MR. CHAIRMAN: Good morning committee members and guests, witnesses to our Standing Committee on Economic Development. This morning we have some Air Transportation witnesses. I would like to introduce, on my right, Mr. Keith Condon, Chairman of the Yarmouth International Airport; to Mr. Condon's right is Mr. Larry MacPherson, the CEO of the Sydney International Airport; and we also have Mr. Fraser Howell, Manager and CEO of the Yarmouth International Airport. Good morning, gentlemen. Because we all have quite busy agendas, we will get right to the schedule. Perhaps, Mr. Condon, you would like to begin.
MR. KEITH CONDON: Thank you for the welcome.
MR. CHAIRMAN: Excuse me. It has always been procedure that we introduce ourselves, we could just quickly go around the table, starting with the honourable member for Cape Breton The Lakes.
[The committee members introduced themselves.]
MR. CHAIRMAN: Go ahead Keith.
MR. CONDON: Lady and gentlemen, it is a pleasure to be here. I will try to keep my comments brief. I realize you would like a five minute introduction. It is impossible to sum up the last five years or so in five minutes, but we will do the best we can. I think we could probably address it better with questions and answers.
Yarmouth is in what we feel is a very crucial area to the province and a very good link to the U.S. We take offence to being called the gateway, because that is something you go through. We would prefer that people stay a little while. It has been five years since we began this little journey of privatizing the airport, shortly after Transport Canada announced their national airport policy. It became evident to us, as members of the chamber of commerce at the time, that the airport was going to close in March 2000, unless somebody did something. We were engaged by the three local councils in Yarmouth to undertake a study to look at the economic values, as well as to look at the possibilities of privatizing, how it would affect the area, and how, in fact, we could keep the airport there.
Shortly after that, about halfway through what was known as the transition plan or the t-plan, we were handed the economic jewel of southwestern Nova Scotia by the federal government. We felt it was a necessary thing. We did not see any way out, other than to assist the federal government in their privatization or face closure, because of a reduction in services in the area. Having only one carrier in and out of Yarmouth was also a grave concern, and having very limited resources in the airport, because being a flight station, those resources were controlled and owned by the one carrier.
We began a journey. We were successful in negotiating a $1.91 million settlement - I call it a settlement because it was an agreement of cash with the federal government, we felt, to buy three to five years of time to allow us to make rational decisions, bring the airport into a businesslike enterprise, wean it away from the old habits of being run by the federal government, reduce expenses, increase revenues to a point where we could actually have it break even or, in fact, even generate money.
The Yarmouth Airport is 780 acres. It was a World War II training base, so it has two long runways; it has a brand-new air terminal; and would cost in excess of $40 million to $50 million to replace today. It would be a sin to watch this close in the area. It also has several tenants, including the Coast Guard, a local printing company, and several other businesses. It is very crucial to our area and crucial to employment.
Shortly after we began negotiations, we faced several problems. One of the problems was the flight service station closed. NavCan was carrying on their plan of reducing services, and at the same time we were trying to find ways to keep the airport open. We were successful, during the period of negotiations, in securing contracts with Environment Canada. As the airport changed into a Unicom, we were able to offer 24 hour service by having a weather contract that put 24 hour staff there. We actually maintained most of the services in the airport. We have been very successful in reducing the costs of operating the airport and increasing revenues, however, we also face serious problems.
I think the one issue that stands out more than anything is the fact that we were levied taxes, almost immediately upon acquiring the airport. There was an assessment, taxes were increased, and we faced an additional expenditure of $125,000 to $150,000 that wasn't there
before and wasn't planned on, shortening the life that we had planned to have for the airport. We have, however, managed, in the first year, to reduce losses of $1.2 million from the federal government, down to $324,000; in the our second year end, just gone by, to $200,000, plus, unfortunately, a tax reserve for another $200,000. We are still hovering around a $400,000 loss, which we feel, in several years, could be brought to a break-even.
I think the message, though, that we are trying to deliver to our councils locally and to anyone who will listen is that we do not want to stand around and watch the airport close. What we want to do is find a way that somehow that loss of the airport, the deficit, can be covered by a government body of some kind, whether it is local, municipal, provincial, or federal, to allow the airport to continue and to give us the opportunity of time in order to bring it to profitability.
We have several very important projects on the go: the building of an airport storage hangar; we are looking at air cargo facilities; we have the Coast Guard helicopter services; and we have several other projects under way, and negotiations under way with other carriers to try to improve the service. One of the very important things we have done is we have taken a 75 per cent revenue from one carrier, turned it around to a 25 per cent revenue by having other contracts, other arrangements.
I think we have proven that we can actually do this, but it is going to take time and it is going to take a willingness of the government levels, somewhere, to support the deficit and to give time to bring it into profitability or break even. We feel strongly that that is possible, but it is going to take time. The airport was there 50 years, mismanaged, we feel, by the federal government. We have only had two years to manage it.
I think what we are looking for is that solution. We are looking for that solution in the order of tax relief or some kind of a grant in lieu of taxes, which always did exist from the federal government. It was a shock to us that the municipal and town governments would continue to increase and levy taxes at the time when we felt this was still institutional property, it just happens to be that we have taken over the responsibility to run it. Nothing else is changing, it is still a public property, yet, it has that burden of taxes, which shortens the life of the airport dramatically. We figure between one and two years of its life, of what we thought was the original opportunity, has been reduced because of that. That basically sums up where we are, and where we are going. Thank you.
MR. CHAIRMAN: Mr. MacPherson, Sydney International Airport.
MR. LARRY MACPHERSON: I guess I could repeat a lot of what has just been said. I wish, when we were negotiating the privatization of airports, that we had better information and that we were much better negotiators. In negotiating the privatization of the Sydney airport, there were many things we discovered when we became the individuals responsible for running it, that the federal government was losing $700,000 a year, on a continuous basis.
We were given $2.5 million to cover the cost of the deficit for the first few years, as well as make repairs to our terminal, out of those dollars originally presented to us. As you go along, you discover that the staff we inherited, the 12 really amounted to 17 because of overtime and man years in relation to overtime, but we weren't aware of that at the time of negotiations.
We ended up with an airport to service two airlines, InterCanadian and Air Nova. We made cuts at the airport to try to cover that deficit. We were doing fairly well in our first year and a half, we came down from a $700,000 deficit to roughly $350,000 to $380,000. Then InterCanadian decided that they weren't going to service Sydney any longer, and there was the money that we saved through cuts and economizing gone, because we were generating roughly $310,000 from InterCanadian. So we are back to $700,000.
The other thing we discover as we run this airport is that in the past, under Transport Canada, the airlines were able to negotiate contracts with Transport Canada, which we inherited and have to honour. It is very interesting, when you analyze the running of the airport, that everyone at the Sydney International Airport is making money except the airport, everyone. We have ground handling and fuelling done by Airconsol, they pay $500 a year to offer those services, and they make a fair profit from that. We are forced into honouring that contract. Everyone who services the airport have contracts for 3, 5, 10, 20 years. It really puts us in a position where for us to generate additional dollars, it becomes very difficult internally. I will touch on that in a second.
When InterCanadian left, Air Nova subsequently added two additional flights to Sydney with Dash 8-300 model, which carries 50 passengers rather than the 37 of the Dash 100 series. They are carrying the same amount of passengers as when the two airlines were in there. Only we lose money as a result of that, because we can't gain the landing and terminal fees from the other airline. Also, the frightening part about that is it makes it virtually impossible to attract another airline into Sydney, to go in competition with Air Nova. They are established. The number of passengers through Sydney Airport is approximately 110,000 to 115,000 a year, that is in and out. For Air Nova it is a very lucrative market, they are making a fine profit out of Sydney.
As I mentioned earlier, when we begin to negotiate from a private sector perspective, this is what it is going to cost you if you want to utilize our services as an airport. I don't blame the airlines for having an attitude, saying, you can't do that to us, because Transport Canada always gave us fair landing rates. They got better than fair landing rates.
Now the airlines have to recognize that this is private sector and they are going to have to pay their way. I am not afraid, at least from Sydney's perspective, that they will pull out of Sydney. Nobody will pull out of a market where they are making a fine profit, but they will threaten that. We are in a good position in Sydney, if Air Nova left, to attract another airline, but we won't be able to attract two airlines. That leads us to another problem. I know I am going over my time.
The other problem, basically, is that the price of a return ticket to Halifax, the average would be $450. We have created another industry, by the way, and that is shuttle service to Halifax. They are doing very well. What is more frightening about that is the business community is now starting to travel by car to Halifax. I was speaking to MTT the other day, and their directives to their staff in Sydney is, travel by car to Halifax, it is cheaper to do it that way. With no competition, the airline can still make a fair profit out of Sydney Airport with the prices they are charging, but providing that service for the travelling public at a reasonable rate is becoming difficult.
One other thing, Icelandair wanted to do - because of the German market in Cape Breton from the tourism perspective - a deal with Air Nova; we will get them into Halifax, you get them into Sydney, but the price of a ticket to Sydney was more expensive than from Germany. So it does affect the other industry on the Island, tourism. If that industry is going to grow, we certainly need a reasonable rate to get into Sydney when you are packaging a tourism product out of Cape Breton. Let me just finish that side of some of the problems.
Taxes were mentioned; we are paying $132,000 a year in taxes. We receive no services from the municipality. Everything is done on site, but yet we are paying $132,000. That is a whole other area. I will stop there, because I think we can go in more depth with questions.
MR. CONDON: I think you can address quite a few of the questions from an operational point of view better than I can.
MR. CHAIRMAN: We are also accompanied by Mr. Dennis Rodgers, Halifax International Airport Authority. Mr. Rodgers, do you wish to make a few comments?
MR. DENNIS RODGERS: Gentlemen, my apologies for being a few minutes late. I guess that is an indication of the supply and demand in parking availability downtown. (Interruptions) Ah, but is it going to be competitive?
I am not sure what the agenda is this morning. I have something like this that came out a month ago, which just said let's get the executives of the airport authorities together to discuss, so I have no prepared text. If there was documentation that came out since then, my apologies, I don't have it, although we have just transferred and we have been doing some changes of phone lines and fax lines.
MR. CHAIRMAN: Mr. Rodgers, essentially the agenda is that you would be, with the agreement of committee members, welcome to make a brief presentation, and hopefully entertain some questions.
MR. RODGERS: Was there anything more than this?
MR. CHAIRMAN: Not to my knowledge. One of our committee colleagues suggested that we bring in some of the local airport committee groups.
MR. RODGERS: Okay. I can ad lib it from there. I guess what you would like to have is the perspective of the Halifax Airport Authority at this time, in terms of what effect the amalgamation of Air Canada and Canadian has had on our airport.
I can tell you that our passenger count is down 4 per cent in the first couple of months of this year, and it is tracking at 3.8 per cent to 4 per cent. That in itself doesn't give you a true indicator of the economic impact, because passenger count is one thing, frequency and gauge or size of aircraft coming in and going out is really the revenue indicator you should be looking at. What happens is, prior to amalgamation or prior to the acquisition by Air Canada of Canadian, we have the demise InterCanadian. With the demise of InterCanadian, who were running at about 30 per cent to 40 per cent capacity in passengers on each aircraft, that 30 per cent to 40 per cent, for the most part, was picked up by vacant seats on Air Nova. Air Nova was running at about 70 per cent capacity.
What you lose is you lose the revenue and terminal fees, the landing and terminal fees, of the InterCanadian aircraft that are arriving and departing on a daily basis. That is picked up by Air Nova, who can then take those passengers and put, for the most part, on empty seats in their aircraft. So you lose the landing and terminal fees. The air carrier, Air Nova for example, increases its yields and increases it margin and bottom line, with no flow-through to the airport. That is the first loss.
The second loss would be with the merger of Air Canada and Canadian, because the same thing happens. Canadian was running at substantially lower capacity rates on their aircraft than Air Canada was. Air Canada, by either taking those passengers and accommodating them in the vacant seats on their aircraft or by slightly upgrading the size of the aircraft, could accommodate those passengers. So you really get a double whammy.
The impact on Halifax this year will be in the vicinity of $1.5 million to $2 million of lost revenue at the same time that the air carriers are making substantial profits, compared to where they were before. Maybe I shouldn't use the word profits, because we can do a lot of things with accounting, but the point is that the airline's revenue for their aircraft has increased substantially.
There are some ways to deal with that. Calgary, for example, has since, I believe, March 1st increased their landing and terminal fees by 15 per cent. You can raise landing and terminal fees. The question is, how elastic is that fee, and what are the alternatives? It is easier for a larger airport, like Calgary, Edmonton, or even Halifax, to do that, because the infrastructure that the airlines have invested in those terminals is quite significant. When you come to a Sydney or a Yarmouth, they don't have that clout because the investment isn't as significant.
One of the things we are looking at, for example, is the cost of parking at Halifax airport. Separate and apart from the fact that we don't have enough space - that is a separate issue - we are looking at parking. I don't know what Sydney or Yarmouth charge for employee parking, when I say employee parking, I am talking about people other than your own employees, in other words, employees of the airlines, the air carriers, the ground handlers, and the other people who use the facility. At Halifax, the charge for that is $12 a month. For the most part, that is paid by the employer.
If you look at parking, you will find that most likely 60 per cent of the so-called employee parking spots are employees of Air Canada and Canadian. We have done a survey, and we find that in other parts of the country, Calgary, Edmonton, Ottawa, Winnipeg, et cetera, the parking rate for employees is between $25 and $35 per stall. Very quickly we are going to change that, because if we don't change it, we are simply subsidizing the airlines. Those are things that I think can be looked at, to say how do we cope with this.
Taxes were raised. I can tell you that prior to transfer, the federal government paid a grant in lieu of taxes, which for Halifax was in the vicinity of $250,000 to $260,000 a year. Our tax bill this year will be $550,000, and I shudder to think what it is going to be in a few years time. I am not going to make a number because I don't want it recorded. But I can tell you that Winnipeg, Edmonton, and Calgary, are in the $2.5 million to $3.2 million range.
At the same time, we provide full services. For example, at Halifax, we have a category three, and we have both emergency response, firefighting services for airside, plus we provide the structural component, because HRM does not have facilities capable of responding in time with the complement of people. There is a facility located at Goffs, which by coincidence is about 300, maybe 200 yards from the end of our runway, but on the wrong end. It takes roughly 15 to 20 minutes for them - I would say 15 minutes - to man their vehicles, drive all the way around the airport and go to the terminal building. The terminal building at Halifax, at a replacement cost, would be several hundred million dollars. Can you afford the risk of not having your own firefighters and relying on HRM at Goffs, when they have a paid staff, from about 8:00 a.m. to 4:00 p.m. or thereabouts, of two people and then a volunteer service at night? If you are paying for that service, one would think you should get a better service from HRM, and we will deal with that, in terms of do we get additional tax relief, or do we deal with some of those issues.
I think those are the issues that for the most part are somewhat akin to all airports, certainly in Nova Scotia, and probably across the country, in terms of the transfer. The federal government is a tough negotiator. They agree to deals and then they back away from deals, but that is negotiations, you live with it. You have to live within your means. We are attempting to do that. Our facility, like a lot of other facilities, is very much worn down. We are looking at major expansions. We have an environmental problem we have to deal with, that the federal government downloaded on us, which will be in the $10 million to $15 million range from a capital point of view, and from an operating perspective, the cost will be
somewhere between $700,000 and $1.2 million. We are still trying to do some engineering, we feel that the more engineering we do, the better we can drive that cost down, in the long run.
We are looking at probably a $25 million expansion to the north end. We are looking at a lot of retrofit to the existing facility that one could suggest is not expansion, it is just replacement of a facility that has been neglected for 25 years. The total cost to us will probably be somewhere in the $70 million range, over the next six years, for upgrading the existing facility and expanding.
There is not a whole lot more I can say, other than talking about specifics in Halifax. I don't think this is the forum to really talk about specific issues, I think what you are looking for are things more generic to Nova Scotia, and where we go from here. I would be happy to entertain any questions, if there are any.
MR. CHAIRMAN: Mr. Rodgers, thank you very much. Perhaps we could begin our questions with the honourable member for Yarmouth.
MR. RICHARD HURLBURT: I confess, I am the culprit who asked you here this morning, because I have an interest, actually there is an airport situated in my home riding. I have an interest for all of Nova Scotia, with tourist season coming up. That is why I asked to have this meeting this morning. Keith, I am going to home in on a few things that you have in your brief here. You had $1.9 million when the airport was turned over to your commission. At the rate you are going now, if my math is right, you have lost approximately $752,000, at the end of December? I am just going by the stats that you have here, approximately.
MR. CONDON: I haven't done it that way. We have approximately $800,000 in the bank. I will answer it that way.
MR. HURLBURT: That is calculated (Interruptions)
MR. CONDON: After two years of operations.
MR. HURLBURT: I was looking at, you have about two and one-half years left, if the status quo stays in place.
MR. CONDON: In fact, we had a recent council meeting in Yarmouth, a joint council meeting, and we have done our own calculations. We feel that it would be irresponsible to run this to the end. What we are now doing is looking for a solution to that deficit problem. My board has given me direction, if we don't have a solution in a reasonable time, and we have set a deadline of the end of December, this year, then we will begin the process of closure because this is going to cost a lot of money to close that airport.
[9:30 a.m.]
MR. HURLBURT: Right. That is why I asked for this emergency meeting so that we could, if there is some solution that this body and the Government of Nova Scotia can do to help, that is what we want to do.
MR. CONDON: Much appreciated.
MR. HURLBURT: First of all, you have to increase traffic to increase revenues. How are we going to go about that? Your aircraft storage hangar, what is the status of that today?
MR. CONDON: Fraser, why don't you address that?
MR. FRASER HOWELL: The storage hangar has been started, all the contracts are in place, the facility has been delivered and the hangar started on Monday, well it started last week, but the contract started on Monday. So we are hoping 3 to 4 months completion.
MR. HURLBURT: Was that funding all by the feds? Was it some of your own monies that went into this?
MR. HOWELL: The story on that, Richard, is that particular hangar is being funded out of this economic diversification cooperation agreement. There is $587,000, which 25 per cent of those dollars are the airport commission's dollars.
MR. HURLBURT: Okay, so that really in fact, Keith, your number of $800,000 left in the . . .
MR. HOWELL: Yes.
MR. HURLBURT: What do you see in the future that this government could do to help the airports? Not just Yarmouth, I am talking the three airports in the Province of Nova Scotia.
MR. CONDON: We see several things that can be done. I think there is no question the federal government has downloaded - if you want to use that terminology - all of the responsibilities, at least of the municipal airport, and I mean all of the responsibilities and left us hanging, if you will, with the responsibility now of taxes, which is new to us, and operations, and securing contracts to stay alive. The issue of Air Canada and the recent merger is a very big concern to us because one of the problems that we have, and this is where maybe the province can help us, one of the problems is that we are captive to, almost a prisoner of, Air Nova's whims as far as traffic is concerned in Yarmouth. What I mean by that is that we do not feel that we are getting a good service on a regular basis long enough to be able to find out whether or not it will actually increase traffic and work.
Putting on a flight once a day, in the middle of the day, doesn't do much for increasing traffic, and what we have been trying to do is to convince them to come early in the morning, leave at night, and give us an opportunity to build some traffic for them, when people travel. Unfortunately, the message we get from the management of Air Nova and Air Canada is, sorry, we are not in the business development mode, number one and, number two, we can make more money elsewhere. So we have no choice; however they continue to put that one flight in and it is an available slot for them, so it doesn't cost them a whole lot and that prevents competition. It blocks competition because everybody knows the minute competition comes in - and we have a track record to prove that, as you know - they will change the schedule and block the competition. So we have that problem.
The other problem, of course, are things like taxes. I will give you one good example, which is a real sore point for me because I have been on many government committees over the last 10 years, mostly economic development-related committees, including chairman of the trade council for years, and we applied in the airport to be the location for the new access centre in Yarmouth. We are told we didn't fit in the plan. When someone came to look, they realized you could toss a rock and be at the same distance away from the other location that was approved.
The assumption was, for people who don't know Yarmouth, the airport is away from the town. In fact, it straddles the town, partly in the town, a perfect location with everything to offer to satisfy the needs of that access centre, but we were told, the minister on down, we can't even possibly address that. That came, I believe, from a lot of pressure from the community in the downtown core, and all the normal small-town problems we have. But, the fact that the government took that attitude really upset us, because it is almost like everybody is working against us. Every time we make headway, we get knocked back again. These are all small issues, much smaller than Halifax, of course, where we are dealing with bigger issues. Still, on a scale, it is the same problem.
MR. HURLBURT: I have three questions, but I don't want to take up all the time. Quickly, Keith, maybe you can tell me what is happening with the property taxes? Are you still negotiating with the councils?
MR. CONDON: No, I think we have received a clear message from the councils. There is no more negotiating, they want their taxes. The bottom line is, we have decided to stop talking taxes and start talking deficit. We need some deficit assistance. We don't care what they pay on the deficit, we need some assistance.
MR. HURLBURT: Who are you accountable to? The federal government? In your mandate, did you have to maintain the airport?
MR. CONDON: The transport agreement is a 10 year agreement. We are responsible for the federal government to operate the airport within the guidelines set out by Transport Canada, for a period of ten years.
MR. HURLBURT: Do they see your financial statements every year? Do they see the road you are going?
MR. CONDON: They do, but there is no obligation. We produce an annual report and we publish it.
MR. HURLBURT: No response?
MR. CONDON: From Transport Canada?
MR. HURLBURT: Yes.
MR. CONDON: No, the day they passed us, what they called the economic jewel of that part of the province, they left, and that was that.
MR. RODGERS: Just a point for clarification. Just so someone doesn't think all agreements with all airports are 10 years, the Halifax airport agreement with Transport Canada is for 60 years, so they do vary depending on the airport. There are differences in terms of term. The second point I will just piggyback, is that there is a further complication with taxes you should be aware of. I will reinforce the fact that the provincial government under municipal assessment and HRM or your council in your particular case, or Sydney's, is that this is money due to them. They have not had this money over the years, they have not been able to compete with the federal government. The federal government has the wherewithal to do whatever they want to do, and now the regional council, so to speak, see the opportunity to say, we are finally going to get what is justly due to us, and they are bound and determined to do that. I guess if I were in their shoes I'd probably take the same position.
There is a complication I want to flag for you. It is an internal one, but nevertheless, it is an important one. When the airport authorities take over from Transport Canada, we inherit all the paper that Transport Canada has produced over the years. So you have all the leases, and the leases we inherit do not have any identification or recognition of taxes for example, so in my case, I have inherited all kinds of new leases with no provision for tax collection. So, it is up to us now to go out and try and give a bill to a major tenant, for example, and you can all think of a couple of major tenants at HRM or at Halifax International, and we will, in turn, issue a tax bill to them, and they can either pay it or not pay it. If they say, we are not paying this, we are going to appeal it, they have the ability to do that. In the meantime, I am stuck with paying that bill, otherwise I am breaking the law. So there are complications in there that one wouldn't normally think of when you look at these things.
MR. CHAIRMAN: We will have to move along to try to get in as many questions as we can.
MR. FRANK CORBETT: Mr. Chairman, not to slight Mr. Rodgers, but I want to give most of my focus to the Sydney and Yarmouth airports because they are in areas on either end of the province, and they have some other more unique-style problems. Larry, I guess one of the things I want to ask you, there was a question posed before that if you increase flights you would, therefore, increase revenues, but I got the feeling from your presentation that may not be so. Is that a correct assumption on my part?
MR. MACPHERSON: We have eight flights a day leaving Sydney. That is carrying as many passengers or has the capacity to carry as many passengers as when both airlines were there. Air Nova will certainly allow eight flights a day during prime season, but at any time, they can cut the flights down to five or six flights a day. When you are budgeting, it becomes very difficult to know what your revenue generation is going to be for the complete year. They can decide that. I think, at least at Sydney Airport, we are going to think a bit differently from the point of view. We are not going to cry about being privatized, we have it. Sydney is a nice little airport, and it is a good market for airlines to come in there. But airlines are going to have to come to grips with, but you are going to pay for the service we offer you. That is what we are going to do. Air Nova may not like it.
We have a responsibility to honour the contracts, as Dennis just mentioned. We have all kinds of contracts. We have NavCanada who purchased that when it was privatized. They put their money upfront for rent, and now they are in our building and we don't get rent from them. The government has taken that. So, all of the contracts are where we are losing dollars and we have to confront those issues. Air Nova, as an example, hires Airconsol to do their fuelling and ground handling. Well, if they want to stay with that, that is fine. We have to honour Airconsol's contract. But we can provide fuelling and ground handling ourselves to generate dollars for the airport which will affect their landing and terminal rates. If they say no, we want to stick with Airconsol, and they are going to do that service, well they are going to pay on the other end of landing and terminal rates.
We are going to take that approach, that it is a business approach. I think the airlines have to come to grips that they are no longer dealing with Transport Canada. We signed the contract, we will carry our end of it through, but we are going to be tough businessmen making tough decisions. As I mentioned earlier, we are not afraid that the airline is going to pull out. If they do pull out, there will be another one in there tomorrow if they are the only airline serving Sydney. Sydney is a lucrative market. The Halifax International Airport is not affected by people who are using ground transportation to get to Halifax. They still are going to get their passengers. But, it does affect ourselves in the smaller regional airports from the point of view of airport improvement fees. We have instituted that. But that money should be going to improve the quality of the physical plant that services the airlines, and not for
deficit reduction. That is what airlines would like to see us do. Just use your AIF for reduction, okay, and keep our prices down.
We also have a responsibility from the private sector perspective that, where else would we generate money at the airport. If we can do our ground handling, how do we do other servicing of airlines, courier service coming into Sydney, and we are involved in negotiations in that area. But, we have to do as much as we possibly can to generate dollars for that physical plant that we have and the dollars that are needed to break even, and I think this is an important point. We are not in the business to make money. We are in the business to break even with this airport. Can we have an airport improvement fee that we can put in the bank so when we need to do a runway, we need to fix up our air terminal, we need to add a hangar because we have more business, that we have that money there.
Air Nova is in the business to make a profit. There is something wrong with the scenario when somebody is making a fair profit, and I don't know what their profit is, but they are making a fair profit out of Sydney Airport and we are going $700,000 in debt. We are not going to, as I mentioned, attract another airline. We are not going to do that because Air Nova is in there, and they will match prices with anyone. So the airline is out. We are not going to generate more money or more landings with Air Nova.
MR. CORBETT: I will ask two questions together, and that will be it for this round. You touched on your AIF. One point I would like to ask you, you have obviously expended some of those funds, what you used them for and so on? The other one, I guess all three could maybe take a shot at answering it. When you were negotiating and that may not be fair to some because you may not have been there when the handover was done, but when you were negotiating with Transport Canada, what role, if any, did the province play in your operation, whether it was in some financial way or just lending some form of expertise? Maybe, Larry, you can answer the first one about AIF.
MR. MACPHERSON: No, the province was not involved in the negotiations. KPMG did the study of what condition the airport was in, what we needed to operate that airport, but the negotiations were done by the committee of the board that was selected at that time.
MR. CONDON: I think I would like to address the negotiation from Yarmouth's point of view. I am sure, as you have probably realized already and knew before, that all three airports are totally different and the negotiations were different. Yarmouth does not have the number of flights of either Sydney or Halifax, of course; however it was an international airport at one time with direct flights to Boston. We have a fairly new terminal, so we have very little to deal with as far as the actual facility is concerned, but during the period of negotiations we were successful in dealing with Transport Canada on a little bit different level.
Because of those issues they actually gave in on some of our issues because we basically - and I did the negotiations myself, I was the committee - dealt with it from the point of view that we have to have enough money to run this airport for three to five years. Their offer to us was $376,000, based on their fictitious forecast of what they called the t-plan, of a steady increase in revenue which never happened, and their steady reduction in expenses which was happening by attrition and closure of services, which included the closing of NavCan. So I feel it was like a constant, it was definitely a path to zero and that meant zero services which would mean zero airport.
So, therefore, we were in a different position. We were not bargaining from a position of strength other than they did not want to be seen as the one closing the airport, if you will. So they gave in by finding little patches of budget, and it was not necessary for them to spend big money in renovations and so on, but all through negotiations Fraser was the manager of the airport at the time and was successful in working with us jointly, to acquire a lot of ACAP money to acquire a lot of projects in renovations and so on. So when we were handed over the airport, it was in first-class condition, without a question; it was like a new facility, including the environmental sign-off, everything.
So we were in a little different position from that perspective, but we have a worse position because we just don't have a service. Now we have a great airport, and if we could take the Sydney traffic and put it in the Yarmouth facility, we would have it made, I mean if we could just combine the two.
MR. CORBETT: Oh, oh, don't go there.
MR. CONDON: Actually I have got some ideas about it. (Interruptions)
MR. CHAIRMAN: Mr. Rodgers, did you want to comment on your negotiations?
MR. RODGERS: I mentioned this before. When you negotiate with the federal government, you are negotiating with a bully who has all the cards stacked in his favour. We found them to be less than honourable in terms of negotiations and, when we thought we had a deal, it turned out we did not have a deal. Their negotiators, for example, would negotiate with us and then go back and say, sorry, the minister will not accept this or Privy Council will not accept this. There was always an excuse and there was always a bottom line.
I think the important thing for people to recognize is that the federal government recognized the cost of maintaining airports, particularly the smaller airports. Halifax is not in that category. We process about 3.2 million passengers a year, which would be equivalent to Ottawa, Winnipeg, or Edmonton. So, Halifax, or those kinds of airports, can make it. I think when you look at Sydney and Yarmouth, for example, the federal government recognized, like this is a black hole. Pardon me if I am saying that, but I think in the final analysis that is what is going to come out, and they were prepared to do whatever it took to get rid of these,
unload them, and it is just a matter of another downloading on the community because now it becomes the responsibility of the province or the responsibility of the municipality and, quite frankly, if we follow that path, we have been snookered.
I think from a broader perspective what this province should be doing is, and I guess to answer your initial question, the provincial government played no part in negotiations. For Halifax, and I presume the other airports, when the federal government determined that they were going to have a divesture of the airport facilities, they encouraged the local communities to establish boards to represent that community and do the negotiations. These boards were set up as a not-for-profit organization.
In our case, we have 13 directors; four from HRM, some from the provincial government, some from the federal government, some at large, et cetera. We negotiated the deal in the terms that we thought were the best that we could arrange at the time. It is a painful process. What you've got is what you've got and you have to live with it.
MR. CHAIRMAN: Can I just ask a question before I recognize the next questioner? I guess nobody knows whether or not you were snookered or duped, but there are things that are very akin to all the airports. Some of the problems are the same, with landing rights and the federal contracts and things of that nature, but at the Halifax International Airport you have what is now quite a high profile environmental problem and that problem existed previous to negotiations. It was no big secret and the federal government, frankly, would not do anything to alleviate that problem.
The Halifax International Airport Authority has taken over the airport, and now the problem, I understand, sits in the authority's court, plus you have a major expansion that you are undertaking out there that will require a substantial capital investment. You have to question, with all respect, why - where I understand it was not obligatory, or certainly didn't appear to be - the airport authority entered into an arrangement when there were strings attached. Some may have been invisible, I think some were quite visible. I am just wondering why you signed when you did, so to speak, and I know there was all-Party support and that was fine and dandy; we all supported the initiatives and the undertaking. I want to make it clear that I appreciate the work that went into it, but was there a time-frame that had to be met from your perspective?
MR. RODGERS: Let me back up. First of all, the board of the Halifax International Airport Authority has worked very closely with all parties and has briefed all the parties in Nova Scotia on an ongoing basis, and we have tried to be as transparent as we possibly can be. We represent our community and this government, for example, has members on our board.
When we were negotiating with Transport Canada up until last fall, when we thought we had a deal, the federal government was to be responsible for environmental conditions that took place up to the time of transfer and the authority would only be responsible for any incremental increase - and the optimum word here is incremental - from the transfer date onward. We had been bandying around numbers of $15 million to $20 million for some time and they quite simply didn't agree with it.
When they hired their consultants and did their due diligence and realized the cost, they all of a sudden felt that and put the position that, well, it is going to be hard to separate a molecule of water. Well, we are not trying to separate a molecule of water. What you have is an acid run-off and to treat the acid run-off you have so much lime that goes in on an annual basis. It is very simple to look at the past number of years and say, how much lime has been used to treat the acid run-off and if the amount of lime goes up 10, 20, 30 per cent, that is the incremental amount. The federal government would not accept that. For the past year, we have stalled in the position of, do we have a deal or don't we have a deal.
In the final analysis, and I will choose my words carefully, we were told you either do this deal the way it is or we have somebody else lined up to take on the deal. We are on the record so I won't make other comments, but I can tell you, I and my chairman and others who dealt with senior federal officials were quite frankly appalled and astonished with the comments that were made through the negotiations, particularly at a time when there was a provincial election in Nova Scotia.
MR. CHAIRMAN: Thank you, Mr. Rodgers, and perhaps we can move to Mr. Estabrooks.
MR. WILLIAM ESTABROOKS: With all deference to Mr. Rodgers, I certainly would like to pursue that. Again, I understand that we have regional carriers here. I have two topics, one is tourism, one is cargo. Judith Cabrita appeared in front of this committee some months ago. One of the concerns that we have, I believe, is the movement of tourists, Icelandair and a connector. Mr. MacPherson, off the top of your head, and if you could add to this Mr. Condon, what is the percentage of people coming and going in your airport who are tourists, from-away tourists, as opposed to from away, what it means to me?
MR. MACPHERSON: I don't have the percentage off the top of my head, but you certainly could talk in the range of 25 per cent to 30 per cent to 40 per cent, somewhere in that area, from the point of view of conventions that come in, and the traffic is much heavier in the summer, that is tourists. When we say tourists, visiting friends and relatives are counted as tourists. People who are living in Toronto or out West and come home to visit, they are considered a tourist. One of the problems that you have to build that sector, if we go after conventions in Sydney, we have no way of getting them in by air. If you have a convention of 400 people, you have major problems if you are taking that convention out of Ontario and getting them into Sydney.
MR. ESTABROOKS: If I may interject, Mr. Chairman, before Mr. Condon responds. I know I was in that situation when we were pushing Sydney for a major international convention for Lions International. Our problem was we could get them to Halifax, but it would almost be better to have a bus service. I was taken aback by that.
MR. MACPHERSON: That is what we do. They do this busing, but for the conventioneer who is coming in, that is not convenient for them. They don't need to drive five hours to get to Sydney to a convention destination. Air access into Sydney is important to build the tourism industry. With the 50-seaters, that may be a little bit better, if we have eight flights a day, you may be able to plan, but you are only talking servicing a convention of 200 or so, that you are sure to get them in. Once you get up around 300, 400 or 500, it is very difficult to solve that.
To give a good example of that, the Canadian Tourism Commission selected Cape Breton as a showcase of Canadian product for the people who sell the Canadian product throughout the world. We had people from Japan, Europe, and all of that. They are invited in by the Canadian Tourism Commission. They had, on their board, key people who knew the airline. We had a very difficult time trying to fly these people in at approximately the same time, and we are only talking 65 people. We got them in within a three-hour span. But there was a lot of persuading of the airlines to book these seats for these 60 people. That was a very important thing for the development of tourism on the Island, because you have people who are selling the Canadian product throughout the world, and they are here looking at it, and you impress them, but their experience has been, my God, but it is hard to get our people in there. There are real major problems with that.
MR. CONDON: First of all, I think tourism in our area, relative to the air service, is a difficult one to pinpoint because of the erratic schedules we had. I could say that at certain times of the year, the majority of traffic is tourism or people who own property. We have a lot of German folks now who have property in the area. We have a lot of people with U.S. ties. These people are very disgruntled with the fact that they now have to fly through Halifax, because it has been the policy of the airline to hub out of Halifax. So now if you live in New England, and you want to come to Yarmouth, you have to go to Halifax. It doesn't necessarily hold true you will fly to Halifax and wait for the flight to Yarmouth. Most of them will drive, because if they fly in the evening or when there is no connection, why would they sit in Halifax all day. So, we figure we have lost most of that traffic because of that behaviour, and we can't seem to convince the airlines to stay with a good schedule long enough, simply because we are not a priority.
[10:00 a.m.]
MR. ESTABROOKS: Have either of you gentlemen ever met with Judith Cabrita on some of these issues?
MR. CONDON: Yes.
MR. ESTABROOKS: Air cargo. Our roads are getting the snot beaten out of them. There is no other way to say it. I notice in Yarmouth in particular, because of the lobster and fresh fish industry, 70 per cent of the product is going through air cargo. Is this viable? Do you have a future in attracting business in this area?
MR. HOWELL: Let me answer that one. Approximately 52 per cent of the total catch seafood product in Nova Scotia is coming from our end of the province, the tri counties, Digby, Yarmouth. Most of our product, by the way, is high-end product, lobster, tuna fish to the Asian market, live eels, it just goes on and on. About 50 per cent of our product is travelling by air somewhere to its destination. But very little of it, whatever you can put on the belly of a Dash 8, is leaving our airport after the baggage is taken off. Each day when that gets filled up, the tractor-trailers or the cube vans come and take the overflow and they drive it up to Halifax to get it on the belly of an Air Canada or something, and Halifax isn't really geared for air cargo to start with either.
As you will see under our current issues there, we are in the middle of doing a regional, multi-mobile air cargo study, looking at, not just the volumes because we know what they are, but the markets and the potential to develop the infrastructure that we think will make it work for us. We have been into it about six weeks. It is a three and one-half to four month project we are doing. The results are relatively positive, and we look at it as a natural growth area for Yarmouth. If the results continue to come in the way they are, we are going to be pursuing the development of the regional air cargo facility, with that much volume, that much exporting. We have 237 companies in the exporting business in the tri counties, and we are trying to touch every one of them. We are really aggressive.
I know Dennis is doing something in Halifax, and I compliment him on that, but we are really not, at a provincial level, into the air cargo business in any significant way, Boston, Montreal, New York, Toronto. We are looking at taking care of our problems the best we can, and if we even got 10 per cent of the product that is leaving our facilities by air, half of our problems are over.
MR. ESTABROOKS: Mr. MacPherson, could you respond to that, too, and then I will be finished.
MR. MACPHERSON: Well, we are not heavy into air cargo out of Sydney. It is hard to move steel and coal.
MR. ESTABROOKS: No, but I should point out that I was at a local establishment last evening and they were lauding the fact that the fish was from Cape Breton. You have 70 restaurants and, need I say, taverns, using fish from the area we are speaking about. None of that goes through the Sydney Airport?
MR. MACPHERSON: No, and you will see it is a whole different scenario there. You have your buyers who pick it up at the wharves, they ship it into New Brunswick and it is processed in New Brunswick. We are not in the of fish business in Cape Breton in any real sense of the word. So, we haven't put the priority on it as Yarmouth has, saying this is our opportunity, we believe, and put our emphasis on cargo; Sydney has put its emphasis on the passenger movement through the airport.
MR. CHAIRMAN: Mr. Dooks.
MR. WILLIAM DOOKS: Mr. Chairman, I will direct these question to the gentlemen from Sydney and Yarmouth and probably the situations could be somewhat the same. I am thinking about fire, also emergency services, policing and customs. How are they administered, and who pays for them?
MR. CONDON: I can address most of that from Yarmouth's point of view. Unfortunately, during the early stages of negotiation - or fortunately, depending on your point of view - the federal government gave the fire apparatus to the Town of Yarmouth for $1.00,
under the provision that they provide services and they also gave them a cost-free lease to keep that apparatus, provided they provide the fire service to the airport.
MR. DOOKS: That would be to the facility or to the airplane?
MR. CONDON: To the facility, yes, to the whole property. We have an excellent fire department, very close. We have one of the best - which I can say with certainty - emergency health services in the world today. So all of us can rest assured that we have comfort in that no matter where you are in the Province of Nova Scotia. So I think from that point of view we are well serviced, police as well. In our area it is the RCMP who have a regional office next door to the airport. So we don't have any problems with that.
MR. DOOKS: So there is no charge back to the airport for policing or fire then?
MR. CONDON: Only through the taxes.
MR. DOOKS: Through the taxes, okay, and the customs?
MR. CONDON: The customs we have now is on a call-out basis. I don't know, maybe you can address that better, Fraser.
MR. HOWELL: The deal on customs is that if you are needing customs services during the working day, i.e. 8:00 a.m. to 4:00 p.m., it is complementary to the carrier and outside of these hours the carrier that comes in pays the overtime costs of the customs guys that apply, very nominal fees. Most people are using CanPass these days as well so there is very little requirement for the officers to come to the airport.
MR. DOOKS: Would that be the same in Sydney?
MR. MACPHERSON: For the customs, yes. It is call-out and after hours the airline, whatever, and we have Air St. Pierre that comes in on a regular basis in the Sydney Airport. From the firefighting perspective, five of our staff are cross-trained, who were in the fire department before it was privatized, and so with the new policy coming out federally about a three minute response time after they get into the fire truck, not from where they are at the airport, we can meet those regulations. We have a volunteer fire department within three kilometres of the airport that is called in automatically if there is any problem. That is for the physical plant as well as planes landing.
MR. HOWELL: Mr. Dooks, I was just going to add to Larry's comments there that the federal government is doing a review about increasing the fire protection standards now that they are out of the business themselves. My concern with it is that these standards, we think we can meet them, we are 2.6 kilometres from the airport. We have a fire truck at the air terminal building, or at the combined services building, as Keith has said. It is a paid fire department in Yarmouth and we see all that, but the standards may be fairly extensive in respect to the amount of training that these guys would need.
Even though we have a fire training area, our municipality is extremely small and these guys may have to incur big costs associated with keeping their training standards up and I am afraid that these costs are going to either be borne by the community or, God forbid, the airport because obviously that would create problems that we would not be able to address. That is one of the things under federal government policies that we are concerned with, the regulations that are subject to be changed as we speak.
MR. DOOKS: Mr. Chairman, I must ask another question, what about other regulations coming down federally? Are there other areas of concern that would once again cause more hardships on the airport?
MR. HOWELL: Yes, there are two more. One is the approach ban. They are in the process of adjusting the limits for landing in poor weather. It is still in the discussion stages, but we can see where it is going. Basically it looks like what is going to happen in our case, and every other case, is that the approaches will be increased by about 50 per cent. So right now where you are coming in in Yarmouth, where you need 1,200 foot visibility, you are going to need 1,800 foot visibility. They were trying to get it to 2,600. The issue with that is we have a lot of fog and if the 1,200 was a safe operation for 50 years, is it necessary to increase it? This may be to the detriment of some of the traffic because there are long periods of fog in the summer months; we are worried about that.
The other thing we are worried about, of course, is this Bill C-26. My counterparts can elaborate on this I am sure. The policy that is being developed, or the guidelines that are being developed to regulate the new air carrier industry with Air Canada and the monopoly
that they have, they are in the final stages, but there are some issues such as the Cabotage rule where an American carrier can't move people between two places in a foreign country. That may have a detrimental effect on us being able to attract some competition. But it seems like the industry and the government are working together, and we are going to be the victim of whatever the results are. We really don't know what they are, but if we are able to attract an American carrier that for instance can go into Saint John, New Brunswick and then drop down to Yarmouth, and if he can't move people between these two points, it may not make it profitable for him to do it. So, there are several things in that particular policy that may have some impact on us.
There is a restriction on Air Canada getting into a low carrier service until September of next year. There is the issue then of the fifth freedom rights where a carrier can move, for instance, our people from Yarmouth to Boston to Toronto on the same aircraft, you can't do that. That is the kind of thing that may help stimulate some competition. We may be able to pick up a U.S. carrier. Right now, if the regulators are going to work in accord with the carriers, and the carriers have the monopoly, which I may add was always the case in Yarmouth; even before the amalgamation, we had a monopoly. It is just now it is certified.
MR. CHAIRMAN: Some of the airports, i.e. Sydney, have a facilitation passenger head tax so to speak. I am just wondering if Yarmouth and Halifax are giving that option consideration? Mr. Condon.
MR. CONDON: The problem we have in Yarmouth, of course, is that we are hanging on by the fingernails, if you will. I also would like to point out, and this is a good opportunity, we have a board of 12 people, of which I am Chairman which is 100 per cent volunteer, and I mean 100 per cent volunteer. In fact, we even incur a lot of travel expenses on our own. It is necessary for us to have that image and to do that because we really cannot see how we can increase any charges to the travelling public under the current conditions without further jeopardizing our position. So, we have a big problem. We were also instrumental in keeping Transport Canada landing fees very low in the Yarmouth Airport and lobbied to keep them that way during our negotiations for fear Air Nova would get upset and leave during the negotiations.
The other problem with that is that Air Nova felt their costs were far too high in Yarmouth because, like I mentioned, they were not in a business development mode, so we have purchased all of the ramp facilities, and we provide them now with economical services which is an incentive to keep them there. That also puts us in a position to offer these services to other airlines for anyone else who wishes to come into Yarmouth as a competitor. But, unfortunately, if they have a monopoly on the rules then we won't have that opportunity. So, that is what Fraser was doing.
MR. CHAIRMAN: So, Mr. Condon, that would be a no at this time?
MR. CONDON: That is certainly a no at this time. We don't even see how it would be possible.
MR. CHAIRMAN: How about you, Mr. Rodgers, at the Halifax International Airport?
MR. RODGERS: With respect to an AIF?
MR. CHAIRMAN: Yes, with respect to a head tax or a facilitator passenger tax.
MR. RODGERS: The head tax you refer to is commonly known within the airport business as an AIF, which is an airport improvement fee. It is collected by most airports across the country now either by commissionaires or staff at the gate, so to speak or, what has happened over the past year is, many of the airports have negotiated with the airlines to include that in the ticket price. When the ticket is sold, it is included. The airlines then take a percentage, I think it is 10 per cent, for collecting that fee and reimburse us at the airport.
In Halifax, when we negotiated the deal, we had indicated and continually committed to our community that we would not put an AIF in place for at least three or four years. We are still trying to hold to that, although it is difficult, and I don't know where we will finally settle out. The problem we have is twofold. First, of all, it is the downloading of the federal government environmental situation which may force us to put an environmental tax in place a little bit sooner. The second thing of course that has further compounded that has been the restructuring of the airline industry, which has significantly affected revenues for all airports in Canada.
MR. CHAIRMAN: Excuse me, just before I recognize the next member. Did you say you made a commitment not to impose the AIF for two or three years? Who did you make that pledge to?
MR. RODGERS: We have verbally made that commitment to our community, to our stakeholders and to the general public, who continuously asked, will there be an AIF in Halifax? When we negotiated the deal with the federal government, the initial negotiation was such that based on our cash flow, based on our forecast, it would not be necessary to do that for at least three or four years. However, with the continued downloading by the federal government, that was now all at risk and it may have to go in place sooner. The particular driver is the environmental issue.
MR. CHAIRMAN: Okay, thank you very much, Mr. Rodgers.
Mr. Chipman.
MR. FRANK CHIPMAN: Mr. Chairman, you asked one of my questions. The other I would like to ask, what is your mandate - to make money; to grow further; develop your airports? What do you see as the potential for air cargo in southwestern Nova Scotia?
MR. CONDON: Well, I can address that from Yarmouth's point of view. We feel very strongly that if we can overcome some of the current problems in the Yarmouth area, and that is one of the reasons for the study, that it can be one of the major growth areas for an airport and a substantial source of revenue for us. So we think that the air cargo is probably one of the ways that Yarmouth can survive in the growth.
Unfortunately, right now that is controlled through a brokerage system and a lot of that is through Halifax. However, we feel with increasing the services and having, for example, a hangar to be able to have aircraft overnight in Yarmouth, put in good aircraft services direct to the U.S. market and onward, that we will be able to overcome those issues. So we see it as probably the biggest growth area in the facility.
MR. CHIPMAN: Gateway Airlines left Yarmouth because you didn't have heated hangars, is that correct? Do you have those facilities now?
MR. CONDON: I think that was the reason that he stated but I think that we could show otherwise. Unfortunately, they were going through some growing pains and it takes time to establish yourself. I don't think the hangar was the only issue. Certainly, though, we encourage that kind of business that wants to develop in the area and we would do everything in our power to help them. That is the purpose for expansion.
MR. CHAIRMAN: Mr. Brian Boudreau.
MR. BRIAN BOUDREAU: Thank you, Mr. Chairman. I am going to try to be brief. First of all, I would like to congratulate everybody here this morning and thank them because it has been very educational for me, at least. It is obvious that you are well-versed in this industry and I appreciate you taking the time to come here and educate me, at least, in this particular industry. I can understand the difficulties that exist within this particular industry. A couple of them that I am concerned about is when you indicate that the airline companies' profits are increasing although they refused to negotiate fair landing fees with various airports. That is a concern. I always believe that the individuals who use this service should pay for the service. I think that they can afford to.
I guess one question that I am concerned about is the municipal taxes. Being a former municipal politician, I certainly don't blame the municipalities because of the difficulties they are experiencing, particularly in today's atmosphere out there. I am wondering, have you or any of the airports begun negotiations with the provincial Department of Municipal Affairs?
MR. HOWELL: We have been having an ongoing dialogue and actually are meeting later this afternoon with that particular organization. We are trying to see what their role may be in this whole picture. In conjunction with that, of course, we have been dealing directly with the municipal units in which we serve. So we are trying to get to the problem collectively.
MR. MACPHERSON: We have been negotiating or talking to different departments. There is not a real openness to have real discussions on these issues because of the financial shape the province is in, and we basically meet with one and say, well, maybe we should talk to the other and so they are getting shifted around, so we don't see much relief coming to be perfectly honest. It costs us probably $700 to have a meeting in Halifax and we don't want to make too many of them because we can't afford it at the present time, especially to hear well, I know your problems but we really cannot help you with them.
As I said before, we, as a private-sector board, have to begin to confront the real issues: where do we generate money at the Sydney Airport and where are the opportunities? Then go after those opportunities and see, is it viable to make this a non-profitable airport and generate dollars to keep improvements going through an AIF?
We are going to take that approach, a business-like approach. I am not depending on government to bail out the airports. As Mr. Rodgers said before, Halifax is an airport that is the hub and that is important that we get good service into the province and the regional airports are the ones that are going to have difficult times supporting themselves. Sydney has an opportunity to do that. We have cut down everywhere we can internally, from a manpower point of view. The men, the staff, are cross-trained from electricians to plowing to the fire component of the airport and contributing a great deal to make the airport successful. I think that is important, that the workers want to make the airport successful. We have cut back as much as we can right now. We have to make the decisions with the airlines who we are servicing and with the other opportunities that present themselves and make that a break-even situation in Sydney.
MR. RODGERS: Just to give you an example of how flexible or inflexible Municipal Affairs are, one of the concerns I raised before was the fact that we inherit paper, leases but there is no provision for us to be able to collect taxes. We have to go out and submit the tax bill, once received from HRM, after the assessment is done, and trust that the tenants of the airport will pay that tax bill. Now I hope being good business people they will. However, there is a risk associated with that.
One of the things we had asked Municipal Affairs was, just to give you a flavour of the abilities they have and the level of cooperation - under the circumstances I have concerns that some of these may not be paid or they may be disputed and you get into some sort of an assessment appeal and the corporation that owes the tax may not pay it and, in the interim, we have to pay it, so it puts a cash flow crunch on us - would it be possible, under those
circumstances, for example, to have Municipal Affairs continue to issue the tax bill direct to the tenant, where the property still is a federal government property? After much discussion between our lawyers, we are told no, they can't, the legislation with which they have to provide services will not permit them to do that.
Now, on the one hand I would say it would appear they have been cooperative; on the other hand I would have to say, unfortunately, it doesn't help us and there is a risk associated with that.
I would like to clarify one point for you, Mr. Boudreau, if I can. I think when you started your questioning you indicated that the airlines would not negotiate. It is my understanding, certainly with Halifax and I think all other airports, that we do have the ability to raise landing and terminal fees. We do not have to negotiate. The question is, what is the consequence if they don't like what we have done? I guess the driving force here is, how elastic is that ability to increase the rate?
One of the things that some of the airports may wish to consider, and we are certainly going to look at that, is to say, okay, we had an arrangement, airlines were paying more or less on a cost recovery basis. You have had a restructuring which has significantly affected the bottom line and enhanced the bottom line of the primary carrier, Air Canada, because of the takeover of Canadian Airlines. Given that, can we do a calculation in-house which says that based on the yields they had before in other things, that it would appear that their revenues had increased by a certain percentage, and on that basis should they not then pay for an additional cost of operating the airport? I think if you do that calculation and you don't overstep certain bounds, that you would probably find they are not happy campers but would be willing to pay.
In the case of the smaller airports, of course, you don't have some alternatives and there is a certain risk associated with that, but you do have the ability to raise the rates. I come back to the point I made earlier, Calgary, in March, gave notice because of the impact on them that they were raising the rates by 15 per cent. I think it was 10 per cent in April and another 5 per cent in June or July. But there is a risk associated with it.
MR. CONDON: I would like to add to that if you don't mind. One of the things that is little known about the way the Yarmouth facility developed is that we have a considerable amount of rental properties and we have tenants that run their businesses on our property. So, we generate approximately $50,000 in just property taxes from the facility for the municipality. So notwithstanding that Municipal Affairs has downloaded the responsibility of the collection of those taxes and thrown a lot of confusion into the issue, those tenants of ours continue to pay their taxes because they had always received their bills before, and we, in turn, pay them into the municipality. So, we do generate taxes. We feel strongly that we could continue to do that and continue to increase that, but that the airport itself should not be taxed. That is our position.
MR. RODGERS: May I take 20 seconds? To add to that for better clarification. He is correct. The tenants, we assume, will continue to pay their tax bill. However, what is going to happen is, under the federal government, Transport Canada gave a grant in lieu of taxes and the grant in lieu of taxes is significantly less than what the tax bill is going to eventually be. This year, I expect the amount those tenants will pay will double and, of course, when it does, you know somebody is going to try to appeal that, and that is where the problem sets in.
MR. CHAIRMAN: Exactly. Mr. Dooks.
MR. WILLIAM DOOKS: Mr. Chairman, I am going to ask both gentlemen from Sydney and Yarmouth a question. If you don't feel comfortable in answering, please don't. I represent an area that is deprived in economic development or growth. The reason for that is because we do not have the proper infrastructure. I believe an airport in Cape Breton or in Yarmouth is very important to the growth of our economy. That is in my opinion, and I think it is very much a part of the infrastructure of that region. It is certainly a pleasure for me to sit here this morning and be better informed of what is taking place there, because the good member from Yarmouth constantly brings it up, and unless you are at the table, sometimes you neglect to understand the importance, and also the members for Cape Breton talk about their airport often as well.
I am sure your boards and so forth are doing a great job managing what is taking place, because I am very familiar with the downloading from the federal government because I was on the municipal council when HRM was dealing with the Kelly Lake Airport. In your opinion, if you were unsuccessful, if you weren't able to pull it together, to keep it floating, to meet the challenges of the day, and unable to meet the challenges of the future, what economic impact would it have on Yarmouth and also on Cape Breton with the idea that we are all in the mode for economic development as we meet the future, in areas that are oppressed, deprived, underdeveloped, all the words that maybe you shouldn't use that are not politically correct today? I would like to have an answer from people representing Cape Breton and Yarmouth. If, God forbid, we were unsuccessful in allowing the airports to remain open, how would that relate?
MR. CONDON: I will address it from Yarmouth's point of view. I feel strongly. I agree it is, what we would say, part of the economic engine for the region in further development, and economic development is near and dear to my heart in this province, not just in my area. For southwestern Nova Scotia, I have not heard one organization say anything other than, oh, we have to have the airport for future development. I am sure that the RDA in the area, in fact, I know, I have heard it with my own ears, when they talk to a foreign client to try to attract him into the area, oh, we have an airport, we have this facility.
We won't know the impact, unfortunately, until it is too late. I guess what we are doing, if nothing else, our message to the councils and to this government is simply that we bought four to five years so we can make a rational decision and decide, should there be an airport? Does everybody agree there should be an airport? What is it going to cost? Is it worth it, and who is going to pay the difference? Because it is going to take time for us to privatize to the point where it does break even. We feel it can be done, but, it is going to take everybody's support including passenger support, certainly airline support.
This country is suffering from poor circulation. It is very easy to see what is happening. With all the extremities, the railroad is gone. The bus stations are gone. In Yarmouth we lose everything one little piece at a time. Everybody sits around after it happens and says we let the bus go, we let this go, and soon, if we are not careful, that is what we will be saying about the airport. We have to avoid that from happening. So what we are doing now is ringing the bell and saying we are ringing this alarm bell now. We are going to continue to ring it until we can force somebody to pay attention to this.
[10:30 a.m.]
It is not just a tax issue. It is a bigger issue than just taxes. That is only one of the issues and if the municipal units need the taxes because of other reasons, let them have the taxes, but there has got to be another plan in place for the citizens of southwestern Nova Scotia, in our case, to support the deficit until it is self-sufficient and if that becomes an issue of this government of saying, do you know what, there has got to be an Access Centre down there, let's give them their fair share. We are not asking for any gift from anybody and we are not asking for money from anybody. We are asking for the opportunity and for the help to get to that point. It is that mentality that has got to change because now everybody is protecting their own little territories that we lose, generally we lose because everybody says that is a federal government responsibility, you know, so we should not be involved, and it is not. Now it is the citizens are the stakeholders.
MR. MACPHERSON: Airports have been taken for granted in the communities all along. Everybody said the airport is always going to be there, the federal government is looking after it. Every regional area needs its airport if it is going to have economic development and, as was mentioned, anyone who is interested in locating in Sydney, certainly one of the first questions asked is about the quality of an airport you have. Sydney is blessed with a high-quality regional airport. It really has everything going for it.
I guess what I am saying is if we ever said we are going to close the Sydney Airport, yes, you would have a community uproar. I believe that if we do it in a business-like fashion and take the risks, as you do in business and not be afraid that the airline is going to pull out on you, and do it maybe differently than we have done it before and be more innovative in our negotiations with airlines in saying, well, this is an airport we have and you own a service and who wants the service, and maybe you would bid on the service if you want Sydney. I am just
saying that we have got to be more innovative, but to your question, I am making the statement that we never let our airport close. It is too important for economic development and we will make it work somehow, in some way.
MR. RODGERS: There is something else you should be aware of as well and that is that any negative impact on Yarmouth or Sydney has impact on Halifax. So there is a double whammy here.
MR. DOOKS: In a negative way?
MR. ROGERS: In a very negative way.
MR. DOOKS: I thought it would pick up the . . .
MR. ROGERS: Oh, no. Halifax is the hub for Atlantic Canada. Halifax does 3.2 million passengers a year. The closest Maritime airport to that would be Moncton at about 300,000, one-tenth our size, and then you go down the line from there to the smaller airports, a couple of per cent the size of Halifax. It is crucially important to Halifax to maintain the hub status. Halifax generates $1.3 billion in revenue in this province per year on a direct and indirect basis. Halifax International, direct and indirect, generates in excess of $100 million of taxes to this province and employs between 8,500 and 9,500 people direct and indirect.
If there is a problem at Yarmouth or Sydney, it will carry through to Halifax and it will impact the province. So when we sit here, just because Halifax is sort of in a league by itself and is much larger, the importance, the viability and the health of Yarmouth and Sydney is crucially important to us.
MR. DOOKS: Mr. Chairman, thank you for that clarification because I was not sure where you would fit together. I did not know if you were in competition with each other or what. So I think we have kind of clarified that. So it is sort of as a group you are working together?
MR. RODGERS: You have to.
MR. DOOKS: Yes, good stuff.
MR. CHAIRMAN: Mr. Rodgers, I probably should be going ahead instead of back, but you indicated awhile ago in this public forum, and people have expressed concern, my constituents and others have expressed concern about the fact, I guess now that while the federal government was divesting themselves of these airports, there are several strings attached. You have assumed a lot of liabilities, the environmental problem, federal contracts, et cetera. But, did I correctly hear you say that at one point during the provincial election you were advised by a negotiator - I don't know if you want to call it a threat or not but the
comment was clearly made - that if you didn't take over responsibility or sign on the dotted line, then somebody else clearly would and that somebody else was lined up?
MR. RODGERS: That is correct.
MR. CHAIRMAN: Now, did your group, the authority, ever have that substantiated? I mean, it was a threat and a comment made, but did they offer living proof, or am I prying somewhere I shouldn't be?
MR. RODGERS: I guess this is the story is it? That really deals with by the negotiation process, and I would have to say that any question you or your committee may have with respect to that should be dealt with our chairman who was the chief negotiator for the Airport Authority. But, yes, I will tell you, we were told you either do this deal or we have people lined up that are prepared to do the deal.
MR. CHAIRMAN: I am quite disturbed. If I can just comment further that I know how disappointed and upset you folks must have been when you were bargaining in good faith to have somebody make that kind of comment. As far as I am concerned that is deplorable.
MR. RODGERS: I was just going to say that our board, as you probably are aware, really represents our community. As I said there are four directors from HRM, there are four from the Chamber of Commerce, there is one from the provincial government, two from the federal government, and they are not just metro. We do have members on our board, Arthur Pickup from Port Hawkesbury, for example. They are all very well recognized senior business people with our community. Quite frankly, we were appalled, but we felt that the airport was of such importance to our community in this province that we couldn't allow it to be given to some other group or body. The organization that was in place, our board, was there to protect the interest, I shouldn't say to protect the interest, but was there to negotiate on behalf of our community. We felt the important thing to do at this stage of the game was to get the airport and use it for the purposes it was initially intended, and that was to be a catalyst for economic development in the province.
MR. CHAIRMAN: Mr. Condon.
MR. CONDON: I can speak for the negotiating committee, because I am it. I can tell you, I can't say to you there were threats made to me verbally, but I can assure you the paper that was on the table was very clear that the plan as they rolled it out, you only had to listen in 1994 to the roll-out of the intentions and watch the flight service stations start closing around this country and watch the attrition, services and personnel, to know the path they were on, and their amended T-plan seven times in my experience in a period of two and a half years. I can tell you there was no question. It didn't have to be said. There was no question that our airport would be closed on March 31, 2000, had it not transferred. There was no question. There would be no services, so there would be no airline. In fact, I predict it would
have closed a year before that and I think that is evident with everybody. Richard was there at the time. He could certainly vouch for that. From that point of the view, the gun was to everybody's head, not just from that point of view.
MR. MACPHERSON: It was the same gun pointed in different ways, that is all. Sydney will close if you don't take it over. It is different than Halifax. The private sector would want to come in and take over Halifax.
MR. CHAIRMAN: Halifax wasn't going to close.
MR. MACPHERSON: No, Halifax wasn't going to close, but Sydney would close. So it was the community who said, no, we want to run Halifax International Airport, as compared to a private sector, and it was Sydney who said, we want to run the Sydney Airport and not have it closed.
MR. CHAIRMAN: It sounds like there were guns held to different heads, but different calibres I guess.
MR. CONDON: I think you would hear the same story across the country, not just Nova Scotia.
MR. CHAIRMAN: Right. Richard, did you want to conclude here?
MR. HURLBURT: Yes, Mr. Chairman. I want to thank you gentlemen personally for coming in this morning. It has been very enlightening to me, and I have a better feel for the picture now. Just three comments I would like to make. The tax issue, Keith, we discussed this when I wore the other hat as the warden for the municipality. I understand the municipality stating that one municipality should not take all of the burden. There always was a grant in lieu of taxes. I understand their side of it too, but I think the community has to come together and work with the commission. In saying that, I believe that our traffic flow in Yarmouth - myself, I have never used, since I have been elected here to Halifax, because in my personal life I wouldn't use a carrier, because of the price. The price is $459 or . . .
MR. HOWELL: The lowest rate is $353.
MR. HURLBURT: And you had to get it on a good day, to get the number. Then it is $25 from the airport to town, and $25 back. (Interruptions) Anyhow, I think that Air Nova is pricing themselves out of the market. I don't know why they are doing that. I pleaded with those people, and I have asked them why they are doing this, especially to our community. I think that is our highway and we have to maintain that highway. Further to that, I think the federal government still has an obligation to the airport system in our province. I am not worrying about the rest of Canada, I am worrying about our province, i.e. Yarmouth.
Mr. Chairman, in saying that, I would like to make a motion, and the motion be Urgent: to the Minister of Transportation and Public Works, and the Minister of Tourism, and the Minister of Economic Development, that they sit down with these gentlemen and see if there isn't a solution to be found, and to lobby the federal government, to make sure that all partners and all stakeholders find the solution to the problem. We have a serious problem, and our tourist season is right around the corner.
MR. CHAIRMAN: Committee members, you have heard the motion. We will just deal with the motion, gentlemen.
Would all those in favour of the motion please say Aye. Contrary minded, Nay.
The motion is carried.
I would like to, on behalf of the Standing Committee on Economic Development, thank our witnesses for coming in this morning. If you want to just take a minute, each, and make some closing comments, you would be more than welcome.
MR. CONDON: I will start since I am first in line. I would like to simply thank you for the opportunity, it is long overdue. We are grateful for your motion, grateful for your support, and look forward to working with you, hopefully, to reverse some of the downloading and make this work. You can rest assured that my thanks comes from the board and the employees of the airport, and that we will do everything in our power to work with you to try to make this a success. Thank you, again.
MR. MACPHERSON: I would just like to make the comment that it is nice that the three airports see the importance of how we are interrelated, how we depend on one another, and that we are speaking with one voice, and that we are all individual airports but we have so much in common for the betterment of this Province of Nova Scotia. I believe that is extremely important for the committee to hear. We can all sit down and talk about, if something happens to our airports, but we also have to take a positive view of this, and say, no, our airports are going to stay open, and we are going to do everything we can and be innovative in making sure that they are the economic generator for our regions.
MR. RODGERS: I will just reiterate, I guess, that we do speak with one voice, that it is important that we continue to work, because we are only as strong as our weakest link. Air traffic and air movements is critical to this province. On that note, what I would like to encourage you, Mr. Chairman, and members of the committee to do is to be very much cognizant of what the Province of New Brunswick is doing to support its air industry. The Province of Nova Scotia, I think, has to step up to the plate and meet that challenge of competition. We can't do it on our own.
What you have heard today is, you have heard from airports who say that they do not have the financial strength to do what has to be done to compete with other areas. We haven't talked about other parts of the Maritime Provinces, but I can tell you that the Province of New Brunswick is supporting, in a big way, air initiatives in that province. If we don't do the same, our base will continue to be eroded, and those numbers that I suggested before will be dramatically reduced. It will have a very serious, negative impact on this province.
MR. CHAIRMAN: Thank you very much for coming in, gentlemen. It has been our pleasure. Perhaps, committee members, we could just recess for two minutes to say good-bye to our witnesses, and then we will come back and deal with our future agenda, if that is agreeable.
[10:45 a.m. The committee recessed.]
[10:47 a.m. The committee reconvened.]
MR. CHAIRMAN: There are just a few things to deal with to my knowledge. Firstly, we have a letter from the Liberal Party House Leader informing us that Brian Boudreau now is a committee member of the Economic Development Committee. We welcome Brian to our committee. It is a great committee from my point of view, with excellent cooperation from all Parties, and we know that will continue with Mr. Boudreau on board, although I believe he is replacing Mr. Downe. We still, nonetheless, are very pleased to have you with us.
Now, our next scheduled meeting is May 30th, according to the schedule. We are going to be meeting with Mr. Andrew Terris who is Executive Director of the Nova Scotia Cultural Network. Now, I just have a question regarding today's agenda. I wasn't sure on Mr. Rodgers, just where he was to fit into the scenario, and I know some other members had similar concerns, i.e. Mr. Corbett. I am just wondering, Darlene?
MRS. DARLENE HENRY (Legislative Committees Clerk): Just to clarify, I did make several phone calls, and I did fax Mr. Rodgers the membership list, which is what they asked for. I asked if he would return my calls, which he never did for confirmation. So, if had, he would have found out what the meeting was about, and he would have been more in tune with what it is the committee was looking for. He was informed.
MR. CHAIRMAN: Yes, Mr. Corbett.
MR. CORBETT: It was enlightening to have Mr. Rodgers here. Without taking words out of Mr. Hurlburt's mouth, it was always my thought that it was important to see the Cape Breton or Sydney Airport and the Yarmouth Airport because they were on the ends. Again, it was more important to have those two places represented than Halifax. But I am glad he showed up. Most people saw by the thrust of the questions, it was about the two regional airports.
MR. HURLBURT: Excuse me, Mr. Chairman, you heard from the Halifax Airport that they need those two airports to make it work.
MR. DOOKS: It was very important to have him here and confirm that.
MR. SPEAKER: I think topics like that and subjects like that are interesting. I don't know about our interim agenda, Darlene. We need a May 30th, but what do we have after that? We should try to have it scheduled at least like we do in Public Accounts, where we try to line up two or three witnesses down the road if we can. I know we may have some time to deal with that. Do you want to put forward a name for today?
MR. HURLBURT: I put a suggestion on the table, just for the committee members to think about, and that is the chairs of the RDAs to come in and let this committee know what is going on around the province. We are hearing tidbits about the RDA in Cape Breton or in the Valley or whatever, but I would like to have like we heard here this morning.
MR. CHAIRMAN: That seems fair.
MR. CORBETT: I second what Richard said. I just wonder, there would be an awful slew of them for two hours. Should we try to book them over maybe two . . .
MR. CHAIRMAN: How many are there in the province?
MR. CORBETT: Oh, God, there are nine at least.
MR. DOOKS: Who do they report to? Do they report directly to the deputy? There must be a director the RDAs answer to in this new economic blueprint.
MR. CORBETT: I think there is a bit of a grey area, because it depends on where you are. Like in Cape Breton, CBCEDA would almost have to report to the provincial level, the municipal level, am I right, Brian?
MR. BOUDREAU: Yes.
MR. CORBETT: And the federal level, so you have a real hodgepodge there. You know I have been on this committee under the previous government, and we did have some of the RDAs in. It was extremely informative. Like the managers of the two airports, they are the grass-roots people, and I tell you, it is worthwhile.
MR. DOOKS: Also the Halifax partnership is another one that sort of sits out they are doing something. I am not quite sure, but.
MR. CORBETT: Which is not really an RDA.
MR. DOOKS: Excuse me, I know exactly what they do.
MR. CHAIRMAN: How about Frank, he had something there.
MR. CHIPMAN: I mentioned a few months back Britech Information Systems. I don't know, have they written a letter or have you contacted them yet? That is a success story in itself. They have gone from a company, about four years ago, information systems, in health care software and they have gone from about $40,000 a year up to about $1.5 million and growing. They are putting up a $1.5 million building. They are doing a world-wide marketing right out of their little village of Lawrencetown. As I said their name was brought up here two or three months ago, and I don't know where . . .
MR. CHAIRMAN: I am afraid to suggest any witnesses. The last guy we had lined up quit at the eleventh hour at the last meeting. Mr. Stokdijk, as you know was cancelled. But I was wondering if there would be any interest sometime down the road to perhaps bring in the private railway company that is operating in Nova Scotia. I think they have a different name now. This is an economic development transportation committee. If we could bring in some of these witnesses, private carriers, and just see where they see opportunities, potential and what type of regulation, or impediments are in the way because with the truck traffic on the roads, it is just beating them to death. Maybe there is more opportunity and there is something we can do to help facilitate a rail line or something.
MR. DOOKS: Where are we with this link between Sydney and Halifax. That was in the paper, and I never followed that. Is that ongoing or a study being done on that? Is that what you are talking about.
MR. CORBETT: I think there are a couple of things and I am intrigued by calling them as witnesses. We are looking at now for a tourism-based once a week for the summer months a passenger link between here and Cape Breton, and if I am not mistaken, Minister Collenette federally has said that he was looking at, if there was more money going to VIA, probably re-establishing the route permanently between here and Cape Breton. So that may be it. There were talks about the gypsum mine and the effects of what happens if that link is not there, if it is just done by road and not by rail, and if Sysco was to close and Devco's coal shipments were to be curtailed, what happens to that line? There are many factors there so it would be really interesting to talk to them.
MR. HURLBURT: One more point, Mr. Chairman. You know the federal government is downloading now, all the ports in Nova Scotia. I know our negotiating team in Yarmouth is in the final stages. It might be good for this committee to hear from that department, too. That is another downloading, and we don't want to hear what we are hearing today in five years' time.
MR. CHAIRMAN: Okay. I want to bring this to some . . .
MR. BOUDREAU: I have another suggestion, Mr. Chairman.
MR. CHAIRMAN: Absolutely.
MR. BOUDREAU: Actually in Sydney Mines, I know this is a local issue, and I know we all have . . .
MR. CHAIRMAN: Well, we have local things.
MR. BOUDREAU: In Sydney Mines there is a group down there trying to promote the fossil centre. It is a project the community has initiated. I think it would be very interesting and educational if we brought that group before the committee to hear input and perhaps this committee could help in the promotion of this project.
MR. CHAIRMAN: Perhaps we could if there is an agreement among committee members, this being May 2nd and Darlene has to have time, perhaps by May 10th, or the middle of next week, on behalf of each Party we would submit a name to Darlene and name the witness or the witnesses that we want contacted. We will try not to stray from the names, we don't want everybody in here, but perhaps we could make her job easier with the name of who we want in and the names of the personnel who she might contact. Would that be agreed?
SOME HON. MEMBERS: Yes.
MR. CHAIRMAN: Then we can schedule irrespective of which Party it is but, obviously, we are going to take one of the three and then we will just take the next two names as they fall in place sort of thing. Would that be okay?
SOME HON. MEMBERS: Yes.
MR. CHAIRMAN: So on behalf of your caucuses, we will do it in that fashion. Is that okay, Darlene?
MRS. HENRY: Yes.
MR. CHAIRMAN: Anything else?
We stand adjourned.
[The committee adjourned at 10:56 a.m.]