Indigenous and Northern Affairs Committee on May 8th, 2024

[The Chair, Liberal, John Aldag]

Good afternoon, everyone. I call this meeting to order.

Welcome to meeting number 107 of the House of Commons Standing Committee on Indigenous and Northern Affairs. We recognize that we meet on the unceded and traditional territory of the Algonquin and Anishinabe peoples.

Pursuant to Standing Order 108(2) and the motion adopted on Wednesday, April 10, 2024, the committee is meeting to study nutrition north Canada.

Now that we're in session, I'd like to remind everybody, both in the room and online, that photos are not allowed from this point until we adjourn.

We have a couple of points related to avoiding audio feedback that I'll take us through as well. We're trying to create a safe workplace for our staff, particularly our interpreters, so we have a new system in place. There are headsets here. You'll have to plug them in. When you're not using your headset, we ask that you place your earpiece down on the dot, the circle, that has been put on the table. You can select floor—which is the language being spoken—English or French. English is channel one; French is channel two. There are audio controls there. You don't have to touch the buttons; we have a team that will turn your microphones on and off. The big thing is making sure that when the red light is on, an earpiece does not go anywhere near the microphone. That's what can cause the audio feedback, so we just ask everybody to be very aware of that.

That's the introduction.

We have some witnesses for our first hour.

I'd like to thank all of you for making yourselves available to be here with us.

The representatives we have include, from Calm Air International, Gary Bell, president and chief executive officer; from Canadian North, Shelly De Caria, president and chief executive officer; from Kimik Co-operative Ltd., Jean-Pierre Goulet, general manager; and from The North West Company, Dan McConnell, chief executive officer.

I understand that everybody will have five minutes for their opening statement. I use a handy card system here, so when there are 30 seconds left, I'll give you the yellow card. When the time's up, I'll give you the red card. Don't stop mid-sentence, but finish up your thoughts. The same thing goes when we get into the rounds of questions. Some of the members like to push the clock, so I'll be giving the cards to them as well. They tend to look towards the witnesses. If the witnesses are mid-sentence, they can just wind up their thoughts, and then we'll move on to the next round of questions.

I don't know if anybody wants to go first. I have the order listed as Calm Air, Canadian North, Kimik Co-operative, and The North West Company, so if you're good with that order, then we'll go to Mr. Bell first.

When you're ready, the floor is yours for your five-minute opening statement.

[Gary Bell, President and Chief Executive Officer, Calm Air International LP]

Good afternoon, Mr. Chair and honourable members of the committee.

Thank you very much for the opportunity to present today. I am pleased to join you in my capacity as president and CEO of Calm Air.

As a regional airline established in 1962, Calm Air now provides essential scheduled passenger and cargo services to 19 communities across central Nunavut and northern Manitoba. Operating 15 aircraft and employing 600 Canadians, including 150 Inuit and first nations, Calm Air also provides charter services across North America.

At Calm Air, we know we are an essential part of the communities we serve. We take our responsibility very seriously and do business as a responsible and conscientious community partner. For instance, of interest with respect to the study, we allow all Inuit beneficiaries in our network to ship locally harvested food, which is called country food, for free within our scheduled network.

With that context, I would like to share the following with the committee for consideration.

First, Calm Air is not a direct participant in the nutrition north Canada program. We appreciate that a considerable amount of the cargo we handle is food, and we prioritize the movement of that cargo accordingly. However, we price all freight consistently, and in that way, the cost to ship food is no different from the cost to ship other essential cargo, like medical supplies, industrial material or household goods.

Second, we know that getting freight transported quickly and efficiently across our network is vital in meeting our commitment to the communities we serve. Calm Air transports over 25 million pounds of freight annually, and we've made significant investments to make sure we're delivering on time. The key measures we've implemented include specifically modifying our aircraft to be “combi”, or combination aircraft, which allows us to transport passengers and palletized freight on the same flights. This both subsidizes the freight, through cost-sharing with passenger sales, and allows us to increase frequencies into smaller markets.

We've also built a series of climate-controlled warehouses across our network in Nunavut, which allows us to fly freight 24 hours a day. It gives customers the opportunity to pick up their goods at times that are convenient to their schedules and allows us to recover operations much more quickly in the event of weather disruptions.

Third, we are deeply concerned with affordability. We know that part of providing the reliable service Calm Air prides itself on is our obligation to ensure that people can access our services from a price perspective. Right now, Calm Air's prices on freight are among the lowest in the Arctic, and our cargo business is not one of our profit drivers. We approach freight with a mind to finding a balance between offering affordable services and making sure our business remains sustainable.

Finally, while some of the cost drivers associated with freight services to the north—specialized equipment or the fact that very little cargo comes south, so the freight will need to bear the cost of travelling both ways—are problems you would expect to see in remote destinations, most of what is driving the cost today might not be apparent simply by looking at our route map. The costs associated with operating aircraft have risen exponentially, far outpacing even the elevated levels of inflation we see day-to-day. Fuel, labour rates, parts and maintenance are all costs that have risen significantly in the wake of the disruption caused by the pandemic.

Perhaps most importantly for this committee, government policy decisions made without proper consideration for the realities of life in the north also drive cost.

For instance, Transport Canada's use of the user pay principle disadvantages remote destinations, where there are few residents to soak up the cost burdens of aviation infrastructure. Apply this to a carton of milk. That carton, when shipped, doesn't just cover the cost of the plane; it covers the cost of the plane, both airports and all of the service providers in between.

Changes to the pilot fatigue requirements in December 2019 mean that we have had to add additional costs, being pilots, and change how we schedule airline service.

Finally, Canada's carbon tax has also increased fuel costs in certain remote destinations.

In conclusion, Calm Air prides itself on being a responsible partner in Canada's northern ecosystem. We are willing to work closely with government on policy solutions that keep aviation services in the north, including the shipment of food, sustainable for all.

Again, thank you for your invite here today. I appreciate any questions you will have.

[The Chair, Liberal, John Aldag]

Thank you, Mr. Bell, for your opening statement.

You were just under the five-minute mark, and I appreciate that.

Next, we'll go to Canadian North, with Ms. De Caria.

When you are ready, the floor is yours for five minutes.

[Shelly De Caria, President and Chief Executive Officer, Canadian North Inc.]

[Witness spoke in Inuktitut]

[English]

Good afternoon, Mr. Chair and members of the committee. I appreciate the opportunity to address this committee today regarding the vital role of cargo delivery, particularly food transport, in the Canadian Arctic.

[Witness spoke in Inuktitut]

[English]

As an Inuk-born person, born and raised in the northern community of Kuujjuaq, I understand more than many what it means to struggle because of a lack of access to affordable food. As a child, I remember the hardship and strain it caused. Most of all, I remember going to bed hungry.

As you know, the issue is disproportionately worse in the north than anywhere else in this country, with rates of household food insecurity reaching 17%, 22%, 35% and 57% in the Yukon, the Northwest Territories, Nunavik and Nunavut, respectively.

At Canadian North, we know that we are not only providing a service; our aircraft touching down is seen by many as a lifeline in northern communities. In short, what we provide is an essential service. Our commitment to this essential service is unwavering, even in the face of unprecedented financial and logistical challenges.

First and foremost, it's important to note that our operations in the Canadian Arctic are not subsidized. I'll repeat that. We get zero subsidies under the nutrition north program. We are merely a conduit for the grocery and retail companies that are receiving those NNP subsidies to get their products on northern stores' shelves. Because of that, we must set rates that not only cover the cost of delivering cargo, including food, but allow for a minimum margin. Generally, I can say it is no more than 1%.

While NNP subsidies have been increasing, at Canadian North, our margins continue to shrink. Over the past two years, we've encountered significant cost increases, particularly in workforce retention and training, as well as fuel, infrastructure costs and key equipment purchases and maintenance. These challenges are exacerbated by strict and limiting conditions on us due to the original combination of Canadian North and First Air.

Despite these constraints, we continue to comply with regulations and strive to operate efficiently, while prioritizing serving the needs of our northern communities. As many of you are aware, operating in the north comes with its own set of unique challenges. There's inconsistent and insufficient airport infrastructure, like undersized gravel runways. Air navigation support is unreliable, primarily because of dangerously low staffing and shortages. On top of it all, there is a fuel supply shortage.

These are just a few examples of what we are facing. Moreover, our operations are frequently impacted by unpredictable weather conditions, darkness, freezing cold, whiteout snowstorms and more, all of which can delay deliveries for days at a time. There are, on average, 175 cancellations a month.

While we acknowledge the importance of the nutrition north program, we do not have any direct knowledge of how it's utilized by retailers to reduce food costs for northern residents. What we do know is that the subsidy is intended to benefit the Inuit and the communities we serve directly, yet we have seen mounting concerns that it is inadequate in offsetting the skyrocketing costs of food and food transportation. Something just isn't right.

I will wrap up my time by saying that the challenges we face in delivering essential cargo to communities across the Canadian Arctic are multi-faceted and complex. Still, we remain committed to providing this essential service to our communities.

I urge the committee to consider the unique circumstances and constraints we operate under. Collaborative efforts between government, industry and stakeholders are essential in addressing these challenges and ensuring the well-being of all northern residents.

We at Canadian North often say we are committed to making life better in the communities we serve. Personally, I think this should be the commitment made by everyone here today.

[Witness spoke in Inuktitut]

[English]

Thank you for your time. I'm happy to address any questions you may have.

[The Chair, Liberal, John Aldag]

Thank you so much for your opening comments.

Next, we'll go to Mr. Goulet.

When you're ready, the floor is yours for five minutes.

[Jean-Pierre Goulet, General Manager, Kimik Co-operative Ltd.]

Thank you, Mr. Chair.

I represent Kimik Co-op, based in Kimmirut, formerly known as Lake Harbour.

Having a business in the Arctic is one thing, but operating it is another. It is very complicated. The operating costs are disproportionate to operating costs for businesses in the south.

Electricity costs 55 cents a kilowatt, while in the south they pay 10 cents or 15 cents. Water costs $90 a cubic metre, while in the south it might cost $2 to $5 a cubic metre where there are water metres. Dual energy programs are not available to help the business.

What is more, maintenance costs are truly extreme. There is a lack of qualified tradespeople at the local level, such as plumbers, electricians or carpenters. In many cases, they have to be flown in.

Our insurance premiums have tripled because of our geographic situation. In the past three years, they have gone from $4,500 to $14,000 a month.

There are also the maintenance costs associated with the Nutrition North Canada program. Providing discounts to our clients through Nutrition North Canada is both an obligation and a pleasure. It is our duty: We receive the money, we distribute it to the clients. However, to distribute that money, we need to have a computer system that meets Nutrition North Canada requirements. Not every software program has that capacity. Supply is limited. Once we get our hands on the software, it then needs daily updates. This costs money and that cost is not covered by Nutrition North Canada.

There has also been an influx of new merchants. New merchants constantly appear online offering very low or no shipping fees. These merchants are looking for a share of the market. For our part, we have to pay shipping fees to the airline companies. The clients have limited funds and want to optimize the cost. The merchant offering the lowest prices wins. We cannot compete. This pushes the price of food up. Sales volumes are going down every month, not because consumers are eating less, but because they are buying their food online. An online store based in Ottawa, Montreal or Winnipeg does not have the same operating costs that we do, as I mentioned earlier. We have to absorb these costs; those merchants do not.

The Nutrition North Canada program should take this into account and perhaps review the amount of the contributions made to merchants located in the Arctic.

We understand that air transportation is subject to very strict regulations from Transport Canada or other organizations, but the fact remains that it is hard to be a supplier right now. For reasons unbeknownst to us, flights are cancelled because of the weather and then 15 minutes later a plane lands, without merchandise, to pick up someone in the community. The plane arrives quickly and leaves again carrying just one passenger, but no cargo arrives. We have to wonder if that is efficient.

Thank you for your time and for providing the Kimik Co‑operative the opportunity to testify.

Qujannamiik. Thank you.

[The Chair, Liberal, John Aldag]

Thank you.

We'll now hear from Mr. McConnell from North West Company for the last of the five-minute opening statements.

When you're ready, the floor is yours.

[Dan McConnell, Chief Executive Officer, North West Company]

Thank you.

Good afternoon, committee members, and thank you for the invitation. The North West Company is committed to working with parliamentarians to address persistently high food costs in the north. We are pleased to be here.

The North West Company is Canada's primary retailer serving northern and remote communities. We also operate stores in southern Canada, including some under the Giant Tiger brand, and serve communities in Alaska, the south Pacific and the Caribbean. We are more than just a store. We are a primary source of employment and a major economic partner in the places where we operate.

We're here to discuss nutrition north. However, we must put it into context. The nutrition north program is an important lifeline for reducing grocery costs by providing a consumer subsidy through retailers like North West. However, it does not fix the underlying infrastructure and supply chain issues that cause high costs in the first place, and neither does it address inflation.

Communities receiving year-round nutrition north retail subsidies do not have year-round road, rail or marine access. Most of these communities lack port facilities and appropriate mooring infrastructure, warehouses and other basic logistics infrastructure. Most do not have paved runways, hangars or sufficient airport weather services. Because of the historic lack of investment in northern infrastructure, these communities are isolated from the global supply chain, making them harder to reach and more difficult to serve.

These communities must rely on service by air. Where possible, we take advantage of the limited number of sealift deliveries arriving in each community in the summer and the short duration of winter roads to resupply staple goods at the lowest possible cost. We work with the few transportation companies serving these communities.

At the best of times, the state of infrastructure in the Arctic and remote indigenous communities makes supplying our stores challenging and costly. Weather and environmental challenges sometimes make it almost impossible. For example, after wildfires devastated the Northwest Territories in 2023, subsequent droughts on the Mackenzie River disrupted our ability to barge goods into the western Arctic.

Close to 10% of our scheduled flights are cancelled due to weather, and 60% of pre-takeoff cancellations occur because community airports do not have sufficient de-icing capability. Melting permafrost is putting infrastructure at risk, shortening ice road season, damaging runways and creating other challenges that drive up the costs of operating in the north.

There are other high operational costs in the north that nutrition north is not designed to subsidize. These include the high cost of energy, which in Iqaluit is almost six times more than in Winnipeg, and other utility costs, such as water. There is a lack of both heated and cold storage warehousing available to rent, which limits how much we can store at any one time. The cost of building in the north is substantially higher than in the south. Site maintenance costs in the north are three to five times higher than in the south.

The nutrition north program improves the accessibility of healthy foods and significantly reduces the cost of nutritious food in our stores. However, it does not fix the underlying inflationary issues that drive retail prices, such as fuel or cost of goods. The nutrition north subsidy lacks the investment needed to keep pace with inflation. As a result, its positive impact has eroded.

The subsidy, however, remains impactful. It still has the ability to efficiently lower prices for consumers. For example, because of the nutrition north subsidy, a four-litre jug of milk is $4.09 in Oxford House, Manitoba. Without the subsidy, it would be $18.28. In Arctic Bay, Nunavut, it is $6.49 instead of $61.32. For reference, in Winnipeg, where I live, it costs $5.59.

We understand that the members have questions about how the subsidy is passed along to northerners. In our NNC-eligible stores, the subsidy is applied to eligible items at the appropriate subsidy level. Our shelf tags reflect the retail price of goods inclusive of the subsidy. The value of the subsidy for items purchased is printed on each customer receipt.

I want to further emphasize that the full value of the subsidy is passed on to our customers. We are independently audited by Canada and consistently found in compliance with the program's directive to pass along the entire subsidy to our customers. Our pricing team provides the Government of Canada with over 83,000 detailed, item-level records each month, and we are subject to random audits each month from the claims processor. We take our commitments to our customers, transparency and accountability very seriously.

We want to leave the members with one main message: The north requires significant attention and investment. We are your partner in northern development, and we look forward to any questions you might have.

Thank you.

[The Chair, Liberal, John Aldag]

Thank you so much.

We're going to get into our first round of questions. The first four are six minutes each.

From the Conservatives, we'll have Mr. Zimmer up first for his six minutes.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Thank you, Chair.

Thank you, folks, for coming to the INAN committee today to talk about nutrition north and food costs.

One of you mentioned that you are from Nunavut. I've been up there and saw first-hand some of the crazy food prices. It's insane. You mentioned some of the food prices yourself and what the subsidy is supposed to make more affordable, I guess, for people who live in the north, but for me, it's still a question about the lack of food security. At the end of the day, there's somebody in Nunavut or somebody in the territories who is left hungry because the job is simply not getting done.

This is from a recent article:

These high food prices, combined with limited economic opportunities and high rates of poverty, have led to Northern Canada having the highest rates of food insecurity in the country. Almost half of all Nunavut households are moderately or seriously food insecure.

It's incredible.

This is from another document, from the Nunavut Food Security Coalition: “Nearly 70% of Inuit homes in Nunavut are food insecure”. This means that 70% of Nunavut families are basically going hungry every day. Again, it's incredible. It states, “This rate is one of the highest rates for an indigenous population in a developed country” in the world.

I don't need to state it all over again, but I'm going to ask you a question about affordability. Gary, you mentioned that part of the cost being so expensive is fuel costs. With your airline, you provide the food. You get the food to the communities. We also have things called sealifts to get the food up there, etc.

I'm going to ask you this individually, Shelly, Dan and Gary: Has the carbon tax made food more affordable or more expensive in the north?

[Shelly De Caria]

I speak about the CPI that we've experienced here in Canada, but it doesn't encounter what the aviation CPI has done to our airlines—

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

My time is really tight. Please give just a simple yes or no.

[Shelly De Caria]

No.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Has it made food more affordable or has it made food more expensive?

[Shelly De Caria]

I don't have visibility on how the nutrition north program is being done.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Okay. This is about fuel costs, though, and you, as an airline, would know that carbon tax gets added to the bill. I talked to Mikey McBryan from Buffalo Airways, and he said that the carbon tax is a huge addition in cost when you buy huge amounts of fuel.

It's a really simple question. Has your fuel become cheaper or is it more expensive?

[Shelly De Caria]

It hasn't become cheaper.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

There you go.

We'll go to Dan.

[Dan McConnell]

Yes, definitely. It's just like every other cost pressure for a northern customer. It has definitely caused food to be more expensive.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Gary.

[Gary Bell]

With the exception of Nunavut, which is exempt from the carbon tax, it's been more expensive throughout northern Canada.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Right, and we know that even Nunavut is still affected by the carbon tax, because sealifts come up by ship, and that ship fuel is not exempt from the carbon tax. A carbon tax applies.

I'm going to ask you for just a bit more, Gary. Expand about how much that carbon tax actually costs airlines in the north. How much does the carbon tax affect your food transportation costs per year or per month? We talked a bit before. I don't know if that's a number that you have on hand, but maybe give us an idea of what the actual costs of the carbon tax are to flights of food and materials to the north.

[Gary Bell]

Right now, the cost of the carbon tax for the locations that it applies to is about a 15% increase on the price of fuel.

[Bob Zimmer, Conservative, Prince George—Peace River—Northern Rockies, BC]

Give us the number for a person who is going on the airline. We need to know the number in terms of dollars. Per flight, an average flight from Winnipeg to a destination of your choice, give us how much that would add to the cost of that particular trip—just the extra cost of the carbon tax.

[Gary Bell]

From Winnipeg to Churchill, the cost increase on that flight would be about $2,000.