Air Transport Association of Canada. Formal Response. To the Emerson Report entitled. Pathways: Connecting Canada s Transportation System to the World

Transcription

1 Air Transport Association of Canada Formal Response To the Emerson Report entitled Pathways: Connecting Canada s Transportation System to the World July 2016

2 2 INTRODUCTION The Air Transport Association of Canada (ATAC) welcomes many of the recommendations found in this report as they address many issues of concern to our industry. We agree with many of the recommendations, we question a number of them, and in a few cases reject them outright. Our concern is that many of the recommendations do not reflect our industry s socio-economic and political reality. Some of the recommendations were suggested by the authors of the Report and not proposed by any of the hundreds of stakeholders queried during the examination. Many of those findings are the result of the analysis by the authors of the Report and are not founded on their likelihood of being politically acceptable, financially feasible or based on their acceptability by industry. Consequently, ATAC must ensure that its positions on the recommendations, and in some cases their negative impacts, are made abundantly clear. ATAC has concerns that the Government of Canada is not maximizing the potential of the air transport industry because of two factors; 1. the government has levied too many taxes and charges upon the industry resulting in an industry not competitive with its southern neighbour, and 2. the application of taxes, fees, charges, and lease requirements is unevenly applied between transport modes in Canada. ATAC would, for the most part, support legislation, regulations, and policies that are harmonized with those of the United States and the European Union. Mostly, however, we would support solutions that are tailored to the specificity of Canada s air transport operating environment. Although we are mostly concerned with the recommendations made in Chapter 9 Air Transport, our official response also addresses recommendations made in Chapter 2 - Governance, Chapter 4 - The North, Chapter 11 - The Canadian Transportation Agency, and Chapter Passenger Rail. However, we will be limiting our comments to the recommendations we consider to have an impact on air transportation. AIR TRANSPORT (Chapter 9) The recommendations found in this Chapter are the focal point of our interest in this Report. It addresses macro-economic aspects of our operational environment that have a profound impact on our industry. We will address each recommendation of this Chapter. Air Transport Recommendation 1 The Review recommends that the Government of Canada act for the benefit of consumers to reform the user-pay policy for air transport and improve its cost competitiveness in relation to comparable jurisdictions, while ensuring continued and sustainable financing for infrastructure and operations by: a. linking fees predictably and transparently to the actual provision of services and infrastructure; ATAC strongly supports this recommendation as the cost for services are significant and the level of service has been progressively declining for a number of years. We fully expect a transparent set of fees based on services rendered by the regulator but we mostly require services to be rendered within more acceptable delay standards and practice.

3 3 b. drawing on general government revenues, in addition to user fees, to support objectives that advance the national interest in a secure, accessible system that services northern and remote airports; ATAC agrees that the Federal Government needs to assume a greater financial role in providing a secure and accessible air transport system and in the North and other remote areas. Clearly the user-pay model cannot be applied in a territory that holds 0.3% of the population over 39% of Canada s land mass. c. phasing out airport rent and increasing capital funding available to smaller airports, as one of the airport governance reforms in Chapter 9, Recommendation 3; The justification used by Transport Canada in setting the airport rents was to earn a return on taxpayer investments. In a 1996 letter to ATAC, Transport Canada valued the airports being transferred at $1.517 billion. Using this to justify what some would call usurious ground rents, Transport Canada concluded leases with Airport Authorities. In the period from 1992 to 2013, Transport Canada collected $4,677,182,806 in ground rents. An astounding 308% return on the investment. Clearly there needs to be a review to determine a more equitable and market derived rate of return. These changes are the single largest inhibitor to the growth of Canadian passenger traffic. The comparison to U.S. airports is stark. The U.S. government contributes funds to U.S. Airports. This produces a clear competitive advantage for U.S. airports vis-à-vis Canadian airports. d. reducing the Air Travellers Security Charge as one of the airport security screening reforms in Chapter 9, Recommendation 8. ATAC agrees with this recommendation. We believe that the fact that revenue generated by the Air Travellers Security Charge (ATSC) far exceeds the Canadian Air Transport Security Authority s (CATSA) expenditures is totally unacceptable. In 2008 ATAC prepared an analysis of security fees worldwide and determined Canada to have the second highest security fee in the world. Shortly thereafter this fee was increased by 53%. We believe it to be the highest in the world now. This is not justified by the level of services provided by CATSA vis-à-vis other countries agencies or the funds transferred to CATSA. Indeed, the Canadian Government has collected over $100 million more from this passenger charge than is annually allocated by the budget to CATSA. This unaudited amount of fees collected from Canadian air travellers in the name of aviation security simply ends up in the Government s general coffers as a disguised tax rather than in CATSA s budget. A serious problem that needs to be addressed is that CATSA s workload is variable while funding for CATSA is fixed. Air Transport Recommendation 2 The Review recommends that the Government of Canada work with the provinces to further improve cost competitiveness by: a. committing to re-invest fuel tax revenues in safety, security, and reliability improvements at smaller regional, remote, and northern airports; ATAC agrees with this recommendation. As it stands now, none of the revenues from aviation fuel taxes is reinvested in aviation. Since it is absorbed into general government revenues it does not end up supporting the mode of transportation for which it was collected. This further reflects and supports our comments to Recommendation 1b. where we state that the user-pay model must not be applied to northern and remote airports in Canada.

4 4 b. reducing or eliminating aviation fuel taxes on international traffic (where these still exist); ATAC strongly agrees with this recommendation. Ontario remains the only province to still impose aviation fuel taxes on international traffic. Rather than follow the economically sound decision of other provinces to remove this obstacle to trade, Ontario in 2014 imposed a new Aviation Fuel Tax of $.047 per litre. It increased that tax by $0.01 on April 1, 2016 and is expected to reach $.067 per litre in Clearly, this is detrimental to the competitive development of international markets by Canadian carriers. The principle of non-taxation of aviation fuel for international flights was endorsed by Canada when it signed the Chicago Convention. c. allowing all passengers arriving from international destinations to purchase duty free merchandise, as is increasingly the case around the world; ATAC supports this recommendation. As alcohol is a very popular duty free item, we certainly see the wisdom of Arrivals Duty Free which would allow passengers to buy duty free alcohol at their destination rather than before enplaning at their airport of origin. Alcohol is heavy, inflammable and takes up space in the overhead compartments. This is both an economically sound and safety promoting solution. There is one caveat condition to consider. Many Canadian international carriers offer duty free merchandise on their flights. Arrangements would have to be made to allow passengers buying duty free merchandise on board to pick it up after arriving at their destination. d. ensuring that payment in lieu of municipal taxes required of individual airport authorities in the National Airport System are no greater than for comparable jobcreating industries. ATAC strongly agrees with this recommendation. In addition to ground rents paid annually to the Federal Government, airport authorities make Payments in Lieu of Taxes (PILT) to municipal governments. These payments cost Canadian airports over $100 million a year. Despite these PILT, airports are mostly responsible for self-financing many of the services that would ordinarily be provided by the municipalities. U.S. airports, on the other hand, make no municipal tax payments and in some cases even have the authority to levy property taxes. 1 Also of concern is the fact that there is no common standard guideline for municipalities in the setting of their PILT. Some airports are paying on a per passenger basis, while others have their PILT based on the commercial value of the airport land. Consequently, some airports are paying up to seven times more than others on a per-passenger basis. Regardless of the methodology used, this high cost is passed on to the passenger in one way or another. Air Transport Recommendation 3 The Review recommends that the Government of Canada strengthen the viability, accountability, and competitiveness of the National Airports System by: Canada s passenger air transport hubs are losing traffic, and thus effectiveness and importance, through leakage of passengers to adjacent U.S. airports. It is estimated that annually 4.5 to 6 million passengers travel by car to U.S. airports rather than fly from Canadian airports. With roughly 120 million passengers originating and deplaning in Canada each year the 4.5 to 6 million passengers is not an insignificant number. ATAC believes that Canadian Government Policy, particularly relating to airport ground leases, taxes and charges, to be the main culprit. It 1 Canadian Airports Council, Connecting Canada : An Aviation Policy Agenda for Global Competitiveness and Economic Prosperity, January 2015, p. 45

5 5 is high time to view their impact upon consumer decisions and their effect upon competitiveness. a. divesting the federal government of smaller federally owned airports in consultation with provinces, municipalities and First Nations, and provide one-time payments for needed safety investments, where appropriate; ATAC agrees with the recommendation should it prove to be feasible. Restrictions on ability to change land usage should be attached in the case of some strategically located airports. b. moving within three years to a share-capital structure for the larger airports, with equity-based financing from large institutional investors, accompanied by legislation to enshrine the economic development mandate of airports and to protect commercial and national interests (including provisions that are currently spelled out in the airports leases) by: i. establishing investment thresholds, foreign ownership limits, and tests of public interest and national security to be administered by Industry Canada and the Competition Bureau, under the Investment Canada Act and the Competition Act, similar to the controls in place for air carriers with passenger service proposed in Recommendation 4, below; ii. maintaining protections against insolvency (currently contained in the airport leases), so that, in the event it should occur, all assets belonging to the insolvent airport authority would revert to the Crown without liability; iii. enacting so-called light-touch regulations covering fees and charges to protect users and confer oversight on the Canadian Transportation Agency. ATAC opposes Recommendation 3b. Moving to a share-capital structure with private sector equity-based financing would add huge financial costs to airports which would be passed down to the carriers. Institutional financing demands a reasonable return on investment and the assets to be financed would be appraised at current market value, much higher than the estimated value of $1.52B when divested in Although the Canadian Government hasn t invested in those infrastructures since then, the Local Airport Authorities have invested over $6B just from the Airport Improvement Fees (AIF) collected. We can therefore estimate that the value of the assets to finance would be well over $10B. This would lead to very significant cost increases for air carriers as private equity funds would require a sound return on their investment. Should the Canadian Government still decide to pursue that option, it would have to ensure that important oversights of those private entities be put in place, perhaps similar to the U.K. s Economic Regulatory Group which oversees U.K. s privatized airports and rules not only on airport charges but also on service levels. c. To resolve issues applicable to airports regardless of the ownership/governance model, enacting legislation to implement the following provisions for all Canadian airports with scheduled services: i. establishing a set of principles to guide all airports in Canada when determining fees, and requiring airport operators to grant reasonable access to any licensed airline who requests it; providing the Canadian Transportation Agency oversight and enforcement in both instances; ATAC agrees with this recommendation.

6 6 ii. tying airport improvement fees to specific projects with explicit sunset provisions; ATAC agrees with this recommendation in as far as AIFs are concerned. The same could not apply to the Passenger Facilitation Fee as it is also used to support operations and is not strictly used for infrastructure projects. iii. requiring airline expertise on the boards of directors of airport operators (current airline employees would not be eligible); ATAC strongly agrees with this recommendation. This was one of our own recommendations and we feel that the current lack of airline and other aviation industry expertise on the boards of the Canadian Airport Authorities is detrimental to management decisions taken by those boards and to relations with carriers. iv. ensuring meaningful and timely user consultation for major capital projects; ATAC agrees that all stakeholders should be consulted on any major capital project for existing or new airports. v. strengthening performance reporting and benchmarking; ATAC agrees as there is an absence of transparent reporting and benchmarking of airport performance. vi. providing appropriate directive powers to the Minister in the event of extraordinary circumstances (legislation is currently silent on this, unlike for other modes). ATAC strongly agrees with this recommendation. The Minister has the authority to cancel an airport lease but we think that this option should only be a last recourse and that other oversight powers of intervention should be granted to the Minister. d. Significantly increasing funding for the Airports Capital Assistance Program to support safer, more efficient, reliable services at regional and local airports. This would require expanding the eligible investments to include lengthening and surfacing runways for modern jet service in northern and remote airports, and investing in more advanced navigation, weather, and landing systems. ATAC agrees. We have provided Mr. Emerson with a list of northern airports which require immediate infrastructure investment. ATAC also wishes to highlight that other northern territories around the world reliant upon air travel such as Alaska, northern Scandinavia and Siberia have all received significant capital investments from their respective governments to develop northern airports including artificial runway and apron surfaces. However, ATAC also believes that this recommendation leaves out a large segment of the North should it solely focus on jet services. Northern Canada is largely serviced by turboprop operations, which is appropriate given the population size. Airports that only support turboprops would also be better serviced through lengthening and surfacing runways. A number of airports do not have artificial runway and apron surfaces (i.e. they are gravel airstrips). At a minimum, ATAC recommends a program of installing artificial surfaces at the following airports: Cambridge Bay, NU Dawson City, Yukon Resolute, NU

7 7 Old Crow, Yukon Mayo, Yukon Kugluktuk, NU The important fishing and tourism industry of Pangnirtung and Pond Inlet in Nunavut would greatly benefit from paved runways. Although a paved runway at Arctic Bay would reduce operating costs of turboprop given the elimination of gravel damage to propellers and the aircraft fuselage, we nonetheless question its viability for use by most modern jets given the steep terrain surrounding the airport on both sides. Paving the airport in Nain, NL, the gateway to Torngat Mountains National Park, would certainly contribute greatly to the development of the tourism industry of that area situated at the northern tip of Newfoundland and Labrador. Also highly dependent on air services, the local First Nations community of Natuashish, NL, would greatly benefit from the community advancement that an extended and paved runway would allow. There are also a myriad of other projects that should be completed including: 24 hour weather reporting Runway lighting Longer runways (i.e. Inuvik, NWT) Approved GNSS approaches Increased fuel storage capacity As an initial project, however, we suggest the replacement of the gravel strips with artificial surfaces. This will allow northern airlines to use modern fuel efficient aircraft that also emit less Greenhouse Gas (GHG) emissions. The only jet aircraft certified to operate on gravel are quickly reaching the end of their useful and certified lives and are also expensive to maintain and are significantly less fuel efficient. Air Transport Recommendation 4 Assuming bilateral agreements continue to form the basis of Canada s international air transport regime, the Review recommends that the Government of Canada amend the Canada Transportation Act and Canadian Aviation Regulations to: a. increase foreign ownership limits to at least 49 percent for air carriers operating commercial passenger services; We do not see the necessity of increasing foreign ownership levels to 49% or more as we think that the existing ownership limits are fine. Should a 49% voting limit be approved, strict controlin-fact tests would have to be reinforced. With respect to foreign ownership, ATAC endorses Air North s argument that foreign nationals will invest in Canada only if they can generate and repatriate profits. I don t see how this will benefit Canada. 2 The control-in-fact test should be more transparent. The CTA could make different rulings based on almost identical fact base. There is also a risk that approval could be rescinded after being granted for unclear reasons. 2 Joe Sparling, President, Air North, dated May 11, 2016.

8 8 b. increase foreign ownership limits to 100 percent for airlines operating all-freight and specialty air services; This recommendation was the one which received the most hostile comment from ATAC Members. There does not seem to be any rationale for 100% foreign ownership. Indeed it would preclude Canadian all-cargo aircraft from flights to foreign destinations. It was also pointed out that all-cargo is a stand-alone proposition and should not be included with specialty air service. The traditional reasoning behind the concept of increases in allowable foreign ownership in airlines is based on access to foreign invested capital to fund modernization of equipment and the addition of capacity to service expanding markets. 3 The argument that the current foreign ownership limit is a barrier to entry and that there may not be enough capital in Canada to finance all-freight air carriers is simply not evident. While a case might be made for large passenger carriers requiring enhanced financing options, 4 cargo operators report not having any restricted access to capital as a result of current ownership structure or foreign ownership restriction limits. Furthermore, it is noticeable that the Report did not offer a definition of what specialty air services includes for the purpose of Recommendation 4b. Specialty services are not air transport services. Specialty air services are not regulated under the (Canadian Transportation) Act, do not fall under the regulation of the Canadian Transportation Agency, and do not require a licence issued by the CTA. 5 The mandate of the Canada Transportation Act Review extends to other Acts of Parliament that relate to the national transportation system and explicitly recognizes the import of the Review to Canada s economic health and competitiveness is not served by this recommendation. ATAC recommends that no action be taken on ownership of specialty air services on the basis of the report; and that, if at any future time a change to ownership of specialty air services is being considered, a study of the industry and consultation with Canadian operators be conducted to assess the effects of an ownership change and evaluate the benefits for Canada. The irony is that the elimination of the foreign ownership restrictions on the air cargo sector would not serve the stated goal of increasing our sector s competitiveness. Rather, a Canadianowned airline would cease to exist and a foreign-owned airline would take its place, with a net zero impact on the competitiveness of the Canadian air cargo sector. 6 ATAC recommends that in lieu of the report s recommendations on this specific issue, the Government of Canada include the proposed foreign ownership changes for all-freight airlines to having the same size and scope as any major international commercial airline in the same Passenger Airline classification. In addition, ATAC would like to suggest that the inclusion of airlines such as Cargojet, Morningstar Air Express and KF Aerospace in the Specialty classification is confusing at best and not logical. ATAC also wishes to point out that passenger airlines also carry a significant amount of international cargo, and that with separate passenger and cargo ownership limits, the condition would exist where two companies operating similar aircraft on the same routes would be regulated under different ownership rules. We insist that consistent ownership rules are vital in a 3 Cargojet Airways Ltd. Comments on the Canada Transportation Act Review Report. 4 Cargojet Airways Ltd. Comments on the Canada Transportation Act Review - Report 5 Provincial Aerospace, Concerns and Responses to Recommendations on Specialty Air Services, p. 3 6 Morningstar, Response to request for Operator Feedback concerning CTA Review, March 21, 2016, p. 2.

9 9 global economy, and to do otherwise would put Canadian companies at a competitive disadvantage. c. ensure legislation and regulations for granting licenses and air operator certificates to new entrants or growing carriers, as well as to specialty air service operators, are consistent with one another; ATAC agrees with this recommendation. However, we would note that CTA license regulations do not apply to specialty air service operators. d. transfer oversight for investment and competition issues to Industry Canada and the Competition Bureau, under the Investment Canada Act and the Competition Act, to apply the various public interest and national security tests (with the Canadian Transportation Agency retaining oversight over the ownership and control tests of air carrier licensing); ATAC agrees with this recommendation. e. review the approach used by the Canadian Transportation Agency to determine domestic control of an airline to ensure that it remains relevant and effective (i.e. focused on testing matters related to the strategic decision making of the airline, and taking into consideration the practices of comparable international jurisdictions for benchmarking); ATAC agrees with this recommendation. We endorse, however, the Helicopter Association of Canada s statement in their submission, that the current process provides little transparency to Canadians, and offers little substantive guidance to other operators preparing to restructure their own companies. The lack of transparency also erodes the credibility of the CTA, and there is a perception that the ownership rules can be circumvented relatively easily by transferring the assets of the company to a corporation that is not subject to any ownership limits, and leasing the assets back to the Canadian AOC holder, for example. 7 f. work with industry to review, clarify, and improve guidelines for testing financial fitness by the Canadian Transportation Agency when reviewing applications for licenses to operate air services. ATAC agrees with this recommendation. Air Transport Recommendation 5 The Review recommends that, as a starting point for negotiations, the Government of Canada commit to making more open international air services agreements, beginning with the following measures: a. a minimum allowance of seven flights per week (7/7 daily service) for each of the air carriers designated by all new and existing air services agreements with any safe and secure partner; ATAC has no comment on this recommendation. b. all subsequent increases in air access in increments of at least seven flights per week, per designated air carrier; ATAC has no comment on this recommendation. 7 Helicopter Association of Canada, CTA Review Submission, April 30, 2016, p.4.

10 10 c. consider agreements that incorporate automatic planned increases in capacity to allow for stimulation of demand, with established timelines for moving towards open skies; ATAC agrees that the Canadian Government should issue a policy declaration that Canada will pursue more liberalized air agreements with all willing, safe and secure partner jurisdictions with a transition period of no more than 10 years. 8 However, ATAC strongly recommends that the Canadian Government only enter into such agreements with partner jurisdictions who offer full reciprocity. d. include fair trade and competition requirements in all new and expanded air services agreements, providing for remedies and enforcement mechanisms should a party not meet its obligations; ATAC agrees with this recommendation. Enforcement mechanisms should be provided with enforceable punitive powers. e. accord greater weight to trade policy objectives, such as the Global Markets Action Plan, Federal Tourism Strategy, and Study in Canada, along with the business objectives of Canadian airports and airlines, when developing negotiating strategies and priorities for new and expanded agreements. ATAC strongly supports the notion that air transport industry objectives be included in the negotiating strategies toward international agreements. Air Transport Recommendation 6 The Review recommends that the Government of Canada look beyond transportation policy and take broader action to foster the development of global air hubs to position the Canadian air sector to compete internationally by: a. harmonizing immigration and trusted traveller programs with the U.S. and other trusted jurisdictions (e.g. the United Kingdom, the European Union, Australia, and New Zealand), with expanded eligibility; ATAC agrees with this recommendation. Harmonization should be prioritized beginning with our major trading partners. b. continuing to streamline immigration and customs processes by, for example, reducing the need for Canadian visas and increasing the use of Electronic Travel Authorization (eta) for lower-risk visitors, such as those from lower-risk countries and/or with valid U.S. visas; ATAC agrees with this recommendation. c. allowing transit without a visa for citizens of all but high-risk countries at all Canadian airports with approved secure facilities; ATAC considers that this should have been done a long time ago. This would help increase the hub potential of our major airports. However, the notion of high-risk countries needs to be clearly defined. 8 Emerson, David, Pathways: Connecting Canada s Transportation System to the World, Volume 1, page 198.

11 11 d. allowing travellers to connect from international to domestic and transborder flights without collecting their bags, at all airports with approved secure facilities; Again, ATAC supports such a policy change in as long as our major foreign partners agree. e. expanding trusted traveller programs and access to Automated Border Clearance systems, in parallel with the U.S., to include citizens from other trusted jurisdictions, such as the United Kingdom, the European Union, Australia, and New Zealand; ATAC agrees with this recommendation. Air Transport Recommendation 7 The Review recommends that the Government of Canada ensure that there is strategic alignment between the priority markets for tourism promotion, immigration and border facilitation measures, and international trade and air services negotiations. ATAC agrees with the necessity of a strategic alignment with priority markets while keeping in mind that all these markets compete with Canada for the tourism market. Air Transport Recommendation 8 The Review recommends that the Government of Canada overhaul the regulatory, financing, and delivery models for airport security, to maximize performance and service while delivering the highest standards of security and good value for money, by: a. establishing greater alignment and coordination between the regulatory and operational functions of aviation security. This could be achieved by replacing the Canadian Air Transport Security Authority with the creation of a single integrated aviation security agency with responsibility for both regulatory oversight and operations; ATAC has serious reservations about merging the regulator with the operational arm. We feel that pulling the passenger security regulatory responsibility away from Transport Canada (TC) and shouldering CATSA, or a new authority, with it is not the only solution to the current poor coordination between TC and CATSA. b. legislating a customer service mandate and regulated performance standards, benchmarked against those in competing international jurisdictions to ensure customer service transparency; ATAC supports this recommendation. A harmonized benchmarking would have to be agreed to among competing jurisdictions. This is not the case at this time. c. recognizing that the primacy of national security can cohabit with customer service through the provision of stable and predictable financing for aviation security, from both the Air Travellers Security Charge and general revenues, that meets the needs of growing traffic volumes, along with evolving security risks; ATAC is confident that the solution to the efficiency problems at CATSA is indeed through adoption of stable and predictable financing, both from a dedicated Air Travellers Security Charge as well as the government s general revenue, as is done in most other jurisdictions. While having travellers shoulder 100% of aviation security costs, as is currently done in Canada, has a negative impact on cost competitiveness and is not typical elsewhere in the world, a user fee approach to fund aviation security can work effectively. It would allow for revenues to rise and fall with changing traffic volumes in order for resources to match demand. The current

12 12 model does not link the rising (or falling) revenues to funding appropriations today passenger traffic is increasing significantly but CATSA s funding has failed to keep pace with inflation or traffic growth. The current model for funding CATSA hampers its ability to deal with fluctuating passenger traffic because its funding is fixed. The funding model also doesn t allow CATSA to nimbly respond to changing security developments as do other screening providers around the world. ATAC strongly recommends that CATSA should receive all ATSC generated funds, which fluctuate according to the number of passengers. Only then could the level of service follow the growing market needs. d. replacing the current one size fits all passenger screening approach, which treats all passengers equally, with an intelligence-driven, risk-based passenger screening process, similar to those employed in other jurisdictions that leverage technology and existing trusted traveller programs such as NEXUS and CANPASS. ATAC agrees that the current situation of the so-called tick box security is highly inefficient. Air Transport Recommendation 9 The Review recommends that the Government of Canada enhance consumer protection for airline passengers by: a. enacting legislation or regulations that define rights and remedies that are as harmonized as possible with those of the U.S. and the European Union, and that apply to all carriers serving Canada; ATAC disagrees with this recommendation. However, should Transport Canada proceed with this measure, we recommend following the U.S. model, as it is the least expensive for both consumers and airlines to administer. Also, ATAC has serious reservations about the European model. Examples of objectionable aspects of the EU model are as follows: i) The EU system is litigious; this is costly for both passengers and airlines, while the U.S. model avoids this through an administrative system. ii) Penalties under the EU System exceed the price of the ticket. iii) There are no limitations in the case of natural disasters and this could lead to airline bankruptcy. Any passenger protection regulation or legislation has to bear in mind the following key elements. These are that safety is paramount and that the pilot should decide whether a flight should be undertaken based on safety considerations, first and foremost, and not be intimidated by financial impacts; unreasonable financial compensation to customers would necessarily generate higher fares; the inapplicability at small airports and those in remote or Northern regions of Canada, must not be burdened with measures designed for our NAS airports; and the necessity of shared liability so that airlines aren t held financially responsible for delays, cancellations and other issues due to factors beyond their control. In no case should compensation exceed the cost of the passenger s ticket. Consideration should also be given, in the case of tarmac delays, to Canada s climate and stricter environmental regulations related to aircraft de-icing or anti-icing operations. Finally, a one-size-fits-all set of rights is nearly impossible to implement in Canada given the diverse nature of operations of air carriers in Canada.

13 13 b. providing the Canadian Transportation Agency with the power to undertake investigations on its own motion so that it may report on and resolve systemic issues, as well as general order powers so that rulings may be applied to all carriers; ATAC disagrees with this recommendation. ATAC believes that investigations should be consumer driven and justified by an accumulated history or tendency of incidents. c. amending the language of the Canada Transportation Act to require complainants to have been a customer of the operator against whom the complaint is being laid (the legislation currently defines a complainant as any person ); ATAC included this particular recommendation in its own set of recommendations to the Review Committee. ATAC contends that if these statutes intend to provide a degree of consumer protection, then the complaint should indeed be from a consumer of the services regulated. Carriers should not have to face complaints from an individual who could not be identified amongst their passenger lists. Such complaints are very costly and time-consuming to deal with appropriately, and it should not allow for abuse by non-customers. ATAC strongly supports the idea of substituting the term any customer for the currently used term any person. d. mandating the collection of relevant data, such as the number of passengers denied boarding, on-time performance, and lost baggage rates, and their publication, where possible, at point of sale; ATAC is opposed to this recommendation. Related data is already being collected through the Electronic Collection of Air Transportation Statistics (ECATS) for Transport Canada during the flight following monitoring at each airline. ATAC recommends that this resource be fully unitized for purposes of data collection. e. clarifying the obligations of airports and airlines to provide service in both official languages, and working with industry and Official Language Minority Communities to improve consistency; ATAC agrees with this recommendation when applied with reasonable limitations. f. working with the Provinces to ensure that the existing all-inclusive airfare advertising rules also apply to charter services. ATAC agrees with this recommendation. Air Transport Recommendation 10 The Review recommends that the Government of Canada commit to strengthening its reputation as a world leader in aviation regulation and certification, in support of the findings of the 2012 Aerospace Review, by: a. investing in the necessary resources and systems to ensure that Canadian certification continues to be a globally recognized and sought-after seal of approval; ATAC agrees with this recommendation.

14 14 b. implementing full cost recovery for certification, with world-leading service standards (e.g. response times); ATAC would agree if response times were improved to reflect costs incurred by operators and manufacturers. c. investing in the resources and expertise needed to properly assess risks and impacts when formulating new regulations and standards in Canada and at the International Civil Aviation Organization; regulations and standards should reflect an understanding of the differences between each aviation segment, including business aviation and small northern and remote operators, as well as large commercial carriers; ATAC fully supports this recommendation. d. working with industry and international partners to ensure that domestic and international regulatory frameworks and standards are tailored as much as possible to the needs and risks in each aviation segment; ATAC strongly supports the concept that each aviation segment be recognized as having its own operating environment, circumstances, and requirements. e. working with industry and international partners to develop protocols and technologies to strengthen protections of public safety, security, and privacy from inappropriate use of unmanned aerial vehicles, and to enforce violations, without unduly restricting the development of innovative and beneficial uses of this technology in Canada. ATAC agrees with this recommendation and emphasizes the need for formalized pilot training and testing of UAV operators for both recreational and commercial users. GOVERNANCE (Chapter 2) Governance Recommendation 1 The Review recommends that Transport Canada lead the development of a clear performance and evidence-based National Framework on Transportation and Logistics in collaboration with the provinces, territories and industry. a. The Report of the Canada Transportation Act Review should provide the starting point for the National Framework on Transportation and Logistics. b. The creation of the Framework should be enshrined in the Act, replacing the requirement to conduct a periodic statutory review of the Act. c. The National Framework on Transportation and Logistics should include intermodal and sector-specific strategies and investment plans, as well as defined infrastructure projects for the next 10 to 30 years in a Transportation Infrastructure Plan and Projects Pipeline. d. The Framework should make provision, through the creation of an Advisory Committee on Transportation and Logistics, for an ongoing dialogue on transportation that includes representation from the entirety of Canada s multimodal transportation system. e. The Advisory Committee should be assisted in its work by a new Centre of Excellence in Transportation, Logistics and Innovation that provides expert policy advice aimed at enhancing the state of the transportation sector in Canada and marketing its position as an international hub. f. A new Integrated Data Platform and Multimodal Data Dashboard should be established, preferably within the Canadian Transportation Agency, to support

15 15 evidence-based decision making, and a more efficient and responsive transportation network among public and private sector stakeholders. ATAC agrees with Recommendation 1 and its subparts as the stated objective is to "create new mechanisms whose goal is to provide advice and expertise in the different modes of transportation and from different aspects of the industry, and focus on the collection of the necessary data and research to inform decision making. Although we don t object to the creation of a new Integrated Data Platform and Multimodal Data Dashboard, we would want to have input on what this dashboard would include. We also question whether the Canadian Transportation Agency is the proper agency to manage this data bank. Governance Recommendation 2 The Review recommends that Transport Canada (through the proposed Advisory Committee on Transportation and Logistics) establish a mechanism to determine, on an ongoing basis and in collaboration with the provinces, territories, and the private sector, the state of Canada s transportation infrastructure, including gaps in Canada s long-term requirements. This new mechanism would be responsible for the following: a. Developing and implementing methods to track public and private maintenance spending and investments in new infrastructure; b. Assessing the current state, deficiencies, risks, and required investments in the transportation system, with particular emphasis on changes in demand and pressures on the logistics supply chain; c. Evaluating opportunities and options for improving essential trade-related infrastructure. ATAC agrees with these recommendations. ATAC recommends that Transport Canada use the Estimates of the Full Cost of Transportation in Canada 9 study it conducted in 2008 to help determine the long term requirements. We also ask for greater clarification on how opportunities and options for improving essential trade-related infrastructure would be evaluated. The report proposes the creation of a Centre of Excellence in Transportation, Logistics and Innovation and an Advisory Committee on Transportation and Logistics. Although ATAC endorses the objectives behind the creation of these bodies, we don t want to see additional organizations working in silos, competing for the Minister s attention, adding costs to industry or using up Transport Canada s budget, further lowering the level of services to industry. Governance Recommendation 3 The Review recommends that the Government of Canada, with input from provinces, territories, and the private sector, develop a comprehensive long-term transportation infrastructure plan, by: a. articulating a strategic outlook, direction, and goals that would be used to set priorities for investment in existing and new transportation infrastructure; b. establishing a projects pipeline, comprising a continuously updated list of highpriority infrastructure needs over the next 20 to 30 years, selected on the basis of a factual analysis of the contribution to Canada s long-term economic development and productivity. The list would highlight assets that support international trade and competitiveness, such as Canada s trade corridors, as discussed in Chapter 3. c. providing targeted funding to support the economic development potential of Canada s three northern territories; 9 Transport Canada TP 14819E, August 2008

16 16 d. obligating project proponents, whether government or private sector, to pay particular attention in their funding applications to the opportunity to introduce user charges to encourage more productive use of existing infrastructure stock; incorporate innovative technology; ensure national and global inter-operability; introduce performance measurement and productivity targets; and assess environmental impacts and labour market risks. ATAC agrees with all of these recommendations. We recommend a true consultation process with provinces, territories and private sector stakeholders rather than an information sharing process once politically motivated decisions have been made by federal authorities. We would expect that the targeted funding to support the economic development potential of Canada s three northern territories be based on a comprehensive consultation process with all northern stakeholders, be they public or private. Governance Recommendation 4 The Review recommends that the Government of Canada act to attract increased private sector financing for transportation infrastructure projects by: a. using the Transportation Infrastructure Plan and Projects Pipeline (as per Recommendation 3 in this Chapter) to identify national priorities (and assets that could be considered for privatization) and to highlight those projects and initiatives that may be of interest to private sector investors; b. working with institutional investors and pension funds to consider additional tools or mechanisms to attract and leverage private investment in transportation infrastructure. This will involve: i. ensuring existing financial, policy and regulatory frameworks do not unnecessarily discourage private sector investment in Canadian transportation projects; ii. legislative amendments to remove any barriers, such as the restrictive investment regulations on pension funds; iii. encouraging and assisting private financial institutions to establish managed transportation infrastructure investment funds in which private investors (small and large) could reduce risk by pooling funds and investments; iv. adopting policies and stable, predictable regulatory frameworks that de-risk investor cash flows and inspire greater confidence among institutional investors in P3 and private infrastructure projects. ATAC agrees with this recommendation. However, ATAC does not believe in privatization simply motivated by pro-privatization policies based on a government s appetite for easier access to capital funding sources. We would support privatization of assets based on sound strategic development or efficiency objectives. Governance Recommendation 5 The Review recommends that Transport Canada incorporate the Commodity Supply Chain Table into the proposed Advisory Committee on Transportation and Logistics, chaired by the Minister of Transport and vice-chaired by the Minister of International Trade. This new Committee should have: a. the mandate to consider and provide advice on all modes of transport, with a view to, among other purposes: i. addressing the systemic issues affecting Canada s transportation network; ii. developing a long-term vision for transportation in Canada; iii. advancing Canada s corridors and critical trade-enabling infrastructure through partnerships with the industry and other levels of government; iv. further integrating Canada s corridors in North American and international approach.

17 17 b. membership representative of federal, provincial, and municipal governments, as well as key stakeholders. ATAC agrees with this recommendation. Governance Recommendation 6 The Review recommends the establishment of an independent Centre of Excellence in Transportation, Logistics, and Innovation. The Reports states that The Centre of Excellence in Transportation, Logistics and Innovation would benefit from the enhancement of the data collection and analysis envisaged through an Integrated Data Platform and Multimodal Data Dashboard. These three entities, the Advisory Committee on Transportation and Logistics, Centre of Excellence in Transportation, Logistics and Innovation, and Integrated Data Platform and Multimodal Dashboard would fit together, lending consistency and coherence to transportation policy and ensuring that decision making is informed by a continuous flow of cutting-edge research and innovation, supported by solid data and designed to address the most critical transportation challenges and opportunities of the day. 10 ATAC agrees with this stated objective of this recommendation which clearly identifies that the three entities would work together consistently and coherently to ensure properly informed policy decisions. Again, we state our concern on the financing of these bodies as the Report makes no mention of that aspect. ATAC recommends that these three entities be either funded entirely by the Federal Government or through a balanced mix of public and private funds, paid for equitably among the various modes of transport, with each paying its fair share. Governance Recommendation 7 The Review recommends that the Government of Canada create an Integrated Data Platform and Multimodal Data Dashboard to facilitate enhanced transportation data collection and processing. Consideration should be given to housing this new entity within the Canadian Transportation Agency. ATAC agrees with this recommendation, in principle, but seeks clarification on and input into what data will be required. ATAC also strongly recommends that all existing sources of data be fully utilized first. THE NORTH (Chapter 4) Note: ATAC will only be commenting on Recommendations 1 and 3. Recommendation 2 concerns the development of a new federal policy vision and regulatory regime to strengthen the safety and reliability of marine transport in the Arctic. ATAC reserves comment on those recommendations. The North Recommendation 1 The Review recommends that the Government of Canada develop and implement an infrastructure strategy for all modes of transportation in the North by: a. increasing the base level of funding in the federal government s infrastructure fund for the territories, and adapting funding initiatives and programs to take account of such northern realities as higher costs and longer time frames for planning and constructing infrastructure. 10 Emerson, David, Pathways: Connecting Canada s Transportation System to the World, Vol. 1, page 30.