:
It's my pleasure to call this meeting to order and welcome all of you to meeting number 10 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.
Today's meeting is taking place in a hybrid format, pursuant to the House order of September 23. The proceedings will be made available via the House of Commons website. Just so that you are aware, webcasts will always show the person speaking rather than the entire committee. To ensure an orderly meeting, I would like to outline a few rules as follow.
Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice, at the bottom of your screen of the floor, or English or French. For members participating in person, proceed as you usually would when the whole committee is meeting in person in the committee room. Keep in mind the directives from the Board of Internal Economy regarding masking and health protocols. Before speaking, please wait until I recognize you by name. If you are on video conference, please click on the microphone icon to unmute yourself. For those in the room, your microphone will be controlled, as normal, by the proceedings and verification officer.
I remind you that all comments by members and witnesses should be addressed through the chair. When you are not speaking, your mike should be on mute. With regard to a speaking list, the committee clerk and I, as always, will do our best to maintain the order of speaking for all members, whether they be participating virtually or in person, albeit we do have the speakers list in front of us.
Pursuant to Standing Order 108(2), the committee today is meeting to continue its study of the impact of COVID-19 on the aviation sector.
I would like to welcome our witnesses here today. I have been told beforehand that there has been some agreement by the witnesses on the speaking order.
With us today we have from Air North, Mr. Joseph Sparling, president; from Air Passenger Rights, Mr. Gábor Lukács, president; from the Canadian Automobile Association, Ian Jack, vice-president, public affairs, and Jason Kerr, senior director, government relations; from Late Flight Claim Incorporated, Mr. Jacob Charbonneau, president and chief executive officer; from Options consommateurs, Sylvie De Bellefeuille, lawyer, budget and legal adviser; and, from the Public Interest Advocacy Centre, John Lawford, executive director and general counsel.
To all of you, welcome. The order that I was given prior to the meeting, which you all agreed upon, I assume from the way it was communicated to me, will be Dr. Gábor Lukács from Air Passenger Rights first, followed by Sylvie, John, Ian, Joseph and Jacob.
With that, we'll start off with Dr. Lukács for five minutes.
The floor is yours.
:
Mr. Chair and honourable members, thank you for the privilege of appearing here today.
Air Passenger Rights is Canada's independent, non-profit organization of volunteers devoted to empowering travellers. We accept no government or business funding, and we have no business interest in the travel industry. We speak for passengers, whom we help daily in their struggle to enforce their rights.
The last time we testified before this committee, we cautioned that the Canadian Transportation Agency had lost its independence and its consumer protection activities had been compromised. The COVID-19 pandemic has confirmed the magnitude of these anomalies.
Since March, we have witnessed an unprecedented assault on passengers' private property and the collapse of consumer protection in Canada. Airlines whose revenues were decimated by the pandemic have helped themselves to passengers' money. They have pocketed airfares paid in advance without providing any services in return. During the pandemic, airlines have perfected the scheme. They kept selling tickets, just to cancel flights at the last minute and keep passengers' money. For instance, between September 25 and October 31, Air Canada cancelled about 75% of its flights scheduled for November.
Let's look at the numbers: 3,870,000 affected passengers is a conservative estimate for the number of outstanding tickets on Canadian airlines as of September 30; about 2.3 million are Air Canada customers. Instead of protecting consumers, the Canadian Transportation Agency mounted a disinformation campaign on its Twitter and on its own website.
On March 25, the agency published its statement on vouchers. The statement told the public, without any basis or authority, that airlines don't have to refund cancelled flights but may provide IOUs instead. The agency's position can be summarized as follows.
First, it says that an airline can cancel a flight for reasons outside a carrier's control and keep passengers' money so long as the ticket was marked non-refundable. Second, the agency blames you, lawmakers, for ostensibly tying its hands and taking away its power to order airlines to refund passengers. These are pseudo-legal arguments that conflate a refund with compensation for inconvenience. Refund means the repayment of the price paid for services or goods. For example, if you order an item on the Internet but you don't get what you paid for, the seller must give you a refund. Airline tickets are no different.
In 2004, when the agency was still independent and impartial, it made a binding legal decision recognizing a passenger's right to a refund for flights cancelled by an airline, even if the reason is outside the carrier's control. The agency reaffirmed this principle in three subsequent decisions in 2013 and 2014, and coined it “a fundamental right of passengers”. These legally binding decisions are based on statutes and regulations that are still in force today. There is no gap in the law on refunds. The Transportation Modernization Act imposed additional obligations on airlines to pay compensation for inconvenience for flight cancellations that are within the carrier's control, but it did not alter passengers' fundamental right to a refund. It is not the law that has changed but the agency's willingness to act independently and impartially and to enforce the law as written. The agency's misleading statement has caused significant harm to the public and to the entire travel industry.
Not only the airlines, but also travel agents, credit card issuers and even travel insurers used the agency's statement as an excuse to deprive passengers of refunds for flights that the airlines themselves cancelled. The agency's conduct has undermined consumers' confidence in the Canadian travel industry and the government to respect private property and protect consumer rights. The loss of confidence will slow the entire sector's recovery.
Our core values and respect for the rule of law cannot be swept aside just because a major Canadian industry may suffer financially. The law must always prevail.
:
Good afternoon, Mr. Chair. Good afternoon, ladies and gentlemen members of the committee. Thank you for giving us this opportunity today to share our observations with you.
I have been working as a lawyer at Option consommateurs for 10 years. Created in 1983, Option consommateurs is a non-profit association whose mission is to help consumers and defend their rights. As such, we receive thousands of legal information requests every year from people experiencing difficulties with merchants, including in the travel industry.
Furthermore, since the beginning of the pandemic, we have received a record number of calls and emails from consumers not only from Quebec, but also from elsewhere in Canada, asking us for information to get their plane tickets refunded.
This is the situation we want to talk to you about today. To us, the situation is very clear: Canadian consumers whose flights were cancelled because of the pandemic must be reimbursed.
Although the pandemic has been difficult for everyone—both consumers and merchants—its impact is not the suspension of applicable laws. The solution offered by most airlines, travel credits, is unacceptable and unfair.
We think it is high time for federal authorities to play their role and protect Canadian consumers.
Under the pretext of force majeure, airlines have assumed the right to keep clients' money without providing them the service they paid for. So far, both the Canadian Transportation Agency and the government have limited themselves to maintaining that the Air Passenger Protection Regulations do not oblige airlines to reimburse their clients for cancelled flights.
However, it is important to specify that those regulations are not exclusive or comprehensive in their provision of all the obligations airlines have. Other laws and regulations impose restrictive obligations and grant the authorities the power to take action.
For example, the Transportation Act and its relevant regulations give the CTA the power to get involved, especially when a tariff contains an unreasonable condition. Yet we are struggling to see how, in a law society, it could be considered reasonable for a business to impose a condition on consumers whereby it can keep their money without being obliged to provide them with the service they paid for.
However, there is more to this. Airline contracts are also subject to provincial laws. In Quebec, where we are the most familiar with the legislation, both the Quebec Civil Code and the Consumer Protection Act contain provisions that make it clear that airlines have the obligation to refund their clients for flights that had to be cancelled because of the pandemic.
We don't understand why the government is silent on this issue. Both the government and the CTA must enforce the laws and regulations and force airlines to refund their clients.
What is more, a declaratory bill—in other words, Bill —was recently introduced in the House of Commons. That bill reiterates passengers' right to be reimbursed for flights that are cancelled for reasons beyond the control of the carrier.
The travel credits offered by airlines in no case constitute a valid solution in the current context, where households' financial health is being tested.
Since the beginning of the crisis, we have received hundreds of calls from consumers who are worried, disappointed and irritated about being unable to get their money back—often in the thousands of dollars—while they need it. We have actually launched a petition to force airlines to reimburse consumers. That petition has garnered 32,000 signatures.
We are being told that airlines are facing revenue losses owing to the pandemic. We don't doubt that. However, this pandemic has also hit industries other than the air transportation industry. It is not up to consumers to fund airline companies.
Many consumers are struggling to keep their heads above water. The measures implemented to help families have certainly been a great help, but they do not ensure the financial health of households over the long term. People need their money, and they need it now.
It is clear that consumers are being manipulated in this case. On the one hand, airlines are saying they cannot refund tickets without government assistance. On the other hand, the government says it is prepared to negotiate assistance, but assistance that would be conditional on consumers being reimbursed. During this time, nothing has been happening. It is high time for things to change.
Thank you.
Honourable members, my name is John Lawford. I'm the executive director and general counsel at the Public Interest Advocacy Centre, which is a non-profit and registered charity. We provide legal and research services on behalf of consumers, and in particular vulnerable consumers concerning important public services such as airlines, in a field we've been working for over 20 years.
PIAC has heard many complaints from consumers about the lack of cash refunds for flight cancellations due to COVID-19. Our message is that COVID-19 is an exceptional situation and passengers deserve cash refunds. Consumers and citizens feel, given the circumstances of an unprecedented global panic disrupting all domestic and international travel, and the economic precariousness caused by the pandemic, and larger personal monetary losses suffered by many travellers, that receiving vouchers or any other option besides refunds is inadequate and unacceptable. They are correct.
Consumers know the general rules for normal times. They know that when they purchase a non-refundable ticket that they will not be refunded if they, not the airline, cancel. They know most airlines' policies are to provide only a voucher good for one year if the airline cancels a flight. This buyer-beware situation is not loved, but it is understood.
The federal government has brought airline cancellation and refund practice more into line with consumer desires in normal times with the air passenger protection regulations. The APPRs are a very good thing, but they're too complex to describe here. As you heard from Mr. Streiner, they had not anticipated a global travel crisis on such a scale as now.
Whether there should be a cash refund for all types of tickets, whether airlines or customers cancel the flight for such large-scale and system-wide shutdowns as COVID, and who bears the risk of paying for such a refund protection scheme are legitimate matters for debate. We think there should be some provision made, and we turn to that now.
One contingency plan that could be to have a compensation fund similar to the Ontario travel industry compensation fund. This fund is financed by registered travel agents and travel wholesalers in Ontario and administered by the Travel Industry Council of Ontario. It provides reimbursement for bankruptcy and insolvency of an Ontario registrant or an end-supplier airline or cruise line.
A similar compensation fund could be paid out of a small levy on all airline tickets, whether purchased directly from the airline on a website or through an online or in-person travel agent. It would require an administration and would likely result in a pass-through charge to consumers; but then, there would be a fund for a situation just like COVID.
Another method could be to introduce a formal legal mechanism that mandates that airlines must segregate funds that they receive from passengers for future flights and keep them separate until the passenger actually departs. This is simply keeping the consumer monies in trust until they travel, and it would equitably belong to the customer if travel were cancelled. Terms of this legal trust mechanism could limit it to payouts only in situations like the present, or be more generous.
Our understanding is that both solutions would be opposed by the industry.
However, even if we cannot protect consumers on this scale in the future, PIAC insists that for this crisis, it is only just and reasonable that all Canadians be fully refunded for having had travel cancelled or disrupted by COVID-19—and ignoring the niceties of refundable versus non-refundable or customer-initiated versus airline-initiated cancellation. We note that the appears to agree with us. Why? Because airlines are going to be bailed out with taxpayer money. The federal government must ensure that passengers get their refunds for flight cancellations because, otherwise, those taxpayers who did not get a refund will bail out airlines and be penalized twice.
:
Thank you, Mr. Chair. I doubt I'll get a gold star, but I'll try my best.
Voices: Oh, oh!
Mr. Ian Jack: Thank you very much to the committee for this invitation this afternoon. CAA was founded in 1913 to represent the interests of motorists originally, but the world has evolved since then and so have we. We have 6.5 million members today from coast to coast, and the services we offer them extend well beyond emergency roadside assistance. We're very proud to be named one of Canada's top two most trusted brands three years in a row by the Gustavson School of Business at the University of Victoria.
Today, we're also one of Canada's largest leisure travel agencies, through our store network and online.
[Translation]
That said, we are still a not-for-profit, member-driven organization that is, at its heart, an advocate for the Canadian traveller.
[English]
At CAA we don't sell business travel, so prior to the pandemic our travel specialists worked with average Canadian air passengers every day. When the pandemic hit, they worked tirelessly to bring home our members who were stranded overseas.
[Translation]
This understanding of the business allowed us to take a strong, informed position as the air passenger right regime was being established in Canada.
[English]
Unfortunately, the pandemic hit soon afterwards, and we saw that the regime, the APPR, was inadequate to protect consumers. That's because the regime carves out events beyond a carrier's control from any requirement to provide a refund. In retrospect, this was a huge mistake.
Since March, CAA has been pushing for access to refunds for Canadians left holding the bag when their flights got cancelled due to COVID-19. Thousands of Canadians were left with multi-thousand-dollar holes in their finances, through no fault of their own.
[Translation]
Essentially, they were forced to provide interest-free loans to the carriers at a time when they could least afford it.
[English]
We welcome the government's commitment to getting passengers their money back. We will be watching closely to make sure this commitment is honoured and that passengers can get cash refunds quickly. Keep in mind that thousands of people have been out of pocket already for six months or longer. For those who have been hard hit economically by the pandemic, this is especially unfair.
At the same time, we recognize that the carriers are struggling and that Canadians need them to survive. In many other jurisdictions governments have already stepped in to make sure their carriers remain viable, but also that passengers are not left to finance them.
[Translation]
We are pleased the government of Canada has finally agreed to do the same thing.
[English]
While some carriers have refunded some fares, the vast majority of travellers affected by COVID cancellations have not received a penny. This patchwork, in which the wealthy and business travellers who can afford refundable tickets get better treatment than do average citizens, is exactly what the APPR was supposed to end.
CAA urges the federal government to ensure that refunds are made available in a timely fashion. COVID-19 has brought significant financial hardship upon average Canadian families, and it is only fair that they can get cash refunds if they want them.
[Translation]
We must remember that these flights were cancelled through no fault of the passenger.
[English]
We urge this committee to focus not just on rectifying this past injustice, however, but also on making sure it never happens again. This is for the benefit not only of passengers but of the economy as well. Getting Canadians back on planes in large numbers depends on health measures, absolutely, but also on consumer confidence about their purchase. What average Canadian would voluntarily spend thousands of dollars on tickets for their family today knowing they might forfeit all their money if there is another unpredictable lockdown at home or at their destination? The government should ensure that in the future, flights cancelled due to government health warnings or shutdowns are automatically refundable.
As mentioned, we're also a travel agency, and we know that travel agents should not lose out on commissions owed to them. Agents did their work, and in many cases the carriers have been holding their money since the spring. Consumers should be made whole, but we feel the government has responsibility to agents as well.
Finally, let me briefly outline CAA's other priorities for air passenger rights, which we urge you to consider. While the pandemic revealed a major shortcoming that should be fixed, it remains a fact that the APPR brought Canada its first industry-wide code of conduct for airlines.
[Translation]
Let us point out that the United States and the European Union already had similar regimes for a decade or more.
[English]
The regulations came into full force only in mid-December of last year. In the first three months, prior to the pandemic, 11,000 complaints were filed. While the lack of air travel performance data leaves us flying blind, we believe it's still too early to fully grade the regime. Most of the complaints filed haven't even been addressed. We need to let the APPR run for a further period and then grade it. We do not believe it needs to be reopened at this time, other than to address the COVID-19 refund situation.
Our other issues include the real cost of air travel to middle-class Canadians including, for example, airport fees and à la carte pricing; making sure the government lives up to its commitment to provide public air travel performance data in a useful and timely fashion; making sure the CTA has adequate resources to enforce the APPR; and CATSA reform so passengers can move more efficiently through security.
:
Thank you for giving me the opportunity to speak with you today.
Air North, Yukon’s airline, has been in business for 43 years. We are based in Whitehorse, and we currently provide gateway jet service from our Whitehorse hub to Vancouver, Kelowna, and Victoria, and regional turboprop service to Dawson City, Old Crow, and Inuvik.
We are 100% Yukon owned and our shareholders include more than 1,500 local Yukoners, including the Vuntut Gwitchin First Nation, which holds a 49% interest. With more than 200 Yukon and northern employees, we are one of the largest private sector employers in Yukon.
My purpose in today's discussion is to provide the committee with a northern airline perspective on how the government might best help Canadian airlines to return to financial stability while minimizing the burden on taxpayers. In the longer term, airlines will return to sustainability when people start to travel again. In the short term, governments have stepped up with financial assistance, for which this airline is most thankful. In the medium term, which is likely to be years rather than months, if governments choose to continue to provide assistance, then we believe that the burden on taxpayers could be minimized by attaching strategic conditions to financial aid. The logic behind this is simply that much of the aid dollars to date have effectively funded excess capacity or empty seats, with the result being that the aid has been somewhat ineffective in stemming record industry losses.
Taxpayers shouldn't be paying airlines to burn jet fuel and wear out airplanes flying empty seats around. We believe it would be far more productive to use subsidy efforts to help all airlines undergo a very necessary temporary contraction so as to ensure that they can operate sustainably with reduced traffic and flying volumes while maintaining essential services and affordable pricing.
The government's commitment to support air service to regional communities underscores the need to support regional airlines. There are currently 23 air carriers in Canada providing service to 189 communities. Only 57 of these communities are served by Air Canada or WestJet, and 131 have a population of less than 10,000. Only 49 are served by more than one airline.
In the Yukon market, we compete with both mainline carriers, one of them seasonally on our gateway routes.
During the course of the pandemic, the resultant excess capacity has doubled the subsidy required to support our essential services.
Mainline carriers only do part of the job in the north, because they don't fly to any regional communities. This is akin to skimming the cream off the top and leaving the milk to go sour. To protect essential services to, from and within the north, we've asked the government to temporarily limit mainline carrier capacity in northern gateway markets. We've also asked the government to make interline agreements mandatory for all Canadian air carriers.
Mandatory interline agreements would help to level the playing field between large mainline air carriers and small regional carriers and would protect consumers and increase competition by making mainline route networks and wholesale pricing available to consumers in regional communities. Co-operation among suppliers is a feature of national policy in both the rail and the telecommunications sectors. In this environment it makes sense for airlines as well.
You may raise your eyebrows at a proposal to temporarily limit competition, but remember, it was not that long ago that limiting competition was the norm. The Canadian airline industry was not deregulated until 1987, and the north was not deregulated until 1996. In 1977, when we started our business, if we wanted to fly between Whitehorse and Vancouver, we would have been required to demonstrate public convenience and necessity to the Canadian transport committee, and our application would likely have been denied because, at that time, the market was only producing about 300 passengers per day, which was enough to support Canadian Pacific's two daily milk run flights to Whitehorse.
With our recent border lockdown, the Yukon market is currently producing only 104 daily passengers, yet there are three daily non-stop flights to Vancouver in the market. The U.S. provides subsidy for thin airline routes through its essential air services program, but only one carrier is subsidized on any route. In Canada, we are currently subsidizing competing carriers on several routes, and in the Yukon, taxpayers are effectively subsidizing three air carriers to fly the same route.
I first want to thank the committee for inviting me to make a presentation.
Late Flight Claim is a business that helps airline passengers obtain—simply, quickly and without risk—financial compensation or a refund after a flight has been cancelled or is late.
Last time I had an opportunity to appear before a House of Commons committee was during the study on Bill , aiming to implement a protection regime for airline passengers. We then critically assessed that bill's shortcomings. We raised the fact that a number of points benefited and protected airline companies more than consumers. The complexity of that piece of legislation and its regulations would open the door to a number of interpretations and encourage airline companies' refusal to provide compensation or a refund, although we had been promised a simple regime that would be ahead of various international programs.
The current crisis is unprecedented and has heavily impacted the aviation and tourism industry. It has highlighted the shortcomings of the current protection regime, the processes, the control measures and the organizations in charge of its proper operation.
The government and the Canada Transportation Agency have been slow in taking steps to protect consumers. Very early at the beginning of the crisis, the European Commission and the U.S. Department of Transportation stated that air carriers must reimburse consumers for unused flight portions. Not only was this not the case in Canada, but the CTA even encouraged consumers to settle for future travel credits and mentioned they should respect the fare rules in place.
In addition, while other countries were implementing clear directives forcing airlines to refund unused portions of tickets purchased, “the CTA quickly took [temporary] steps to address the significant impacts on the airline industry”. One of the things the agency did was apply a temporary exemption on the obligation to provide compensations or to provide new protection for passengers through other airlines.
The CTA additionally gave carriers a deadline extension to respond to passengers' compensation claims. Airline companies had until October 28, 2020, to respond to all compensation claims that had been backlogged since March 25, 2020, or that had been submitted between March 25 and September 29, 2020. That represents nearly a 700% extension of the deadlines.
The agency ordered that the processing of all requests for dispute resolution before the agency concerning airlines be suspended until June 30, 2020, including all requests received under the formal dispute settlement during the suspension period.
So the agency hurried up to implement measures to protect airline companies to the detriment of consumers. One has to wonder what the Canada Transportation Agency's role is and who benefits from it.
During his presentation, Mr. McNaney, from the National Airlines Council of Canada, mentioned that foreign companies that received support were starting to take parts of the market. However, Air Canada, which was in a good position in terms of cash flow at the beginning of the crisis and which has gained several billion dollars in cash flow since, in addition to the billions of dollars in non-refunded tickets, is probably better positioned than others to face this crisis, proportionally speaking.
Moreover, I am astounded when I see a company, on the one hand, asking for public assistance to survive and, on the other hand, offering a gold plated pension of several million dollars to its outgoing president.
And what if this was not just a matter of finances? Would it not be connected to the fact that clients are better protected and helped by different entities?
As you know, travellers expect a certain level of service, and I am not talking about a five-course meal served on board with nice plates. They just want to be able to talk to someone when they have a problem or to be reimbursed when services are not provided. Unfortunately, all too often, certain Canadian carriers have neglected their duty in both cases. The same goes for organizations in charge of regulating and protecting consumers. The situation was already noticeable well before this crisis began.
The longer we wait, the more consumers lose out, as do all other players in the value chain. This situation that has persisted puts undue pressure on service providers such as travel agencies and agents, insurance providers, as well as credit card companies. They should not have been paying for the lack of clear guidelines and airlines' inability to meet their commitment.
In closing, I would like to remind the committee of the fact that, before this crisis, when the airline industry was at its peak and had record sales and profits, a number of situations showed that short-term profit superseded services provided to consumers, who were all too often taken hostage through decisions related to business operations.
What will happen now, following cost and staff cuts, and with the two airlines about to be merged, which will result in less healthy market competition, which is already restricted in Canada, in addition to increasing a number of risk factors?
I have heard various stakeholders mention, at different meetings of this committee, to what extent the airline industry is Canada's economic backbone. Must we hit a wall to realize what consequences our decisions have, thereby jeopardizing an entire industry?
Thank you.
Mr. Lawford, you mentioned something that I think is of great significance going forward, through the pandemic and beyond, as we look to the vaccine. That's the loss of confidence in the travelling Canadian public. Usually, I would say, we attribute this loss to the health and safety risks the public currently associates with flying. You related it to the lack of refunds. You made a very good point, that tens of thousands of Canadians have invested lots of money in purchasing tickets. This has created a loss of confidence within them for future travel.
Can you expand upon that, please? If the government doesn't act to provide a global plan allowing for passengers to be reimbursed, can you expand upon the loss of confidence we'll see in the travelling public as a result of their uncertainty in receiving a refund, should they book a flight?
I thank the witnesses. We really appreciate their presence.
This a fairly delicate situation. On the one hand, people who purchase tickets have the right to be reimbursed. On the other hand, it is important to support the airline sector, so that carriers can retain and protect their employees. That is actually an absolute priority for me and for most people.
We don't know how long this pandemic, during which emergency levels are increasing on a daily basis, may last.
My first question is for Ms. De Bellefeuille.
Ms. De Bellefeuille, if airline companies went bankrupt, their assets would likely be liquidated and the product would go to their creditors, be they banks, suppliers or others.
According to you, where would passengers rank in the state of the collocation? Would there be enough money to pay them, after preferential creditors got their share?
I would like to hear your thoughts on that.
:
It is not a fair assessment at all.
First of all, when it comes to the issue of refunds, there are no gaps. The APPR is indeed poorly drafted, but it is not a complete code. For example, the APPR does not say that passengers are entitled to a seat in the cabin, but the APPR's silence does not mean the airline can transport passengers in the cargo bay. The situation is similar with respect to refunds.
With respect to this specific issue, it is simply not well drafted. The fundamental right of passengers to a refund should have been incorporated in the APPR for simple clarity purposes, which would have spared the public this issue. We cautioned the agency about it in our 52-page report. We cautioned the agency about it during our consultation. Unfortunately, the agency did not listen. The government did not listen.
:
Well, in terms of airline economics, you've likely all heard people describing airlines as often running in a hub and spoke system. In a typical hub and spoke system, the cash tends to flow from the spoke to the hub.
In the case of Yukon, by making Yukon our hub, when Yukoners buy their travel locally their travel dollars stay in Yukon to support the local economy, and when visitors come to Yukon, their travel dollars flow into Yukon to support the local economy.
I don't know how familiar you are with territorial economics, but it costs about a billion and a half dollars a year to run the territory. We only generate $200 million to $300 million ourselves. The rest comes courtesy of southern taxpayers.
There's a lot of interest in making territories—our territory in particular—more self-sufficient, and by creating our own airline in Yukon, I think we've taken a big step in that direction. We have indigenous ownership with a 49% stake by the Vuntut Gwitchin First Nation.
One of the clauses in all of the Yukon first nation land claims settlements is a commitment by both the federal and the territorial governments to take steps to help first nations participate in the territorial economy. I think the investment in Air North north by the Vuntut Gwitchin was one of the first such investments made by a Yukon first nation. I think it's generally regarded as perhaps a great template of just how first nations can participate in the territorial economy.
:
Firstly, as an industry, we sympathize with Nav Canada's problems. They're just like the rest of us. They're trying to keep their expenses from getting too far ahead of their revenues. Nav Canada has proposed a 30% rate increase to airlines. As an industry, we've come back to them and said they should look at cutting costs before they look at increasing rates.
As a Whitehorse-based operator, we have to be a little careful about criticizing every area in which they choose to cut costs. Having said that, there are some peculiarities with Whitehorse. We are a non-radar environment. That's probably the most significant differentiator between our control tower and other control towers. I think that if we were in a radar environment, if we had low-level radar, the safety considerations would be far less.
We've reached out. Nav Canada hasn't made a plan to formally close the tower. It's something they're considering. We've come back to them and are saying, “Look, without radar, there are some safety considerations.” We've asked if they could not look at perhaps reducing hours, reducing staffing or doing something else to save money instead.
:
Employment.... With 1,500 local Yukon shareholders, that's between 1 in 15 and 1 in 20 Yukoners who has an equity stake in the airline. Our shareholders are our customers. When we hold our annual general meeting in our hangar, we get better than 10% of our shareholders showing up. I don't think General Motors does that well. Our shareholders are a very engaged and interested group of people.
The question of refunds came up. I'm surprised nobody's asked me. We live in a small community. We don't sell the middle seat on our flights, and we do give refunds to passengers who need them, but in our market, people are going to travel. Only about 15% of our cancellations have resulted in refund requests. We are very lucky in that most people are happy to accept vouchers or credit for future travel.
The big guys, the international carriers, have been hammered by a drop in demand. I sympathize with them. They're trying to stay afloat. We have it relatively easier here in that northerners have to travel. People travel back and forth for medical reasons. There's good cargo flow on our regional routes. Old Crow doesn't have a road, so all of the groceries, building materials, consumer goods, absolutely everything that goes into that community has to be flown in. There is, with or without a pandemic, a somewhat stable level of demand for air service. It's just not what it was this time last year.
First of all, let me welcome all of the different groups today. The witnesses and their presentations are very interesting. I'm sure we've heard from many groups, and individuals especially, who are lobbying for cash refunds of course. Rightly or wrongly, the airlines argue that such activities, as were referenced earlier, could cause them to fail—which would be something we certainly wouldn't want—and that they're not legally obligated to offer refunds for some of the tickets they've sold without insurance and that kind of thing.
I want to ask Mr. Jack and Mr. Lawford to comment maybe. In a situation or a scenario where the courts confirm that given the circumstances, the airlines did in fact have the right to offer vouchers in lieu of cash reimbursements, what would you advocate for at that point? For instance, should vouchers be valid for longer than two years? I'd like for Mr. Jack, Mr. Lawford, or both, to comment on that, please.
:
Sure. If I were a politician, I might say that I don't like to comment on hypotheticals, Mr. Chair, but I will go ahead and answer the question.
Under the circumstances, we have a government that has publicly stated that it will get refunds for people, and also that there is financial assistance on the table for the industry. In our case at least, our first thought is not about the outcome of a court case; it's about the outcome of a negotiation that is said to be under way, and that we hope will finish as soon as possible. As we noted in our remarks, some people have been out-of-pocket now for six, seven or eight months already, multiple thousands of dollars.
I would say that other jurisdictions have got on with this and got it done. Those would be the U.S., the EU—several European jurisdictions. Their governments have gotten together with their carriers and ensured that passengers have, at least in some circumstances and far more broadly than in Canada, gotten their money back. It is more than possible to do this. We just think that both the government and the carriers need to get on with it.
:
Thank you for the question, Mr. Soroka.
We think that at some point we are going to get past this pandemic. We will start to see air travel resume, perhaps not for some time now to the volumes it was at before. There were a series of reforms that were finally getting under way in this country, to a system that hasn't really been touched in over 20 years—the airline system broadly. All of those, of course, went into the deep freeze when COVID-19 happened.
We hope that some of them will be brought back and that they're not all forgotten. One of those, in relation to CATSA, involved the length of the lineups that used to exist. This is obviously not an issue today because nobody's flying, but when people start flying again, we're going to start seeing very long lines again. There was a project by the government to reform CATSA significantly, to give it better funding, and to allow it to invest more in technology so that we could see a better air system for Canadians.
The point of my remarks at the very end was simply to say, let's deal with this big issue of refunds first, but let's not forget about all of the other things that we all cared about right before the COVID pandemic hit. We should come back to some of those once we get past this unfortunate situation.
:
Thank you, Chair, and to all the witnesses for your excellent presentations.
Certainly, with situation we're in now, we're all absolutely clear that refunds are necessary. My constituents are telling me that very clearly.
We also know that pandemics have been predicted by public health officials for years. Those of us in the GTA were very conscious of the SARS pandemic, and, in fact, the spread of that through air travel. That's a given. There will be more pandemics in the future. I think it's really important for us as legislators to get things like the air passenger protection regulations right.
Mr. Jack, I would ask you to perhaps elaborate a little. Is there a model from another jurisdiction that could be very helpful to Canada going forward? You mentioned the United States. Could you be more specific as to how their regulations are worded and how they work?
:
There are several jurisdictions around the world that have fairly clear black and white language. None of them are perfect. The U.S. law applies to domestic flights, not international flights. It doesn't cover everyone. There's no reason we can't simply right this in Canada. I think Mr. Lawford had a couple of interesting suggestions that the government should be considering for us going forward. We need to come up with a way to make sure that this doesn't happen again.
Unfortunately, and you referenced SARS and past pandemics, we've also seen predictions that COVID won't be the last pandemic. This could happen to us again. We all hope it doesn't, but it could. We have to make sure that we have proper refund provisions in place and that we close this loophole.
When people were looking at the legislation and the regulations in the APPR, they said we might have a hurricane somewhere and an airport might have to shut down for two days, so it wouldn't be fair to penalize the carrier in that case, because they would be doing their best to get people home. That's what the APPR says: make your best efforts to get people home again.
Unfortunately, nobody had thought about a pandemic shutting down airspace and then people not wanting to travel for months and months, even if the airspace were theoretically open. That's the world that we sadly live in now, and we need to take care of that for the future.
:
Thank you for the clarification. I appreciate it.
Just today we had one of the carriers announce that they're pulling out of a couple of small markets. Perhaps that's part of their negotiating strategy right now—I'm not sure. If I were a member of the committee, if I were the government, I would want to make sure that the service is restored, that there are guarantees for minimal service across this country. The aviation sector binds us. We have somebody from Air North who has said repeatedly and quite truthfully that people need to travel in the north. People need to travel from communities across this country. Some travel is a nice to have, but some of it is a must-have. We do need to make sure that those services are there.
I would note that the carriers have taken slightly different positions on this. We have heard that WestJet is refunding passengers for flights that it cancelled, not flights that passengers cancelled out of from an abundance of caution in the spring. I cancelled two of my tickets for flights in early to mid-March because I thought there was no way I was going anywhere in April or May. Those were business flights. I'm not out of pocket myself, so I'm not complaining about my own finances, but I'm observing that an awful lot of people would have done that. That's why I think that, overall, it's important that we don't differentiate between the people who cancelled flights themselves during the height of the pandemic and those whose flights were cancelled by the carriers.
:
Thank you. Hopefully, I covered everything in the notes. I think one of the things that I tried to point out is that I learned a lot when I was researching just how many—or how few—communities in the whole country actually have scheduled air service. The fact is that the majority of them are communities of under 10,000 people.
There is also the notion of interline agreements. A lot of our regional communities are not accessible to the rest of Canada in the absence of simple interline agreements between air carriers that will show a passenger wanting to go from Toronto to Dawson City, for example, that it's possible to fly there. In the absence of a interline agreement between ourselves and Air Canada, Dawson as a destination doesn't show up.
Another example would be that of a passenger who flies from Old Crow to Toronto and misses a connection in Vancouver with an Air Canada or WestJet flight. They could conceivably be asked to buy a new ticket, because there is no interline agreement between the two carriers.
I think that if our goal as a nation is to truly link every community in the country together, then we should be making the airlines mandated to link themselves together so passengers can check their bags and be protected when transiting from one carrier to another. This should not be a competitive tool that a big airline can use against small airlines. I think that's a key point to think about.
My next question is for Mr. Charbonneau from Late Flight Claim Canada.
Mr. Charbonneau, you mentioned earlier that, since the start of the pandemic, several countries around the world, including EU countries and the United States, have been stating loud and clear that passengers are entitled to a refund. Here, in Canada, it's quite the opposite. The policies of the Canadian Transportation Agency and the statements of the , have resulted in a decrease in the protections offered to passengers. For example, since the beginning of the pandemic, the minister has not supported passengers' right to a refund. In fact, what he is now saying is that passengers may be entitled to a refund if there was government assistance, but he isn't defending their right to reimbursement.
I'd like to know what you think of Canada's position, compared to the rest of the world, with respect to passenger protection.
:
Obviously, this can become problematic, because you are giving the keys to the kingdom to a single company, in this case a company that often sets itself apart, but not for the right reasons: it is the subject of several complaints, both in terms of language and services offered.
It also puts the entire industry at risk. Less competition means fewer players in the value chain for services, because you want to get volume discounts, and if there are fewer players, then fewer suppliers are engaged. But the value chain and the critical chain are important because if there are fewer suppliers, as soon as one of them has a problem, it can affect the whole industry. If there is a global computer failure, as we've already seen with some carriers, it affects the entire industry. If there is widespread piracy, it will affect the entire industry. Obviously, the less competition there is, the more the industry is at risk, and the less we try to stand out.
This is also the case for other stakeholders. I'm thinking of travel agents and travel agencies. If there isn't as much competition, these people won't have the choice to use a given supplier, then there will be no room for negotiation.
The same applies to passengers. If there isn't enough airline choice in Canada, and they are forced to choose between Air Canada and Air Canada, they risk going to an airline outside of Canada, which can result in a reduction in market share for Canadian companies.