Senator Cormier: I will ask this question — a really concrete one.
[Translation]
Which Canadian destinations are the most and least profitable for WestJet? What factors determine profitability? What impact does the suspension of the excise tax have on your ability to transport travellers to a destination? I know that airport taxes are one of the factors that determine the cost, but I would like to get a general overview to fully understand the challenges you face.
[English]
Mr. Weatherill: Thank you for the question.
For the first question, about which routes are beneficial, I assume you mean profitable for WestJet and which ones are loss-making —
Senator Cormier: And why.
Mr. Weatherill: We don’t like to share details about where we’re specifically making money and where we’re not. You see it, ultimately, over time in the industry. When you see airlines add capacity to destinations, it gives an indication that something is working, and when capacity is reduced, it gives an indication that something is probably not working.
To the extent that the excise fuel tax relief has had an impact on those decisions, at this point, it’s too small in the overall equation and it’s too early to be able to say to what extent all of these factors together will ultimately result in those types of decisions.
When we put a flight out into the schedule, it’s always our intention to fly it. We never like to make changes to our schedule because we know it’s disruptive to our guests. However, there are cases when we have to. For example, when the demand dropped for flights to the U.S. as a result of the U.S. President’s comments 15 months ago, we had to make changes to our network. There simply weren’t as many people flying as there used to be.
There are a lot of factors that impact the demand for air travel, factors that impact the supply of air travel and factors that impact the willingness of the market to pay for the service. When all those come together, we ultimately make decisions around where we’ll adjust our capacity.
[Translation]
Senator Cormier: Let’s not focus specifically on the suspension of the excise tax, but what impact does that have on the staff working on your aircraft? I’m trying to understand how you make your decisions. How are decisions made? What are your priorities? Are you reducing staff, distances, destinations, frequency or the number of flights? I would like to fully understand the reality you are experiencing.
[English]
Mr. Weatherill: That is an excellent question.
The process we go through when we make a decision about where we’re going to adjust capacity in response to something like this, a fuel spike — which is somewhat like how we responded to COVID, unplanned and dramatic — is outside of our normal network planning process. We’re planning for next winter at this point, and we are planning where we’re going to fly next summer. That’s our normal process.
When there’s a shock to the system like this, we have to make decisions quickly about where we’re going to adjust our capacity. The first thing the team does is look at forecasting — where we believe we’ll potentially lose a significant amount of money. However, the network is very complex, so we might forecast that a given flight from, for example, Calgary to Winnipeg might lose money next month. We might say, “Maybe we could remove that flight and consolidate the demand onto the remaining flights.” However, that plane, when it flies from Calgary to Winnipeg, may then fly from Winnipeg to Montego Bay, and that flight might make a lot of money.
So, it’s difficult to identify flights on a round-trip basis that might become financially nonviable. That takes the list down to a very small number.
Then we look at what the impacts will be on our operation. We have cabin crew, flight attendants and pilots whose routings are associated with those aircraft, and if we make a change to a flight, we might leave a crew stranded somewhere. Then we have to work closely with our operational team to determine which subset of those flights will not be operationally disruptive.
Once we have that, then we look through the lens of our guests: For which of these flights, if we were to remove them, do we have an easy re-accommodation option, where you could put them on another flight an hour or two earlier or later. If you have easy re-accommodation options so the change won’t be too disruptive, then we can proceed. However, if it’s a route where we don’t have the ability to do that because it’s one we fly infrequently, then we won’t make the change; we’ll continue to operate it.
It ends up being a very small proportion of our total capacity that passes through all of those filters to the point where we think we can make a change.
Again, this is a process we don’t do on a regular basis. We do it when we’re faced with a shock like this, and we do it as far out into the future as we can. So these decisions we’re making now for September and October adjustments to the network are happening because we want to give people as much notice as possible.
[Translation]
Senator Cormier: Thank you.
I would also like to thank you for your company’s efforts to serve customers in both official languages. I encourage you to continue improving your services in that regard. That will enable us to choose WestJet as often as possible.
Mr. Weatherill: Thank you very much.
[English]
Senator Mohamed: First, I really appreciate how forthright you’re being. I’ve learned quite a bit from you, so thank you very much.
I’ll ask you my AI question if I have time, but you captured our imaginations, I think, on the national aviation strategy idea. Given the challenges that Canada has — landmass, population and climate — if this were a road that Canada would go down, whether it’s a study put together by this committee or something, what countries would we look at that have it figured out regarding a national aviation strategy? What countries could Canada learn from? Did you say we are 101 out of 119? We pride ourselves on being first, second, third or maybe fifth, but that’s quite stark, and there must be people who are in those top categories we could learn from. That’s my first question.
Second, AI is all around us, and I imagine you are using AI to bring down costs, whether that is determining flight paths — maybe if you go on a certain flight path, you’re bringing down fuel costs. What is the application of AI in your business as a direct result of wanting to reduce costs? Thank you.
Mr. Weatherill: Those are two good questions.
First, it is tough: We’re not top 5, top 10 or even top 100, which is not a great spot to be. From our perspective, we see the need for this integrated strategy that, first, determines what the objectives are that we want out of aviation for this country for the benefit of Canadians. Once those objectives are clear, then we can align policies with them.
We’re trying not to be prescriptive in what we think that looks like. To be honest, I believe it probably looks like taking the best bits of how it’s done in a bunch of different countries.
There are a number of different things, many of which the government is already looking at, that look at the funding model for the industry, the governance structure for the industry, whether that’s airlines, airports, air navigation providers and so forth. There are a number of different models around the world.
I don’t know that anyone is doing it perfectly, but I know that there are a lot of countries that are doing it differently, and I think it’s time that we look at whether we can improve in certain areas.
Senator Mohamed: Are there some you could name?
Mr. Weatherill: For example, one of the countries we point to in some of our analysis is Sweden. Sweden has a user-pay model like Canada, but there’s also a degree of funding for the aviation system in Sweden that comes through public sources. As a result, the cost of aviation in Sweden is roughly 15% to 20% lower than it is here in Canada.
Again, as I mentioned, air travel in Canada is price elastic. If we could reduce the price of travel by 15% or 20%, we would expect a multiple of that, 20% or 25% more people travelling. There are 150 million on-plane and de-planed passengers a year travelling through Canadian airports. Imagine if we could increase that number by 20% or 25%. That’s 30 or 40 million more Canadians who could afford to travel, and that’s the objective that we have.
On your second question around AI, we are using it in a number of areas. As you mentioned, there are a lot of use cases for AI in operations. We’re working right now with a number of our airport partners in video technology that looks at when an aircraft pulls into a gate, what actions are happening around that airport, then time stamps the different milestones and helps us to create the processes more efficiently or predict where there might be a delay. If a catering truck hasn’t shown up by a certain time, we can predict that might cause a delay, so how do we then respond to it? There are almost endless use cases, particularly around operations.
At this conference I was at with IATA, we discussed a drone that flies around an aircraft that has just experienced a lightning strike, hail or something like that. It can scan the aircraft to determine whether there’s damage that needs to be repaired, for example. So there is no end to use cases. We use it in the commercial function. We’re using it in operations and throughout the business. It’s still at relatively early stages, but there’s a lot of promise.
Senator Mohamed: Through its use, have you seen a drop in the costs that you incur, whether it be operations or otherwise? Have you seen a direct impact or is it too soon to tell?
Mr. Weatherill: I’m not sure if it’s too soon to tell, but I don’t have the information. I would have to look into that.
Senator Mohamed: Thank you.
Senator Simons: Last summer, there were disruptions in air service because Air Canada had a strike by flight attendants. The issue of paying flight attendants for the time on the ground before the door closes remains a live one at your airline. What do you think will happen this summer?
Mr. Weatherill: You’re making reference to the fact that we’re in negotiations with our flight attendants and collective bargaining for a new collective agreement.
We have widespread union representation at WestJet. I don’t know the exact numbers, but something like 80% of our staff members are unionized, and we work really hard to have a constructive relationship with all our unions.
We’re in the process of collective bargaining right now. The teams are bargaining this week, and we certainly hope we can get to a resolution that works for everybody.
Senator Simons: Thank you very much.
Senator Quinn: I have a bunch of things, but I’ll have to consolidate. Regarding the opportunity for Canadians to travel more, like in Sweden, because of cost concerns, what can we do as a country? We have heard a lot about airport consolidation, for example, privatization and things like that and then, of course, the fees.
The airports belong to the federal government. I’m a port guy. The ports belong to the federal government. We always improve those things through different fees, and yet the rental fees go back to the federal government in consolidated revenue.
How do we rationalize that with coming up with an approach that decreases the opportunity for airlines being pulled to serve as many airports in small geographical areas, which increases costs, I would think, for the overall airport system? How can we do it better? Should we be looking at consolidation? Should we be looking at privatization?
Mr. Weatherill: The consolidation of airports?
Senator Quinn: I’ll give you a real example. In my province, we have three bigger cities — which are suburbs in Toronto, but three bigger cities — and each have their own airport, and they’re all essential. They are all within an hour of each other.
Mr. Weatherill: I don’t know. There are probably not that many use cases where consolidation is really an option in Canada, partly because, where I come from, the distances between cities are so vast that you just —
Senator Quinn: Where are you from?
Mr. Weatherill: I live in Calgary.
Senator Quinn: Well, Calgary and Edmonton —
Mr. Weatherill: Yes. We could maybe do one airport in Red Deer. No, that was not a serious comment.
With airport consolidation, I don’t know. I’m not sure whether that would answer the challenge that we have.
Airport privatization is something that is done in many parts of the world. Ironically, Canadian pension plans own airports in many parts of the world but not here in Canada.
There are implications for airlines regarding whether airports are privatized. I don’t have a strong view. Ultimately, the view will probably be shared with airports.
However, when an airport is privatized, if we move to a privatization model, there are considerations around governance that would need to come with that. But last week, and the reason I couldn’t be at this event, is I was with the Canadian Airports Council in St. John’s, with the CEO caucus, and I know there is quite a divergence of views even within the airport community about whether privatization is the right step.
Senator Quinn: On rental fees, if I can come to that quickly, rather than returning it to the consolidated revenue, should airports keep them to help reduce airport improvement fees, to reduce the cost of a ticket so maybe we increase the flying public?
Mr. Weatherill: Yes.
Senator Quinn: Thank you.
Mr. Weatherill: I think that’s right. The more that fees generated from the industry can be reinvested into the industry, the better it is for all of us.
The Chair: Mr. Weatherill, thank you for your directness and openness. We really appreciate it.
We are going in camera in a moment, but I would like you to sit tight for a moment while we’re still in public.
Colleagues, I would like to take a moment to pay tribute to one of our colleagues who has served as a member of this committee since 2018. This may likely be our last committee meeting before we break for the summer recess.
Senator Dasko, you’ve been a member of the committee for eight years. Your contributions to the committee throughout that tenure have been deep and valuable, not just to the committee but to the Senate and Canada as well, especially your contributions to the Online Streaming Act — I know you were heavily involved in that with many of your interventions and proposed amendments — as well as the Online News Act. I know you leaned heavily. Those are just the ones from last year, but you’ve been a valuable member of this committee, and we really appreciate the work that you’ve done on behalf of the committee, the Senate and Canada. Thank you.
Hon. Senators: Hear, hear!
The Chair: We’ll now go in camera.
(The committee continued in camera.)