Speech by David Rheault, Vice President, Government and Community Relations to governments and communities at the Standing Committee on Transport, Infrastructure and Communities meeting on May 2, 2024

Good morning,

I am pleased to appear before you today.

Air Canada is proud of the services it offers Canadians. We serve more than 180 airports worldwide, including 50 in Canada. In 2023, we deployed nearly 55 million seats and welcomed more than 46 million passengers, whom I would like to thank for choosing us.

In the domestic market, we offered Canadians nearly 25 million seats. We are the only carrier to serve every province every day of the year.

At the outset, I’d like to underline that the Canadian air travel market is highly competitive. Close to 70 international carriers operate to Canada and compete with Canadian airlines. Some of these carriers are two- to three-times larger than Air Canada, including Delta Airlines, Air France-KLM, British Airways, American Airlines, Turkish Airlines, and others.

In fact, Canada has three of the world’s 50 most globally connected hubs. This is a significant achievement. No other country apart from the US and China has 3 hubs in this ranking. This highlights that the air travel market in Canada is dynamic and competitive, and that Air Canada can compete - and succeed - at the global level. The level of connectivity offered by Air Canada enables trade and tourism and facilitates immigration – it allows us to employ 40,000 people and support more that 190,000 indirect jobs in Canada.

There has also been a significant increase in competition in the domestic market, with other carriers increasing capacity – including WestJet, Porter, and Flair Airlines. While in 2001, Air Canada’s capacity share of the domestic market was around 75%, it is currently around 43%.

There are 24 airlines serving the Canadian domestic market including 20 offering more than 50,000 seats per year. Three carriers have more than 10% of the capacity, for a total of 82% of the capacity.

Let me share with you some facts to put this into a global perspective.

In Australia, with a population of 26 million, Qantas has 58% of the capacity – and more than 90% of the total capacity belong to two carriers - in total there are 13 carriers.

In France, Air France has 54% of the domestic capacity, four carriers have more than 10%, for a total of 95%. There are 10 carriers.

Finally, in the US, by far the largest market, 20-times bigger than Canada, probably the most competitive market in the world. Four carriers have at least 10 percent of the capacity, for a total of 80%. Only 28 carriers offer more than 50,000 seats per year, compared to 20 in Canada.

There are, however, challenges unique to Canada that limit airlines' ability to stimulate the market, offer more attractive fares and develop our Canadian airports.

First, our geography poses a particular challenge. Canada has relatively few major cities, long distances and a difficult climate.

Also, we have a model in Canada where travellers pay all the costs, and where some revenues are not reinvested by governments. Revising this model would make travel more affordable.

For example, airports pay rent to the government, which totalled around $400 million last year. They also make payments in lieu of taxes to municipalities.

In addition, Canadian travellers are subject to high fees and charges. This includes security fees that have risen by 30% in the 2023 budget, now exceeding $34 for an international flight. In the U.S. the equivalent fee is $5.60 US. As well, airports charge airport improvement fees to fund infrastructure that can reach $46 per flight in Canada (compared to $4.5 in the US – where the government reinvests excises taxes in the system and has announced $40B US to support airport infrastructure).

Finally, air navigation fees are also higher in Canada.

The impact of the Canadian model is well documented, and has been the subject of numerous studies. Both the Senate Standing Committee on Transport and Communications in 2012, the 2015 Canada Transportation Act Review Report (the Emerson Report), and more recently the Montreal Economic Institute have drawn the same conclusions. To quote the Emerson report:

"Canada is unique among its competitors in charging onerous rents and taxes that undermine competitiveness."

This Committee issued a report last year recommending reviewing all costs imposed on airports and airlines, and reinvesting all rents collected in airport infrastructure.

In conclusion, we are here today to reiterate the importance of adopting policies that recognize the role of our industry, which is, in the words of the Senate, a spark plug and not a toll booth.

Thank you.