ATAC Presentation to the Standing Committee on Transport Infrastructure and Communities
(SCOTIC) on Bill C-11

Fred Gaspar
Vice President, Policy and Strategic Planning

Thursday, October 5, 2006

Mr. Chairman, honourable members, good afternoon.  Thank you for inviting me here this afternoon to speak to you on the matter of Bill C-11.  I will limit my formal comments on the legislation to matters of broad interest and look forward to your more detailed questions afterwards.

Let me first take a few moments to familiarize you with our organization.  The Air Transport Association of Canada was founded in Ottawa in 1934 as the national voice of Canada's fledgling aerospace and aviation industry.  Since that time, we have evolved into a more focused organization representing the interests of Canada's commercial air service providers.  ATAC today is composed of a membership of over 200 companies of all sizes, who collectively account for more than 95% of all commercial aviation revenues in Canada.

We would like to address this committee, however, from the passengers' perspective.  For it is the passengers' interest which ought to be at the heart of everything we do.

In Bill C-11 we see a Bill which, ostensibly, deals with many issues related to passengers concerns:
* Air travel complaints;
* Reviewing mergers and acquisitions;
* Airfare advertising; and
* Use of airline data and passenger information.

The sad reality, however, is that none of these measures address any of the real issues of concern to our passengers.  You know, yourselves, what those are.  You travel by air more than most Canadians.  You know that what passengers want more than anything else for their air travel experience is safety, efficiency and the right balance on the price/service mix.  So that is the proper perspective from which to view these measures.

Indeed it is a perspective which casts this Bill in a less-than flattering light.  Not for what it addresses but for what it does not.

It purports to introduce measures which are friendly to the consumer but does not help to lower costs, does not help to improve efficiency and does not help to improve value.  For more than a few years now, ATAC and its members have been pleading with successive governments on behalf of our passengers to reduce the crippling effect of government ground rents due by passengers using airports.

Established in the mid-1990s in conjunction with the devolution of airports, these rents contribute approximately $300 million annually - and $2 billion since their inception - to general government coffers. The total contribution has already exceeded the net worth of those facilities at the time of their transfer to local authorities, which was approximately $1.5 billion; a figure, by the way, which in no way accounted for the significant upgrades to those facilities which were required in the terms of the transfers themselves.

Transferring the airports allowed the Government to offload that cost to the local authorities, which recouped the investment cost from airport users; namely airlines and passengers.  In short, it is really a misnomer to label these payments as rent. Since they are remitted to the Federal Government with no services received in return, the airport rent regime can only be categorized as a simple but brutal tax on flying which makes the system about $300 million per year more expensive than it needs or ought to be.  We respectfully submit that if Parliament is truly interested in pursuing the best interests of passengers it should first and foremost occupy itself with this pressing matter.

Still, we are presented with a series of measures contained in this Bill, which require our scrutiny.

It is probably fair to say that the most high profile of the measures is the proposal to fold the activities of the air travel complaints commissioner into those of the broader Canadian Transportation Agency mandate.  From our perspective, this is sensible move, insofar as the existence of that office represented little value for taxpayer's money.  This has been an institution that stands out from other sectors in its purpose and role.

There is no Complaints Commissioner for other modes of transportation, nor is there such an office for practically any other sector of the economy.  The reason is self-evident; clearly there can be no better arbiter of the consumer interest than a healthy and highly competitive sector.

Let's recall that when this office was created, it was in an era of much hand-wringing about the future state of competition in this industry.  Air Canada had just completed its acquisition of Canadian Airlines in 2000 and many observers, including many parliamentarians at the time, expressed significant concerns about Air Canada's potential dominance of the market.  Despite this industry's assertions at the time that the marketplace would, in fact, provide the appropriate level of service and competition demanded by consumers, this office was established - amongst a series of other measures - in an attempt to create by legislation a regulatory framework which would protect consumers' interests in the absence of competition.

But, as we said it would, the marketplace, did return to provide a level of competitive service which responds to the demands of consumers.  Anyone doubting that assertion need look no further than to the fact that WestJet's domestic market share today - at approximately 40% - is higher than any level previously achieved by Canadian Airlines.

While there will always be some level of service disruptions in our industry from time to time, we respectfully submit that a careful analysis of the role and value of the Complaints Commissioner since its existence will clearly demonstrate that a healthy and competitive marketplace and not another layer of government bureaucracy can best respond to the need of consumers.

Similarly, the proposed authority granted to the Minister under this legislation to review mergers and acquisitions in all sectors of transportation - as opposed to just in the air sector - is another example of a legislative tool, introduced amidst the Canadian Airlines-Air Canada hysteria of 1999-2000, which has little if any practical value for passengers.  Unlike the previous measure, however, this one actually does very real harm to the interests of passengers.

Nearly all stakeholders in commercial aviation, from consumers groups, to infrastructure service providers, to airlines, support lowering the barriers to investment in this sector.  We all recognize that ours is a very capital-intensive business, with large start-up and operational costs required to support what is, ultimately, a low-yield business climate.  If, a healthy, competitive aviation sector is the goal, why put in place regulations which cast doubt on Canada's openness to investment in this sector?

Moreover, this authority vested to the Minister runs counter to the stated principles in the Canadian Transportation Act, including that;
"competition and market forces are, whenever possible, the prime agents in providing viable and effective transportation services"
Clearly, this proposal does not support the role of competition and the marketplace in providing viable and effective transportation services.

Again, as with the previous measure discussed, since this was a tool introduced to deal with a perceived problem which never materialized, parliamentarians should rightly be asking themselves; what is this for and what does it do for consumers?

As to the matter of empowering the Minister to regulate airfares, we encourage parliamentarians to remember where this came from and to ask themselves what value it represents to passengers.  Indeed, some of our own members may say that it has some value.  Carriers, who primarily distribute their tickets through provincially-regulated tour operators or travel agencies, for instance, may see some value in a federal standard that would apply throughout Canada, while others, who market their services directly to consumers, question the need for this measure in the first place.

Certainly, we are all united by the common interest to ensure that consumers are fully and directly informed as to the makeup of their ticket cost.  ATAC's concern with this proposal rests simply on its potential for abuse by future governments.  As you well know, the final average cost of discounted airline ticket in this country is comprised of anywhere between 25 and 40% in various government and government-created monopolies' taxes, fees and charges.  I don't think it would be fair to consumers in anyway, shape or form to hide information from them as to who is getting their travel dollar.  They have a right to know.

So, while we take no specific view as to the propriety of this measure, we do question the focus on disclosing the full price when the real focus should be in helping to reduce it.  After all, shouldn't we be more concerned with making a $99 fare to Toronto more sustainable in the long run, than in wringing our hands about whether or not that includes all the various government fees and charges?

In a similar vein, this Bill also purports to empower consumers by giving the CTA the authority to regulate the display of its terms and conditions for international services on the carriers' website.  As an industry, we completely agree with the notion of ensuring that consumers are fully informed of their terms of carriage, which is why we clearly state the restrictions applicable to any ticket prior to the completion of a sale transaction.  We would caution the Committee, however, to seek clarification on the meaning of this clause.

As some members may know, the full tariff is a legal contract consisting of thousands of detailed lines of text, spelling out every travel eventuality and arrangement known to man or woman.  The full text of a tariff rule can run over a hundred pages.  We respectfully submit that it is in keeping with the spirit of this legislation to clarify this clause in order to provide consumers with practical and clear information as to their terms of carriage, rather than a requirement to publish the full text of the tariff. 

As to matter of sharing aviation data between government agencies, our industry takes no specific view as to the merits of these provisions.  This is a broader social question, which is not limited to the commercial interests of airline service providers.  From our members' perspective, our limited concern rests with the integrity of that data, which rightfully belongs to our passengers.  We urge government to proceed cautiously when sharing information, to do so only to the extent necessary and to ensure the integrity of our databases by limiting any data-fishing exercises.

Finally - and to be fair - the legislation does propose a few house-keeping measures, which the industry can support.  It contains clauses to require that persons acquiring an air service from another licensee must, themselves hold an unsuspended license.  It exempts operators of seasonal service from the obligations of providing notice when suspending a service, for obvious reasons.  And, several other sections are also amended to provide the CTA with greater flexibility in making its determinations on a number of regulatory measures.  The industry, by and large, supports these measures in principle.

So, while this legislation is not entirely without merit, I return to my opening statement about assessing this Bill from the passengers' perspective.  If we can agree that more than anything, passengers want safety, efficiency and value in their air travel experience, we have to ask ourselves what, if anything, this Bill accomplishes from that perspective.  Sadly, the answer is very little.

Ultimately, motherhood statements about airfare advertising rules, air travel complaints and reviewing mergers and acquisitions will do nothing to lower costs at airports or improve the travel experience in any other way for passengers.

As some parliamentarians may recall, this Bill is the third incarnation of this legislation.  For some strange reason, Transport Canada keeps focusing on these measures which offer words in place of action to promote the interests of passengers.

With that, I can only conclude by saying that the aviation industry in Canada is disappointed in this legislation and looks forward to discussing issues of meaningful reform, including those contained in the Airports Act, as well as to hopefully and finally seeing some meaningful airport rent reductions for our industry and our passengers.

Thank you.  I look forward to your questions.