The future of the Canadian Aviation Market: An in-depth review

Transcript

David Duval:Canada's aviation system, a bit of a unicorn in many ways. The Parliamentary Transportation Committee has been viewing Canada very closely in terms of airline competition. Just yesterday, you might have noticed that the Competition Bureau announced at the very same committee that they were also going to start a market study on airline competition. So I'm going to ask my panel to join me. Joining me this morning to discuss some of these issues is Peter Cerda, who is the Regional Vice President for the Americas for IATA. We also have James Jackson, who is the VP of Air Service at Edmonton International, and Ryan Goepel is the President and CFO of Global Crossing Airlines and is also a founder and board member at Canada Jetlines.

Peter Cerda:Gentlemen, welcome.

James Jackson:Have a seat.

David Duval:Let's have a bit of a chat. Ryan, maybe I'll start with you.

Peter Cerda:Sure.

David Duval:Let's talk about Canada Jetlines. Let's talk about the market that you're entering. I think you're announcing Q1 results on Monday.

Peter Cerda:Yep.

David Duval:Your 2023 investor Profile shows quite a bit of upswing. Tell me about how things have been going in the context of being a leisure-based, ultra-low-cost carrier in Canada.

Ryan Goepel:So I think when we went to form Canada Jetlines, I think the original manifestation of it was to be another ULCC. And to be blunt, they didn't have enough money to do it, right? In order to do that in this country, you probably need $200 to $300 million. And that amount of capital doesn't exist from Canadian investors. It just doesn't. So I think you've seen Flair, they did it, but they didn't do it with Canadian money. And so what the goal of Canada Jetlines was is not only— they originally were targeting kind of the leisure market, kind of not dissimilar to what Sunwing was doing. As we've evolved, and this is probably the Global Crossing influence, is really more targeting the ACMI model. The ACMI model is prevalent in Europe. Global's kind of leading it in the US, and the idea is to lead it in Canada with Canada Jetlines. So the focus is significantly transferred in 2023, kind of away from maybe necessarily selling tickets and capacity, more into the ACMI model, which we think there's a space for, right? And the key to Canada in competition is where is the space you can play, right? There's 2 big monsters out there. And there are spaces where you can play, and we think there's space in the ACMI market, which means we act to kind of supplement, right? And we fill in— the analogy I use with Global and we use it with Jetlines is, you know, if aviation's a fishbowl and the scheduled carriers are the marbles, we'll be the water, right? And we'll go fill in the gaps as we can, which I think can be pretty valuable if embraced by the industry.

David Duval:Yeah.

Ryan Goepel:Because I think with, especially with the fluctuations in Canada, you know, everyone can make money in the summer. Everyone. It's, the trick is how little do you give back in the winter, right? And I think using ACMI, you can actually, it's a really valuable— that's what the Europeans have figured out, right? They've figured that out. And so they don't chase that last dollar. They ACMI it in so they don't overbuild their capacity. So when they get to the winter months, their capacity matches.

Peter Cerda:Yeah.

David Duval:So you use the flexibility of having mobile assets—

Ryan Goepel:Correct.

David Duval:To position them under the ACMI model.

Ryan Goepel:The great thing about planes is they move. They move, right? They can go to where the work is, right? So Jetlines this summer will send 5 of its aircraft to Europe, right? Because that's where the ACMI business is, right? It's kind of crazy in my brain that, you know, we don't embrace it more in Canada. So versus overbuilding your infrastructure and then giving all the money back in the winter, You know, don't chase that last 3%, employ an ACMI operator, of which, you know, there weren't any options before, and I think that's the space we see we can play.

David Duval:Peter, is that a model that we're going to see more and more of?

Peter Cerda:I think across the board you see more flexibility. You see in the US, you see in Europe, where airlines are being strategic in the way they move their airplanes. You know, many times you'll see airlines used to say, I've flown to this country or city for 50, 60, 70 years. But now you begin to see, well, I'm gonna fly there for 5 months of the year because the remaining part of the year I can't make money off of it. And that's where you see governments and cities and airports say, well, but we've been partners for years and years. But the landscape is changing. We're an industry that we have to adapt to change.

Ryan Goepel:Right.

Peter Cerda:There's no other industry in the world that is consistently changing and reinventing itself. And nowadays you see airlines like United, American, Lufthansa, Iberia, they're redeploying their airplanes on a seasonal basis based on where the demand is, not so much because I've flown there for 60 years. And I think we're going to see more of that as we move forward, and particularly because the leisure market continues to be very strong.

David Duval:Yeah.

Peter Cerda:And, you know, depending if it's summer in the north and winter in the south, you're going to move airplanes depending where there's the demand.

David Duval:I'm going to come back to you in a minute. I want to ask James, you've seen some of the modeling with respect to passenger growth trajectories and some of the forecasts. What excites you about the next 12, 18 months as part of an area, as an airport operator, part of that team? What are you looking forward to most?

James Jackson:You know, I think we work very hard on building all sorts of models to convey to airlines, you know, the value proposition and the customer base in our region, and, you know, we're very aware of the supply chain constraints, and so I think moving forward, as some of those supply chain restraints start to ease, I'll say, that is really what we're looking forward to, because We have some business that if we had the metal, we can probably mobilize, but our partners just don't have the metal, and so that's something we're really looking forward to.

David Duval:Does the planning of when you have the type of model that Ryan has described, you're in and you're out for a brief period of time, how does that affect in terms of airport planning and service development? Where does that enter into the equation?

James Jackson:I mean, it definitely enters into the equation. We want to build our model to be as malleable as possible to create value for our partners. You know, at the end of the day, that's the business we're in. We're in facilitating economic prosperity, both for residents of our region, but for our airline partners as well. And so, if we can sort of get our head up above the day-to-day operations and create flexibility and malleability in our model, then we're open and able to take advantage of And Peter, what's your view in terms of—

David Duval:are you excited about— IATA has released some information and data in the last few months comparing February '24 versus '23, and North America was up, I believe, 9%, but that's the smallest of all the regions. APAC was the largest. Are we doing something wrong out here? Is there something more that we could be doing?

Peter Cerda:No, I think in Canada's case, it's been actually a very strong recovery considering How late it took the country to reopen, how slow it was to begin the recovery. And but the last, you know, 8, 9, 10 months has been very, very strong in Canada. Comparing it to Asia is also a little bit misleading because we had China that was closed.

Ryan Goepel:Yeah.

Peter Cerda:It's taking a longer process to reopen. So obviously Asia is a global monster in terms of connectivity and flights. But I think in North America, it's been particularly in Canada, The recovery in the last quarter, half a year, has been very positive. And I think we're in the upswing and it's going to be a very strong summer in North America. But, you know, then we get winter and we have to see what happens in winter and, you know, the regulatory changes and costs. So, you know, we always have to be mindful we're going to have these pitfalls and we have to prepare. But so far, the first part of the year has been very positive here in Canada.

James Jackson:Very cool.

David Duval:You mentioned regulatory changes, the elephant in the room. Ryan, I want to come to you. Are there barriers for you? I think you have 6 Airbus in operation, you just recently took delivery of 2, I think it was.

Ryan Goepel:Yeah.

David Duval:Are there barriers besides the investment climate, which I do want to address, but are there other barriers that you can think of that where you sit in your office and you think, if things were just a bit easier in Canada, we could make a great I think it comes down to the investment side.

Ryan Goepel:I think, you know, working with Transport is— you know, I work with the FAA and Transport, so I've seen both, and EASA. I work with all 3. Transport's been great. I don't see that as a real barrier. I think what it comes down to is capital. Like, for example, the thing I find that's crazy is when you import a plane, you have to pay GST on it, and then you get the refund the next month.

David Duval:Yeah.

Ryan Goepel:But you've got to front the GST, which can be like $2 or $3 million. And so when you're in a capital-constrained environment, that's a huge burden, but it's also insane, right? Because it's basically a transaction, and then you get it back like 3 days later, but you've got to front it. And I was like, why? I think that's an example of where it's tough. I think if you think about us being an ACMI model, there's all these protections, or I guess with the foreign-owned ownership and with the way the rules work, But yet we still let Eastern European ACMI operators come in the winter at pretty discounted rates to compete, which is what makes it hard for a Canadian ACMI operator to compete. So you would think the protections would work all around. So that's probably an example. And it's never really been addressed because no one's asked for it. It's not like there hasn't been an ACMI operator here, but I think as we develop our model, we would question, okay, if they're going to bring in other— And when I was at Flair, we brought them in. I know exactly why. We did it because there wasn't an option, but if there's an option, that should be— I think that would be something we would be open to, because it would make the ACMI model for a Canadian operator work year-round, right? Because there's a demand for it in the winter to go south and to do some off-peak markets. There's tons of demand in the summer. That's not really a huge issue, right? And so that would be helpful, but I guess no one's really asked.

David Duval:No one's asked. In terms of capital, though, what about the Bonza model? Why not explore something like external capital now that under— following the Canadian government review of the Canada Transportation Act, which opened up foreign ownership to 49% with a 25% cap? It's not— won't do it, really.

Ryan Goepel:There's no money. No one wants to do it. Like, I was— I spent 2 years raising money for Flair. I raised the money for Canada Jetlines. They just— the institutional money won't touch it. And there's just not the appetite for— in just the Canadian investors, I think if you're a Canadian investor and you're looking, I want to go into aviation, you're going into Air Canada or WestJet. They're the kind of seed venture, high-risk kind of capital that you need to launch these things just doesn't exist in Canada. There's just not an appetite for it.

David Duval:So one of the things that's been discussed in Ottawa in the past few weeks even is, although some of the undercurrents kind of date back before, is looking at some of the pension funds in Canada and almost unlocking the access to some of those, because the Canadian Pension Plan Investment Board, of course, invests in airports around the world. And one of the questions is, is that would they not be interested in investing in either airport properties or airline operations and enterprises? Peter, is that something that we should be considering here in Canada from a policy perspective?

Peter Cerda:I think you're probably better suited than I for the question. Look, margins are razor thin in this industry. It's a tough, tough industry. You know, how we obtain funds to keep airlines afloat or airports moving forward, it's a challenge. It's a challenging environment because Because we are competing on a global scale. We are an industry of risk, and it's difficult to convince, and particularly barriers. This is a very costly industry in a challenging environment here in Canada, and we have other countries around the world that are in a similar situation where you just can't get air transport off the ground because it's financially challenging.

David Duval:Right.

Peter Cerda:Because of the hurdles that have to come over—

David Duval:overcome.

Peter Cerda:And many times these governments don't want to open the playing field. They don't want to facilitate the industry kind of going on their own and trying to be competitive and trying to create a structure that's going to benefit not only to continue to grow and be financially sound and provide a good service, but be able to be competitive.

Ryan Goepel:Right.

Peter Cerda:And I think that's some of the challenges that we face here in Canada. It's the partnership with— we talked about it yesterday, the partnership between the industry and government. Where are we?

James Jackson:Right.

Peter Cerda:And I sometimes think we're at a crossroad and it's a love-hate relationship. But then you see other countries where it does work and those airlines are flourishing, they're able to grow, the industry is doing well. Well, and, and, and the, the country is doing well thanks to aviation. So it really comes to partnership, but it has to be a very transparent, open, and fair partnership where both parties win and you create the landscape which permits everyone to succeed.

David Duval:Why doesn't Canada have a national aviation strategy? James, what do you— I mean, why are we not— why are we not there?

Ryan Goepel:We do. It's called Air Canada.

David Duval:What are we thinking? Australia's got a green paper out, their white paper is coming out shortly.

James Jackson:I mean, I come from the tourism industry. We, until recently, didn't even have a national tourism strategy. So, I think there's some type of precedent for not having national-level strategies. That focus on inbound investment. Going back to your comment about the airline versus airport infrastructure, you know, there are Canadian pension funds who invest in airports globally, so it's not like the expertise in the ecosystem doesn't exist. It definitely exists. There's definitely willingness, and so we'll see, you know, how things unfold if and when there is a change in government. Who knows? So, there are advantages of having the system that we do have. Having said that, though, it's an extremely cost-competitive country to do business in, and so maybe that is a contributing factor to why there isn't sort of an incentive-oriented strategy.

David Duval:Maybe we need to host this conference in Ottawa next time and Well, as I've said at the beginning, they've been discussing this in the Transportation Committee in Parliament, and Ryan, one of the things that has come up several times is the high burden, or the substantial burden, that carriers face with respect to charges and fees and taxes. Canada has a user-pay model. We've heard it yesterday at the conference. Is that a model that you think is sustainable? that should be thought about in terms of shifting, and what does the next model look like? And then as a kind of a follow-up to that, what does the regulatory system look like that may have to adapt as a result?

Ryan Goepel:Well, if you think about, you know, the AIF fee, right? So effectively, when you talk about pensions investing in airlines, right now it's the passengers who invest in airports, right? The passengers fund the airports, and that drives So it's— and that's kind of how that mechanism would work. That's kind of something that doesn't exist pretty much anywhere else in the world, right?

Peter Cerda:Right.

Ryan Goepel:You know, and so where the value of the pensions funds or whatever funds investing in airports, because airports do need the money to operate and grow and do all that, no one denies that. But right now it's a passenger pay model. And but the— I think the problem is, like you do, when you look at your ticket in Canada and you look at the breakdown of fees, it's The airlines get the— it's really disproportionate. And I think, I don't know what can be done about some of the other fees, whether it's CATSA or some of those others. They're just different. They're not market for the world, right? And so airlines compete in the world market, right? We compete for the metal with every other airline in the world. And so if there's an inefficiency anywhere in your system, you're gonna lose, right?

David Duval:Yeah.

Ryan Goepel:The metal will go. There's limitations of metal. There's a limitation of pilots. And so the metal— right now we're metal constrained. Last year in the US, we were pilot constrained. Now we're metal constrained. The metal's going to where they can get their best return. And if you're not competitive as a country with— for whatever reason, you don't get the metal. And so I think, yeah, it needs to change. And I think maybe we rethink how things are funded.

David Duval:Yeah.

Ryan Goepel:And so it's not really the passenger who pays, because it's ultimately the passenger who pays. And what ends up happening, and we've seen it, we called it the Flair effect when we were there, when the rates come down, people fly more. Like, Flair was— when we were at Flair, we weren't competing with Air Canada, we were competing with the truck, you know, the willingness to drive from Regina to Edmonton versus fly, because it costs so much, right? And so, you know, we as a country have made the designation that we're going to make the passengers pay for all this infrastructure, all these— through all these taxes, so they just fly less. Supply and demand. So if we—

David Duval:So, Peter, an economist, or some economists, might say user-pay model is actually efficient. Those who consume the service or the good pay for the service or the good. Counter that and explain why maybe that won't work in Canada anymore. Maybe it's worked up until now, maybe it has, maybe it hasn't, but why might it Sure, should it change?

Peter Cerda:You see in Canada, it's about $35, $40, and the US is $6. I mean, huge divergence in terms of pricing, one. And, you know, we talked about it yesterday, why are the ULCCs not successful in Canada? But we also have to ask, you know, in the US, ULCCs is a huge competitor in the market. They don't fly to Canada. You know, you don't see Spirit, you don't see Southwest, But they all fly to the border.

David Duval:Yeah.

Peter Cerda:So, when you're in Montreal, you're going to have people who will actually drive to the border, cross the border, and go to Plattsburgh and get on a Spirit or US Airways flight down into Fort Lauderdale or Miami or wherever because it's significantly cheaper. And what are these airports south of the border doing? They're advertising as, we're Canada's airport to the south, and they're offering free parking and very easy So there's something that's not working. And then the amount of money that airports have to pay to provinces, it's about $400 million a year. $400 million.

Ryan Goepel:Mm-hmm.

Peter Cerda:Now where is it going? Is it being reinvested into the airport system? No, it's going to the national coffers in most cases. And you're subsidizing hospitals, roads. We're not saying that's not important, but the industry is subsidizing something that You know, the provinces and federal government should be looking at it from a different perspective. It seems that the industry is held accountable and in handcuffs to subsidize and pay for other things, and then we struggle to have the good infrastructure to be competitive, to keep our airlines afloat. Now, we've had 2 airlines have gone almost bankrupt this year, one has. So, it's a challenging environment and it doesn't— and it's not going to get any easier. So, you want to stimulate more connectivity, You want more, but what you're doing actually is you're stifling it. In a country that is so heavily dependent on it, I was looking at Flightradar yesterday, you begin to see all the airplanes going up north to the mining towns, to the fishing. If you didn't have air service, those communities would not exist, just would not, because you don't have high rail service like you do in Europe. You don't have, you know, getting there is not 9, 10 hours. So air service in this country is essential. And sometimes it's hard for me to understand, does government really understand that? And at times I think hockey is no longer the national sport. I think the national sport is just having disputes in Parliament, trying to see, you know, just drag out and have, you know, what can we do to make this industry More burdensome, more troubling, and to me, that's stifling in a country that's so dependent on air service.

David Duval:And it's not even Parliament, it's Senate. We've had, over 10 years ago now, we've had 2 standing Senate committees that looked at and assessed the role of airports, the role of air transport, and it probably, maybe we can conclude that air transport 100% is an economic fulcrum in many respects for the economy. How do we get The government to see this? And maybe, James, I'll ask you. Edmonton International pays rent, ground rent. Ostensibly, the argument being is that the federal government owns the land on which the airport is built. You're paying rent. Now, some would argue that you've paid enough by this point. Others would suggest that maybe this is a proxy for regulation, so that the government is at least keeping tabs on how things are developing.

James Jackson:What would you like to see changed with Oh, wouldn't we all like to have, you know, zero or 1-cent mortgages or rent? That would be great, but the reality is today we are paying rent, and I think a conversation moving forward about improving our model would be great, because similarly to the airlines, airports are constrained by the competitive environment, and by that I mean I mean, you know, you can move your metal anywhere you want, but there's a certain level of expectation for infrastructure, and that is another compounding factor on the whole equation, is that airports are also competing with each other globally, and there's sort of an arms race happening with the infrastructure, and that gets very expensive very fast. I mean, right now we've got, I think, $175 million in capital deployed today. And so, you know, that's a fair amount of money and it's important. We're invested in our community and invested in creating value for our partners, but there's a lot that goes into that. And when you have a 50, 60, 70-year-old piece of infrastructure that's coming due, you know, the money's got to come from somewhere and we have to look at our, you know, all of our costs across the board.

Peter Cerda:I just want to add, in some cases, I think we have to look at airports as probably the most important infrastructure that we have in these communities, because if you don't have the airport infrastructure, you don't have people coming, you don't have goods, and in some communities within Canada, then the livelihoods of those small towns, small communities will disappear. So really, if you don't have the airport and the airport's able to sustain itself, grow, provide the right infrastructure, the rest of the community, the ecosystem in those communities will end up dying or moving somewhere else.

Ryan Goepel:Yeah.

Peter Cerda:So, you know, many times we won't agree on everything, but in these type of things, you need to have the right infrastructure to be able to prosper and to grow and to bring more business and bring more social well-being to your communities. But again, I kind of deflect on government. Are they really understanding Do they understand how important it is to have the right infrastructure at the right cost to stimulate more connectivity?

David Duval:Would you agree with that, Ryan?

Ryan Goepel:Yeah, well, you know, obviously you have to have somewhere to land, right? So I think the tough part is there's like, you know, 5 major kind of airports in Canada, and then the rest are kind of fighting for attention, right? Because our population is so focused on such small areas.

Peter Cerda:Right.

Ryan Goepel:And so how do you balance that out with kind of the scale needs? And that's tough. We're a massive, massive country, and we're spreading infrastructure costs across a very small investment base, which is the population, right? And so I think that's perennially been the challenge in Canada.

David Duval:And so, yeah, again, it comes down to the priority of the government as to Is the long linear nature of Canada and the sparse population as 2 variables of the equation that would determine the success of a carrier such as Canada Jetlines? Is it that, or is it the user pay experience and the fact that government doesn't understand and things should be cheaper for an operator?

Ryan Goepel:Yeah, I'm trying— not trying to— I think you only can charge what the market can bear.

James Jackson:Right.

Ryan Goepel:And the market, you know, the market can bear what it can, and if a huge percentage of it is going to not support the operation, then the math stops working, right? And so I think from the question is, is how many aircraft really matter? How many aircraft should there be in any given month to support whatever we support in Canada? And there's a lot of debate on what that number is, and the question is, can you stimulate more demand? and with lower fares, right? Like, it's one thing, like, you know, right now if I wanted to fly today to Vancouver, because I looked, it's like $600 one way, right? If I was— when I live in Miami now, to fly the same day, it's $100 to a similar kind of flight, and there'd be multiple options for that. And so you don't fly, you know? I think people just decide not to go. And so I think definitely we saw that at Flair, like, when we started introducing Those really low fares, we saw more people flying. The trick we learned at Flair was you didn't need to be a dollar— I think there's a study that's been done, is I think for $5, 90% of Canadians would switch airlines. It's a really tiny—

David Duval:They're that sensitive.

Ryan Goepel:It's so price sensitive. So you didn't need to offer $9 fares, which isn't sustainable either. You just needed to be $10 cheaper or $20 cheaper. But there's a number that can work that allow for more airlines to exist.

James Jackson:And if I may, to help maybe some of the international folks in the room, like 80% of Canada's population lives within 100 kilometers of the US border, so we have incredible leakage south. So we tend— we're talking about government, and we tend to live in our echo chamber talking to Canadians about Canada, but Canadians are Slipping through the ground border.

Ryan Goepel:Highly price sensitive.

James Jackson:Yeah, and then on that, and I'm going to get this wrong, but our stage lengths are twice, 3 times on average longer. So when you're flying from Miami to New York or wherever, they can flip that plane—

Ryan Goepel:Right, 3 or 4 times.

James Jackson:3 or 4 times more than a Canadian operator. So it's a challenging jurisdiction to operate in, and I think As an industry, we can collaborate with government by sharing some of those rudimentary-level realities with government to help them empower the industry to create more value.

David Duval:Peter, is Canada a 2.5-airline market?

Peter Cerda:I would say no. I think you just have to create the conditions that will permit That competition to come in. Today, probably it is, but it shouldn't be. I mean, this should be an open market. This is a country where per capita you have Canadians travel about 2.2 times a year, so it's a country where Canadians actually travel quite a lot. But the environment, the landscape is set up for those 2 airlines right now, and, you know, it's unfortunate because I think it is a country with huge potential. Yeah. Possibilities to grow and get more people to travel, but competition is heavy. And you also have to look to the south. The south is also looking to the north, and, you know, they'll try to do whatever they could do to lure some of that traffic away. But you have to create the landscape in order to have that dialogue, and I don't think you have that landscape at this point where you can have a serious discussion on it.

David Duval:That seems to be the message that parliamentarians are hearing in the Transportation Committee, that we just do not have the system correct. And case in point, for instance, is the revisions, and we're waiting for the Gazette to be published from the Canadian government after the review that the Canadian Transportation Agency undertook with respect to the Air Passenger Protection Regulations. This is causing, in fact, if they were introduced in 2019, and by my count, they've almost changed every year since then, It's creating an uncertain environment. Do you think about those often, Ryan? Do they concern you, those passenger protection regulations?

Ryan Goepel:Well, you know, obviously if you're on that Facebook platform, there's a lot on there, and I was at Flair, so there was a lot on there. I think the passenger rights that you see in Europe are so— the dynamic it creates, right, is it creates a disincentive to cancel flights. if it's put in properly. And the way Europe has addressed that is, this is why ACMI exists in Europe, right? Because the consequences of cancelling a flight you sell are so great, you make sure you have the capacity, right?

David Duval:Yeah.

Ryan Goepel:I don't think the consequences are that great. They're definitely not in the US. They're not that great in Canada yet. Like, it's not that strong. But the other part is, being an airline, I know how hard it is to to do this every day, and we're stretched. There's no slack in the model anymore, right? Like, every plane's flying. Every plane's flying. I think people underappreciate just how much, you know, we do this for a reason. It's a very— it's so safe because there's so many redundancies, there's so many checks, there's so many hurdles to taking off that are there to protect the passenger. But it happens more than people realize, and when there's no slack, it creates the delays. So what's the balance between an airline, you know, there might be a perception the airline is out to kind of screw the passenger or like, you know, make that extra dollar. It's like, no, we all want to fly. It's highly disruptive to us not to take off. It's highly disruptive for us not to land. It's incredibly expensive without the passenger rights. We don't need any more motivation to leave on time. It's just when you are— when you have no spare capacity, you have no redundancy to—

Peter Cerda:when stuff happens, like literally stuff happens on every And I think we have to be cognizant to the point that you were saying that passengers will switch airlines for $5?

Ryan Goepel:Yeah.

Peter Cerda:So, if a passenger is consistently having a bad experience on one airline, they're going to shift.

Ryan Goepel:Actually, they don't. They'll come back for $5.

Peter Cerda:Well, I think one of the things, and going back to government, is sharing Shared accountability.

Ryan Goepel:Yeah.

Peter Cerda:Because it is very easy to impose the blame on the carrier, but when there's storms or Nav Canada or ATC begins to reroute airplanes and deviate because of weather, or you land and there's just an enormous amount of congestion, or you just don't have enough staff to process people through immigration or security and you begin to misconnect, well, that's Out of the airline's control.

James Jackson:Mm-hmm.

Peter Cerda:So, but it's deemed, airlines, you're responsible, but I was just following orders, or there was not enough staffing. So shared accountability is something we need to have a discussion on when you do create these consumer regulations to protect, and consumers deserve to have regulations that will protect when something has gone wrong. But the shared accountability is who should be Who should bear the burden? Who should be held accountable? If it's not in the airline's responsibility to control because there was ATC reroutings or lack of staffing, well, then wherever that entity falls under should be held accountable.

David Duval:In Europe, they've spent the last 20 years debating exceptional circumstances, extraordinary circumstances. We're about to get exceptional circumstances. They've been debating what's inherent in the operation of an airline. Fairly significant case studies that discuss this. Is Canada— are we about to enter into that period of legislative—

Peter Cerda:I think the whole world is, and I was mentioning it yesterday. Social media is probably our best worst enemy out there, because when something goes wrong, it's actually in many cases, it's on social media before even the airline becomes aware that the airplane has been impacted. And actually, I've become a pretty active user in terms of really calling out governments. And I've seen around the world where you get, you know, Miami's a perfect example where I live. I mean, you could be literally in immigration for 3 and a half hours. If you're a US citizen, you could be an hour and a half. It's 3 and a half hours. How does an airline, you know, protect its passengers or do its planning? So, you know, you used to be able to commute, you know, Between international and a domestic, hour and a half. Now it's 3 hours, but if you go to Miami, you're gonna need 5 hours. So when the system works, then you have 5 hours just to kill and say, what the hell am I doing? But in most cases on a Saturday, you're gonna be stuck for 3 hours on immigration. That's inhumane. So to me, what I tell in the US, what are you doing about it? But then we had the Secretary of Transport Telling the airlines, if you continue to do what you do, I'm going to impose all these series of regulations. Well, you know what, you need enough staffing to help us not get to that problem. So, it's becoming— it's not only a Canadian issue, it's not only a US, it's becoming a systemic issue around the globe because manpower is an issue and, you know, working in security or immigration are not attractive positions, it seems.

David Duval:We do have a couple of questions here I want to get from the audience, but James, Just briefly, shared accountability, you don't shy away from that, of course. Airports, of course, embrace the fact that customers are customers are customers, and no one really owns the customer, even though the contract is between the carrier and the customer. Where do you land on this?

James Jackson:Yeah, I mean, it takes 12 different organizations to get that passenger where they're going, and so I think we all have a duty of care to take care of that passenger. Crafting policy to try to speak directly to the infinity amount of permutations of things that can go wrong on any given day is extremely difficult. And so I think this is sort of our generational opportunity to craft the narrative, collaborate, and exemplify, you know, what we do every day. We, 12, 15 organizations, get that passenger where they're going. So, this is our opportunity to work with government, collaborate with each other, and put the passenger experience at the centre, and then hopefully craft policy that creates value for everyone.

David Duval:It's a system. Yep, it's basically a system. Thank you, folks, for some of the questions. First one here is the— I guess, Ryan, this is for you— the AMCI model stronger now due to supply chain issues?

Ryan Goepel:Well, you know, I'd like to think so. I think what the AMCI model does is It's designed on flexibility. I think especially as deliveries have not come in and tickets have been sold, there's money to be made. And so I think from our perspective, our ability to operate, you know, in our first— our second year of operation, we operated to 52 countries and 400 airports. And to be able to have that kind of flexibility as a resource for different airlines, I think, is— we're seeing that there's a significant demand for it around.

David Duval:Nice. Next one here. Because of the AIF, airports and airlines are misaligned. Why not join forces to find public funding for airports? Like roads, some should be public, some toll. Maybe James will—

James Jackson:Yes, I think that would be great.

Peter Cerda:I mean, we—

James Jackson:airports tap into federal funding all the time. We secured some major funding for our cargo, international cargo hub expansion, and so So we're extremely appreciative to our governmental partners for that. I think if there was sort of a reinvigoration of some of those federal programs, that would be valuable, but I think, you know, some days you try to eat an entire elephant with something like this, and without maybe a federal-level strategy that some of these funding programs can stand you know, draft below. It can be difficult because sometimes certain programs can affect others. So yeah, I think it's a great idea and we can all work together to make it happen.

David Duval:Peter, do you have a thought on that?

Peter Cerda:No, I tend to agree. I think we should be open to look at different models, different ways of doing it, particularly if we haven't been successful in the past.

David Duval:Fair enough. How can the industry engage with government to understand the value of Air Service and the roadblocks that government creates for airlines? There's a grand touring question. Who would like to—

Peter Cerda:Well, I think James said, I think as an industry we have to work better collaboratively, and we have to educate government. We also have to be fair to government. They're managing multiple types of issues and agendas, and we are in an industry which is very complex, it's very difficult to understand. They only see one part of the story, and it's either good or bad. And I think moving forward as an industry, we have to collaborate closely between airports, airlines, the travel and tourism community, the local communities that are moving their developments. We have to do a better job telling the message, telling how complex it is, educating them. And again, it's not a Canadian problem. I think it's a global problem. Regulators are sometimes looking at it from the screen as a passenger and they only see one view of it instead of really trying to understand the complexities of the entire system and how difficult it is to move airplanes day in and day out and how complex an airport is. It's a challenging environment and again, razor-thin industry.

James Jackson:Thank you.

Peter Cerda:The general public and government sometimes think we're making billions of dollars because an airplane costs so much, it's sexy, it's in the air. It's a tough industry. It's a very difficult, cutthroat industry, and I think we have to educate in a better way.

David Duval:I think that's an absolutely perfect place to stop. Ladies and gentlemen, please join me in thanking your panelists.

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