What is the bond market and how does it affect Canadians?

Iva Poshnjari, BNN Bloomberg

Activity in global bond markets grabbed headlines in 2023 and piqued interest in fixed-income markets that are often overlooked by equity investors.

While many Canadians may not be tuned into bond market ups and downs, the health of the Canadian bond market has a direct impact on how people live their lives and the economic realities they face.

Here is an explanation from market experts on what the bond market is, how it works and why Canada’s bond market has been showing resilience.

WHAT IS THE BOND MARKET?

The bond market, also known as the fixed-income market, is directly tied to Canada’s economic success, according to experts.

It establishes the amount of lending banks can provide to borrowers and also provides the country’s federal government and corporations with access to capital, said fixed-income expert Hank Cunningham.

“The bonds market is 100 times the size of the equities market,” Cunningham, fixed-income strategist at Odlum Brown, told BNNBloomberg.ca in an interview.

It’s a place where borrowers and lenders meet, he explained.

The borrower, who sells the bond, is either a corporation or a government, he said. The lenders, who buy the bonds, are investors or private equity firms.

“The advantage an investor has in investing in the bond market is that their principal loan will be returned to them in addition to interest paid,” Cunningham said.

HOW DOES IT WORK?

For example, Cunningham explained, a government issues a bonds and an investor pays money for the bond.

The investor will get back their original investment while also receiving interest throughout the maturity of the bond, while the government gains access to capital.

A similar scenario plays when a corporation comes to the market and issues bonds, he said.

“Usually corporate bonds pay more interest, also referred to as yield, than a government bond does,” Cunningham said. “This is because corporate bonds can be riskier, depending on the company rating, as there is risk of a business failing but not the federal government.”

The cost for a retail investor to enter the bond market typically starts at around $10,000.

Alternatively, an everyday investor can choose to buy bond exchange-traded funds for much less, which will allow them to own a fraction of various bonds, said Cunningham. 

HOW DOES THE BOND MARKET AFFECT CANADIANS?

Even if the average Canadian isn’t buying bonds, their financial futures are still linked to the bond market, said Steve Locke, chief investment officer of fixed-income and multi-asset strategies at Mackenzie Investments.

“Most people who engage in the bond market do so through their bank when they ask to obtain a loan to fund a mortgage, which will determine where they live, their lifestyle, or an education,” Locke, who oversees $60 billion in fixed-income assets, explained in an interview with BNNBloomberg.ca.

Canadians who have gone to the bank to save money are also affected by the bond market, Locke said, as they are relying on what the bond market allows banks to pay in interest for their deposits, Locke said.

The health of Canadian businesses is also tied to bond market activity, he added.

“Corporations will go to the bond market to raise money when they need it,” he said. “This allows businesses to grow and by extension hire more employees and produce more output in the economy.”

HOW IS THE BOND MARKET PERFORMING NOW?

The price of a bond is driven higher or lower due to political risks, a country’s interest rate environment and overall economic factors like inflation.

Despite sticky inflation and high interest rates, Canada’s fixed-income market is showing signs of strength at the moment, according to Locke.

“Canada’s bond market activity has been healthy as of late and stacks up quite well to the rest of the world,” he said.

He explained that sector stability and strong regulations have propped up Canada’s bond market.

“Stability promoted in some sectors such as financials in Canada has been created through good regulatory policy and supported by the rule of law,” he said.

“All these things are healthy underpinnings for issuing bonds in the public market.”

WORKERS CAPITAL

Here are the changes to CPP deductions starting in 2024

Ritika Dubey, The Canadian Press

Middle-income earners will start seeing a larger portion of their paycheques going toward Canada Pension Plan contributions as of Monday.

A broader pension revamp began in 2019 as both the Quebec Pension Plan and CPP began phasing in enhanced benefits intended to provide more financial support for Canadians after they retire. So far, individual contributions — and the employer's matching portion — have primarily ticked upward.

The trade-off is that Canadians will eventually receive higher payouts once they start collecting their pensions. 

But as of 2024, the CPP includes a new, second earnings ceiling. For those who make more than a given amount, additional payroll deductions now apply. 

"The primary objective of these changes is to strengthen benefits and enhance overall financial stability for prospective retirees," said Alim Dhanji, senior wealth adviser at Assante Financial Management Ltd. in Vancouver.

Previously, everyone earning over the base amount (currently $3,500) contributes a set portion of their income, up to a maximum amount (last year's was $66,600) that increases slightly every year. Those who are self employed pay both the employee and employer portions.

Starting this year, the enhanced pension plan now has two earnings ceilings.

The first tier works similarly to the old system: just like before, workers contribute a set portion of their earnings to CPP, up to a government-set threshold — for 2024, it's $68,500. Those earning that amount or less won't see any changes to their current contribution rates. 

What's new, for anyone earning more than that amount, is a second contribution level that tops out at $73,200.

People in this group pay an additional four per cent on their second tier earnings, or the amount they make between $68,500 and $73,200. 

For 2024, that means a maximum $188 in additional payroll deductions. Overall, people earning over $73,200 will be contributing an extra $300 in 2024, compared to their previous contribution last year. 

The upgraded CPP policies, which continue phasing in through next year, were designed to significantly boost retirement income for Canadians — an increase from one-quarter of their eligible income to one-third. 

Anyone who has paid into CPP since 2019 will receive higher benefits, but the full effects will take decades to materialize, so  the youngest workers stand to gain the most. People retiring 40 years from now will see their income go up by more than 50 per cent compared to the current pension beneficiaries.

Dhanji noted the changes will not affect the eligibility criteria for retirement pension, post-retirement benefits, disability pension and survivor's pension.

The new, second threshold will affect employers as well as employees, Dhanji noted, since they are required to match their workers' higher contributions.

Employers have been affected by the phased increase since 2019, he said. Between that year and 2023, both workers and their employers saw contribution rates rise by almost a full percentage point. 

Canadian employers match their workers' pension earnings as a part of the policy. While the pension amount gets split between the employer and workers, freelancers and self-employed people are responsible for paying both portions — a combined 11.9 per cent for the first tier and eight per cent for the second tier.

"From a financial planning standpoint, employers can find assurance in the fact that these changes are designed to benefit their employees during retirement ... contributing to enhanced financial well-being," Dhanji said.

This report by The Canadian Press was first published Jan. 1, 2023.

Unimaginable excess': Bid to attract showy superyachts to Cape Breton under scrutiny

Michael MacDonald, The Canadian Press

Not so long ago, the largest community in Cape Breton was best known as home to one of the most toxic waste sites in North America: the infamous Sydney tar ponds.

Containing one million tonnes of oozing sewage and industrial sludge — left behind after centuries of steelmaking — the site has since been capped with concrete and transformed into a sprawling urban park that opened 10 years ago.

"It's a transformation from what was an industrial economy to one that is more service-based with tech businesses and education, ” says Terry Smith, CEO of Destination Cape Breton, the island’s tourism marketing organization.

With memories of the tar ponds receding, the port city is now trying to cultivate an upscale vibe — one that includes appealing to billionaires and their toys. It wants to become a destination for superyachts, the most expensive, luxurious boats in the world, which have become the ultimate status symbol for A-list celebrities, dot-com titans and lesser-known oligarchs.

Destination Cape Breton has hired Superyacht East Coast, based in Halifax, to attract to the island those who own boats like Archimedes, a 68-metre superyacht believed to be worth about $100 million. According to Superyachts.com, the vessel — as long as a 20-storey building is tall — has a marble Jacuzzi, a grand piano, an enclosed gym, a wood-burning fireplace and six staterooms.

Compared to some superyachts, which boast helicopter hangars and glass elevators, Archimedes is considered an understated boat.

Owned by U.S. hedge fund billionaire James Simons, the vessel spent at least a week last summer in Cape Breton, moored at the community wharf in Baddeck, N.S., where it caused quite a stir among the locals.

"The larger yachts are the ones that people tend to gravitate to," said Adam Langley, president and CEO of Superyacht East Coast. "They come alongside, and suddenly there's hundreds of people around buying ice cream or lunch and taking in the environment that these boats create."

And the economic benefits don't end there, Langley said. The owners of these floating mansions typically spend a small fortune on provisions after they arrive in port.

Once Archimedes had completed its eight-week tour of Canada's East Coast, the captain told Saltscapes magazine that its owner had spent US$400,000 on fuel, groceries, tours, guides and entertainment.

"Think of them as large, floating resorts," Langley said in a recent interview. "They'll spend thousands of dollars on things like flowers."

But Tom Urbaniak says there needs to be a broader discussion about using public funds to attract superyachts to the East Coast.

"What this is really about is marketing to an infinitesimally small group of oligarchs, the uber-rich, hyper-celebrities and the people who swoon around them," said Urbaniak, professor of political science and director of the Tompkins Institute at Cape Breton University in Sydney. 

"This is not just a celebration of wealth. This is a celebration of almost unimaginable excess."

The professor says that at a time when Canadians are being asked to make sacrifices to deal with climate change, it doesn't make sense to cater to rich people who flaunt their wealth in vessels that leave a massive carbon footprint.

"I haven't seen anything from Destination Cape Breton that there will be some kind of standard set to determine which ones get welcomed based on whether they pay taxes .... and whether they subscribe to the rule of law," Urbaniak said.

Smith says attracting superyachts is a small part of a broader strategy aimed at getting more boaters to come to the region. And he challenged the argument that superyacht owners represent the worst kind of polluters.

"I don't agree with that," said Smith, whose non-profit organization gets most of its budget from a levy charged to those who pay for accommodations in Cape Breton, as well the provincial and federal governments. "There are electric superyachts now. I think we're going to see a transformation in them in terms of cleaner fuels and cleaner ways of operating."

As for courting oligarchs, Langley says they're not coming to Atlantic Canada anyway.

"We see more explorer yachts that are not the huge, 600- and 400-foot superyachts," he said, adding that superyacht builders are now keen on using hydrogen technology to propel their boats.

"These are usually 200 feet and less, and they're usually owned by people who are very sensitive to where they are going and operated by captains who are respectful (of the environment)."

Meanwhile, Langley says he's working on a marine tourism strategy for Nova Scotia that will include sections on sustainability and best practices for marinas and waterfronts. 

"I am very sensitive to that," he said. "I grew up in Nova Scotia along the Northumberland Strait and I'm lucky enough to have a place in Baddeck .... These places are very special."

This report by The Canadian Press was first published Jan. 1, 2024.

 

Here are Canada's highest-paid CEOs

Ben Cousins, BNN Bloomberg

Canada’s highest-paid CEOs come from a variety of industries, including telecommunications, fast food, auto parts and technology.

In 2022, Canada’s highest-earning CEOs took home average salaries of $14.9 million, marking a new record that’s 246 higher than the average Canadian worker’s annual earnings, according to a new report from the Canadian Centre for Policy Alternatives (CCPA).

Here is a list of the 10 Canadian CEOs who took home the most pay in 2022:

1. J. Patrick Doyle, executive chairman of Restaurant Brands International

Doyle was in the top spot with $151,812,911 in total compensation for the year, which includes more than $100 million in share-based awards.

Restaurant Brands, the parent company of Tim Hortons, Burger King and Popeyes, also had the tenth highest-paid executive in 2022, with former CEO José Cil earning $22,188,911 in total compensation. Joshua Kobza replaced Cil as CEO in March 2023.

2. Matthew Proud, global CEO and director of the corporate software firm Dye and Durham.

Total compensation: $98,864,268

3. Magna International Inc. CEO Seetarama S. Kotagiri

Total compensation: $36,398,662

4. Tony Staffieri, president and CEO of Rogers Communications Inc.

Total compensation: $31,515,047

5. Mark J. Barrenechea, vice-chair, CEO and CTO of IT firm OpenText Corporation

Total compensation: $30,252,989

6. Tobias Lütke, CEO of Shopify Inc.

Total compensation: $26,026,203

7. Gary Berman, president and CEO of real estate company Tricon Residential Inc.

Total compensation: $25,781,356

8. Joseph C. Papa, former CEO of Bausch Health Companies Inc.

Total compensation $25,742,006      

9. Irwin Simon, president, CEO and chairman of the board at cannabis company Tilray Brands Inc.

Total compensation: $25,319,091

10. José Cil, CEO of Restaurant Brands International Inc.

Total compensation: $22,188,911       

With files from The Canadian Press

Canada's 100 highest-paid CEOs broke new compensation records in 2022: report

Rosa Saba, The Canadian Press

Canada’s 100 highest-paid CEOs broke records with their compensation in 2022, according to the Canadian Centre for Policy Alternatives.

“The data this year is breaking new all-time highs,” said senior economist David Macdonald. 

The organization’s annual report found that the CEOs, most of them men, were paid an average of $14.9 million, up from an average of $14.3 million in 2021. 

That’s $7,162 an hour, 246 times more than what the average Canadian worker makes. Before the second day of the new year is over, the average CEO has already made the average worker’s yearly salary, the report said. 

That gap widened in 2022, as the average worker saw their pay rise three per cent while CEOs’ pay rose on average by 4.4 per cent. Meanwhile, prices rose by 6.8 per cent that year, the report said. 

“This is very much related to what's happening to corporate profits in 2022, similar to what happened in 2021,” said Macdonald. “It is a similar story of inflation driving profits, profits driving bonuses, and CEOs reaping the rewards.” 

CCPA has been tracking CEO pay for about a decade and a half, said MacDonald. In the early days of the report, CEOs were making closer to 150 times what the average made, he said. 

Most CEO pay comes not in the form of salary but in bonuses, company shares and stock options, said Macdonald — in fact, some CEOs don’t have a salary at all. 

Halfway through 2021, the stock-option tax deduction was capped at $200,000, noted Macdonald. Perhaps as a result, awarding shares has become a bigger part of CEO compensation recently, he said. 

The report looks at the pay of current and former Canadian CEOs in 2022 as well as executive chairs, a position that outranks CEO. 

Topping the list was executive chairman J. Patrick Doyle of Restaurant Brands International Inc., the CCPA report said. 

Doyle, whose company owns Tim Hortons, Burger King and Popeyes, made $151.8 million in 2022, the report said. His pay came exclusively in the form of share-based and option-based awards. 

Coming in second was CEO Matthew Proud of Dye & Durham Ltd., who brought in $98.9 million solely through option-based awards.

CEO Seetarama (Swamy) Kotagiri of Magna International Inc. was a distant third, making $36.4 million through a combination of his salary, share-based and option-based awards, and non-equity incentive plan compensation. 

The list includes leaders from a variety of sectors including financial, technology, energy, telecom and health. 

Only four of the top earners are women — the same number as people named "Mark" and "Scott," the report said.

“This is a boys’ club,” said Macdonald. 

The gap between average CEO pay and average worker pay is highest in Ontario, which holds almost half the people on the top-100 list, Macdonald said. The highest-paid CEOs in Ontario make 298 times the average Ontario worker, at $18.5 million. 

The report recommends making new top income tax brackets, removing the corporate deductibility of pay packages over $1 million, introducing a wealth tax and increasing the capital gains inclusion rate.

Even though executive compensation is supposed to be tied to company performance, the weakening economy in 2023 doesn’t necessarily mean CEO pay will have weakened in step, said Macdonald. Profits have been lower in 2023, but companies have historically found other reasons to compensate CEOs, he said.

“It’s tails, I win, heads, I also win.” 

This report by The Canadian Press was first published Jan. 2, 2024.

Record-breaking CEO pay should spark tax discussion: researcher

BNN Bloomberg

An economics researcher says record-breaking CEO compensation figures should spark a conversation about tax policies affecting Canada’s highest corporate earners.

Canada’s highest-earning executives were paid 246 times more than the average worker in 2022, according to a new report from the Canadian Centre for Policy Alternatives (CCPA).

The top 100 CEOs took home average salaries of $14.9 million in 2022, setting a new record.

David Macdonald, senior economist with the CCPA and author of the report, told BNN Bloomberg many of the highest-earning CEOs fill most of their salaries with vast sums of share awards are meant to incentivize CEO performance.

However, Macdonald’s research showed that stocks at companies run by upper-echelon earners have largely declined over the past two years, suggesting high salaries don’t necessarily translate to better stock performance.

“Just because you’re paying your CEO top amounts, it might be good for them, but it’s not necessarily great for the shareholders,” Macdonald said in a Tuesday television interview.

TAX CONSIDERATIONS

The CCPA’s report found awarding shares to CEOs has emerged as the most popular pay option in recent years, as stock options and salaries have more tax implications.

Macdonald said he hopes the report raises alarm bells about tax incentives for the richest Canadians.

“I think a lot of Canadians are upset CEOs get paid so much and CEO work is valued so much more than the work of average workers,” Macdonald said.

“We don’t have to like it, but that doesn’t mean we don’t have to tax it and certainly we shouldn’t be giving tax subsidies to some of the richest people in the country.”

HIGH SALARIES REFLECT ‘UNIQUE TALENTS’: PROF

Ian Lee, an associate professor of management at Carleton University, made the case that CEOs are “superstars” in their fields and said their high compensation levels reflect their skills and expertise.

“There are some people with very, very unique talents, whether they’re Hollywood movie stars or musicians or football players or hockey players … or CEOs that have the very, very unique skills and they’re not substitutional,” Lee told BNNBloomberg.ca in a Tuesday phone interview.

“The vast majority of us are not Beyonce or Taylor Swift or Patrick Mahomes or Sidney Crosby.”

Musk leads world's richest to US$1.5 trillion wealth gain in 2023

Jordan Fitzgerald, Bloomberg News

It was a comeback year for the world's wealthiest.

The combined net worth of the 500 richest people surged by US$1.5 trillion in 2023, fully rebounding from the $1.4 trillion lost the year prior, according to the Bloomberg Billionaires Index.

Once again, their fortunes were closely correlated to the performance of tech stocks, which rose to fresh records this year despite recession fears, lingering inflation, lofty interest rates and geopolitical turmoil. Tech billionaires saw their wealth grow by 48 per cent or $658 billion, propelled by intense hype around artificial intelligence.

No one did better than Elon Musk, who recaptured the title of world's richest person from French luxury tycoon Bernard Arnault. The Tesla Inc. chief executive officer netted an additional $95.4 billion through Thursday's close, bolstered by the success of Tesla and SpaceX, after losing $138 billion in 2022. His net worth is now more than $50 billion above Arnault's after a global slowdown in demand for luxury goods dented shares of LVMH Moet Hennessy Louis Vuitton SE.

Amazon.com Inc. founder Jeff Bezos added more than $70 billion to his wallet this year and is now neck-and-neck with Arnault for second place, while Meta Platforms Inc. CEO Mark Zuckerberg's fortune jumped by more than $80 billion.

The rising tide left some boats behind. Indian billionaire Gautam Adani lost $21 billion on Jan. 27 alone – and $37.3 billion across the whole year – after short-seller Hindenburg Research tanked the value of the Adani Group. Nevertheless, he still possesses an 11-figure fortune.

LOOKING AHEAD 

What does the world hold in store for the wealthiest people in 2024? While it's impossible to know for sure — few would have foreseen such a large rebound this year — here are some of the names to watch:

Miriam Adelson

Adelson, 78, became the majority shareholder of casino operator Las Vegas Sands Corp. after her husband Sheldon's death in 2021. After lying low for a time, Adelson this year reached a deal to buy a $3.5 billion majority stake in the Dallas Mavericks and courted Republican presidential candidate Nikki Haley. Her net worth climbed to $34.3 billion. 

Francoise Bettencourt Meyers

As the heir to the L'Oréal fortune, Bettencourt Meyers, 70, is the richest woman on the planet and the first to possess a 12-figure net worth. Bettencourt Meyers' success comes as a result of France's thriving beauty and fashion industries, which have also thrust LVMH's Arnault, Chanel's Wertheimer brothers and the Hermès family into the realm of the ultrawealthy. Her fortune surged 40 per cent this year as L'Oréal's shares climbed to a record high.

Steve Cohen

The founder of Point72 Asset Management is all in on New York dynasties — old and new. Cohen, 67, owns the News York Mets and is attempting to revitalize the baseball franchise after years of lackluster performance. He's also partnering with Hard Rock International in an attempt to secure one of the state's limited new casino licenses, giving beleaguered Mets fans the chance to gamble their sorrows away. His wealth rose to $13.9 billion in 2023. 

Mark Cuban

Cuban, 65, has a knack for getting out at the right time, selling his radio-streaming website Broadcast.com shortly before the dot-com bubble burst. He purchased the Dallas Mavericks in 2000 for $285 million, winning three division titles, two conference championships and an NBA championship before flipping them to Adelson for $3.5 billion. (He'll keep a minority stake.) Whether this goes down as another well-timed Cuban sale remains to be seen. His fortune climbed to $6.8 billion this year.

Carl Icahn

It was a rough year for the activist investor after short-seller Hindenburg Research initiated a meltdown that wiped $18.1 billion from his fortune, including more than $10 billion in just one day. Still, 87-year-old Icahn has a lot of fight left in him. He intends to launch a new proxy battle to take control of Illumina Inc.'s board, according to people familiar with the matter, after the DNA-sequencing company terminated a costly acquisition that Icahn had criticized. 

Rupert Murdoch

The 92-year-old News Corp. founder has officially retired, ceding control to his son, Lachlan. It's set to be a rocky year for the heir as candidates including Joe Biden and Donald Trump vie for the presidency again. Fox Corp. already settled with Dominion Voting Systems for $787.5 million after the company accused the network of airing false claims that it rigged the vote against Trump. Fox still faces another lawsuit by Smartmatic Corp. in a similar case. The controversy hasn't dented Rupert Murdoch's net worth, which rose to $8.9 billion in 2023.

Masayoshi Son

The Japanese investor made a big bet on WeWork, which officially crumpled in 2023, and people are questioning his judgment after he continued to pour money into Adam Neumann's remote-work business even after it was clearly struggling. The SoftBank Group Corp. founder, 66, is likely to struggle further as deals dry up. But he's pulled himself out of deeper holes before, climbing back after losing tens of billions of dollars in the dot-com crash. Son's wealth fell to $11.4 billion this year.

Donald Trump

The former president and current candidate may have lost the 2020 election, but his wallet has only gained. His wealth has grown by ​​$500 million since 2021, giving him a total net worth of $3.1 billion, according to the Bloomberg Billionaires Index. Still, 2024 will be a battle for Trump, 77, as he defends himself in lawsuits related to his defamation of author E. Jean Carroll, alleged fraud as well as his attempts to overturn the 2020 election – all while running for president.

Changpeng “CZ” Zhao

In many ways it was a rough year for the 46-year-old founder of Binance, the world's biggest crypto exchange. In November, CZ and Binance pleaded guilty to money laundering and U.S. sanctions violations. He agreed to step down as CEO and personally pay a $50 million fine in addition to the $4.3 billion Binance will have to fork over. Still, the rebound in crypto boosted CZ's wealth by nearly $25 billion this year, even as he may be headed to jail in 2024.

 

LOSER

Air Canada ranks last for on-time performance in North America

Christopher Reynolds, The Canadian Press

Air Canada notched the worst on-time performance among large airlines in North America in 2023, according to a new report, even as the carrier surged back to profitability.

The country's biggest carrier landed 63 per cent of its flights on time last year, placing it last among the continent's 10 largest airlines. That means roughly 140,000 planes rolled up to the gate late — more than 15 minutes after scheduled arrival.

The score was five percentage points below the second- and third-lowest carriers, JetBlue Airways and Frontier Airlines, respectively.

Canada's other major airline, WestJet, placed seventh in North America with a score of 69 per cent.

"When I joined the industry, good OTP was 75 per cent-plus," said Willy Boulter, a Cirium advisory board member and 35-year aviation veteran.

Targets have gone up since. Delta Air Lines came first with an on-time performance (OTP) of 85 per cent, followed by Alaska Airlines at 82 per cent.

Better technology in areas ranging from jet engines to air traffic control have made on-time goals more achievable than ever, said Boulter. 

Other, smaller airlines in Canada and the U.S. may have had worse on-time records than Air Canada's, but weren't included in the report due to their size.

Air Canada said its outcomes reflected challenges that affected carriers across the country last year.

"However, our operation has been consistently improving so that by year-end our monthly on-time performance showed a double-digit improvement over July, a significant increase," said Air Canada spokesman Peter Fitzpatrick in an email.

Forty-nine per cent of Air Canada flights in July arrived late, according to Cirium.

The airline's focus remains on reducing the number of delays and cancellations in 2024, Fitzpatrick said.

In the past, the Montreal-based company has pointed to a shortage of air traffic controllers, bad weather and a network running at full tilt amid high demand, which can mean longer recovery times after a disruption.

CEO Michael Rousseau has acknowledged Air Canada's relatively low ranking, including after a wave of flight delays in June and July.

Despite more staff and revamped technology, the carrier's operations failed to meet "expected levels," he told analysts on a conference call in August.

The chief executive identified "severe weather" — thunderstorms, in particular — and global supply chain issues as among the culprits.

He also acknowledged that high load factors — when all planes are almost fully booked — do result in more "spilling traffic" after flights are cancelled, as passengers scramble to rebook with competitors and may arrive hours or days later than planned.

John Gradek, who teaches aviation management at McGill University, noted that those challenges were not unique to Air Canada, despite its tardier track record. Air Alaska deals with inclement weather too, for example.

Air Canada is "counting on Canadians" to prioritize availability over punctuality, Gradek argued. 

"It's more important for us to be able to get a seat to Jamaica or to Dubai or to Bangkok, and the heck with the on-time," he said. "And that's a shame."

Gabor Lukacs, president of the Air Passenger Rights advocacy group, says Air Canada's explanations for its low on-time standing "ring hollow."

“WestJet is flying the same weather, the same air traffic control environments," he said.

The results stem partly from a failure to ensure the number of tickets align with the capacity of the whole flight ecosystem, from airport slots to Nav Canada staff.

“The airlines cannot just pretend that the capacity’s in place," he said. “There are no proper systems in place to rein in airlines that do this type of behaviour.”

The summer travel peak poses a slew of obstacles, as carriers look to maximize their fleets to fly as many customers as possible.

"The harder I work the airplane, the higher the risk that that airplane will have a mechanical issue ... and that these airplanes will not operate on time," said Gradek, who worked at Air Canada for 18 years.

"Delta does value on time performance quite highly. Air Canada does not," he claimed, stating that its last-place results partly reflect business decisions around scheduling and route choices.

Other reasons can account for delays. The cold weather in Canada means planes need to be de-iced as early as October, runways need to be cleared of snow, and landing and takeoff times can be more spread out.

The frosty hurdles make achieving parallel on-time performance north of the border a challenge, experts say.

Over the holidays, however, the fairly mild temperatures across the country meant that most passengers enjoyed smooth sailing. That outcome stood in contrast to the tales of travel nightmares from 12 months earlier, when thousands of passengers saw their flights delayed or cancelled largely due to poor weather.

In peak travel season, some fleets are often stretched too thin to find a backup plane right away, Gradek pointed out.

Strained capacity in the sector extends to labour as well, from pilots to baggage handlers. In July, the International Air Transport Association called out air traffic control organizations in North America, which include Nav Canada, for staffing shortages that "continue to produce unacceptable delays and disruptions."

Nav Canada has acknowledged that occasional delays at the country's biggest airports are related in part to a lack of air traffic controllers. More than 400 new recruits are now in training, with 600 more slated to be hired in the next two years, the organization said.

On average, every minute of delay for one airplane costs the carrier about US$100 on average, according to aviation analyst Tony Brooks, drawing on 2022 data from the U.S. Department of Transport. 

"It is estimated delays cost over US$1 billion each year to the industry, a vast sum which could be put to better use towards investment in airline and airport infrastructure," he said in the Cirium report.

Air Canada earned $2.08 billion in profit in the first three quarters of 2023. The resurgence followed 11 straight quarters of losses totalling $10.01 billion between 2020 and 2022, when demand for travel dried up due to the COVID-19 pandemic.

This report by The Canadian Press was first published Jan. 2, 202

 

Transat flight attendants reject tentative contract deal

The Canadian Press

Flight attendants at Air Transat have voted to reject a tentative deal with the Canadian leisure carrier. Air Transat aircraft are seen on the tarmac at Montreal-Trudeau International Airport in Montreal, on Wednesday, April 8, 2020. , THE CANADIAN PRESS/Paul Chiasson

Flight attendants at Air Transat have voted to reject a tentative deal with the Canadian leisure carrier.

The Canadian Union of Public Employees (CUPE), which represents the 2,100 flight attendants at the airline, says more than 98 per cent of workers voted against the tentative contract reached Dec. 14. 

The union says it will be back at the bargaining table with Transat later this week.

In November, Air Transat flight attendants voted to approve a strike mandate if a new contract cannot be reached.

But CUPE says there is currently no timetable for a strike.

The collective agreement for Air Transat's flight attendants based at airports in Montreal and Toronto expired on Oct. 31, 2022.