STANDING COMMITTEE ON TRANSPORT
LE COMITÉ PERMANENT DES TRANSPORTS
[Recorded by Electronic Apparatus]
Thursday, May 14, 1998
The Chairman (Mr. Raymond Bonin (Nickel Belt,
Lib.)): Good morning. Bonjour. We continue our
voyage in the study of passenger rail.
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
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
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
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.
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
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
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.
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
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
The Chairman: Okay. Thank you very much.
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.
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
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
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
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
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?
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,
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
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. 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?
Mr. Geoffrey Elliot: I've been doing it for the
past two and a half years with Air Canada.
Mr. Michel Guimond: Did you work at Air Canada before you were
appointed to this position?
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.
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?
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
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
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
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
Mr. Michel Guimond: That was my last question.
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
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.
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
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
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
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
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
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,
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
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
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
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.
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
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
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
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
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.
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
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
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
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
Mr. Lou Sekora: Okay. That's all I wanted to
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,
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
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
is not going to hit the peak that I am hoping to see.
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
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
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.
Mr. Guy Saint-Julien (Abitibi, Lib.): I have three brief
Mr. Elliot, you talked about the Montreal-Toronto-Windsor
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
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.
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?
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
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
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.
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?
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
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.
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?
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
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.
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.
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
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
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.
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
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?
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
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.
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
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?
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.
(Motion agreed to)
The Chairman: Thank you very much. Please
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?
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,
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.
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
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.
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
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.
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
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
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.
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
The Chairman: Thank you.
Ms. Debra Ward: Thank you very much.
The Chairman: The meeting is adjourned.