Introduction

Following the worldwide implementation of travel restrictions in March 2020, commercial airlines have experienced significant decreases in passenger traffic and revenue. The International Air Transport Association (IATA) estimates that air traffic fell by 66% in 2020 compared with 2019, “by far the sharpest traffic decline in aviation history.”[1]

Since 13 March 2020, the Government of Canada has advised travellers to avoid all non‑essential travel outside of Canada to limit the introduction and spread of COVID-19 within the country.[2] Canadian airlines have cancelled most of their international flights and significantly curtailed their scheduled domestic flights; some companies suspended their operations either temporarily or indefinitely.

This substantial reduction in aviation activity brought with it major upheavals in employment in the sector. Airlines resorted to temporary or permanent layoffs, or reductions in salary or hours. The decrease in air traffic also significantly affected airport revenues and airport service providers, such as NAV CANADA. Anticipating a drop in demand for their products, many aerospace companies also reduced their workforces.

In this context, the House of Commons Standing Committee on Transport, Infrastructure and Communities (the Committee) adopted the following motion on 29 October 2020:

That, pursuant to Standing Order 108(2), the committee undertake a broad study on the impact of COVID-19 on the aviation sector; and that no fewer than eight meetings be set aside for this study, and that the impact of the Air Transat sale on the sector be the first item considered as part of the study.

As part of this study, the Committee held 12 meetings, heard 60 witnesses and received 8 briefs. The study was already underway when, on 8 November 2020, the Minister of Transport announced plans to roll out a package of assistance to Canadian airlines, airports and the aerospace sector.[3] This assistance would be subject to strict conditions, including reimbursing airfares for cancelled flights and maintaining regional connectivity.

An Unprecedented Crisis

Travel Restrictions

On 25 March 2020, the federal Minister of Health announced a 14-day mandatory self‑isolation order for people entering Canada, whether or not they are showing symptoms of COVID-19.[4] Since 7 January 2021, air travellers entering Canada must also provide proof of a negative laboratory test result for COVID-19 to their airline.[5]

In addition to these measures, all flights from Canadian air carriers flying to and from Mexico and the Caribbean were suspended as of 31 January 2021.[6] The Government of Canada also suspended all commercial and private passenger flights from Pakistan and India as of 22 April 2021.[7] As a further precaution, all international flights to Canada since 3 February 2021 can land only at the Toronto, Montreal, Calgary and Vancouver international airports.[8] Lastly, since 22 February 2021, air travellers arriving in Canada must take a COVID-19 test upon arrival, in addition to the pre-arrival testing requirement. Travellers must also reserve a room in a Government of Canada-approved hotel for three nights while awaiting their test results. The test and the hotel stay are at their own cost. If the result is negative, travellers can finish their quarantine period at home. If the result is positive, they are directed to a public health centre designated by the federal government.

Since March 2020, some provinces and territories have also implemented their own travel restrictions. For example, the Atlantic provinces agreed to establish an Atlantic travel “bubble” between 3 July and 23 November 2020: residents could move freely between the four provinces and people entering the bubble from another region were subject to screening.[9] Every person entering the bubble was required to quarantine for 14 days, with no exceptions. The restrictions within these provinces have changed since then, but interprovincial travellers are still subject to entry restrictions.

Protecting Air Passengers and Workers

As of 20 April 2020, Transport Canada has required passengers on flights departing or arriving at Canadian airports to demonstrate they have a non-medical mask or face covering during the boarding process.[10] Travellers over the age of two are required to cover their faces when they are unable to keep two metres of separation between them. On 3 June 2020, the Minister of Transport unveiled new regulations requiring employees in the aviation sector, including airline agents and airport screening officers, to wear a non-medical face mask or covering in the restricted areas of an airport.[11]

On 14 August 2020, the federal government announced Canada’s Flight Plan for Navigating COVID-19, the foundation for Canada’s current and future efforts to reduce the public health risks of COVID-19 while travelling by air.[12] This plan outlined a series of safety measures, including the following:

• temperature screening at the busiest Canadian airports and at points of origin for all incoming flights to Canada;
• restricted services and passenger movement during flights; and
• enhanced cleaning and sanitation protocols and practices.[13]

Various stakeholders in the Canadian airline sector introduced their own health and sanitation initiatives. For example, when Air Canada and WestJet representatives appeared before the Committee, they mentioned that they had developed policies and programs that sometimes exceeded the minimum federal requirements in order to protect the health and safety of passengers and crew.[14] However, Wesley Lesosky, President of the Air Canada Component of the Canadian Union of Public Employees, believes the Government of Canada should “better protect the rights of airline workers to a healthy and safe work environment, including the right to refuse unsafe work.” He made the following point about the early months of the pandemic:

Our members went through hell in the early months of the pandemic, and we had a regulator that refused to act when we tried to push for protections to make our jobs safer.

A Sector That Connects Canadians to Each Other and the Wider World

Canada is a vast country with a scattered population stretching from coast to coast. It needs an efficient air transport network connected to major cities, not only to enable Canadians to travel within the country, but also to ensure that Canadians can travel abroad and international travellers can visit Canada. Many remote and Northern communities rely on air transport to get workers to job sites, as is the case in the mining industry, or to ship essential goods, such as food and medicine.[15] At certain times of the year, air transport can be the only viable way to supply some regions of the country.[16]

According to IATA, the air transport sector supports 633,000 direct and indirect jobs in Canada.[17] It estimates that 3.2% of the country’s GDP (approximately US$49 billion) is generated by the air transport sector if spending by foreign tourists is included.

Domestically, Air Canada and its subsidiaries account for 54% of available seat kilometres (ASKs), while WestJet accounts for 32% of ASKs.[18] Air Transat and Sunwing Airlines are the two biggest leisure carriers in Canada, offering flights primarily to sun destinations. The busiest airports in terms of passenger volumes are the Toronto (Pearson), Vancouver, Montreal (Trudeau) and Calgary airports.

When he appeared before the Committee, Mike Mueller, Senior Vice-President at the Aerospace Industries Association of Canada, emphasized that Canada is a world leader in the aerospace industry. Most aerospace manufacturing jobs are located in Quebec (51%) and Ontario (30%), while most aerospace maintenance, repair and overhaul jobs (commonly referred to as MRO services) are in the Western provinces (41%).[19]

Reduced Air Traffic and Its Effects

Following the border closures in March 2020, Level I air carriers[20] saw a 97% drop in the number of passengers carried in the month of April 2020 compared with April 2019.[21] Demand for air travel increased slightly during the summer, although it was still well below 2019 levels, and then stalled in the fall.

Figure 1—Indexes of Passengers Carried and Air Carrier Movements, Domestic and International, January to December 2020

Source: Statistics Canada, Monthly civil aviation statistics, December 2020, 25 February 2021.

Some witnesses reported that passenger volumes had decreased by roughly 90% since the beginning of the pandemic.[22] As an example, Hillary Marshall, Vice-President of Stakeholder Relations and Communications at the Greater Toronto Airports Authority (GTAA), explained that passenger traffic at Toronto Pearson was down 88% in the third quarter of 2020 compared with the third quarter of 2019. Revenues dropped 63% as a result, which led the GTAA to reduce its workforce by 27% in July 2020. It also dramatically decreased its operating and capital expenditures.

Lawrence Hanson, Assistant Deputy Minister of Policy at the Department of Transport, pointed out that the Canadian air transport sector has traditionally operated under a user-pay system. Therefore, in the current context, airports and airlines must continue to pay significant fixed costs while they have had little or no off-setting revenue since March 2020. Gerry Bruno, Executive Advisor to the President and Chief Executive Officer at the Vancouver Airport Authority, said that the Vancouver Airport Authority has reduced expenses as much as possible, but it still had to secure a $600‑million loan to ensure it could continue operating for the next two years. He said the airport was operating “on borrowed money.”

With the arrival of COVID-19 variants in Canada and the introduction of new quarantine and testing measures for travellers entering the country in early 2021, it is difficult to predict when the aviation sector will return to 2019 air traffic levels. The IATA estimated that demand in 2021 would be 43% of 2019 demand.[23] Some witnesses mentioned that it may take three to five years for air traffic to return to 2019 volumes.[24] Andy Gibbons, Director of Government Relations and Regulatory Affairs at WestJet Airlines Ltd., said that WestJet would need six and a half years to achieve its 2019 bookings, but he reminded the Committee that it is difficult to predict the future in the current context.

Uncertainty About the Fate of Workers

Because of the sharp decline in air traffic and the need to cut spending, aviation sector employers – including airport authorities, airlines and aerospace companies – have laid off employees either temporarily or permanently and reduced wages. Air Canada said it had laid off over 20,000 employees since the beginning of the pandemic, while WestJet informed the Committee that it had 5,600 active employees remaining, with 1,000 on leave and another 4,000 that had left permanently since the beginning of the pandemic.[25] Christopher Rauenbusch, President of the Canadian Union of Public Employees – Local 4070 and a WestJet flight attendant for 19 years, told the Committee he had narrowly avoided being laid off. He said that, as of 26 January 2021, no WestJet flight attendants with fewer than 17 years of service were actively flying.

Some witnesses expressed concerns about the fact that pilots have been on leave for several months; some thought that it could get harder to recruit new pilots if jobs are no longer guaranteed.[26] This would exacerbate the severe pilot shortage the industry was experiencing before the COVID-19 pandemic.[27] Witnesses were also worried about how furloughed or inactive pilots would maintain their skills. Similar concerns were raised about air traffic controllers and electronics technologists.

NAV CANADA, the private not-for-profit provider of civil air navigation services in Canada, has cut more than 720 positions, representing 14% of its workforce, since the pandemic began.[28] According to Doug Best, President and Chief Executive Officer of the Canadian Air Traffic Control Association, air traffic controllers were short-staffed by 13% before the pandemic hit, and NAV CANADA was paying over $100 million in overtime. Debi Daviau, President of the Professional Institute of the Public Service of Canada (PIPSC), added that, even though air traffic has decreased significantly, the workload has not changed for active employees, who “have to work that much harder” to make up for the staff shortage. In addition to cutting positions, NAV CANADA also terminated most of its trainees. This move could have long-term consequences, given that it takes two to three years of training to become an air traffic controller.[29]

Similarly, Matt Wayland, Executive Assistant to the International Vice-President and Canadian Director of Government Relations at the International Brotherhood of Electrical Workers, informed the Committee that electronics technologists who were laid off by NAV CANADA could be recruited to work in other sectors in Canada and around the globe since their skills and expertise are in high demand. Similar concerns were raised by representatives of the aerospace industry, who pointed out that one of the industry’s top competitive advantages is its highly skilled workforce.[30]

NAV CANADA and Level of Service Reviews

In addition to providing air traffic control and flight information services from coast to coast, NAV CANADA provides communications, navigation and surveillance infrastructure, as well as 24/7 advanced air traffic management systems.[31] NAV CANADA is subject to the Civil Air Navigation Services Commercialization Act and covers its operating costs with service charges paid by its customers: airlines and aircraft operators. Given that air traffic in Canada has plummeted by roughly 90% since March 2020, NAV CANADA’s revenues dropped considerably as well.[32] In response, the corporation cut spending, reduced the size of its workforce and increased its service charges by approximately 30% for the 2021 fiscal year.

Witnesses made a point of mentioning NAV CANADA’s excellent safety record, but were concerned about how workforce reductions and reduced capacity would affect safety when air traffic picks up again.[33] NAV CANADA launched level of service studies for seven control towers, and employees received letters of vulnerability indicating their jobs could potentially be at risk if service levels were to decrease.[34] To protect jobs and ensure safety in Canadian airspace, some witnesses, including the Association des pilotes et propriétaires de hangar de l’Aéroport de Saint-Jean-sur-Richelieu, are in favour of suspending these studies and any closures of air traffic control towers until further notice.[35]

David Rheault, Managing Director of Government Affairs and Community Relations for Air Canada, said that losing a control tower could make operations more complex, cause more diversions to other airports and increase costs for carriers.

Ray Bohn, President and Chief Executive Officer of NAV CANADA, argued that the level of service studies for control towers are based on air traffic levels seen before the pandemic and expected after the pandemic. He also assured the Committee that safety would remain at the forefront, no matter the result of these reviews.[36] Michael Keenan, Deputy Minister at the Department of Transport, stated that NAV CANADA could not change its service levels unless “Transport Canada reviews the proposed change and concurs that it doesn’t sacrifice safety.”[37]

Concern for Isolated Regions

While most witnesses who participated in the Committee’s study agreed that it was important for a country as large as Canada to have an efficient and reliable regional air transport network, some were particularly concerned that the COVID-19 pandemic could have negative repercussions on regional connectivity in Canada.[38] Brian Grant, Chair of the Regional Community Airports of Canada, said that the vast majority of regional and municipal airports saw a loss of over 90% in passenger volumes and over 70% in revenues since the start of the pandemic. The decreased demand for inter-regional air transport led some air carriers, including Air Canada and WestJet, to temporarily or permanently suspend flights on some routes.[39] Porter Airlines, whose routes focus on business travel within Canada and between Canada and the United States, temporarily suspended all its flights on 21 March 2020.[40]

Monette Pasher, Executive Director of the Atlantic Canada Airports Association, explained that in recent months Atlantic airports have been drawing from their cash reserves, built up over two decades, to survive, when normally these funds would be earmarked for safety infrastructure projects. The situation is critical for some communities in the region, such as Sydney, Nova Scotia: it no longer has air service, and it is several hours by road to the nearest airport, in Halifax.[41]

Bruce Rodgers, Executive Director of the Canadian International Freight Forwarders Association, said that suspending passenger flights in remote regions also affects freight capacity, as approximately half of air cargo is transported in the belly hold of passenger aircraft.

Regular regional service helps connect remote communities to each other and connect passengers to major Canadian airports.[42] Large carriers are not necessarily in direct competition with small carriers at the regional level, because they offer different services that may be complementary. For this reason, many witnesses from the regional airline community stressed the importance of not forcing large carriers back into the region to compete with smaller carriers. Yani Gagnon, Vice-President and Chief Financial Officer at Pascan Inc. said that “[s]ubsidizing Air Canada or other major air carriers, which will compete on regional markets, makes zero sense.”

In addition, some witnesses pointed out that Air Canada has been part of the problem rather than part of the solution in regional air transportation in recent years. Serge Larivière, Director General of the Coopérative de transport régional du Québec, made the following comment about Air Canada:

A business with $18 billion in annual sales need only start a price war and the competition is gone just like that. That's been the problem for the last 30 years.

Similarly, Mr. Larivière, agreed that the current crisis, combined with large carriers pulling out of some regions, could be an opportunity to rethink regional transport in eastern Canada. In his opinion, regional supply was low in Quebec and the Atlantic provinces well before the pandemic.[43]

Competitiveness of the Canadian Aviation Sector

A number of witnesses pointed out that Canada is one of the only industrialized countries that has not yet put in place a specific national recovery plan for the aviation industry.[44] Some were concerned that foreign aviation companies that had received significant financial support from their governments would take international market share from Canadian companies.[45] Witnesses also pointed out the importance of Canadian airports being able to compete with American ones.[46] If Canadian operators lose market share, it will undermine the years of effort and billions of dollars they have invested to improve Canada’s connections with the rest of the world.

Fearing a drop in research and technology spending, as well as an exodus of workers to foreign countries that are investing heavily in the sector, Andrew Petrou, Chairman of the Board of Downsview Aerospace Innovation and Research, explained his view that Canada’s status as a leader in the aerospace industry is at risk. In his opinion, the Canadian aerospace industry will become less and less competitive, and the effects of the COVID-19 pandemic will only accelerate its decline, unless a massive investment is made in the sector. In the same vein, Mr. Mueller offered the following caution:

While the government’s emergency measures have been appreciated and helpful, they’re just not enough, not when aviation and aerospace are facing unprecedented challenges, and not when other leading aerospace countries, our competitors, began taking action early on. … These countries … have positioned their sectors for the future. Canada needs to do the same. The future is bleak for aerospace if its customers, the airlines, can’t buy its products and services.

Sale of Transat A.T. Inc.

On 27 June 2019, Transat A.T. Inc. and Air Canada reached an agreement that Air Canada would acquire Transat. On 11 August 2019, it was announced that the transaction was valued at $720 million ($18 per share). On 10 October 2020, Transat announced that its board of directors had approved a revised transaction in which Air Canada would acquire Transat shares for $5 per share, which is $13 less than the agreement reached in August 2019.[47] Transat shareholders approved the revised transaction details on 15 December 2020.[48]

In his report on the transaction, the Commissioner of Competition (the Commissioner) stated that the transaction would likely lead to “substantial anti-competitive effects” due to the elimination of rivalry between the two carriers in certain parts of their networks.[49] Specifically, competition would be eliminated or reduced on 83 routes between Canada and Europe, Mexico, Central America, the Caribbean, Florida and South America. In addition, the two carriers were the only ones offering non-stop service on 22 of these 83 routes. The Commissioner found that the transaction would likely lead to increased prices, less choice, decrease in service, and a significant reduction in travel.

Echoing the Commissioner, some witnesses expressed concerns about how the proposed transaction between these two carriers would affect competition in the Canadian market.[50] During their appearances, Omar Alghabra, Minister of Transport, and representatives of Transport Canada informed the Committee that the department had taken into account the competition issues raised in the Commissioner’s report before reaching its decision, and that other matters of public interest had also been considered. These factors included protecting jobs, maintaining a head office in Quebec and ensuring the financial health of the aviation sector.[51]

The Government of Canada announced on 11 February 2021 that it approved the transaction, subject to certain terms and conditions, including preserving the Transat A.T. head office and brand in Quebec.[52] However, after being advised that the European Commission would not approve the transaction, Air Canada and Transat A.T. announced on 2 April 2021 that the agreement was being terminated by mutual consent.[53]

A plan to ensure the Canadian aviation Industry survives and recovers

While witnesses proposed different measures to ensure the survival and recovery of the aviation sector based on their own priorities and circumstances, they all agreed that significant financial investment is needed in the sector. Many witnesses said it is important for the federal government to ensure that the assistance provided is equitable and goes to more than just the largest players in the industry.

A number of witnesses said that, regardless of the measures that have been taken – or will be taken – in response to the COVID‑19 pandemic, the health and safety of passengers, crew and the Canadian public should remain the top priority for the various stakeholders in the sector. Canadians must feel safe in airports and on planes before they will consider travelling again, and this requires a clear, consistent COVID-19 testing framework.[54]

Finding a Balance Between Ensuring Public Health and Resuming Travel

During her testimony, Brigitte Diogo, Vice President of the Health Security Infrastructure Branch at the Public Health Agency of Canada, explained that air travel is quite safe, particularly due to universal masking and ventilation.[55] According to Dr. Isaac Bogoch, Physician and Scientist with the Toronto General Hospital and University of Toronto, data indicates that the stages leading up to the flight and those following it are probably riskier from a transmission standpoint than the flight itself.

Like many witnesses from the aviation sector, Dr. Bogoch and Dr. Zain Chagla, Assistant Professor in the Division of Infectious Diseases at McMaster University’s Faculty of Health Sciences, believe it is important to implement rapid testing in airports, using antigen tests that provide results in under one hour.[56] These tests could be given to passengers just before boarding.

In her testimony, Monique Frison, Acting Assistant Deputy Minister of Programs and Implementation at the Department of Health, indicated that rapid tests are not as accurate as lab-based tests, which are the gold standard, but other factors, such as ease of use, can compensate. Patrick Taylor, Global Business Development Director of New Markets at LuminUltra Technologies Ltd., informed the Committee that some portable PCR testing units can run samples in under two hours, making them an option for airports.[57]

According to Dr. Chagla, another promising option is serial testing, such as the pilot project launched on 2 November 2020 at Calgary International Airport. International travellers and Canadians returning from abroad who participated in the pilot project were required to take a test at the airport. If they got a negative result (approximately 48 hours later), their mandatory quarantine period would be shortened, as long as they committed to taking a second test six or seven days later.[58] The pilot project was updated to release travellers from their quarantine only after they had obtained a negative result from the second test. The project was suspended on 21 February 2021 following the implementation of additional quarantine and testing measures by the federal government.

Meanwhile, Air Canada partnered with the Greater Toronto Airports Authority and McMaster HealthLabs to assess whether self-collection COVID-19 testing was effective and whether the quarantine period could safely be reduced for international travellers. The pilot project ran from 3 September to 14 November 2020. The interim results indicate that most positive cases of COVID-19 are identified upon arrival at the airport or within seven days.[59] However, Dr. Chagla said that “the rate of people who test positive at day seven who don't test positive on the day of arrival is still not insignificant.”

When they appeared before the Committee, representatives from the Department of Transport and the Department of Health explained their roles as partners in the pilot projects, and clarified that the purpose of these projects was to gather science-based data that will inform the government and public health on how best to reopen borders.[60]

Some witnesses called for the relationship between testing and quarantine to be reviewed in order to determine whether quarantine times could be decreased to 10 or 7 days, similar to the pilot project at Calgary International Airport.[61] Mr. Gibbons suggested that the pilot project could be developed into a national policy and that funding for the transition could be included in the upcoming federal budget.

Financial Assistance on Par with Pandemic Losses

On 8 November 2020, the Government of Canada announced that it planned to implement a package of assistance for airlines, airports and the aerospace sector.[62] The funding provided would include amounts for major airlines such as loans and other financial supports. However, this financial assistance would be conditional on Canadian travellers getting refunds for flights they booked but did not take because of the pandemic, and would ensure that “regional communities retain air connections to the rest of Canada, and that Canadian air carriers maintain their status as key customers of Canada’s aerospace industry.”

A number of witnesses were upset about the time required for the federal government to put an action plan in place specifically to rebuild and stimulate the aviation sector, given the time-sensitive nature of the industry’s needs.[63] During his testimony, Minister Alghabra stressed his commitment to finding an arrangement as quickly as possible and assured the Committee that negotiations were underway with sector representatives.

Financial Assistance Appreciated, But Insufficient

Since the start of the pandemic, the federal government has announced a number of assistance measures specific to the aviation sector, including $191.3 million for remote communities that depend on air transport, as well as rent relief for the 21 airport authorities that have ground leases with the federal government.[64] In the Fall Economic Statement 2020, the government announced additional financial support of approximately $1.1 billion for the aviation sector, to be allocated through several programs, including $186 million for the Airports Capital Assistance Program (ACAP), $206 million to create the Regional Air Transportation Initiative and $500 million for safety, security and transit infrastructure in large airports.[65]

A number of employers in the aviation sector also applied for programs that were available to all economic sectors, such as the Canada Emergency Wage Subsidy (CEWS) and the Large Employer Emergency Financing Facility (LEEFF). During his appearance before the Committee, Minister Alghabra said that the aviation sector alone had collected between $1.7 billion and $1.8 billion from the wage subsidy.

Most witnesses told the Committee that the programs put in place by the federal government since the beginning of the pandemic were greatly appreciated. However, they also agreed that most programs were insufficient, given the extent of the crisis for the air transport industry and the expected slow recovery.

During his appearance before the Committee, Daniel-Robert Gooch, President of the Canadian Airports Council, commented on the suite of measures for airports outlined in the Fall Economic Statement 2020. In his opinion, the $500 million earmarked for safety, security and public transit infrastructure is inadequate, given the extent of the sector’s needs. However, he was pleased that $206 million would be invested in the new Regional Air Transportation Initiative and hoped for more details. He also pointed out that ACAP funding is valuable for small airports, but expressed concern about how they will be able to use these funds if they cannot pay their share, considering they have run down their cash reserves.[66] Similarly, noting that small airports are not eligible for most assistance programs, Mr. Grant called for permanent funding for rural and regional airports and a $95‑million annual increase to the ACAP for small airports.[67]

With regard to rent relief, Mr. Gooch was disappointed that the largest airports were granted only a deferral on 2021 rent, which they will then have to repay over 10 years, beginning in 2024. He also argued that the rent relief for mid-sized (2021) and small airports (2021–2023) should be extended, given that recovery will take several years. In his opinion, airports with federal leases should not have to pay rent beyond 2020, until the sector recovers. Ms. Marshall explained to the Committee that the Greater Toronto Airports Authority has been asking for months for its 2021 rent to be waived. As for the many small airports that do not pay rent, Mr. Gooch called for interest-free loans or direct operational support. Lastly, several other witnesses called for the government to address cash flow problems across the industry, with measures for airports of all sizes, small and large airlines, and service providers.[68]

For his part, Joseph Starling, President of Air North, said he was satisfied with the funding programs that were outlined in the Fall Economic Statement for essential air services in the North. In his opinion, Air North and other Northern carriers would not need as much support from the federal government if they could increase their passenger numbers, which would mean streamlining market capacity in the North. He believes that financial assistance should not go to pay for empty seats, which is what is happening now. His proposal, to introduce interline agreements between carriers, is addressed later in this report, in the section on regional air transport.

Some witnesses were critical of assistance programs that were available to all sectors, as they did not address issues specific to the aviation sector. Mr. Gooch gave the example of the Highly Affected Sectors Credit Availability Program (HASCAP), announced in the Fall Economic Statement 2020. In his view, the $1 million cap means that it fails to meet the needs of many airports.

Likewise, Mr. McNaney thought that the LEEFF program implemented by the federal government did not take into account the challenges in the aviation sector. Its conditions, particularly the high interest rate, make it less attractive for a sector with a slow road to recovery ahead.[69] In its brief, Unifor expressed similar views, saying that the industry needs access to long-term loans at low interest rates, which would be “an improvement over the LEEFF.”

Some witnesses recognized that the CEWS was a lifeline for many employees and employers in the aviation sector in the spring of 2020.[70] However, some indicated that employers are using the program to pay for active employees, not to keep inactive employees on the payroll, which is not in keeping with the intended purpose of the CEWS.[71] Mr. Grant expressed disappointment that many small airports under the jurisdiction of provincial, territorial or municipal governments are not eligible for the wage subsidy. He believes the CEWS eligibility criteria should be amended to include airports, no matter how they are governed.

Derek Ferguson, Representative of the Grand Lodge of the International Association of Machinists and Aerospace Workers in Canada (IAMAW Canada), noted that the CEWS was beneficial to IAMAW Canada members early on, but over time most employers stopped paying the 25% top-up and used the program only for active employees.[72] According to Mr. Lesosky, the federal government should change the terms and conditions of the CEWS so that employers using it for active employees are also required to use it for inactive, laid-off and furloughed employees.

Financial Assistance That Is Not a Blank Cheque

Beyond financial assistance, some witnesses mentioned that the aviation sector and government officials need to work together to rebuild passenger confidence so they are comfortable flying in the future. In their opinion, it is important to ensure that passengers view air travel as safe and secure and also that passengers get reimbursed for flights that were cancelled because of the COVID-19 pandemic.[73]

When asked about executive compensation and returns to shareholders, Jerry Dias, National President of Unifor, said they should not benefit financially from federal assistance measures. While acknowledging the importance of having a strong airline industry to ensure a post-pandemic economic recovery in Canada, he emphasized that the funding must go to putting people to work.[74]

Refunding Consumers for Services Not Rendered

On 25 March 2020, the Canadian Transportation Agency (CTA), the independent body responsible for enforcing Canadian transportation regulations, released a statement indicating that airlines would be meeting their obligations under Canadian law if they offered passengers affected by cancellations vouchers or credits for future travel, as long as they do not expire in an unreasonably short time.[75] However, the CTA noted that it would examine any specific situation brought before it on its merits. On 22 April 2020, the CTA provided additional clarifications, stating that Canadian law requires only that airlines ensure passengers can complete their itineraries, and it does not obligate airlines to issue refunds if a flight is cancelled or delayed for reasons beyond their control.[76]

According to Gábor Lukács, President of Air Passenger Rights, the message of 25 March 2020 misled members of the public about their rights. He said it is unacceptable for the CTA to have issued a public statement on a matter (refunds) that is so contested. In its brief, the organization Air Passenger Rights argued that airlines, travel agencies, credit card issuers and travel insurers used the CTA’s statement as an excuse to deprive passengers of refunds for flights the airlines chose to cancel. When he appeared before the Committee, Scott Streiner, Chair and CEO of the CTA, said that the statement does not change the obligations of the airlines or the rights of passengers; it simply gave suggestions and should not be interpreted as a binding decision. Mr. Lukács and Jacob Charbonneau, President and Chief Executive Officer of Late Flight Claim Canada Inc., both expressed concerns that the CTA favours airline companies over consumers.

With regard to the obligations of airlines, Mr. Streiner expressed the following opinion:

Because the statutory framework does not include a general obligation around refunds for flight cancellations beyond airlines’ control, any passenger entitlements in this regard depend on the wording of each airline’s applicable tariff.

Some witnesses stated that the current legislative framework, particularly the Air Passenger Protection Regulations (APPR), does not do enough to protect consumers.[77] According to Mr. Charbonneau, the complexity of the current protection regime opens the door to a number of interpretations and protects airline companies more than consumers. In a move to help address this situation, the Minister of Transport issued a ministerial directive on 17 December 2020, directing the CTA to make a regulation respecting air carriers’ obligations to refund passengers when flights are cancelled because of situations outside their control.[78] However, in a news release issued on 21 December 2020, the Minister of Transport specified that the new regulation would address future flight cancellations.[79]

While he believes the APPR lacks detail on the matter of refunds, Mr. Lukács does not think there is anything in the legislation that would contradict the “fundamental right [of passengers] to a refund.”[80] Similarly, Sylvie De Bellefeuille, Lawyer and Budget and Legal Advisor for Option consommateurs, asserted that other statutes, including the Canada Transportation Act and its regulations, outline obligations for air carriers and give authorities the power to act. In its brief, Option consommateurs explained its view that, while transportation activities fall under federal jurisdiction, airline company contracts are also subject to provincial legislation on consumer protection.

A number of witnesses, as well as  Minister Alghabra, supported refunding plane tickets for Canadian consumers.[81] Some also argued that travel credits or vouchers are not equivalent to a refund.[82] For example, Ms. De Bellefeuille explained that travel credits do not guarantee future prices and may not be enough to cover the cost of a future trip. According to John Lawford, Executive Director and General Counsel at the Public Interest Advocacy Centre, if the federal government plans to bail out airlines, it must ensure that passengers get refunded for flight cancellations. Otherwise, they will be penalized twice: once as a passenger and once as a taxpayer.

In addition, some witnesses pointed out that the adoption of Bill C-249 would be a good way to address the current situation of non-refundable tickets by airlines[83][84]. Mr. Lukács offered the following opinion on Bill C-249:

Bill C-249 is going to fix just the basics. The most important principle in every commercial transaction, that if you don't receive what you paid for, you get your money back, is a vital step for the entire sector's recovery.

In its brief, the Association of Canadian Independent Travel Advisors (ACITA) said it supports consumer refunds, but called on the federal government to protect travel agents from commissions being returned, as commissions are their sole source of income. The brief explains that, when an airline refunds a passenger, they first notify the travel agent who booked the trip, if applicable, and the agent must return their commission in order for the consumer to receive a refund. ACITA indicated that, in the current context, returning commissions would have undesirable outcomes, as most travel agencies would not be able to survive the blow. Furthermore, as noted by Ian Jack, Vice-President of Public Affairs at the Canadian Automobile Association, travel agents did their work and deserve to keep the commission they were paid. As ACITA explained, travel agents “worked on the trip, sold the airline’s product to the consumer and received a commission for the sale.”

During their testimony, Mr. Rheault and Mr. Gibbons said they were aware that mandatory refunds could affect the commissions of travel agents. Minister Alghabra and Transport Canada officials confirmed that this issue was being addressed in their discussions with the major air carriers regarding a package of assistance.[85]

Boosting Regional Air Transport

Many witnesses agreed that it was important for remote and Northern regions to have access to reliable, efficient and affordable air service. As mentioned above, a number of witnesses argued that it was important for federal government assistance for the aviation sector to be fair for all stakeholders, large and small. Given that major airlines like Air Canada and WestJet suspended many domestic flights in March 2020 owing to a drop in passenger volumes, some witnesses questioned what regional air transport would look like in the future.

In a statement issued on 8 November 2020, the federal government indicated that financial support for Canadian airlines would include conditions ensuring that regional communities maintain their connectivity.[86] However, according to Mr. Larivière and Mr. Gagnon, the government should not force large air carriers to serve outlying regions when smaller carriers are ready to fill the gap. Mr. Larivière believes that the government’s role is to “maintain healthy market conditions.”

To illustrate the role of small carriers in the Canadian market, Robert Deluce, Executive Chairman of Porter Airlines Inc., said that historically airfares drop by 60% or more when Porter enters a market, particularly when these markets were previously served by only one airline. Ms. Pasher stated that, prior to the pandemic, the Atlantic provinces were served by a number of companies of different sizes, including Air Canada, WestJet, Porter and PAL Airlines, and that competition and fares in the region were “good.” She mentioned that small regional carriers are important and that the biggest issue is collaborating with national carriers to connect the Atlantic provinces to the rest of Canada and the world.

When they appeared before the Committee, representatives of WestJet and Air Canada said they hope to re-establish services that have been suspended because of the pandemic.[87] However, they pointed out that they need more passengers before they can restore service, which means that some travel restrictions would have to be lifted first.

According to Mr. Sparling, the large air carriers offer limited services in Northern regions, as the smaller connections are often served by small carriers. To ensure that small carriers survive and to maintain the essential services they provide to remote communities, he suggested that the federal government should temporarily limit mainline carrier capacity in Northern gateway markets. He believes that, given the current lack of passenger volume, the federal government should not be subsidizing multiple carriers flying the same routes.

In the future, Mr. Sparling would like to see more interline agreements, which are mutually beneficial arrangements between the large carriers and smaller ones. In its brief, Air North explained the advantages of these agreements for passengers, such as being able to make a single booking with flights offered by multiple carriers and being able to make connections without having to collect their bags between each flight. Mr. Sparling believes the federal government should mandate that airlines link themselves together, which would ensure more communities across Canada are connected.

Ensuring the Competitiveness of the Canadian Aerospace Industry

As mentioned above, witnesses representing Canada’s aerospace industry were concerned about the future competitiveness of the sector internationally. To reverse the downward trend, Mr. Mueller called on the federal government to invest significantly in the sector so it can be part of Canada’s economic recovery.[88] This assistance should also help industries transition to new technologies for a greener future. In his view, a national strategy is needed to secure the future of the aerospace sector. He explained that the national strategy should cover the civil, defence and space sectors.

Likewise, Samantha Anderton, Executive Director of Downsview Aerospace Innovation and Research, called on the federal government to adopt a top-down approach to supporting commercial airlines. This would mean support would flow through the supply chain, including to aircraft maintenance companies. Like Mr. Mueller, she would like to see the federal government support research and development, particularly for sustainable technologies.

With regard to aircraft maintenance, Mr. Ferguson called for a repatriation plan to secure the jobs of Canadian aircraft maintenance and technical operations workers. Many Canadian airlines have aircraft that were grounded outside the country, which means the maintenance is being done outside of Canada as well, but he believes it should be done in Canada by Canadian workers. Mr. Rheault assured the Committee members that many Air Canada aircraft were being maintained in Canada.

Supporting NAV CANADA Financially

As mentioned above, one of the measures NAV CANADA took to address its significant drop in revenue resulting from the decline in air traffic was to increase its service charges by approximately 30% for the 2021 fiscal year. When he appeared before the Committee, Mr. Bohn explained that NAV CANADA’s requests for financial assistance from the federal government had not been successful to date.

In a letter to the Committee, several organizations in the aviation sector argued that the user-pay model for service providers such as NAV CANADA is not appropriate in the current context to “adequately fund and maintain infrastructure and services,” given that it will take years for passenger volumes to recover. They suggested temporarily suspending this model and providing financial assistance to NAV CANADA.

Some witnesses representing NAV CANADA workers believe the government should provide $750 million in funding over two years to the corporation so that its jobs, services and excellent safety record can be maintained.[89] According to Ms. Daviau, funding should be subject to a moratorium on layoffs.

Conclusion

Throughout the Committee’s study, witnesses from various sectors of the Canadian aviation industry called on the Government of Canada to implement an industry-specific assistance plan so they could contribute to Canada’s economic recovery. They also highlighted the importance of air transport for regions across Canada, particularly remote and Northern communities that rely on air transport not only to travel, but also to have essential supplies delivered.

Some witnesses were concerned about the future competitiveness of the industry and the fate of workers, as many of them have been inactive for months without knowing whether or when they will return to work. While they agreed that the health and safety of Canadian workers, passengers and the public were the top priority, they also agreed that the industry’s current financial situation is not viable in the long run.