STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, May 14, 1998

• 0909

[English]

The Chairman (Mr. Raymond Bonin (Nickel Belt, Lib.)): Good morning. Bonjour. We continue our voyage in the study of passenger rail.

• 0910

Committee members have requested that airlines and airport authorities be invited, because the approach we are taking to this study is that Canada is a big country with few people; there's room for everybody. So we are looking at transportation more in the direction of completing one another in the systems, rather than competing.

For that reason, and after having seen the system in France especially, where the train ends up right at the airport, we felt it was important for the airlines to have input and to share with us their view on passenger rail as complementary or competitive.

But if you wish to speak of other issues, of course the time is yours.

I invite you to start, Mr. Elliot.

Mr. Geoffrey Elliot (Senior Vice-President, Corporate Affairs and Government Relations, Air Canada): Thank you, Mr. Chairman.

Mr. Chairman and members of the Standing Committee on Transport, I'd like to thank you first of all for inviting Air Canada to appear before the committee today. My name is Geoffrey Elliot. My position at Air Canada is senior vice-president of corporate affairs and government relations.

In thinking about what messages Air Canada should deliver to you today, we took the time to read the terms of reference of the review of passenger rail service that were sent to us. Your focus of course is on the future of VIA Rail. You're obviously looking at ways to revitalize VIA Rail and possibly other rail systems in Canada as well.

Airline passenger services do not appear on the radar screen of the committee in the context of the review that is under way. Nevertheless I'm encouraged that in inviting Air Canada to appear before you, there is a recognition that airlines and railway companies sometimes compete for the same customers.

There are other occasions—and here I'm thinking of commuter and other urban rail transit systems—where rail and airline systems in fact feed each other. And certainly travellers and airlines both benefit from better public transportation, including commuter rail services, linking downtown centres to airports.

You've listed a number of specific issues that are of interest to Air Canada, including intermodal traffic on commuter, intercity, and transcontinental passenger rail services. You mentioned in the terms of reference the possibility of private sector participation in VIA Rail, and you also mentioned the high-speed rail option in the Quebec City-Windsor corridor.

Let me say from the start that Air Canada is not in the railroad business and I don't think buying into a railroad is on our short list of corporate priorities. But like VIA Rail, we are in the business of moving people.

Our services include intercity, transborder, and international route networks, and to be successful, we have to move people on and between those networks as conveniently, efficiently, and safely as possible. Our survival depends on the quality and price of our services being at least as good as, and preferably better than, the competition. The competition is other airlines, rail, bus, private automobile, and sometimes even ships. We have to be better than them in every possible way we can.

To do that, Air Canada and our connector subsidiaries have a fleet of over 230 aircraft, most of them being latest-generation, modern, fuel-efficient, and quiet jets. Air Canada is, as you all know, Canada's largest airline. We serve 118 destinations with our own aircraft and hundreds more destinations around the world through our global Star Alliance relationship with United Airlines, Lufthansa, SAS, Varig, and Thai International Airways.

Last year Air Canada celebrated its 60th year of service to Canadians. Since 1989 the airline has been fully privatized. Last year was also the best year ever for Air Canada in every significant financial, statistical, and technical measure.

Just like VIA Rail, we transport people in the Quebec City-Windsor corridor, with particular focus on the heavily travelled Montreal-Ottawa-Toronto segments of the corridor. So Air Canada is a competitor of VIA Rail, particularly for the business traveller. But we also compete for the leisure travel market, together with other consumer choices, such as private automobiles and buses.

• 0915

As a competitor of intercity passenger rail, Air Canada has an important interest in several of the issues identified by the committee. Our guess is that regardless of which rail option is considered, the bottom line is that every one will require some measure of public funding to make it work. It's also a safe bet that the more esoteric the passenger rail option—and here I'm thinking of high-speed passenger rail service—the greater the need for public financial involvement and investment. But any option, including revitalization of VIA Rail with modern conventional rolling stock, will also require significant public investment.

I guess it would make your job a whole lot easier if a private sector investor was waiting in the wings with deep pockets ready to take over, and invest in and run the system without public subsidies. But I suspect there isn't a long line-up of investors outside the room waiting to do that. If past experience is a guide, quite apart from start-up costs and infrastructure, it remains unlikely that any intercity passenger rail system of any kind can survive in Canada without ongoing operating subsidies. And without public investment, I suspect there would probably be no passenger rail system today, except perhaps to meet local commuter needs and niche specialty tourism markets.

I'm not here representing Air Canada to oppose public investment in passenger rail. A decision to extend and possibly increase public investment in passenger rail is essentially a matter for public policy. Your committee will need to consider what the options are. You'll have to assess to what extent each of those options for a revitalized passenger rail system will serve the public interest, including economic, social and environmental factors, and all the other questions that you've identified in your terms of reference, so that you can provide informed advice to government.

In the end, government will decide which of the various options, if any, are likely to give a return on public investment. And that presumably will include whether or not it might be better to invest public funds elsewhere. Certainly in today's world there are plenty of choices.

To give one note of caution, I believe the committee should at least be very careful to consider the potential implications on private sector unsubsidized businesses when publicly funded enterprises enter into competition in the same markets for the same customers.

Air versus rail is an obvious example. But there may be others. I was speaking the other day to Peter Armstrong, who is the president and CEO of Rocky Mountaineer Rail Tours. He phoned me when he heard that I was appearing before this committee, and as you probably know, he has a specialty rail operation based in Vancouver that provides scenic rail tours through the Rocky Mountains. Mr. Armstrong told me that he was worried about competition from VIA Rail using the same CPR track but benefiting from operating subsidies provided by government. And he asked rhetorically, what's the public interest in that? I'm not sure I know the answer.

For the record, Air Canada services do not benefit from public subsidies. The airway infrastructure...airports and air navigation systems today are not only self-supporting, but in the case of airports and profitable airlines like Air Canada, they contribute significantly to the public treasury. Some people might claim that Air Canada benefited from public subsidies in its former life as a crown corporation. The fact is that when the government sold its interest in Air Canada in 1989, the proceeds of that sale, all of which went to the government treasury, enabled the government to fully recover all of its prior investment in Air Canada over its 52 years as a crown corporation, plus an additional margin of $ 341 million.

Air Canada is not aware of any proposals for privatization of VIA Rail or of variations on this theme that would attract private sector capital. So we're not really in a position to comment on the merits of what those possibilities might be. We understand that while important progress has been made at VIA in providing and marketing a more competitive product, there is also an urgent need for substantial investment in rolling stock replacement. And given that even without that investment more than half of VIA Rail revenues are now in the form of direct government subsidy, that's about $ 1.18 in public funds for every $ 1 in passenger revenue collected in 1997, based on published VIA numbers. And with those numbers, it seems to me that it will be a major challenge to transform the existing business into a commercially viable enterprise. I'm not saying it's not possible, I'm just saying obviously something quite substantial has to be done to achieve that.

• 0920

As you may know, several years ago Air Canada looked closely at the potential impact of a high-speed rail service on Air Canada's operations in the Quebec-Windsor corridor. Our 1993 joint study with Canadian Pacific Railway concluded that, assuming similar passenger fares, the rate of diversion of traffic from Air Canada's existing corridor services would be substantial, and that is 45% or more depending on the technology selected. At that time, the revenue lost to Air Canada was estimated to exceed $ 200 million, a figure that would be significantly greater than that today. Those are numbers that would be difficult for Air Canada to ignore obviously. We're in the business of providing transportation services to customers, and my guess is that if the government decided to invest in high-speed rail, we, in Air Canada, would be looking at innovative ways to continue to serve and retain the loyalty of those customers we now serve on the corridor.

That brings to mind the intermodal experience of our European partner in the Star Alliance. Today it is possible, for example, to buy a ticket from Lufthansa for a trip originating in Dusseldorf, to travel by train from Dusseldorf to Frankfurt directly to the international airport, and to transfer to an international Lufthansa flight just like a connecting flight on an airline. The baggage would be checked from the originating point at the railway station in Dusseldorf to the final destination, and the entire trip, train and plane, would be accomplished using a Lufthansa airline ticket.

I'm not sure whether that Lufthansa intermodal experience can be transferred to the Canadian situation. European population centres and established rail infrastructure are obviously quite different from the situation in Canada. European governments also have a long history of public investment in passenger rail. What I am saying is that the possibilities and experiences of others are worthy of close examination.

As we've told this committee before, Air Canada is always searching for ways to improve our transportation service. We do not confine ourselves to the strict limitations of the air mode, which represents our primary form of business.

Air Canada does not regard intermodalism as an end to be pursued in itself. Sometimes it simply makes no sense in terms of passenger convenience or economics. However, we do believe that in the right circumstances there will be opportunities for intermodal linkages that provide added value to customers and commercial benefits to transportation providers, both rail and air. That's the open mind that we bring today to your consideration of passenger rail revitalization and the future of VIA Rail.

That concludes my opening remarks. I would obviously be pleased to take any questions you might have.

The Chairman: Okay. Thank you very much.

Before we go to questions, colleagues, we have a presentation from Air Canada. It will be distributed when it is translated. It is unilingual at this time.

Throughout this exercise I haven't asked too many questions. If you will agree, I will allow myself one at this point.

Some hon. members: No. On division.

The Chairman: On division. I wasn't paid to ask this question, by the way. In this committee, when they want to shut somebody up, they elect them chair.

Some hon. members: Oh, oh!

The Chairman: My question is to get a feeling from you about how passenger rail differs from regional carriers. The reason Air Canada and CP invested in regional carriers was to have feeder lines because it was too costly to operate the short lines. I'm wondering why we wouldn't see passenger trains in the corridor as feeding your long-haul flights as opposed to being a threat of competition.

• 0925

Mr. Geoffrey Elliot: As I mentioned, we don't have a problem in principle with that, and there are occasions when it does make sense from a passenger and transportation provider point of view to have that kind of intermodal linkage.

However, if you look at the practicalities of the example you used, it seems to me that our regional connector carriers tend to be focused on linkages between large cities such as Montreal, Toronto, and Vancouver, and smaller communities in those regions where it may be impractical to use the larger jet aircraft that Air Canada has in its main line operations. If you look on the map, I'm not sure those smaller communities that we reach out to in our regional commuter services are served by rail. I suspect it would be enormously expensive to invest in providing passenger rail services to those communities.

In theory it would be possible; I'm just not sure whether it might be a lot less expensive and efficient to do it the way we do it with our small commuter aircraft like the Canadian-built Dash 8s and CL-65s.

The Chairman: Even though I'm retired, there are times when we still disagree.

Mr. Morrison, Mr. Guimond, Mr. Calder, and Mr. Cullen.

Mr. Lee Morrison (Cypress Hills—Grasslands, Ref.): Thank you, Mr. Chairman.

Mr. Elliot, before I begin my questions, I would like, if it's possible, not to have to mentally separate operations like RapidAir, for example, from Air Canada and just talk about your operations, since they are so intimately integrated. Is it possible, if I ask you about operating procedures and so on, not to make that distinction?

Mr. Geoffrey Elliot: I'm not sure how to translate your proviso into the substance of the question.

Mr. Lee Morrison: All right. I'll give you the question and I will just assume there's really only one airline with this question.

Do you haul mail for Canada Post on your short connector flights between, say, Montreal and Ottawa or Montreal and Toronto? Do you have any contracts with Canada Post, or is that all done by the trucking industry?

Mr. Geoffrey Elliot: I believe we do carry mail for Canada Post, but I'm not sure on which particular segments. We certainly have in the past, and I know our competitor does as well. I'm not sure whether we both do it at the moment. But obviously those are commercial contracts that are negotiated between the airline and Canada Post. Whether we have one at the moment I don't know, but I do know that if we don't do it now, we have certainly done it in the past and probably will do it in the future.

Mr. Lee Morrison: What about long hauls on transcontinental flights? I assume you carry mail.

Mr. Geoffrey Elliot: I would assume so.

Mr. Lee Morrison: The reason for the question should be fairly obvious. We're looking for ways that VIA Rail could be more commercially viable. One way would be if they were not restricted to passengers only and could carry Canada Post stuff on their shorter runs. Clearly, it wouldn't be practical on the long ones because they couldn't compete with airlines. As you said, if you give business to one entity, you have to take it away from another. That was the reason for the question, but if you're not sure of the situation, I guess it's something we would have to inquire about with Canada Post. But it is quite relevant.

You touched on something else very briefly, and I'd like to get your comments on it. I get a lot of letters complaining about the airlines' pricing policies. I think one word that I've seen is “bizarre”. There's the fact that there's all this cross-subsidization whereby you will, under certain circumstances, sell tickets for the identical travel for about a third of the amount within Canada when compared to somebody walking up to the counter and saying they want a ticket to Toronto right now.

Is this aimed primarily at your competitive surface carriers? You do this, I know, on air routes where there is no air competition, so who are you competing with when you do this? Do you just do it because you're so good-hearted that you want to provide these cheap fares and help people? Why do you have this unusual fare structure on non-competing lines?

• 0930

Mr. Geoffrey Elliot: I can assure you that the motivation is purely driven by our business needs and our economic interests. It's not altruistic, it's competitive.

Mr. Lee Morrison: I'm surprised.

Mr. Geoffrey Elliot: But let me explain it to you this way. The most expensive seat for an airline to operate is a seat that flies empty, so you don't want to fly any empty seats. All major airlines have sophisticated yield management systems that create different classes of fares for the same seat.

Now, a businessman who's travelling who decides today that he wants to fly will buy a return ticket. He's not sure which flight he's going to come back on, but he wants to be free to be on any plane that he can get on when he gets to the airport. If he misses that plane as a no-show and he wants his ticket to be good to get on the next plane, he pays a premium to have that kind of ticket flexibility.

Someone who books three weeks ahead and is staying over a weekend for a specific flight going and a specific flight coming back will pay less.

The sophisticated yield management systems will tell us on the basis of a historical examination of every route what the likely passenger load will be of the different categories of passengers. We price and sell our tickets in that way. Clearly, we'll charge a lower price for that person who plans ahead and can structure his trip to provide an assurance of being on specific flights. He'll get a better price.

Mr. Lee Morrison: Okay, I'll be more specific—

The Chairman: Mr. Morrison, make it a very short question.

Mr. Lee Morrison: Okay, this is very specific: from Toronto to Montreal, with your lowest-price excursion fare, do you undercut VIA's fare?

Mr. Geoffrey Elliot: I have no idea, because I don't know what VIA's fare would be. But I would suggest that the people we look at would primarily be the other airlines in the marketplace. I suspect, given our size on that market, it's more likely that they're looking at us rather than our looking at them.

Mr. Lee Morrison: They claim they have 19%.

The Chairman: I can vouch for the situation that a big cost for airlines is maintaining a schedule for business people. There's a reason that I could explain if we had more time.

Mr. Guimond.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Orléans, BQ): I would like to ask you an initial question in order to get a better understanding of the situation. Mr. Elliot, how long have you been working in government relations at Air Canada?

[English]

Mr. Geoffrey Elliot: I've been doing it for the past two and a half years with Air Canada.

[Translation]

Mr. Michel Guimond: Did you work at Air Canada before you were appointed to this position?

[English]

Mr. Geoffrey Elliot: No, before that I worked for a forest products company in Toronto for six years, and prior to that I was in government.

[Translation]

Mr. Michel Guimond: I don't know if you have the information I'm looking for. In 1990-1991, three governments, the federal government, the government of Quebec and the government of Ontario, set up a task force referred to as the Bujold-Carman Committee. The former Liberal MP, Rémi Bujold, and Mr. Jean Pelletier, who is currently the Prime Minister's chief of staff, were members of this task force. This marked the first time that these three governments examined the feasibility of a high-speed train in the Quebec City- Windsor corridor and they had prepared a pre-feasibility study.

There were some rumours that Air Canada had provided some funding to this task force, and therefore Air Canada was interested in examining the feasibility of a high-speed train in this corridor. Is it true that Air Canada has already participated in the funding? This is not bad in itself, but this would demonstrate your interest in this issue. Is it true that Air Canada was a partner in this pre-feasibility study?

• 0935

[English]

Mr. Geoffrey Elliot: In response to that, I referred in my opening remarks to the fact that we did participate in a feasibility study related to the high-speed rail project. I'm not sure it was directly related to the committee you referred to, but we had a joint feasibility study that we and CP Rail commissioned to examine the impact of a high-speed rail system on Air Canada's operations.

As I mentioned in my earlier remarks, what we determined was that depending on the technology selected and on the pricing, there would be a significant—that could be upwards of 45%—diversion of passenger traffic to a high-speed rail system. We did not look at what it would cost to put in place that high-speed rail system and what the economics of that diversion would be, but we did see the potential for a substantial diversion.

Our interest was that they would be our customers. Our interest was not that we would be opposed to a high-speed rail system so much as that, if there was going to be one, we would be looking for an opportunity to continue to serve our customers in that marketplace. So if it was going to proceed, I suspect that we would be looking for a way, ultimately, to be involved in that project in some way. That was Air Canada's interest.

[Translation]

Mr. Michel Guimond: Mr. Elliot, you would agree with us that the congestion problem, especially at Pearson Airport, has become very obvious. This is precisely what the consumer is looking at. We have looked at customer loyalty tables produced by SNCF, in France, with respect to customers who are now deciding to travel by rail instead of air. We must also consider trips from one downtown core to another. We all know that although the actual flight time provided by Rapidair between Toronto and Montreal is relatively short, you have to also take into consideration the time required to land in Pearson and to travel to the downtown. Also, because of the congestion problem, you may very well spend a long time circling above the airport before being given permission to land. Consequently, I think that this project warrants our attention. Your company is concerned about the congestion problem in Pearson.

The Chairman: Colleagues, your questions are much too long. We have only 20 minutes remaining and six other people want to ask questions.

Mr. Michel Guimond: That was my last question.

[English]

Mr. Geoffrey Elliot: Could I respond to that?

The Chairman: Absolutely.

Mr. Geoffrey Elliot: You raised a number of interesting issues, one of which is congestion at Pearson International Airport. We anticipate that with redevelopment at Pearson, with new runways and terminal facilities, there is scope for a substantial increase in the capacity of Pearson International Airport. I believe the management of the Greater Toronto Airport Authority would agree with that assessment.

But you also raised a number of other interesting points, one of which was the convenience for travellers of service from one city centre to another. That certainly is very real. Another component of that, however, is access to the downtown rail station from which the service will originate, because many of the travellers don't live downtown.

My experience when I lived outside Toronto—I had the choice of travelling by plane or train to Montreal, which I did occasionally—was that it was a lot easier for me to drive to the airport than it was to get to downtown Toronto's Union Station in rush hour. So if I was leaving from my office downtown, I would sometimes take the train. If I was leaving from my home, I would almost always take the plane because it was easier to get to Pearson than to downtown during rush hour.

So that issue cuts in several different ways. It underlines the need to study it very carefully. I think all the points you made are very good points.

The Chairman: Mr. Calder.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

Mr. Elliot, I think another thing we have to take a look at is the type of passenger we're going to be handling in another decade. Right now, there's somebody turning 50 in this country every eight minutes, and when they go on a vacation, they're probably going to want to take a look at a different type of vacation than what they're doing right now.

• 0940

It was interesting. Your industry has come a long way since TCA, and it's going a long way. Basically we're picking up VIA right now at basically the days of TCA, and we're trying to bring it along too.

I can see a marriage between the two, the same as what we saw over in Europe. You land a tourist who wants to see Canada, but not at 35,000 feet. They'd rather see Canada at ground level. You land them at Pearson, you put them on a rail system, you take them up through the Windsor-Montreal corridor, where they see a good chunk of Canada.

An hon. member: Eastern Canada.

Mr. Murray Calder: Eastern Canada, anyway. I was waiting for that.

You can show different parts of Canada on the rail system, and for instance, in Quebec or Dorval or whatever, if they want to head back home again, they can fly back out. I can see a perfect marriage between Air Canada and VIA in that situation.

What would be your comment on that?

Mr. Geoffrey Elliot: Well, it seems to me there's no reason that couldn't happen today. You're talking about a commercial relationship in terms of how one sells a transportation product that consists of components of both modes. I'm not sure what the demand is for that mix between rail and airline service between Toronto and Montreal, but in theory certainly what you say makes some sense.

Mr. Murray Calder: In that situation, then, we have one half of the story, because Air Canada's in very good shape and doing a great job. I fly it all the time. The other half of the story is not in very good shape. It has rolling stock right now that needs recapitalization. Obviously they're going to need some help from the government in this situation, to get them back on their feet. I think that's a given that we're working with right now.

I know in your own situation, from when your company made the transition from a crown corporation to where it is right now, there was help from the government for you to make that transition.

Mr. Geoffrey Elliot: No, there was no help.

Mr. Murray Calder: There was no help. None whatsoever?

Mr. Geoffrey Elliot: No. The government sold its shares and made, as I said, $ 341 million in profit. We paid all our debts, and we acquired our capital from private sector sources.

Mr. Murray Calder: I'll leave that open for some of my colleagues to comment on a little bit further, because I haven't been on this committee that long, but I question you on that.

What would you feel would be fair support from the government to help VIA get on its feet, so that we could put together that type of marriage, for which both of us agree there could be a lot of potential?

Mr. Geoffrey Elliot: First of all, I agreed with you on the potential for a commercial product that combined rail with air. I'm not sure I would agree with you that the particular tourism product that combined rail with air would be of sufficient magnitude to make a great difference to the viability of a passenger rail service. I think if you're going to make VIA profitable and commercially competitive, it has to be able to attract the kind of traffic that is currently carried by the airlines between Montreal and Toronto and Quebec City and Windsor, and Ottawa, if you want to extend the corridor. That means it has to attract people out of the planes, it has to attract people out of cars, and it has to attract people out of buses, and that's not the example you gave to me.

Mr. Murray Calder: Now I'm a little bit confused, because when we were over in France, we found that there's a lot of money coming from the VAT—the value-added tax that they have over there. There's a huge tourist trade going on there right now, and basically the French government is pumping billions of dollars into its rail system just to address that.

I look at us over here in Canada. We have a cheap Canadian dollar, things are relatively inexpensive here, and people from the United States, for instance, could come in here. For $ 100 they get $ 140, and it's a heck of a deal.

I see a lot of potential. There could be people from Europe wanting to visit Canada, and yet they don't want to see it from 35,000 feet. They'd rather see it from the rail.

• 0945

Mr. Geoffrey Elliot: I'm not arguing with you that there would be people who see some merit in that. My question about it is whether there would be enough of them to make a difference to the viability of your rail service.

In order to consider a successful VIA Rail revitalization, it has to tap into that existing traffic that's travelling between Montreal and Toronto in a more successful way than it has in the past, and that's not the incremental people from Europe. They may come, but I doubt the numbers would be sufficient to justify the kind of investment you're talking about.

The Chairman: Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman.

Thank you, Geoff. I'll call you Geoff, because we used to plant trees together for the same forest products company, based in Toronto.

I'd like to pick up on this question of market share, because it seems to me we've been receiving sort of conflicting information. When we were in Europe, and when we visited Amtrak, it seemed that when you increased the desirability of trains through greater frequency, greater speed, you were really taking market share of people from planes, and only peripherally taking people from the highways and the buses and putting them onto the trains.

When we talked to Amtrak about the corridor investment they're looking at between New York and Boston, they're electrifying the track, they're putting in about $ 4 billion, and they contend that they'll take about four points of market share, and that's from the airlines. They were quite clear on that point.

We've heard from VIA that if there's better train service between Montreal and Toronto, for example, they'll take a mixed bag—people from the air, people from the highways. Taking people from the highways might serve some public policy objectives, and it might be a desirable thing to do, but I'm not so sure it's there.

You did some feasibility work on this. What's your take on it? Would you take people from the planes, or from the road and from the buses, and onto the trains?

Mr. Geoffrey Elliot: My recollection from a 1993 study was that most of the diversion—and I talked about diversion of upwards of 45% in the most favourable circumstance for the rail—or nearly all of that, would be the business traveller from the airline. You wouldn't take people out of their cars because, number one, it's a lot cheaper to drive a car. Most of that is leisure, and so it's cost sensitive. In addition to that, when people are travelling in a leisure context, they also need their car when they get to the other end, and the train doesn't provide that. So there are a lot of factors that will keep people in their cars.

At the low end, you might be able to get people out of buses, but if you have a high-speed sophisticated train system, it's debatable whether you would be able to have a fare structure that would be competitive with buses, unless it was a subsidized fare.

Certainly our assessment is that it would be the airline services that would see the bulk of any diversion that happened, and that's why if, for public policy reasons, the government determined that it wanted to go in that direction and those customers would be, today, our customers and our airline competitors' customers, we'd be looking at it very closely to see if we could put our customer service expertise into that project somehow or other.

Mr. Roy Cullen: Okay, thank you.

Switching gears for a moment, I was in Prince George recently with another committee, the natural resources committee. We were actually looking at sawmills and pulp mills, but we met with a mayor and councillors.

One of the councillors, knowing I was on the transportation committee, came to me and said the airfare between, let's say, Vancouver and Prince George is very high. I remember, when living in B.C., some of these short hops into the interior were hugely expensive, and we use to joke that it was cheaper to fly to Europe.

But I wonder, and I think it's relevant to understanding the economics of your business in relation to rail—and also I promised this councillor that I would raise the question with Air Canada—could you describe the economics of flying these short hauls, say, Vancouver to Prince George, where the pricing seems to be quite expensive, versus a long haul where the pricing might be much more competitive? How does that work?

Mr. Geoffrey Elliot: I'm not sure I can give you a good answer to that, other than to say pricing in those markets again is determined very largely by competitive circumstances. In Prince George to Vancouver, I suspect you have three airlines or their subsidiaries operating. Air BC is probably operating for Air Canada. I'm not sure who Canadian has operating—whether it's Canadian Airlines or Canadian Regional. I suspect that WestJet is also in that business, and there may be some small tier 3 operators, as we call them, although Prince George to Vancouver is a long enough haul that maybe they're not in that business; I'm not sure.

• 0950

We have found it very difficult to justify our regional connector services, even with the fares that they operate, as stand-alone businesses. They tend to be fairly marginal at their fare structures on the basis of a stand-alone business.

Where they provide a significant value to Air Canada, which makes them viable as well, is the extent to which they provide feed to our main-line airline—for example, those people who fly that Prince George-Vancouver route, who then get off the plane and get on an Air Canada flight that brings them to Toronto or Montreal. That's why it's important to us.

Obviously we like to make money on our connector airlines as well, but they tend to be less profitable than the main-line airline in that context. We've had to restructure our Air BC operations precisely for that reason, and shift some of its operations down to the smaller carriers who still contract to feed our system.

So when you're talking about how high the fares are, that's directly linked to the bottom-line situation in terms of the viability of the carrier. My response is that they may seem high, but it relates to the cost of providing service. Of course, within that you still get variations in individual fares, for the reasons we discussed before, related to yield management and the availability of cheaper excursion fares and more expensive must-go fares for the discretionary traveller.

The Chairman: I'll just jump in and clarify something, because Canadians do say that it's cheaper to go to Europe than to go a long distance here. We have to compare apples to apples. This committee knows that the fare we were given for our trip to London and Paris was $ 3,200, but with conditions, we went for $ 820. So if we compare the $ 3,000 fare to the $ 700 fare to Sudbury and back, that's a fair comparison, but if we compare our $ 820 to a seat sale to Sudbury from here, then we're comparing onions with onions.

Mr. Geoffrey Elliot: Absolutely.

The Chairman: The way we got that fare was by staying an extra day. The business person won't stay seven days when they go to London or Paris. We were going for six days. We said we can save thousands of dollars by staying an extra day, and that's how you get that low fare. But we have to compare the same fares.

Mr. Geoffrey Elliot: Astute business people do take advantage of the cheaper fares. If they can plan their travel, they do. But there are enough business people who decide to book their trips the day they're going to travel that it still justifies the high fares.

The Chairman: Mr. Bailey.

Mr. Roy Bailey (Souris—Moose Mountain, Ref.): Thank you, Mr. Chairman.

Mr. Elliot, I see that the president of the Tourism Industry Association of Canada is Debra Ward. Is Debra from Regina?

Mr. Geoffrey Elliot: I don't know where Debra is from. I know Debra, but I don't know where she's from.

Mr. Roy Bailey: Okay. The reason I ask is that she.... It may be another Debra, but the Debbie Ward that I know is the president of the Saskatchewan School Trustees Association, and I wouldn't doubt that she's in this as well.

Mr. Elliot, obviously Air Canada keeps a financial record of each of your feeder routes coming in.

Mr. Geoffrey Elliot: Yes.

Mr. Roy Bailey: I'm wondering—what would cause you at any time to drop one of those feeder routes? Would it have to lose a lot, or break even? At what point would you say, “That's it. We're not running that any more”?

Mr. Geoffrey Elliot: That's a commercial decision that personally I don't have to make, and I'm not sure what methodology is used. But you evaluate a particular route on a number of factors, one of which is, as I mentioned earlier, the extent to which it contributes to the entire system by feeding people onto other routes.

You may have a route—and this is just for example, because I don't know what the numbers would be—from Prince George to Vancouver, since we mentioned that, and say, for example, it is not profitable on its own. It may be that 20% of the people who are carried on that route in fact get off in Vancouver and get onto another aircraft and contribute to Air Canada revenues on that subsequent trip. That may be sufficient to make that unprofitable route worth keeping. It's that kind of calculation that has to be made.

• 0955

Mr. Roy Bailey: That's a little long, but I was thinking of, say, Toronto-Sarnia. Keeping Toronto-Sarnia in mind—I've been on that one a couple of times—you have made it very clear in your presentation that Air Canada is definitely opposed to any government money going into a rebuilding of VIA Rail. Is that not right?

Mr. Geoffrey Elliot: No, I actually didn't say that.

Mr. Roy Bailey: Okay.

Mr. Geoffrey Elliot: I just said you have to consider those things very carefully. I was careful not to say you should not subsidize passenger rail.

Mr. Roy Bailey: All right. That's not quite the way it came across, but that's fine.

We have a proposition presently before us, and you've seen it in the paper. If the government were to go with it—and I don't think they will; that's up to them to decide—I suppose it would probably be the largest single contribution ever made in the transportation history, to the proposal.

You would be opposed to any major government intervention that you think would take away passengers from Air Canada operations.

Mr. Geoffrey Elliot: Again, I didn't say that.

The reason I didn't say that is that I suspect if a government made a decision to make a major investment in a high-speed rail proposal—and I'm not sure what the precise numbers are, but it seemed to me it was upwards of $ 8 billion to $ 10 billion and about 80% of that was going to be in the infrastructure related to putting that system in place—if the government were to move in that direction, Air Canada's opinion one way or the other would not be a deciding factor. There would be a whole lot of other public policy and public interest reasons that would motivate the government to make that kind of investment.

Sure, it would have an impact on Air Canada's operations and might be quite inconvenient for us, but if government were to decide to go in that direction, our response would be to look for some way in which we could be commercially involved so that we would continue to serve those same passengers that we do now, perhaps through the kind of commercial relationship with that new entity that would put Air Canada flight attendants on the trains—I don't know—and use our marketing system. Who knows? There may be various ways we could be involved.

Mr. Roy Bailey: I have one short question.

Marketing air travel out of a small-sized city that I use, which is Regina, could best be described, on a scale of 1 to 10, at about 2. We don't really have that good a service out of the city of Regina, particularly going east. No doubt Air Canada has heard about that.

We're the only one of the provinces west of Ontario that doesn't have a daily flight, say, to Ottawa. That's maybe not that important, but the number of routes, the availability of getting from Regina to Ottawa and Regina to Toronto, is extremely limited and we certainly feel the pressure in Saskatchewan in our airports because of that. Maybe that's justified, but it certainly is a big consideration for us.

Mr. Geoffrey Elliot: If I could respond to that, of course the system we have in Canada now for domestic air transportation would enable any carrier to initiate that service if they thought they could make a buck doing it. That would suggest that if the service isn't there, it's because the airlines that are capable of providing that service have calculated that they couldn't make money doing it and that it's a more sensible business proposition to move through a connecting flight via another point those people from Regina who want to go to Ottawa.

Clearly, if there were sufficient people to justify a non-stop service, if Air Canada didn't do it, Canadian would do it, and if Canadian didn't do it somebody else would. There is nothing in the transportation policy and regulatory system that would prevent that service from going into a place if there was a market for it.

The Chairman: Mr. Sekora.

Mr. Lou Sekora (Port Moody—Coquitlam, Lib.): You see, that's why I moved out of Saskatchewan, so I can have a direct flight to Ottawa. No, I'm just kidding you.

• 1000

An hon. member: I thought it was a conspiracy to keep the Reform Party away from Ottawa.

Mr. Lou Sekora: Mr. Elliot, you mentioned booking three weeks ahead, or whatever timeframe in which you book ahead. I have been booking way ahead and there are certainly no breaks on flights as far as the price tag is concerned.

The Chairman: I'll teach you how.

Mr. Lou Sekora: Yes. The rest of the time I can tell you, you can give them a certain flight that you're going on for three weeks ahead of time and the flight you're coming back on, but there are no breaks in pricing. And if you're staying the weekend, because I know when you fly to certain parts of Canada they ask if you're going to stay a Saturday night. I can stay for a whole weekend and still not get any break on price. So those are things I'd like to learn a little more about. You mentioned that there are price breaks.

Mr. Geoffrey Elliot: In the price structure of tickets you have a full Y fare, which is perhaps what you're paying. I don't know. That's the full economy fair. Then there are prices that are below the full Y fare, and normally those prices are conditioned by what I call fences, and the fences are a combination of advance booking and minimum stay. And so you can have both factors at play and they can vary in terms of their requirements to result in different fare structures. But Air Canada is no different from any other airline in the way that system is operated, and it's all designed to make sure that to the extent possible, we don't fly with an empty seat.

Mr. Lou Sekora: So if I was going to Vancouver, let's say, during the week or the weekend, it doesn't matter, the price is the same, is it not?

Mr. Geoffrey Elliot: I'm not an expert on the pricing schedule. You'd have to look at it. The prices may be different on different days. I'm not sure.

Mr. Lou Sekora: Okay. That's all I wanted to really know.

The Chairman: Keep in mind that the travel agent is paid by commission.

Mr. Lou Sekora: But they get $ 60 per ticket.

The Chairman: Sometimes they have no interest in giving you a low fair.

Mr. Lou Sekora: I know, but it doesn't matter what the fare is, the travel agent only gets $ 60 per ticket, period, from the airlines.

The Chairman: They're not on percentage any more?

Mr. Geoffrey Elliot: They get a percentage and there's a cap on the top.

Mr. Lou Sekora: Sixty dollars is the cap, yes.

The Chairman: Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Mr. Chairman.

No, I don't know Debra Ward and we've never planted trees, but my question in most part has been answered both by you, Mr. Chairman, and by my friend Roy Cullen and now my colleague Lou Sekora. It has to do with pricing, which is an issue that is often brought up by many of my constituents, Mr. Elliot, when I'm sitting there at Tim Horton's and having a coffee on a Saturday or a Sunday. You know, they too are puzzled.

I know, Mr. Chairman, you gave some of the figures with respect to Europe and so on, and I don't know if maybe it's a communication problem that the airlines have and if indeed there are solutions, but the question most often asked is, yes, I can go to England for $ 700 and it costs me the same to go from Toronto to Ottawa, and this weekend stuff, whether it's factual or not.... If it is, it's not being communicated properly. Then you made a point here just a minute ago that Air Canada is no different from any other airline.

I'm glad you're here from the Tourism Industry Association, because it's often discussed that we want to see this beautiful country of ours, but we're not going to venture from Toronto to Vancouver because we can go to Hawaii, or we can go to Spain or to Italy. It's cheaper for me to go to Florida and spend a couple of days, than to go to Saskatoon, Saskatchewan, or Abitibi and do some good fishing.

I speak on behalf of thousands and thousands of people—I kid you not—who have often brought this thing up. Yes, we want to see the Rockies, we want to get out there to the east coast and the west coast, and we see them in videos and pictures. But we're enticed to go to visit Spain or Portugal, as I mentioned earlier, and I think the airlines have failed miserably to try to do something about it.

In regard to travelling from Ottawa to Toronto when it costs you $ 450 or $ 500 both ways—and most of us stay weekends as well—I see no break. I think unless the airlines come together to motivate...and maybe the government even still by enticing the traveller with some kind of tax break to motivate them to travel within Canada, we're going to be losing a lot of good tourist dollars, and the development of the tourism industry, which I think is a future industry, is not going to hit the peak that I am hoping to see.

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But I want you to focus on “no different from any other airline”. Which other airline in Canada can take me from, let's say, Toronto to Ottawa or from Montreal to Saskatoon besides Canadian and Air Canada? Given that you've spoken about public funding in the past, that you've had fuel tax concessions and there have been concessions from this government—and I don't know about other governments—what has your return been to the public at large?

Mr. Geoffrey Elliot: That's a very complicated question and I'm not sure where to begin to answer it.

One part of it asked how many airlines.... Well, when you want a cheap ticket, as the chairman suggested, the first thing to do is talk to your travel agent and say “I'm going to such-and-such a place; tell me what the cheapest ticket is and tell me how I have to get it, what the conditions are”. They'll explain the fences, and if they're doing the right job, they'll tell you what the cheapest ticket is. Then if you want to check it out, call the airline and ask them the same information. Hopefully you'll get the same information, and that will verify that you're getting the cheapest available fare.

Now, as to Canadian Airlines and the Canadian airline system, most people tend to think of Air Canada and Canadian as the two Canadian carriers. But in fact there are a whole lot of others in the system, and a number of the others cater specifically to the leisure market much more than Air Canada and Canadian Airlines and the mainline airlines do. Here you have Canada 3000, Royal, Air Transat and a few others. They are in the leisure travel business. All of the seats they sell are cheap seats, relatively speaking. They operate in the domestic market as well as taking Canadians on sun spot vacations to international destinations.

You can choose to fly transcontinental from Toronto to Vancouver on several of those airlines and you will get fares that are probably much the same as the very cheapest fare you would get on Air Canada or Canadian Airlines. They operate in a different kind of system. Their unit operating costs are much lower than those of the mainline airlines because they have a different kind of infrastructure, different kinds of overheads, and they're really in a different kind of business.

But we could not survive if we sold all of our seats at the prices at which they sell their seats. It simply would not work. We would not be able to cover our costs. And the prices we do charge in the marketplace tend to be determined on the basis of competitive needs. There are very few city fares in which Air Canada is the only operator. I wouldn't want to say there are none, but there are very few.

Mr. John Cannis: Wouldn't volume offset that? You made the statement earlier that an empty seat is the most expensive seat.

Mr. Geoffrey Elliot: That's right, and so you sell it at whatever price you can and it'll make a contribution to your overhead. However, if you sold all the seats on the plane at that price, you would lose money.

The Chairman: Before I go to Mr. St. Julien, a simple example is this. Take yourself as an example. You come to Ottawa on Monday and you go back, let's say, on Thursday or Friday. You don't stay over a weekend and you pay top buck. What you should do is go to the riding for the weekend. You go on Friday, come back on Monday. You stay overnight Saturday, book ahead, stick to your booking, you save close to 50%. And it's been there forever. The airlines are not hiding it. It's our travel agents who have to explain it to us.

Mr. John Cannis: In closing, Mr. Chairman, that message then should be better communicated.

The Chairman: But if I were in business, I wouldn't spend all my advertising on the sales. When Sears have a sale, they're selling what they have to get rid of to make room. But if everybody goes on the seat sales, they're going to disappear. There's no doubt about that.

[Translation]

Mr. Saint-Julien.

Mr. Guy Saint-Julien (Abitibi, Lib.): I have three brief questions.

Mr. Elliot, you talked about the Montreal-Toronto-Windsor corridor. As Air Canada got together with VIA Rail to look at the possibility of taking passengers along secondary routes, for example in Abitibi and in the Saguenay—Lac St-Jean area, in order to hook up with Air Canada or Air Alliance, so that Europeans and Americans can visit these regions in Quebec as part of a package deal?

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[English]

Mr. Geoffrey Elliot: I don't know the answer to that. I'm not aware that there have been those discussions, but I wouldn't want to say no because they may well have taken place without my knowledge. But I'm not aware that there have been discussions with VIA Rail or any other rail service with respect to combination air and rail passenger packages. Often that kind of business is put together by tour operators, who will try to construct a package by negotiating something individually with the airlines and individually with the rail companies, but I'm not aware of any individual examples.

[Translation]

Mr. Guy Saint-Julien: Mr. Elliot, I would like to have a specific answer on this matter. Could you write to the committee to confirm whether or not there have been any discussions on the issue? Are you going to check into it?

[English]

Mr. Geoffrey Elliot: Certainly I'd be prepared to check it out and verify to the committee whether or not we have had such discussions. As I said, I suspect we have not, but I will certainly confirm that.

The Chairman: It matters not to this committee who you discuss it with. We're here to study passenger rail, and I don't think whatever communications you have—

Mr. Stan Keyes (Hamilton West, Lib.): The member is making a linkage here with discussions between the two to see if there is any kind of market share that could be established in order to boost frequency for the—

The Chairman: Well, I'm more interested in knowing if there are market shares that can happen. As for whether they had discussions, I don't know.... But if you're willing to provide it, that's fine.

Mr. Geoffrey Elliot: It seemed to me that the question was related to whether there are any in-the-marketplace discussions between VIA and Air Canada that would relate to the intermodal component of your agenda.

The Chairman: That I'm interested in.

Mr. Geoffrey Elliot: In that sense, I think it is a legitimate question. As I said, I suspect the answer is no, but I wouldn't want to give you a definitive no without checking it out.

The Chairman: Okay, that's perfect.

[Translation]

Mr. Guy Saint-Julien: Mr. Elliot, in your brief, you often referred to the public interest. The cost of airfare in comparison to the rates charged by VIA Rail... I will limit myself to airfare. I have just received my airplane ticket to travel, with the committee, to the northern part of Abitibi, in my riding. It costs $ 1,800.62 to travel from Ottawa to Kuujjuaq, in northern Abitibi.

I would like to know whether or not these airplane tickets include a special tax for regional development that you turn over to the federal government, 10% for instance. There is still a rumour out there to this effect. Could you explain to us what taxes are paid on a plane ticket that must be submitted to any government, whether it be the federal government or provincial governments? Is there a special tax on plane tickets?

[English]

Mr. Geoffrey Elliot: There used to be a tax, and there still is to some extent, the air transportation tax, which relates to the provision of air navigation services provided by Transport Canada. Now 50% percent of that tax has been removed, and the other 50% will be removed by the end of the year, as a result of the privatization of air navigation and the creation of a company called NAV CANADA. It doesn't mean that cost will go away, however. NAV CANADA will bill the airlines directly for the provision of those services, and we will build those fees into our ticket prices. Whereas before it appeared as a tax on a ticket, in future it will be built into the price.

The federal government taxes on fuel used in flying aircraft are higher in Canada than in almost any other jurisdiction, and this has been a matter of concern to the airlines for many years because it affects our ability to compete with foreign airlines. In addition, we pay for the use of airports, and also buried in the ticket is the cost that we pay to land and take off at airports. Some airports are now starting to charge a passenger facilitation charge and they would like us to put that on the tickets as well, and that issue is one that has not yet been resolved.

In addition to that, of course, there are the usual GST and PST taxes. A very substantial component of the ticket price is related to the payment for services that are not provided by the airlines.

[Translation]

Mr. Guy Saint-Julien: I have a final question, Mr. Chairman. I was just getting to the subject of the access fee for travellers. Presently, it seems that some travellers are refusing to pay the $ 10 access fee, even on Air Canada tickets. Is this true?

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[English]

Mr. Geoffrey Elliot: You're talking about the $ 10 fee at Dorval?

Mr. Guy St-Julien: Oui.

Mr. Geoffrey Elliot: This is a function of government policy on the commercialization of airports. That's a subject for a separate discussion, I suspect, because it's a very complex one.

The government, although it privatized the airports, continues to collect substantial lease payments from the major airports, and in the years prior to turning the airports over to the local authorities, the government did not maintain the integrity of the capital stock at the airports. The airports needed substantial capital investment.

As a result of the operation of the lease arrangements with a number of the larger airports, the only way the airport authorities could raise the cash to do the necessary reinvestment in their capital infrastructure was to find a way to charge another fee. Our preference as airlines was that our customers would see what they were paying for. In other words, the airports would directly charge customers, rather than bury it on a ticket, so they would know that's where the money was going. That's why you see it.

[Translation]

Mr. Guy Saint-Julien: One brief final question.

The Chairman: The previous one was supposed to be brief. This time, we have finished. I'm sorry.

[English]

Mr. Elliot, thank you very much for having appeared before us today. We know it was short notice. We really appreciate your cooperation. Thank you.

Mr. Geoffrey Elliot: It's my pleasure. I'm delighted to appear before you and would be happy to do it on any occasion.

Mr. John Cannis: On a point of order, Mr. Chairman. why some airports and not others, this airport tax?

The Chairman: It's a local decision.

Mr. John Cannis: So it's not the federal government. I want to get that on record.

The Chairman: Order. Order.

We're at this point twenty minutes late, but I will allow you the time to which you're entitled.

I now welcome Ms. Debra Ward, president of the Tourism Industry Association of Canada.

Mr. Belyea, your function is...?

Mr. Adam Belyea (Director of Policy, Tourism Industry Association of Canada): I'm with the Tourism Industry Association of Canada as well.

The Chairman: Okay.

You're familiar with the study we are doing. We appreciate that you be here, because the tourism component is a very important component. Many people—in fact, most people—wish to talk about the corridor. This is a big country, and there are other components, and tourism is there, too.

I invite you to make a presentation, and then we'll allow questions.

Ms. Debra Ward (President, Tourism Industry Association of Canada): Thank you very much, Mr. Chairman. I'm very pleased to be here.

Working together...I hope I can explain a bit about what we're trying to do to increase tourism and jobs and employment opportunities across Canada, and how I believe we can work together with the government to achieve that and maybe at the same time make it a little easier for all of us to travel around Canada.

An hon. member: Hear, hear!

Ms. Debra Ward: Yes. That's what we're all about.

As this committee may be aware, the tourism industry is a key economic sector in Canada. It's certainly not small business. In 1997 the sector grew by 5.3% over 1996 and reached $ 44 billion in spending in Canada. That includes air fare, all forms of transportation, hotel, and recreation. Altogether, tourists spent $ 44 billion.

• 1020

Of that, $ 12.7 billion was spent here by foreign travellers. That makes tourism one of the top three or four export industries in Canada. So it's huge and it's growing. That represented an increase of 5.2%.

In contrast, as tourism was growing by 5.2% in 1997 compared with that of 1996, the GDP rose by 4.4%. So we are growing faster than the economy at large.

At the same time, we employ more than 503,000 people. That was an increase of 2.3% over that of 1996. As a comparison, the business sector of the economy grew by only 0.9% in 1997. So both in economic value to the country and in terms of creating jobs especially for young people, tourism has outranked the labour force and the economy in general.

While contributing to the economic health of Canada, tourism is also a significant contributor to governments as well. According to the Buchanan report to the Prime Minister, it's estimated that $ 1 billion of tourism revenue generates $ 230 million for the federal government alone, $ 160 million for the provincial governments, and an additional $ 60 million for municipal governments. So we are a net contributor to society.

Moreover, Canada offers travellers a unique opportunity to learn, explore, and share. In a time characterized as “experience-hungry”, Canadian tourism offers a virtually unlimited palette to enjoy personal growth, renewal, and affirmation of values.

You see this in more demands for ecotourism, which is for people who want to get out and explore and get to the backcountry. There's more discussion about the importance of preserving our heritage and the wilderness. People can go out and feel, touch, and smell the things that are Canada. That's something that's growing by the day.

The Tourism Industry Association of Canada is the national advocacy body representing all tourism business interests. We do not represent any one company, organization, or sector within tourism. We make representations based on what the association believes is in the best interests of tourism as a whole, along with input and endorsement from our members.

I have just returned from Canada's premier travel and trade showcase, Rendez-vous Canada, which was held in Quebec City. What a beautiful place to hold it!

TIAC, as host of Rendez-vous Canada, brought together 781 sellers of Canadian tourism product, mostly small and medium-sized businesses, and approximately 357 foreign buyers over the course of three days. In addition, there were 13 provincial and territorial tourism offices, supported by 50 regional and municipal-destination marketing organizations. Overall, that three-day event generated about $ 400 million in new tourism business to Canada.

Rendez-vous Canada was an overwhelming success. Interestingly enough, I heard some comments that relate directly to what this committee is considering, which is: how do we transport people quickly, efficiently, and in an environmentally responsible way to more parts of Canada?

Major buyers of Canadian product from around the world were eager to fulfil consumer demand in their respective countries by offering tours to various regions of Canada. However, the burning question was: how do I move 400 people off a plane to Dawson City, Yukon, Kenora, or the Avalon Peninsula? The question was: they want to come, they want to see, so how can you help us get them to where they want to be?

This is not of concern only to the tourism business, it affects the business traveller as well. Just last week I attended a conference in Baddeck, Nova Scotia. After the conference, I flew from Nova Scotia to Quebec City in order to attend Rendez-vous Canada. This sounds simple, but it wasn't, because I had to take three separate flights. I know exactly what you were saying earlier.

We went from Sydney to Halifax. There was a three-hour stop in Halifax. Then we went to Montreal, where we had a 40-minute stop. Then we had to change terminals. Finally, we moved from Montreal to Quebec City. By the end of that—it was too painful for me to keep track—it was about seven hours of total travel time to arrive at this three-day event.

This is not only a question about air access to various regions of Canada, but also whether there are alternatives to air access and hence intermodality.

Currently in Canada, seamless and efficient ground access between airport terminals and destinations is lacking. Furthermore, policies, regulations, and practices affecting ground access vary across all government jurisdictions, airports, and carriers. That's one of our major issues here. There is such a multi-layering of different needs expressed by the different levels of government and there are different policies expressed by the different levels of government, as well as taxation. Communities have their own strategic plans, provinces have their own and the federal government has its own, so it's very difficult to get everybody around the table and agree we have a problem. We have to move more people to more places in Canada cost-effectively, environmentally responsibly, and efficiently. How can we do this collectively? It tends to be very haphazard.

• 0950

I would go so far as to say lack of an efficient and effective integrated transportation infrastructure, in terms of intermodality, has actually threatened the economic growth of our major metropolitan and rural communities as far as tourism is concerned. The reason for that is it's getting so damned difficult to get around. It's expensive, slow and cumbersome, so people will find other ways to do it. They will go to other places. I think there's a danger here that if we don't treat this issue with the seriousness it deserves, we will lose this great potential for more economic growth and job creation.

We also have another sidebar situation that people, of course, tend to take the path of least resistance. If it's easier to go here, people will go here. So this part of the tourism product is being overused and that part is being underused. If a place is overutilized for a long time, you start getting issues of environmental degradation because people want to experience something, but you can't move them out of there. An example that comes to mind is Banff. People go to Banff because it's well known. It's very easy to get to Banff because the infrastructure is in place.

But there are issues, as you know, about the overuse of Banff. At the same time, there are beautiful parks not far that people just can't get to, like Waterford. So a strategic approach to intermodality would help us develop more products and relieve some of the overuse of some other areas.

As stated in the 1997 final report of the Transportation Policy Harmonization Task Force to the TAC Multi-Modal Council, which was a very good report, the transportation infrastructure is the major challenge facing the travel and tourism industry and freight industries. This challenge will intensify over the next five years with continued population, travel and economic growth. The challenges that must be addressed include airport development and complementary linkages to highway systems and the downtown core. Efficient and viable transportation linkages must be developed to move people from urban areas to Canada's less populated communities.

Governments could take the lead in this. Governments have historically, and the Canadian government in particular, had an important leadership role in creating the east-west ties and creating a country out of its transportation infrastructure, right from the building of the railway to the Trans-Canada Highway to what is now the national highway system.

I believe the Canadian government has built these east-west ties to forge a nation, and this is a continuation of that responsibility and role of the Canadian government. Doing that today in the 1990s is a different story from doing it in the 1840s or 1850s. Today we have to look at a comprehensive, integrated, multipartite alliance to create light rapid transit systems and other forms of seamless transportation systems that are linked to viable regional hubs. These alliances, of course, would have to include everybody who is a shareholder or a stakeholder. That would be the airport authorities, the air carriers, railways, municipal transit authorities, ferries, bus companies and of course tourism industry partners.

The alliance must also develop an integrated strategy that would effectively harmonize all the different regulatory, safety and taxation requirements that are placed on carriers. As you know very well, we are now at a point where some of the international barriers between provinces are far worse than the barriers we faced before NAFTA. Those are some of the issues we're facing as we look at an integrated transportation system.

I must also add that the Department of Finance through the GST/HST tax policy has recognized the importance of intermodality and moving groups of people on several different modes of conveyance as a single trip. The continuous journey rules effectively relieve the GST/HST on qualified inbound and outbound passengers and transportation services. These have been highly effective for promoting Canada as a tourism destination.

An example of that is a Japanese tour group that wants to come to see Niagara Falls. Obviously they can't fly to Niagara Falls, so they'll fly to Toronto and get on bus. The bus will take them to Niagara Falls. All of that trip, including the bus portion, is GST/HST-exempt or zero-rated because the Government of Canada, through its fiscal policy, has recognized that in order to move people across this large land, one trip takes more than one mode of transportation. So there is a recognition that this is indeed the case in this country.

• 1030

If we can integrate this further, I believe we would further promote and enhance the development of transportation systems that are environmentally and economically sustainable. Of course, cost is the paramount challenge, but governments, in partnership with the private sector, cannot afford not to take the initiative, we believe. Inaction might diminish Canada's position in tourism and international commerce.

Seamless transportation systems can only strengthen Canada's position within the context of the global economy. It would bring Canada and the North American free trade zone closer to the standards of the European Union.

I'm sure you have heard very often the examples of Europe and how they move people around using light rapid transit or traditional rail systems. It's very different from what we have here.

This will also enhance our opportunities for economic growth in the areas of trade, commerce and tourism within the North American marketplace. Further, a seamless, fully integrated transportation system may enhance Toronto's bid for the 2008 Summer Olympics due to the fact that it would relieve traffic congestion for both inbound tourists and participants at Canadian international gateways and for the residents of Toronto.

This would be a legacy the Olympics could leave to people from the Metropolitan Toronto area that would last for a very long time and be of great benefit to that congested area.

Mr. Chairman, the Tourism Industry Association of Canada looks forward to working with you and your committee and all interested parties in finding innovative ways to fulfil the vision of seamless travel in Canada. We believe in order for not only the tourism industry to grow but also for all of Canada to prosper in the new millennium, we must seriously consider the challenges I have articulated today. Together we can build on the achievements that have so far been obtained on transportation policy to the betterment of not only the Canadian tourism industry but also Canadians and Canada.

Thank you very much. I'll be happy to answer any questions you may have.

The Chairman: Thank you very much.

We'll move to questions. Mr. Calder.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

Debra, you said tourism here seems to be a real growth industry. Was I right in hearing $ 44 billion?

Ms. Debra Ward: Yes.

Mr. Murray Calder: Then for every $ 1 billion of revenue you're taking in, basically we're taking in about $ 230 million to $ 235 million in taxes.

Ms. Debra Ward: That's right.

Mr. Murray Calder: That's pretty good.

One of the things you obviously have a good handle on is what a tourist wants when they come to Canada. What is that? They obviously want to see our sites here. How do they want to travel when they see them? Do they want to fly to each spot or do they want to move across the country to go to each spot?

Ms. Debra Ward: It depends on the kind of trip they're doing. You are finding more people who want to get out on their own. Canoes are a form of transport too, as far as a lot of them are concerned, and that's a growing part.

Generally, though, the rule of thumb is that they want to get to where they want to go to in a very transparent and simple way. They don't want it to be difficult, regardless of the mode of transportation. If they have to get off the plane to get on a bus, they don't want to have to fumble for a new ticket. They don't want to have to walk across three terminals. They don't want to have wait 20 minutes. They want it boom, boom, boom—get on and enjoy their holiday.

Part of the reason for this is that people are so busy now. There's really a distaste for wasting any time, particularly very precious holiday time. It's get me where I want to go, and quickly.

Mr. Murray Calder: If they landed in Pearson, for instance, and they could hop on an LRT system to Union, and hop on Union to be on the corridor, they'd probably be very happy with that.

Ms. Debra Ward: Yes, I think they would.

If any of you have gone to Heathrow and taken the tube to downtown London, you'll know they have special gates to let luggage through, because it is such a well-used way of getting to London from the airport. You have special turnstiles, big gates, and people use it all the time.

Mr. Murray Calder: Is there a lot of tourist traffic in the Windsor-Montreal corridor, and is there a lot of potential to increase that?

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Ms. Debra Ward: There is a lot of traffic and there is a lot of potential for growth from the corridor out to other parts of Ontario and Quebec—the north shore of Quebec, for example, the whole Muskoka area, Algonquin Park. Most of the traffic, though—and I'm just guessing here—would be business or personal/business related. However, when you look at international agreements and the increase of business travel as a result of North American free trade, you do have to start looking at efficiencies in the corridor.

For example, as you know, in Ottawa Mitel is increasing its staff by 5,000 people, and I think Nortel is doing the same over the next five years. That will put a tremendous pressure on the two Ottawa travel...not only for business meetings but for family travel and all the rest of it. There's a big ripple effect in that kind of business, and we do have to make sure the corridor can perform.

Mr. Murray Calder: What's the average age of a person vacationing over here who would be interested in using the rail system?

Ms. Debra Ward: We find our biggest market is late baby-boomers, just on the other side of baby-boomers. They're highly educated, well travelled, well off financially, very sophisticated in terms of what they want. Probably a lot of them have used the European systems, Britrail and Eurorail passes, and are very comfortable with those systems.

I also think you may find, depending on what you're talking about and where these people are going, some more adventure travel and eco-travel using light rail. One of the reasons for that is, as we know, rail is the most environmentally responsible way of getting people around. People who want to experience that kind of outdoor holiday—a no-trace camping sort of pristine holiday—may indeed choose to use rail as the best alternative and most responsible way to get to their destination.

Mr. Murray Calder: So basically the age group would be late forties and early fifties on up. The kids are in university now and it's time to rediscover their marriage or whatever, and away we go—that group.

Ms. Debra Ward: Yes. And that's the same group, interestingly, that's spurring the growth of recreational vehicles, because in certain areas where perhaps there are no trains they are choosing to take RV holidays.

Mr. Murray Calder: So if they use the train, they're not really all that interested, then, in cars and what not; they'd probably prefer a taxi and to let somebody else worry about it.

Ms. Debra Ward: Yes. It's hard to generalize. You have to identify your market. But I think overall your remarks are very accurate.

Mr. Murray Calder: Okay. The previous presenter gave me the impression of what I've just been talking about. He didn't really see too much of a future in that. It was more or less that people want to fly instead of taking the train and seeing the countryside. Would you agree with that?

Ms. Debra Ward: Certainly the previous witness had a point, in the sense that when you look at the growth charts you see that air travel has been explosive over the last decade. When you look at passenger rail North America-wise, you see it has been fairly stable. More people want to fly.

It's hard to generalize. I'd say, in a sense, we're probably both right in our ways. More people want to fly because, if you consider what I said a moment earlier, people don't want to waste time to get there. So if you want to go from Toronto to Montreal and you want to get there quickly, you'll fly.

Mr. Murray Calder: Okay.

Ms. Debra Ward: And I think there are more people who want to do that. But at the same time, there's another group of people who say, well, you know, by the time I get to the airport, the hassles of that and all the rest of it...I'm going to sit back, put my feet up, and take the train.

Mr. Murray Calder: One last question, Mr. Chairman.

In that situation I agree with you, because I'm a bit of a student of demographics. I'm in that 47-to-50 range, looking at 50 very closely now. In my twenties, thirties and early forties I was in a hurry, and I now find I'm beginning to slow down a little bit more. I like to see the scenery. And I think there is a huge sector of the population that is just on the verge of that.

My point is there's a huge potential market out there right now that is just starting to become visible. Would you agree with that?

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Ms. Debra Ward: I agree with you wholeheartedly, and I would add something to what you said about this particular age group. I think the most important thing you have to give them is choices. They have worked hard, and they are mature and sophisticated, and I think you have to give them a variety of choices. Perhaps one of the things we can find ways to do together is to give them more travel choices.

The Chairman: Before I go on to Mr. St-Julien, please forgive us, we have to break for, I hope, one minute. We have business to do and Mr. Morrison must go to the House.

I'm asking the committee for permission to hire a consultant at a maximum fee of $ 500 per day for a maximum total cost of $ 10,000 to assist in the research and the writing of the report. I can't wait until we come back to do it, so can we deal with this now? Is there any problem?

Mr. Stan Keyes: That's a ceiling of $ 10,000?

The Chairman: That's a ceiling, a maximum, of $ 10,000.

Mr. Roy Cullen: I so move.

The Chairman: Mr. Cullen, seconded by Mr. Morrison.

(Motion agreed to)

The Chairman: Thank you very much. Please resume.

[Translation]

Mr. Saint-Julien.

Mr. Guy Saint-Julien: Ms. Ward, it is a fact that the tourist trade in Canada is huge and that there are remote regions. Regarding remote regions, we're thinking about packages for North America and Europe, including passenger trains. For instance, we're thinking about the Montreal-Senneterre-Abitibi passenger train. We know that packages including snowmobile trips or hunting and fishing trips are substantially on the rise. Have you discussed with VIA Rail the possibility of making this mode of transportation truly reliable and punctual? Have you met on that subject?

[English]

Ms. Debra Ward: I noticed the question that you asked earlier to Mr. Elliot, as well. This is being done already, but on a very small scale, and it's not being done by the transportation companies, it's being done by tour operators.

The way it works is that the tour operators will buy 100 seats on the plane, 100 on the train, 100 rooms in the hotel, and get the charter boats set up to take people out fishing. Then they will sell those tickets either to groups coming in, and it could be domestic groups—there are more and more domestic packages being built, which I'm very happy about—or, most often and most usually, international tourists.

One of the reasons I believe the transportation companies don't do it is that tourism is not their job. Their job is to move people. Their job is to make money for their shareholders and to move people around in a very good way. But you need the tourism people and the reason to travel to say, well, you have a train to here, you have a plane to here, and you have a boat to here, and we will put them altogether because we're tourism and we know how to sell the experience of that. What we need in order for that to work is, as you said earlier, a stable schedule of transportation and stability in pricing—which actually we do have to a large extent in Canada—that allows us as the tourism industry to put those packages together.

[Translation]

Mr. Guy Saint-Julien: One final question, Mr. Chairman. Does your association attend meetings with outfitters from Quebec and Canada in order to find new ways to attract these tourists? I would also like to know, in the same context, whether your association attends international meetings, in the United States or in Europe, in order to promote co-operation between passenger trains and airline companies.

[English]

Ms. Debra Ward: As a matter of fact, for the marketplace I was just talking about earlier, Rendez-vous Canada, the purpose is just that. You bring in the international buyers and you have the full array of products you need to build the package, and they sit together and make the deals. We do that at the national level; at the provincial level, there are provincial events that do the same thing.

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There's always an issue in our industry, quite frankly, that you never do a good enough job doing that because so much of our business is remote or small. It's hard to get to these people. So we do it in stages, and we try to reach out a little bit more every year to those groups.

The key now for us, and our great strength, is that more and more people want to go to the remote regions. I'll give you a very, very good example of that. Starting next week, Air Transat, which is a charter service, will be flying non-stop from Frankfurt to Whitehorse for the summer season. They are full, and next year I think they might be increasing capacity.

There is one thing I would like to mention, and it's not intermodality, but it does talk to this whole issue of airline pricing and availability for leisure travel versus business travel and all that. The charter airlines, Canada 3000, Air Transat and Royal Air, have made a tremendous difference in moving people around Canada. Non-stop Frankfurt to Whitehorse—that is incredible, and it's because people in Germany want to see the great outdoors of Canada, and it took the charter company Transat to find the way to get them there.

So the charter airlines are also going to be helping change how we sell Canada and what parts of Canada we sell, and in some ways they're not quite as restricted as the scheduled carriers in terms of their load factors and all that.

Mr. Guy St-Julien: Merci beaucoup.

The Chairman: Mr. Sekora.

Mr. Lou Sekora: I was in the tourism industry myself. I had hotels by the airport and that type of deal in British Columbia, so I know what you've done.

To me it seems there's a great need for airline and rail combination packages. I've had an awful lot of people say they would like to fly into Vancouver and take the train, whether it be VIA Rail or whatever it is, to Calgary, Banff, Lake Louise, Jasper, through there. I think there's a great need for that, and yet it's missing.

Ms. Debra Ward: I think you're quite right, sir. There are opportunities we're missing. But I think perhaps some of that is because we, in the tourism industry, have not done a good enough job telling the transportation companies what their opportunities are here. As I said earlier, they're not in the tourism business and they won't look at our business the way we do.

It is happening on an ad hoc basis, as I was saying earlier to Monsieur St-Julien. But you're right, there isn't enough of it and we're trying very hard, through venues like Rendez-vous Canada, to say it's easy to do.

It's happening slowly. I think the more we allow, through government regulations, demand rather than supply to drive policy, the better off we're going to be. I think one of the challenges we've had in our industry is that transportation policy, particularly air policy, has always been from the point of view of the transporter, the person who transports, whether it's VIA Rail, Air Canada or whoever it happens to be. It's been “What do we need to do about this company?” as opposed to “How do we use the transportation network we have to increase travel opportunities in Canada?” I think, with respect, transportation policy has to take that shift to looking at the demand side on the part of the public good as opposed to just the supply side, which is the traditional way we've been doing it.

Mr. Lou Sekora: As you said, a flight from Frankfurt to Whitehorse is just amazing—and a sell-out! The same people would probably love to go through the Rockies. We could capture the market if there were a combination—

Ms. Debra Ward: That's right, and that's a start.

The other thing that's starting to happen now is you're starting to see some of the charter services pick up in Canada as well. They're flying St. John's to Moncton, Moncton to Montreal. So you're starting to get a different kind of service, lower air fares but a different kind of service, being fulfilled by charters in Canada. That's going to open up a lot of doors to this kind of thing happening.

The key is that it has to be easy for the companies to do. If it gets very regulated or very bureaucratic or slow to do, the transportation companies won't.... I want them all to make lots of money and I want them to fill every seat. We, in tourism, have to find ways to help them fill those seats, and I think it would be helpful if government could find ways to remove regulations or remove the barriers that stop the filling of those seats.

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Mr. Lou Sekora: That's the chairman's job.

Voices: Oh, oh!

The Chairman: Thank you very much, Ms. Ward—

Ms. Debra Ward: Thank you.

The Chairman: —and Mr. Belyea, for your presentation and for having agreed to be with us on short notice. I apologize for that. Do you have closing remarks that you'd like to share?

Ms. Debra Ward: I just want to thank you for looking at these issues. They're very important, and I feel very good about what I'm hearing around this table, because I believe you do understand that we're missing opportunities and that there are ways we can work together to stop that and start making those opportunities happen for Canada.

Thank you very much.

The Chairman: Yes, and tourism is definitely a very important component of our study.

Ms. Debra Ward: Yes, and tourism is all of us. For all of you who stay here four days a week for your constituency, you're tourists here right now as far as we're concerned. You count. In some ways everybody's a tourist.

The Chairman: Thank you.

Ms. Debra Ward: Thank you very much.

The Chairman: The meeting is adjourned.