airports – Massimo Bergamini

COVID CRISIS AN OPPORTUNITY FOR INDUSTRY AND GOVERNMENTS TO REIMAGINE AIR TRAVEL

November 12, 2020 Massimo Bergamini

Transport Minister Marc Garneau This column first appeared in National NewsWatch

With Canada’s commercial aviation industry bleeding red ink and with parts of the sector on the verge of collapse, Transport Minister Marc Garneau this weekend announced that discussions with industry representatives on an assistance package would soon begin.

The announcement was welcomed by airlines, airports, and their employees who had for months been calling on Ottawa to step up to help their industry, which the minister has acknowledged had been “hit…harder than any other” by the pandemic.

But with the announcement coming in the wake of Prime Minister Trudeau’s warning to provincial premiers and mayors to impose more restrictions to slow the current rise in COVID-19 cases, and “do the right thing”, the celebrations risk being short-lived.

In issuing his call for vigilance and caution to premiers and mayors, it is likely the Prime Minister was also urging individual Canadians and the country’s business community to show patience and not put undue pressure on governments to open things up.

The recent spike in COVID-19 cases in Canada may not be as steep as that experienced in Europe and in the United States, but with universally available vaccines months away, we know that the virus and government mitigation measures will be with us well into 2021.

So what does this tell us about the assistance package promised by the transport minister?

First it tells us that whatever assistance measures are eventually announced by the federal government, they will be framed by the public health imperative to minimize coronavirus transmission.

Recent polls that show a growing number of Canadians who expect things to get worse before they get better will only serve to bolster the government’s resolve.

Meanwhile, the airline industry has been pushing rapid COVID-testing as a way to reduce quarantine time for international passengers along with air traveller anxiety about the risk of contracting the virus and promoting it on social media using the hash tag #TimeToTravel.

This is not to say that no additional public health measures to facilitate and encourage air travel will be introduced, only that these will likely be limited in scope.

It is possible that a pilot program underway at Calgary airport aiming to evaluate COVID testing for international travellers as a safe alternative to the current 14-day quarantine requirement could, if successful, be expanded to other airports.

But it also means that, while of value in reducing passenger health concerns, industry efforts to expand the use of rapid airport testing for domestic flights will likely not be successful in quickly reducing government restrictions currently in place on domestic travel.

Second, it tells us that short-term transition measures alone will not be sufficient to put the aviation industry on a path to sustainable recovery.

The latest Stats Canada aviation industry report shows an uptick in travel in the month of August – typically the best month for the industry — but also shows total traffic falling by 87 percent over the same period last year.

Most industry experts agree that it will take years to bring passenger levels back to what they were pre-pandemic.

Nicholas Calio, chief executive of Airlines for America, says it’s unlikely air travel in the U.S. will return to pre-pandemic levels before 2024, a perspective echoed last June by the International Air Transportation Association (IATA).

Liquidity assistance in the form of low-interest loans, floated recently as a likely component of a federal assistance package, is a good transitional step but it will have to be supplemented by additional short-term measures and more importantly, changes to Canada’s user pay policies.

The impact of user pay policies on the competitiveness of Canada’s airline industry has been well documented over the years, including in the 2016 Canada Transportation Act Review – better known as the Emerson report.

The pandemic and the federal government’s reluctance to match the assistance provided to their aviation sector by other countries have exacerbated the competitive imbalance and risk crystallizing market dislocation for years.

Canada’s aviation user pay policy generates a healthy windfall for the federal government, but it also penalizes travellers, particularly those from smaller or remote centres, by increasing the cost of air travel and making service to their communities more vulnerable.

Minister Garneau said he wants his assistance package to ensure “Canadians and regional communities retain air connections to the rest of Canada”.

But the only way to achieve this — short of turning the assistance program into a commercial straight jacket or re-regulating the industry — will be by providing additional price latitude to carriers in the short and medium term.

In other words, by opting for market driven solutions.

The government can do this by abandoning or curtailing for a few years certain revenue streams, such as airport rents and subsidizing the costs of air traffic control and airport security screening – now paid in their entirety by air carriers and travellers — like many other countries do.

This would immediately reduce carrier operating costs and lower the per-flight break-even point, and would also eliminate from the price of a ticket those costs the government now charges travellers for their security screening.

If coupled with short-term liquidity assistance, such an approach would give air carriers additional room to adjust their pricing structures to begin growing demand while also reducing their cost disadvantage vis-à-vis foreign competitors.

Noted American economist Paul Romer once remarked that a crisis was a terrible thing to waste.

Navigating this crisis will require vision and daring by both industry leaders and governments, and carries no guarantee of success. But it also provides an historic opportunity for industry and governments to work together to fix longstanding issues and imagine a pathway toward more competitive, efficient and safe air travel for all Canadians.

It is an opportunity that must not be wasted.

PASSENGER RIGHTS: STOP THE COUNTDOWN

April 25, 2019 Massimo Bergamini

Responding to recent calls from Canadian air carriers, airports and even a leading Canadian labour union to postpone the July 1 launch of his passenger rights regulations, Transport Minister Marc Garneau told the CBC, “We’ve been working on this for over two years. I am anxious to get them out.”

If the minister’s impatience is understandable in the context of a looming general election, it is much less so if the goal is a passenger rights system that actually works.

And it’s not just Canadian air carriers warning that rushing implementation of his plan – which is yet to be finalized no less – will fail to achieve its intended goal of protecting consumers. IATA, which represents air carriers worldwide, and Airlines for America (A4A) also called on the government to slow down and get it right.

Not only do the draft regulations lack the clarity needed by airlines to translate them into day-to-day commercial practices but they are often at odds with global airline operating realities.

This is not an idle consideration.

In practice it means that implementation is made more difficult and time consuming because of new systems and procedures that would be required. More important, it also means that unless the government addresses some of the more glaring problems with the regulations, in some cases they could actually make things worse for travelers.

Whatever time it took the government to get the legislation through Parliament and the regulations drafted does nothing to justify a rush to implement them before their more glaring problems are fixed or with little consideration for their impact on the commercial airline industry and the passengers it serves.

Confronted with such haste, it is good to reflect on the teachable moment that the federal government’s 2016 decision to move all federal payroll functions to the ill-fated Phoenix pay system provides.

The parallel between the rushed implementation of the Phoenix pay system and the rush by the federal government to implement its passenger rights regime is instructive — both involve undue haste in the face of a complex undertaking.

In the case of the Phoenix pay system federal employees are still paying the price. Air travellers shouldn’t have to pay the price for the minister’s impatience.

And why the rush anyway?

Is there an overriding rationale for July 1^st beyond the obvious symbolism? Is air travel in Canada and globally in the throes of a market failure of such scope that exceptional measures are required immediately, even if not fully baked?

The answer is no.

Canadian air carriers move over 350,000 passengers domestically every day. That is almost the equivalent of the population of the City of Toronto – every woman, man and child – every week.

For the vast majority of these air travelers, the flight is as it should be: pleasant and uneventful, thanks to the efforts of tens of thousands of people working in airlines, airports, air traffic control, security, national governments and international agencies. And the vast majority of these air travelers will never once refer to the minister’s new rules in a dispute with an air carrier.

With less than 10 weeks left until the minister’s July 1 target date, time is running out. Airlines cannot begin changing information and communication systems, procedures and policies or developing training for tens of thousands of front-line and other employees before they even know for certain exactly what they will be required to do.

After spending over a billion dollars trying to fix its pay system and with over 200,000 federal employees still hurting, the federal government announced in its February Budget that it plans to phase-out Phoenix and start anew.

Unlike the government, air carriers and their passengers cannot afford a do-over. This is why we’re saying take the time to do it right.

As a former astronaut who flew three Shuttle missions, Minister Garneau knows better than most that impatience has no place in the planning or execution of a successful launch.

Even with the world watching, shuttle launches were delayed dozens of times in the course of their status check – proving that sometimes the greatest virtue is knowing when to say “no go”.

When the federal government ran into difficulties rolling out its legal cannabis program as planned on July 1, 2018, it did the right thing and delayed implementation for a few months.

Getting legal cannabis rules right was important — getting air travel regulations right is no less important.