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37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Thursday, April 10, 2003

0935

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.))

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance)

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

0940

The Chair

Mr. Jim Gouk

The Chair

The Clerk of the Committee

Mr. Jim Gouk

The Chair

Mr. John Christopher (Committee Researcher)

The Chair

Mr. Jim Gouk

The Chair

0945

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

0950

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Ms. Catherine Cody (Associate Director General, Labour Market Directorate, Department of Human Resources Development)

0955

Mr. Gordon McFee (Acting Director General, Insurance Policy, Department of Human Resources Development)

1000

The Chair

Mr. Jim Gouk

Mr. Gordon McFee

Mr. Jim Gouk

Mr. Gordon McFee

Ms. Catherine Cody

1005

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Ms. Catherine Cody

Mr. Jim Gouk

Ms. Catherine Cody

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

Mr. Gordon McFee

Mr. Mario Laframboise

Mr. Gordon McFee

Mr. Mario Laframboise

Mr. Gordon McFee

Mr. Mario Laframboise

1010

Ms. Catherine Cody

The Chair

Mrs. Bev Desjarlais (Churchill, NDP)

The Chair

Mrs. Bev Desjarlais

Ms. Catherine Cody

Mrs. Bev Desjarlais

Ms. Catherine Cody

Mrs. Bev Desjarlais

Mr. Gordon McFee

Mrs. Bev Desjarlais

Mr. Gordon McFee

Mrs. Bev Desjarlais

1015

Mr. Gordon McFee

Mrs. Bev Desjarlais

The Chair

Mr. Rex Barnes (Gander—Grand Falls, PC)

The Chair

Mr. Rex Barnes

The Chair

Mrs. Bev Desjarlais

Mr. Rex Barnes

1020

Ms. Catherine Cody

Mr. Rex Barnes

Ms. Catherine Cody

The Chair

Mr. Roger Gallaway (Sarnia—Lambton, Lib.)

Mr. Gordon McFee

1025

Mr. Roger Gallaway

Mr. Gordon McFee

Mr. Roger Gallaway

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Mr. Gordon McFee

Mr. Jim Gouk

Ms. Catherine Cody

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

1030

Mr. Gordon McFee

The Chair

Mrs. Bev Desjarlais

1035

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Jim Gouk

Mr. Gordon McFee

The Chair

1040

Mr. Larry Bagnell (Yukon, Lib.)

Mrs. Bev Desjarlais

The Chair

Mr. Larry Bagnell

1045

The Chair

Mr. Murray Leitch (Vice-President Legal and Director, Air North)

1050

The Acting Chair (Mr. Jim Gouk)

Mr. Murray Leitch

The Acting Chair (Mr. Jim Gouk)

Mr. Murray Leitch

The Acting Chair (Mr. Jim Gouk)

Mr. Mario Laframboise

1055

Mr. Murray Leitch

Mr. Mario Laframboise

Mr. Murray Leitch

Mr. Mario Laframboise

Mr. Murray Leitch

Mr. Mario Laframboise

Mr. Murray Leitch

The Chair

Mrs. Bev Desjarlais

1100

Mr. Murray Leitch

Mrs. Bev Desjarlais

Mr. Murray Leitch

Mrs. Bev Desjarlais

Mr. Murray Leitch

1105

Mrs. Bev Desjarlais

The Chair

Mr. Larry Bagnell

Mr. Murray Leitch

Mr. Larry Bagnell

Mr. Murray Leitch

The Chair

Mr. Rex Barnes

Mr. Murray Leitch

1110

Mr. Rex Barnes

Mr. Murray Leitch

Mr. Rex Barnes

The Chair

Mr. Larry Bagnell

The Chair

Mr. Murray Leitch

The Chair

Mrs. Bev Desjarlais

The Chair

Mrs. Bev Desjarlais

The Chair

1115

Mrs. Bev Desjarlais

The Chair

Mr. Thomas Penney (Vice-President, Planning and Product Development (Industry Portfolio), Canadian Tourism Commission)

1120

The Chair

Mr. Jim Gouk

Mr. Thomas Penney

Mr. Jim Gouk

Mr. Thomas Penney

Mr. Jim Gouk

Mr. Thomas Penney

Mr. Jim Gouk

Mr. Thomas Penney

The Chair

Mr. Mario Laframboise

Mr. Thomas Penney

1125

Mr. Mario Laframboise

Mr. Thomas Penney

The Chair

Mr. Rex Barnes

Mr. Thomas Penney

The Chair

Mr. Roger Gallaway

Mr. Thomas Penney

Mr. Roger Gallaway

Mr. Thomas Penney

Mr. Roger Gallaway

1130

Mr. Thomas Penney

Mr. Roger Gallaway

Mr. Thomas Penney

Mr. Roger Gallaway

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Thomas Penney

The Chair

Mr. Randy Williams (President and CEO, Tourism Industry Association of Canada)

The Chair

Mr. Randy Williams

1135

1140

The Chair

Mr. Randy Williams

The Chair

Mr. Jim Gouk

Mr. Randy Williams

Mr. Jim Gouk

Mr. Randy Williams

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

1145

Mr. Randy Williams

Mr. Mario Laframboise

Mr. Randy Williams

Mr. Mario Laframboise

The Chair

Mrs. Bev Desjarlais

The Chair

Mr. Stan Keyes (Hamilton West)

1150

1155

The Chair

Mr. Stan Keyes

The Chair

Mr. Randy Williams

Mr. Stan Keyes

The Chair

Mr. Rex Barnes

The Chair

Mr. Rex Barnes

The Chair

Mr. Rex Barnes

1200

Mr. Randy Williams

The Chair

Mr. Rex Barnes

The Chair

Mrs. Bev Desjarlais

Mr. Rex Barnes

The Chair

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance)

Mr. Randy Williams

1205

Mrs. Lynne Yelich

Mr. Randy Williams

Mrs. Lynne Yelich

Mr. Larry Bagnell

Mr. Randy Williams

Mr. Larry Bagnell

Mrs. Bev Desjarlais

The Chair

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

The Chair

Mr. Randy Williams

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

Mr. Randy Williams

1210

The Chair

Mr. Randy Williams

The Chair

Mr. Randy Williams

The Chair

Mr. Randy Williams

The Chair

Mr. Randy Williams

The Chair

Mr. Dave Ritchie (Canadian Vice-President, International Association of Machinists and Aerospace Workers in Canada)

1215

1220

The Chair

Mr. Dave Ritchie

1225

The Chair

Mr. Dave Ritchie

The Chair

Mr. Dave Ritchie

1230

The Chair

Mr. Mario Laframboise

The Chair

Mrs. Lynne Yelich

Mr. Dave Ritchie

The Chair

Mr. Mario Laframboise

1235

Mr. Dave Ritchie

Mr. Mario Laframboise

The Chair

Mr. Mario Laframboise

The Chair

Mr. Mario Laframboise

Mr. Dave Ritchie

Mrs. Bev Desjarlais

Mr. Dave Ritchie

Mrs. Bev Desjarlais

Mr. Dave Ritchie

1240

Mrs. Bev Desjarlais

Mr. Dave Ritchie

Mrs. Bev Desjarlais

Mr. Dave Ritchie

Mrs. Bev Desjarlais

Mr. Dave Ritchie

Mrs. Bev Desjarlais

Mr. Dave Ritchie

Mrs. Bev Desjarlais

The Chair

Mr. Rex Barnes

Mr. Dave Ritchie

1245

Mr. Rex Barnes

Mr. Dave Ritchie

Mr. Rex Barnes

Mr. Dave Ritchie

Mr. Rex Barnes

Mr. Dave Ritchie

The Chair

Mr. Roger Gallaway

Mr. Dave Ritchie

The Chair

1250

Mr. Dave Ritchie

The Chair

Mr. Dave Ritchie

The Chair

Mr. Dave Ritchie

The Chair

Mr. Dave Ritchie

The Chair

Mr. Dave Ritchie

1255

The Chair

Mr. Larry Bagnell

CANADA

Standing Committee on Transport

NUMBER 019

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, April 10, 2003

[Recorded by Electronic Apparatus]

¿ (0935)

[English]

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): Good morning, ladies and gentlemen.

Pursuant to Standing Order 108(2), this committee will continue to hear evidence with respect to the viability of the airline industry in Canada.

Let's do some housekeeping before we call our first witness.

Could you please advise the chair if you've received a letter from our former witness, Mr. Le Pan, the Superintendent of Financial Institutions of Canada, from whom we requested additional information on the pension liability outstanding for Air Canada employees? It's being circulated.

Mr. Gouk.

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): I have a question that I never thought to ask him when he was here, or somebody else. I think it's a very appropriate question. Is the pension plan of Air Canada a defined benefit plan, or is it just an investment plan in which they get whatever the value is?

The Chair: Let's read the letter. I can't answer that.

Mr. Jim Gouk: It's something we need to know, because it makes a huge difference.

The Chair: Would you explain your question again, please?

Mr. Jim Gouk: A defined benefit plan is what we have, where you make a specific contribution for a very specific formula for what you will get—2% a year, 3% a year, or $300 per year for every year of service, or whatever. It's a defined benefit plan when you know exactly what you're getting.

I don't know what the proper name is for the other one, but it's a more general one in which what you get fluctuates based on the value of the plan from time to time. You don't know what you're getting, but you are still in some kind of pension plan. This is a generality.

It makes a big difference whether or not—

The Chair: That's a defined pension plan.

Mr. Jim Gouk: If it's a defined benefit plan, then it means there's a specific commitment to a specific pension amount, making it much more difficult when it is in deficit than if it is a plan where they say “We don't know what you're going to get, because it's going to depend on the value of the plan”. There are a lot of both types of plans.

The Chair: What's the other plan?

Mr. Jim Gouk: I don't know what the proper name is, but in it you don't know for sure what you're getting. It's based on the value of the plan from time to time.

¿ (0940)

The Chair: Thank you for that question.

We can't give you an answer, but the researcher will try to get that answer before the end of hearings.

Mr. Jim Gouk: Joe, I am not going to be here at noon, because I made other commitments. The schedule was changing so fast that I finally just had to make some decisions.

If we're going to start trying to put together a report and recommendations on the industry, then I would suggest that we've missed two fundamental witnesses who we must have. They are the national airports group, and we must know what impact we will have on them, and Nav Canada.

The Chair: They were both asked to attend, Mr. Gouk. The airports refused to attend.

Clerk, can you explain what we've done with respect to those two witnesses?

The Clerk of the Committee: The association of airport authorities was invited, and they declined. Nav Canada was also invited, but apparently they have an annual meeting this morning, so they couldn't make it and declined also.

Mr. Jim Gouk: I would suggest that we need to talk to them. If we're going to be really serious about putting together recommendations that we sincerely believe are going to attempt to address problems in the aviation industry, we must talk to those groups.

It's within the power of this committee to require those groups to appear before us. It's an authority that we don't often use, but we cannot make recommendations that impact on the airport authorities and Nav Canada if we have not talked to them, heard their side, talked about possibilities, and found out about any impacts there will be—at least from their point of view.

It's very difficult for us to make those things, because there's a cause and effect. Everything we do causes some problems.

The Chair: Yes, we hear you, Mr. Gouk.

Let me go through the housekeeping issues, which may answer some of your questions, and then we'll come back to your issue.

Have you been able to summarize the report from the Superintendent of Financial Institutions? Why don't you read the letter from the superintendent, please.

Mr. John Christopher (Committee Researcher): Yes.

Dear Mr. Comuzzi,

During my appearance before the House Transport Committee on Thursday, April 3, 2003, I committed to provide you with the surplus position of the 12 Air Canada pension plans at the time of their most recent valuation reports. The results of the plan valuations were provided to...OSFI at different times during the course of 2001. The aggregate surplus in the plans, as reported..., was approximately $915 million. As I indicated on April 3, I believe that the plans did not have a significant deficit going into 2002. Our stress testing at the beginning of 2003 identified the possibility of a material deficit problem, which was confirmed when we approached the company. That led to a series of communications with the company and actions on our part that I have described. In my judgement, there was ample time for Air Canada and the other parties involved to begin to address the issue, both before and after OSFI raised the funding issue with the company earlier this year.

At one point during my presentation, I was asked who is responsible for administering the Air Canada pension plans; my answer may have been unclear. These plans are administered by the employer, in this case, Air Canada. Plan sponsors, unions or representatives of other employees select the administrator when plans are being established. The duties of the plan administrator are to manage the pension fund, including: making prudent investments, ensuring contributions are remitted, administering the terms of the plan text, and communicating with plan members.

Thank you for having provided me with the opportunity to address the Committee....

The Chair: Thank you.

Does that clarify the situation with respect to the question you asked?

Mr. Jim Gouk: No.

The Chair: All right, we'll find out more.

That letter is tabled, and will be circulated and form part of the minutes of the meeting.

I apologize to the committee, but the clerk will now know that we can't keeping changing the hours of commencement from 9:00 to 9:30 to 10:30. Once we set the time of a meeting, then we can start the meeting without causing the confusion to which you alluded, Mr. Gouk.

I also hope that you understand that this committee meeting isn't held in isolation, that some of us on the committee have been travelling since last Sunday with respect to transportation issues affecting our country. We just got back to Ottawa last last evening, including the clerk, the researcher, and the translator. So on their behalf, I apologize for the confusion and the difficulty we had in bringing the witnesses before this committee to make a final determination on the recommendations we want to make.

I have a whole series of.... Mr. Moore, Ms. Desjarlais, and we have Peter Stoffer coming to represent the NDP.

As you well know, Mr. Gouk and Mr. Gallaway, the whole parliamentary system is made up of conflict and conflicts. We just happen to have a conflict with Bill C-17. As I came into the meeting today, I was told that the Bill C-17 hearings have been cancelled. Is that correct?

So to everybody who was complaining about Bill C-17 conflicting with what we have before this committee, it's no longer in conflict. But I don't see any of the members who were complaining about the conflict in attendance. We don't have to discuss that any further—unless somebody wants to comment on it.

¿ (0945)

Mr. Jim Gouk: I just have a comment with regard to scheduling, so that it's understood. We have gone from the committee ending its morning session at one o'clock.... I started trying to schedule something based on that, hoping that I might find support from my colleagues so that I could get away a bit earlier. Then I found that it was moved to twelve o'clock, so I thought, great, and I made my commitments based on that, only to find that it now goes to two o'clock. I have now made commitments.

The Chair: The meetings don't go to two o'clock. We break at noon, do we not?

Mr. Jim Gouk: It depends on which schedule you're reading from, Joe. The latest one I have says that we're meeting from twelve to two in camera, in consideration of the draft report.

I've worked in the airline or aviation industry, the air navigation system, for 22 years. I think I can say without any hesitation that I have at least as much knowledge about this industry as anyone around the table, and I have now made a commitment to be elsewhere.

The Chair: Mr. Gouk, as you and I have talked many times, you're invaluable to this committee. You bring a wealth of knowledge to the committee because of your experience in the air transport business. We certainly need your input with respect to any recommendations that are going to be made.

Let me continue, please, with the other housekeeping issues, so that we can get to the witnesses. Then we'll come back to that issue and settle it as we get closer to twelve o'clock.

Is that okay?

Mr. Jim Gouk: I just wanted to make you aware of what my commitments are.

The Chair: I completely understand.

I'm also going to table the comparison between the excise tax on aviation fuel in Canada and the United States, which you requested. We could circulate it to committee members, along with the excise tax being applied in Canada per litre. I've also asked a researcher to get me the information on how much revenue comes into the treasury on an annual basis from the excise tax on aviation fuel. I'll hopefully have that information for the committee before decision time.

With respect to your issue, Mr. Gouk, which I also thought was important, that NavCan play an important role in our discussions with the evidence that they could bring. Unfortunately, I again I go back to the theme of conflict, because they have their annual meeting in Winnipeg starting today. They rightly chose to carry on with their annual meeting. I asked through our committee clerks and researchers if they could send a representative to explain to us what is happening with respect to NavCan fees, and how these are going to affect the airline industry in Canada.

If I could explain succinctly, the numbers that I'm going to relate are hearsay, but I suspect that they are fairly accurate. Nav Canada is owed $44 million by Air Canada for NavCan fees, representing nonpayment for part of January, February, and March. Again by hearsay, I am told that they are meeting today to discuss how they're going to deal with that $44 million deficit. Because of the evidence that we have heard to this point, I have expressed to NavCan that it would not be fair to the other airlines in this country if they took the deficiency resulting from Air Canada's indebtedness—which is obviously because creditor relief will not be paid—and apportioned it to the other airlines in the country to make up that $44 million. I have expressed that to NavCan, and I think that it meets with the concurrence of all the committee members. What I've said to NavCan is “You create a domino effect in the airline industry that we're trying to correct”.

They are in the process today of discussing an increase in NavCan fees. I think it is one of the first items on the agenda. Hopefully, our committee will make a recommendation in camera that any increase in fees to the airline industry would be counterproductive at this point in time. We will discuss this in the committee as a whole.

I report this with respect to NavCan, which I thought was very important with that background information....

¿ (0950)

Mr. Jim Gouk: If I could just make one comment....

The Chair: I don't need comments right now, Mr. Gouk. I'm just reporting, and am trying to get through this, so that we can get to our witnesses.

Mr. Jim Gouk: You made one comment that wasn't quite correct.

The Chair: Okay, go ahead.

Mr. Jim Gouk: You said that it was with the concurrence of the committee. I would have to take exception to that, because—

The Chair: Okay, I shouldn't have said that.

Mr. Jim Gouk: If Nav Canada has a deficit and a loss of revenue from Air Canada, they can't just ignore it. They have no other source of income.

I agree with you that it will be devastating for the airline industry to suddenly drop this on these other airlines, but if we're going to say “Don't do that”, then we should be prepared to answer the question, “Where do we get it from?” They are a non-profit organization.

The Chair: That will be discussed in camera.

Thank you, Mr. Gouk.

I've asked for witnesses from Human Resources Canada.

I welcome Ms. Cody and Mr. McFee. Thank you for attending on short notice this morning.

Given that Air Canada has so many employees, I think it is fair to indicate that in the restructuring process there will have to be some assistance through HRDC. What we want to do is go through what would be the normal assistance, and then to ask if there is going to be any special consideration given for the layoffs of the Air Canada employees. As we travelled through the industry the last couple of weeks, I think it's common knowledge that there is so much uncertainty among all of those employees—not only of Air Canada, but also of Air Transat, and the other airlines in a borderline situation in Canada—that they are in a certain amount of distress.

Ms. Cody, thank you to your minister, because I only asked her yesterday morning if you could participate in this.

Ms. Catherine Cody (Associate Director General, Labour Market Directorate, Department of Human Resources Development): Thank you, Mr. Chair.

I'd like to talk about the programs HRDC has to assist Canadians faced with difficult economic times. In particular, I'd like to talk about the EI program we have, which provides benefits to individuals who have lost their jobs. It provides them with temporary income support.

In the case of large layoffs, HRDC does provide assistance to employers and employees when a permanent or a temporary layoff is taking place. We have employment insurance personnel who can go to the workplace to help to process claims quickly.

We also have programs to help people get back to work. There's been a very strong emphasis on active employment measures. You may be familiar with the employment benefits and support measures we have under part two of the act. Here we're able to provide individuals who are facing unemployment or who have lost their jobs with employment counselling, labour market information, diagnostic testing, and job finding assistance to help them get their feet on the ground and figure out what they want to do in terms of looking for future employment.

Some people may be interested in doing some additional skills upgrading, and there is provision for individuals to receive financial assistance to take training. We do provide a considerable contribution to individuals in that way through the department.

We also have a program that will allow individuals interested in starting a small business or becoming self-employed to look at opportunities. And finally, we have assistance under a wage subsidy program if individuals are looking for employment and need some additional assistance.

We also have a program that provides financial assistance to employers and employee associations planning to undertake a major adjustment. It enables them to look at the needs of individuals, helping them make moves into other occupations. This can be done on an industry basis. And in fact we have done this with the auto industry in recent layoffs. We also did it after September 11, providing assistance to Air Canada and some assistance to Air Transat.

So we have a number of different programs to provide assistance to people who are looking to get back to work. We also have something known as the work sharing program. It's another tool to help companies and the employees undergo a temporary adjustment, a downturn in an industry. It allows for individuals in the company to share the work so they are able to perhaps work three days a week and receive EI benefits for two days a week.

We did provide assistance to a wide range of companies after September 11, when we saw a very significant decline in the travel industry. This tool is available in the case of temporary layoffs or a temporary decline in an industry.

We also have something called the older worker pilot project, where we have been able to test some new ways of helping older workers get back to work. And this is once again focused on active employment assistance. It is administered jointly with the provinces.

¿ (0955)

Those are some of the key highlights.

Would you like to speak to EI any further, Gordon?

Mr. Gordon McFee (Acting Director General, Insurance Policy, Department of Human Resources Development): Good morning to you, ladies and gentlemen.

Perhaps it would be useful just to say a couple of words.

Ms. Cody has dealt with measures we attempt to undertake in our department to assist people in retooling or getting back to work. She intimated that these same people, while they're in that situation, obviously need some kind of income support.

On the income support side--the EI side, if you like--there are perhaps three things you might be interested in. The first thing is that when people are in this kind of situation, time is of the essence in providing them with income support. So we have procedures we use in the event of mass layoffs, which we all hope don't happen, but if they do, we have procedures we use to ensure that the information from both the employer and the workers is accumulated as quickly as possible.

This usually involves our staff going to the premises, conducting interviews; we call it our mass claims-taking procedure. This at least allows claims for employment insurance benefits in this kind of situation to get into the system as quickly as possible.

In addition, there are two other items that may apply in some situations. As you're well aware, what happens as this unfolds, whether or not these particular items will be of use, will depend on the specificity of the situation. One is the supplemental unemployment benefit program, or SUB, as it's sometimes called. It's been around for quite a long time, and it permits individuals involved in temporary layoffs to have their EI benefits topped up to as high as 95% of their former salary.

I did say temporary layoffs, so depending on what happens, this may be of assistance. My information is that there are discussions going on as we speak in fact between our department and the airline industry on the availability, utility, etc., of SUB plans. They're certainly aware of it and they're looking at it in conjunction with our folks.

The other program I could mention, which also applies in the event of mass layoffs, is what we call our workforce reduction program. That in fact is an employment insurance regulation. It basically provides the following. In a normal situation where a person simply leaves their job, we have to then determine whether or not they had what is called “just cause” for doing so. In the case of mass layoffs, especially where there is going to be a reduction in the workforce, if there is a plan in place to effect a workforce reduction, and if the individual who may be leaving the employment is able to demonstrate that he or she, by so doing, preserved the employment of another employee, that person's claim is allowed and no penalty is incurred.

Once again, it's income support, if you like, or temporary income replacement; it is by no means the answer to all the questions. But it's there so we can do the best we can to ensure that while people go through the very difficult adjustment phase, at least they have some kind of income support while that's happening.

À (1000)

The Chair: Thank you, Mr. McFee.

Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chairman.

Thank you, Mr. McFee. You've just answered one of my questions, I guess. I was looking at slightly different terminology--“voluntary layoff”. I was just worried that might be determined as having quit, but I guess you've addressed that with your last comments.

One thing I was curious about, you mentioned job sharing where someone works three days a week and gets EI for the other two. Presumably that would leave them at 60% salary. Are you telling me that if someone is getting 60% of what they used to earn, they would still have EI benefits coming? And if so, would it be any significant amount?

Mr. Gordon McFee: The way an approved work sharing program is normally set up is that all of the people at the place of employment work a shorter week than they ordinarily would. While they're on the work sharing agreement, the money they get from that is not considered to be earnings for employment insurance purposes. So to answer your question, it would not be deducted from their employment insurance.

What we do in a case like that is calculate what their benefit rate would be if they were on a full EI claim. I have to use easy examples. Let's take an example where the individuals work three days and have two days off. We would calculate their benefit rate, and since two days out of five is 40%, they would get 40% of that benefit rate in EI benefits. Say they worked Monday to Wednesday; they'd get benefits for Thursday and Friday. The money they had received from Monday to Wednesday would not be subtracted from their EI.

Mr. Jim Gouk: What restrictions would there be in terms of someone getting on this program? What number of people would you be able to handle in the program? How long could a program like that operate?

Mr. Gordon McFee: I think Ms. Cody is better placed to answer that.

Ms. Catherine Cody: Generally speaking, these agreements run for a maximum of 26 weeks. They're used in the case of a temporary downturn. Under exceptional circumstances, we can extend it for another 12 weeks.

In order to initiate some kind of work sharing agreement with a company, we need to get the agreement of the company and the workers. We work with the company in order to work toward this kind of agreement.

À (1005)

Mr. Jim Gouk: Okay. The other one you mentioned--

The Chair: It's your last question.

Mr. Jim Gouk: It's my last question? I have two more here, Joe.

The Chair: All right, I'll come back to you. Ms. Desjarlais is very interested in this, and Mr. Laframboise.

Mr. Jim Gouk: What about job funding grants? If Air Canada were to go down--let's hope it's not going to happen, but we can't ignore that it's certainly a possibility--and suddenly we have 35,000 airline people on the street, would there be a possibility now that they're unemployed for job funding grants for airlines wishing to expand? That would happen should this situation occur. Would they be eligible for consideration for HRDC job funding grants for people who want to expand their service?

Ms. Catherine Cody: We don't have any sort of programming to respond to this kind of request. Generally, any sort of self-employment assistance we can provide is very much targeted to the individual. They're looking at starting small micro-businesses.

Mr. Jim Gouk: There are job funding grants. They come across my desk all the time. They're applications made through HRDC by different organizations who want to do a special project or who want to do something--

Ms. Catherine Cody: You're probably referring to job creation partnership kinds of proposals. Those proposals are really intended to create employment opportunities in areas of the country where there are few job possibilities. The intention is really to provide short-term employment opportunities. If I understand your question correctly, these funds are not really seen as investment dollars for a business start-up.

Mr. Jim Gouk: If I can paraphrase, the short answer then is no. Thank you.

The Chair: Mr. Laframboise.

[Translation]

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chairman.

I listened carefully to the programs that you have described. I think we are all aware that Air Canada is experiencing a major crisis. If we wanted to establish a program for layoffs, early retirement or voluntary departure incentives, is there a program that could be adapted to, for example, help a company that might want to undertake a massive downsizing operation? Would you be able to subsidize an incentive program for early retirement or voluntary departures? Does this type of program exist?

Mr. Gordon McFee: I do not think we have that type of program. When employees are laid off and are given compensation from the employer, for example, there is a whole host of considerations that must be taken into account.

If the employees were able to suggest this type of thing, because we are in touch with them almost on a daily basis, we would have to take a look at it, but usually, with the exception of what I have already explained, if employees receive any financial compensation then we have to account for that in our calculation.

But if the employees want to make recommendations, we would be, of course, prepared to take a look at them.

Mr. Mario Laframboise: Mr. McFee, how many years have you been with the Department of Human Resources Development?

Mr. Gordon McFee: Some people might say that I have been there too long.

Mr. Mario Laframboise: For example, during the rail crisis, when there were massive cuts to the railways, did the government contribute to any specific early retirement or departure programs?

Mr. Gordon McFee: No, not to my knowledge, with the exception of what I have already mentioned, particularly the program that applies when there are staff reductions, for example.

Generally speaking, employment insurance was designed to pay out benefits. That is half of the response that we sought to give. And at the other hand, we try to put programs in place to help people find other employment.

Mr. Mario Laframboise: But have you ever worked on an early retirement or voluntary departure program? In your time with the department, has the government not offered a program for early retirement or voluntary departures in one type of industry?

À (1010)

[English]

Ms. Catherine Cody: A program existed back in 1988, called the program for older worker adjustment, or POWA. It was a cost-shared program with the provinces, and was terminated in 1996. It was directed very much at low-skilled workers and workers who were working in declining industries, like the textile industry.

We have really moved to much more active measures, to try to help people get back to work. As I mentioned earlier, we have the older worker pilot program focusing on helping people to get back to work, as opposed to bridging until retirement.

The Chair: Mrs. Desjarlais.

Mrs. Bev Desjarlais (Churchill, NDP): Thank you.

I'm almost afraid to admit this, but I actually know about a good number of these programs, because we have used them numerous times when there have been layoffs in my area.

The Chair: It's so important to have our seniors get—

Mrs. Bev Desjarlais: Yes, it's very important.

So I recognize that there are some good programs out there, but there's always room for improvement.

You commented and the pamphlet indicates that the work-sharing program is for a minimum of six weeks and a maximum of 26 weeks, with the possibility of an extension. If someone were not work-sharing and they were totally laid off, would they have the right to benefits for up to 52 weeks?

If they were on work-sharing, would it not be sensible to give them at least 52 weeks, if not even longer, rather than reduce it, because they're at least attempting to work and are spreading out their employment or benefit dollars over a longer period of time. Now, I admit that they're probably making more money if they're working. But if you're only going to get payment for 26 weeks, and if there's not enough work after that, wouldn't you be better off to not work at all at some point and to get the extended benefit dollars?

Ms. Catherine Cody: Generally, when individuals are faced with the choice, I think they prefer to stay at work—

Mrs. Bev Desjarlais: I agree.

Ms. Catherine Cody: Because in the case of a temporary layoff, they're hoping that the company will be able to get on its feet again and move forward.

On the other side, employers are very interested in keeping skilled employees, so they will often encourage workers to continue on.

Mrs. Bev Desjarlais: I agree.

So why not give them a longer period of time on support dollars through EI, because they haven't been totally laid off? Instead of cutting it in half to 26 weeks, why not make it 104, if they're staying and working halftime?

Ms. Catherine Cody: Actually, we do have another program in a pilot stage, called work sharing while learning.

Mrs. Bev Desjarlais: Fair enough, but I'm just curious about what the logic was in cutting the amount of time because someone was working, instead of extending it. In essence, they are spreading out their EI benefits over a longer period of time.

Mr. Gordon McFee: When work sharing was first introduced many moons ago, the normal length of a work-sharing agreement was 26 weeks, given that its purpose at the time was for temporary downturns—and hopefully, upturns afterwards. This period was chosen because it was felt that at that point in time one was moving from what appeared to be a temporary layoff to what might end up being a permanent layoff. It was felt that it would be appropriate around that point in time to evaluate how things were working out.

Mrs. Bev Desjarlais: How long ago was that brought into place?

Mr. Gordon McFee: It was introduced in about 1981 or 1982.

Mrs. Bev Desjarlais: So it would be reasonable to suggest that it's an outdated process in these changing economic times. We should be looking at adjusting it to maybe help those employees who are doing their darndest to stay in the workforce. They've been paying EI premiums for however long; they paid their insurance premiums, and their employer paid their insurance premiums.

I think that Air Canada paid their employment EI, didn't they? We know that they didn't pay NavCan and that they didn't pay a lot of others, but my guess is that the federal government got the CPP and EI from them. Right?

So why wouldn't we give the employer and those employees an opportunity to benefit from those premiums?

À (1015)

Mr. Gordon McFee: We're actually talking two issues at the same time here. One issue is the length of the agreement itself, and the other issue, I guess, is what EI does, the benefit side. On the benefit side, I already pointed out that the money they get is not taken off their EI. Secondly, maybe I should have pointed out that the period during which they can get benefits is extended when they're still on work sharing. So I guess the issue--it's a very good issue--in that scenario would be for people who are part of the work-share agreement and for HRDC to take a look. I may be misquoting, and pardon me if I'm wrong, but I don't think it's a long, involved waste-of-time kind of look. I think it's done quite quickly. But you see where they're at. If it's determined that the best interests of everyone are served by the work-share agreement being extended, it is extended. Their EI is not affected by that because their benefit period is extended while the work-share agreement is in effect.

That's what I should have said in the first place.

Mrs. Bev Desjarlais: That was my question. When I talked about the 26 weeks, it was to ensure that there was a longer extension of time if they were work-sharing. If that's happening, I would say that's the route to go, and it possibly should be looked at for an even longer period of time.

That's it, Mr. Chair.

The Chair: Thank you, Ms. Desjarlais.

Mr. Barnes.

Mr. Rex Barnes (Gander—Grand Falls, PC): Thank you, Mr. Chair.

First, I've had several chats with Gordon before, I think. We've had meetings on a lot of EI issues for problems back home. But from what I can see, Mr. Chair, I don't know if we can find any solution in the present EI system that will benefit the people with regard to Air Canada. We have 35,000 employees who could be--I say could be--out on the street.

Of course, the programs that EI have at present are programs that try to get people back to work. But if you have an industry of 35,000 people out on the street because of bankruptcy and there's no work in the industry for them, they have to find work elsewhere. It's always been said to me that if your job is gone at the hospital, you have a choice: take your chances with EI and see if a job comes up on a part-time basis or in the same field, or leave the area and go away from home. But the problem we have with Air Canada is that 35,000 people could be out of work, totally.

There are two scenarios. If they're out of work, then the EI system is there to assist them to get back into the workplace in a manner that is feasible and reasonable. But if you have Air Canada saying they will downscale their operations and you have 10,000 people who will be totally affected, the only option for them, I believe, is that a new program has to be developed to suit the problem of today.

I believe the solution, Mr. Chair, is for EI to come up with a program of two weeks on and two weeks off. It's called job sharing. You would work for two weeks, a month, or whatever, and of course you're sharing with other employees, people who want to take advantage of that option. For example, if you're working for two weeks and you have 10,000 people who are in the program, 5,000 would work for two weeks, the other 5,000 would be on EI. Then that 5,000 will come off EI and go to work for two weeks. They'll go back and forth rotating in this way. That's the only way I can see the EI program being beneficial for those employees, because in the present system there's no alternative.

Has there been any thought given to the job-sharing process in that manner?

The Chair: Before you answer, could I maybe put that question in more succinct terms? What you're really talking about, Mr. Barnes, is when an industry goes down, there may be no further jobs in that industry available. Is that correct? Is that the substance of the question?

Mr. Rex Barnes: That could be, yes.

The Chair: I think your question might better be, is there a retraining program involved with EI?

Mrs. Bev Desjarlais: On a point of order, Mr. Chair, I understood him totally. It could be that there are a lot of Newfoundlanders in my riding, but I understood him totally, and I'd like to hear the answer.

Mr. Rex Barnes: I know there are retraining programs out there, Mr. Chair. I know that. But in this case there are two scenarios: Air Canada goes completely out of business, or Air Canada stays in business with a decreased workforce. If they go completely out of business, these employees will have to compete and try to get jobs within the industry, with other carriers that come on board. That would be a good solution, because they would get full-time jobs. But if they cannot get full-time jobs, has there been any consideration given to job sharing involving two weeks on, two weeks off in a decreased workforce?

À (1020)

Ms. Catherine Cody: I have to tell you that our focus has really been on helping people find other jobs or make the adjustment. In terms of two weeks on, two weeks off, we haven't looked at that as an option. Generally speaking, our experience has been that individuals are interested in trying to get on with their situation and their lives. Very often, people who don't have current skills will look to training opportunities. We make a very considerable investment in providing training for individuals who are looking for new jobs in emerging industries. We're living very much in a world where people are continually having to learn and upgrade their skills.

Mr. Rex Barnes: I would say you're 100% right, and I have no trouble with that, because there will probably be a number of employees from Air Canada who would say they are fed up with the threat all the time of being laid off or closed down or bankrupted by the airline, so they will want to move off and go for retraining. That is excellent. That's what the EI system is there for. There are programs there for that.

At the same time, there may not be a large number of people who want to do that. If that's the case, where do we go? I think the only option is for there to be a program developed for this purpose. As I said before, I hope Air Canada stays in business, but if it does not stay in business and is completely gone, then retraining and programs under EI are going to be very well used. They'll probably be used more than they have ever been.

I don't know if it has enough money at the present time to do what it would want to do, but if Air Canada is not going out of business and you have 10,000 employees affected, we'll have to come up with a new system. If people do not want to be retrained, the option may be two weeks on and two weeks off. If you have 10,000 employees affected, 5,000 will be working and 5,000 won't. It would be a job-sharing program that helps out the whole 10,000. Then, of course, you'd have them all back in the market, only half time, but at least they are back in the market. If they don't do that, they will be unemployed or they will have to go the other routes and into the other programs EI has.

Ms. Catherine Cody: Mr. Chair, we do have a fairly extensive network of employment-assisted services in areas where HRDC is delivering, and they do provide employment counselling for individuals to help them go through that adjustment period and figure out what will be their next step. In fact, we do provide services to many Canadians to help them find that next job. There is that service available across the country, and people do have considerable success through using those services.

The Chair: Thank you, Mr. Barnes.

Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Thank you, Mr. Chair.

I have one question. This has more to do with application. As I understand it, there are a large number of employees in the Air Canada group who.... I'll give you an example. Let's assume that somebody's been full-time with Air Canada for five years and in the last few months their hours have been reduced to the point at which their status is essentially part-time. Whatever hours they had been working have been cut in half. They follow along this trail for another three, six, or eight months, so they are now a part-time employee and then they're terminated. Tell me, what are their EI benefits? Are they reflective of the last three months, or six months, or are they reflective of the five or six years the employee worked there?

Mr. Gordon McFee: The level of EI benefits is calculated on the earnings the person had in the six months preceding the start of their claim. Whether or not people qualify is calculated on the number of hours they worked in the year before the claim. To answer your question, the money that would be averaged to determine what their benefit level was would be all the earnings they had in the six-month period before their claim starts.

À (1025)

Mr. Roger Gallaway: In effect, if you were full-time and then became part-time because of the economics of the company, what you would collect would be substantially less than if you were a full-time employee who was put out of the door.

Mr. Gordon McFee: That's theoretically possible. I guess it depends, sir, on the way the person is paid, because as you know, EI maxes out at a certain level. My understanding is not all, but several of the occupational categories involved in the airline industry are reasonably well paid when there's work to do. Therefore, the switch, in the case of a pilot, for example, from full-time to part-time likely would not affect the benefit rate because he already makes significantly more than the maximum. But obviously there are people it could affect.

There's one thing I found interesting in your question...and I can't find it here. As usual, when you want to find something in a pack of paper, you can't find it. I thought I heard somewhere that Air Canada had said--and this is also hearsay, so I could very well be wrong--that in their case, part-time workers weren't their problem. I don't know where I saw that. I hope I'm right, but I may be wrong.

Mr. Roger Gallaway: I'm not disagreeing with what you've read, Mr. McFee. I think Air Canada has said a lot of things. I'll leave it at that.

Thank you.

The Chair: I have one further question from Mr. Gouk and one from Mrs. Desjarlais.

Mr. Jim Gouk: I have to choose between the two I have, now.

The Chair: Take two, if you can do it quickly.

Mr. Jim Gouk: I ran into a situation where a company in my riding went bankrupt and the people there didn't even get their last pay cheque. They filed for EI and found they couldn't get EI because they were entitled to severance pay, even though they didn't get it.

I believe that's been changed now. It's based on what you actually collect. Or would people potentially still be disqualified because they're entitled to severance pay they'll never get because the company went bankrupt?

Mr. Gordon McFee: Since you want to ask two questions, the succinct answer is you're right. This is not a problem any more. There's been a change in the regulations. I'm supposed to be the expert on it, but I can't remember what year it came in. It was within the last year or so.

Mr. Jim Gouk: The other one I was going to ask is you mentioned when someone gets reduced to three days a week, they can get EI for the other two days. Is it possible, given the situation, to create something where, if someone went from a high-paying job with Air Canada to a lower-paying job with a different airline that was expanding, there could be some kind of transitional assistance? They wouldn't get it forever, obviously, but when you go overnight from this level of income to this level down here, you have to adjust lifestyle and a lot of other things. Is there any potential for some kind of transitional funding for them to make that change?

Ms. Catherine Cody: We don't currently have any programming like that in operation. There has been some research done on the results of that kind of approach, not with such a high-income group, and with very mixed results. But it's certainly something to take under advisement.

The Chair: Thank you, Mr. Gouk.

Mrs. Desjarlais.

Mrs. Bev Desjarlais: I have two questions. One is really short, so I'll ask them both together.

The Chair: You can ask them separately.

Mrs. Bev Desjarlais: First of all, what is the maximum right now that someone can get?

Secondly, recently CCRA, in conjunction with Human Resources, sent letters out to flight attendants indicating that according to Transport Canada regulations, or the CARs, they were no longer considered flight crew. As a result, their hours now have to be the absolute hours they work. And because contracts were settled recognizing they were part of the flight crew as of, I believe, April of this year, if they do not have exact hours worked, they don't get to credit other hours that they put in toward their EI.

Specifically, flight attendants in a number of airline companies will be at an airport an hour or two ahead of time. If the plane is delayed, they still have to be there. Different companies have worked things into the contracts where they have credit hours, and there are numerous different ways of doing it. Now, if it is not recorded as exact time worked, those flight attendants cannot use that time to go toward calculating their EI benefits.

Is that correct? And is it strange that it happened in April of this year, in light of all the changes to the airline industry?

À (1030)

Mr. Gordon McFee: I have the honour of being the recipient of both those questions. I don't know what you people think when a witness says “that's a good question”. It usually means I wish I were somewhere else when I'm asked.

To answer your first question, the maximum EI is $413 a week based on maximum earnings of $750 a week. That's in the legislation.

On the flight attendants, yes, I'm well aware of that situation. And forgive me, I need to say a couple of sentences to give context to it.

When EI reform took place in the mid to late 1990s--it came into full blush in June 1996 and January 1997--one of the agreements the government made at the time was they would talk to industries where people didn't work the nine-to-five kind of job and do whatever they had to do to adjust for that. One of the groups involved was the airline industry. Adjustments were made to recognize the way they work, which, as you correctly pointed out, is not simply working three hours and then going to lunch, for example. They have stand-by time and all sorts of issues like that.

The rule is any full-time person who's a member of the flight crew, if they work a full-time week, are deemed to have worked 35 hours. They usually work less, but they're deemed to have worked 35 hours. That's to give them equality with everyone else--unless they work more, of course, in which case they get the actual amount they worked. That applies to the flight crew.

What we discovered, very recently--and not to our happiness---was the fact that flight attendants are not considered part of the flight crew. The reason they're not is a long story, and I don't know if you want to hear it necessarily, but it involved a committee that was looking at this stuff.

The committee apparently was struck in 1996 to look at the issue--I don't mean a committee of the House, it's an internal thing--and they have not reported yet. It turns out that because the EI statute requires there be a federal or provincial regulation or statute saying these individuals are obliged to work the hours they work for safety reasons--so it was a safety consideration--and because that does not exist for flight attendants, that's why this has happened.

I have just a couple of other very quick points, and maybe I should get to the most important point first. As I said, we're well aware of this, and we are talking--my understanding is as recently as yesterday and again this morning--with the various players involved--the airline industry, the Department of Transport, CCRA, and ourselves--to see what we can do in this situation. The one thing that's being considered is whether or not when they report their actual hours.... And I should open a parenthesis to say some of the information we have is that even reporting their actual hours, they'll still be able to qualify. Mind you, it will take them longer, because it won't be deemed 35 hours. I believe their normal block is 75 hours every four weeks. You can do the math. It will take them a bit longer to qualify. But people who are continuously employed would be able to do so.

Nonetheless, there is some concern that if we're going to count actual hours, if we're obliged legally to count actual hours, we should make sure that count is as accurate as it can be. Therefore we're looking at issues such as whether or not some of the time they are paid half rate for--I don't know the technical term for it, forgive me--could be included at some pro-rated amount or whatever.

This, by the way, has not been done yet. I think they were talking about it this morning. And I may have just said more than I should have, but I thought I should answer your question honestly.

So there's that issue.

The legal way to rectify the situation would be if a regulation were passed by the Department of Transport to put these folks back where in fact we thought they were until very recently.

I apologize for the length of that, but I wanted to--

The Chair: No, that's very helpful.

Ms. Desjarlais, do you just want to make that exclusive to the airline attendants, because it seems you have people--

Mrs. Bev Desjarlais: It is exclusively applied to airline attendants, simply because they're no longer considered flight crew. And I think in all my times at transport hearings, we were all of the impression they were flight crew. They're emergency responders on the plane. I think they've taken a hit here at a very bad time, because it's going to affect them. A good number have indicated that although it does say 75 hours, every contract is different, and the majority would do well over the 75 hours. So there has to be some way of addressing it now, in light of the crisis.

À (1035)

The Chair: Could I ask you, Ms. Desjarlais, to pursue that issue on the regulation? Would you mind?

Mrs. Bev Desjarlais: I would imagine that they would be able to give this committee any further information, and that our research person could also get the stuff from Transport Canada, so that we could suggest....

The Chair: I'm asking you to push it along.

Some hon. members: Oh, oh!

The Chair: Thank you.

Mr. Jim Gouk: This is very important.

The Chair: Absolutely.

Mr. Jim Gouk: I appreciate that Bev has brought this up, especially given the timing.

I would ask our witnesses, given the timing of this and the crisis the industry is facing, particularly Air Canada, is there some way of temporarily putting this on hold until we can react to it and try to come up with something that you may require from government to deal with it? It would be catastrophic if this came in right now, or we were suddenly hit by this right at a time when the potential of these layoffs is hitting us in the face. Is there some way to put this on hold?

Mr. Gordon McFee: This is one of those unpleasant situations one occasionally goes through. We're faced with the fact that we know, and have known for a few months, that if we were to calculate their hours the way we used to, which was deeming the 35, it would not just be ill-advised, but also be illegal. It's unpleasant to have to say that, but it would be.

The first thing we did was to look for every conceivable way, while respecting our rules, of course, we could to adjust the stuff. We couldn't find one. Every solution we came up with, some of which were rather bizarre—at least the ones I came up with—did not fly. Therefore, we didn't have a choice.

So two things are happening now. The first thing is the part I just talked about. In doing that, we gave the employer and workers about five or six weeks' notice. I don't like to say this, because I will get into trouble if I do, but I guess we stalled it as long as we could. To the people affected, we tried to give as much advance warning as we could that this was the way it was going to have to be. We had many meetings with them to try to get a sense of how serious it really was.

Your point was well made that it would be very unfortunate if this were the difference between someone qualifying and not qualifying in the event of a mass layoff. Our best information so far is that we don't think it will be the difference—but who knows what the future is. That's one thing.

The second thing is that the only way to fix it legally is to change the regulation or statute, which I guess Transport Canada would have to do, to re-include these people as part of the flight crew.

The Chair: Thank you, Ms. Desjarlais. I think you got the message.

Mr. McFee and Ms. Cody, I want to thank you both very much for coming here on short notice this morning. You have given invaluable evidence with respect to those many, many people across Canada who are rightly assuming that they're going to be very seriously affected. As a committee, we are responsible for trying to assure them as much as we can that the resources within Canada and HRDC are going to be used to their benefit. This may have to be a very important part of the recommendations that this committee should be making very soon. This is really the reason, ladies and gentlemen, why we're here today. There are some critical issues that we have to address in a short period of time.

I would certainly think, Mr. McFee, that you would want to leave your telephone number with the research crew here, as we go down this road.

I know that as a chair, I should not ask these questions, but I'll just point out that I was very, very involved in CN's disposal of its trucking arm several years ago. We had approximately 11,000 people.... By way of history, CN decided to get out of the trucking business, and sold it to a group they should not have sold it to, called the Road Hogs, or whatever they were.... Anyway, they absconded with the pension plan, and it was a tremendous mess, leaving about 8,000 or 9,000 employees across Canada really destitute. Since they were no longer employees, the unions weren't protecting them. It was a dog's breakfast.

For those particular employees, the older worker adjustment program was invaluable. It was invaluable because most of those people were between 45 and whatever their retirement age was. I don't know how many applications I made for all of those people in that age group. I think they called it POWA. So I'm wondering if it couldn't be a recommendation of this committee that we should rethink that older worker adjustment program. It seems to fit right into....

The other area I would like to comment on is retraining. We're going to have a lot of young people who have dedicated their lives to the airline industry, who are going to find out that they don't want to continue with the uncertainty they've been facing for a number of years. We should be looking at a retraining program, where they can change careers.

Those are two suggestions that I hope the committee will recommend to HRDC. Knowing the good work you've done for so many years, I offer these suggestions.

I want to thank you all.

Members of the committee, I know that the chairman takes a lot of abuse because we run overtime, but I want you all to know that I thought this was the most valuable part of the evidence we've heard. I want to thank you folks. We would have extended the hours....

Thank you very much, Mr. McFee and Ms. Cody, for coming.

Mr. Bagnell, I'm going to allow you two minutes to introduce our next two witnesses, through the chair. But this is not a commercial. If you go beyond four minutes in your introduction, Mr. Gouk will have the authority to call a halt.

Is that fair?

À (1040)

Mr. Larry Bagnell (Yukon, Lib.): I'll just be really short and take just a minute.

Air North is an airline that has existed in the Yukon area for many years, with flights around the Yukon and internationally.

Mrs. Bev Desjarlais: Mr. Bagnell, we gave you five minutes of free advertising at our last meeting as well.

Thank you.

The Chair: Excuse me, but we need the full concurrence of the committee to accept the submission by Air North, which unfortunately has not been translated into French.

Do you want to accept it or not?

Not accepted.

Mr. Larry Bagnell: It has had international flights through Alaska, and it recently started flying jets from Whitehorse to Calgary, Edmonton, and Vancouver.

Because they're in their annual audit, the president could not make it down here.

The interesting thing about this airline is that it's 49% owned by the Vuntut Gwitchin First Nation in the Yukon, which is very exciting. A vast majority of the shareholders are Yukoners. It's great that the north is being served by a local—and now an international—airline with a whole series of planes. In a time of depression in the airline industry, I think this is quite an exciting story.

Mr. Leitch is one of the directors on the Air North board. The president of the Vuntut Gwitchin Development Corporation, which owns 49% of the airline, also hoped to be able to make it, but he just couldn't make this trip on such short notice.

À (1045)

The Chair: Thank you, Mr. Bagnell.

Mr. Leitch, the normal process is that you can take up to ten minutes to give an introduction, and then there will be some questions from the panel.

Mr. Murray Leitch (Vice-President Legal and Director, Air North): Thank you, Mr. Chairman.

Good morning. I'd like to thank the committee for this opportunity to speak on behalf of Air North. I'd also like to apologize to the committee that we weren't able to translate our submission into French. We were invited to appear on Monday afternoon, and it just didn't allow sufficient time for us to do that.

I'd like to briefly go over some of the background on Air North. Mr. Bagnell has given you some of the background.

Air North is a small regional air carrier based out of Whitehorse. As Mr. Bagnell indicated, we serve nine communities in the Yukon, Alaska, and the Northwest Territories, and starting last June, we are also flying to Vancouver, Calgary, and Edmonton.

Air North has been serving Yukoners for over 25 years. As Mr. Bagnell indicated, Air North is 100% owned by Yukoners. A substantial portion is owned by the Vuntut Gwitchin First Nation, which is the first nation in Old Crow. The other major part of the airline is owned by the president and chief executive officer, Mr. Sparling. Then there are approximately 450 Yukoners who put up their money in the last year to help the airline expand and start its southern service.

That service started after the events of 9/11 and in the midst of the troubles in the airline industry. Air North started with three flights a week to Vancouver from Whitehorse, and three flights a week from Whitehorse to Calgary and Edmonton. Just this last February, Air North announced it was expanding its service to Vancouver. Starting May 15, Air North will be flying six times a week to Vancouver, or daily except for Saturdays.

In starting its southern service, Air North of course had to hire more people. It went from approximately 28 full-time employees to 56 full-time employees now, and we are again hiring more people in connection with the additional service to be put on in May.

On the revenue side, Air North is a small carrier. In 2001 its annual revenues were approximately $6 million. Last year, in 2002, they were approximately $11 million. And this year we're hoping to see revenues of about $20 million.

That's the background of Air North.

There are just three short points that I wanted to make to the committee. The first point is that we say that competition in the airline industry is working and that it's good for the smaller carriers that are growing, like WestJet and CanJet.

No one wants to see Air Canada cease to exist as an airline, and I don't believe that's going to happen. I think they will emerge from their restructuring as a more viable entity and be able to provide the good service that they have provided to Canadians in the past. But as the possibility was raised by members here today, even if they ceased to operate, it doesn't mean that the service will not be picked up or be provided by other air carriers. There are other airlines in Canada that will come to the plate if that eventuality were to occur.

I also agree with Mr. Beddoe and others that Air Canada is mainly the author of its own misfortune. The situation it is in is perhaps partly because of 9/11, SARS, and the war in Iraq, but I would suggest that it's mainly because of the business model they've been working with and the poor management the company has in place.

They do seem to have this policy or practice of trying to put their competitors out of business, rather than trying to work with competition in a reasonable and businesslike fashion. Air North has seen that from the time it started its southern service. Basically, from the moment we started flying to the south, Air Canada responded in an anti-competitive way.

À (1050)

One of the attachments I had on the paper here was the calculation that Mr. Sparling had done as part of our complaint to the competition commissioner, which is still in the investigation stage, showing that Air Canada added capacity and reduced its prices on Air North's entry into the market. And had it not done that, if it had acted in a business-like and reasonable manner, rather than both airlines losing money for that period of time, up to the end of last year, we would have both made money. That's not anything related to SARS, 9/11, or any of those other factors. That is a decision by its management to purposely lose money on a route where it could have made money.

So as I say, I do agree with what Mr. Beddoe said. I was also heartened to read in the Globe and Mail the other day the comment by the former transport minister, Mr. Tobin, who again said the same thing. That is where Air North believes the problems are.

That's not to say Air North doesn't recognize that the industry as a whole is in a slump. We certainly agree with the comments that have been made to the committee by many of the witnesses that it would be helpful to the airline industry generally if Parliament could take steps to reduce airport fees, fuel excise taxes, and Nav Canada fees, and to further reduce the security fee.

As an example, this year, as I said, we're looking at revenues of approximately $20 million. The Nav Canada fees and the airport fees that Air North is looking at are approximately $1 million--5% of our gross revenue. That is a lot of expense for a small airline.

Anyway, I'd like to thank the committee again for this opportunity to put forward Air North's views, and I welcome your questions.

The Acting Chair (Mr. Jim Gouk): Thank you, Mr. Leitch.

I might take a liberty here for a minute, because I'd be the first one to speak normally anyway.

Just so you understand, your submission will go to the committee. It will be translated, and everyone will get it. So we will get your submission, but it will just be delayed a day or two.

Mr. Murray Leitch: Thank you.

The Acting Chair (Mr. Jim Gouk): One thing you mentioned was the Nav Canada fees. This is something we'll be discussing later. I worked in that industry for quite a long time. We can certainly look at the potential of doing something about airport fees, and again, because we can use an offset, we can look at the security fee.

Nav Canada, however, has no way of offsetting. If it drops its fees, it has to make that up somewhere. So we're going to have a look in terms of what's fair and reasonable and whether or not there are any changes there, but that's the most difficult one to change.

Mr. Murray Leitch: I certainly can appreciate that, Mr. Gouk.

[Translation]

The Acting Chair (Mr. Jim Gouk): Mr. Laframboise.

Mr. Mario Laframboise: Thank you, Mr. Chairman.

Mr. Leitch, you must realize that we will be making recommendations to the government at noon. Since September 2001, and more particularly since the last convention of ATAC, the Air Transportation Association of Canada, the entire industry has been asking the government to review the taxes on security, fuel, airport improvements, as well as the NAV CANADA fees.

Besides the fact that Air Canada is experiencing difficulties, it is important for you to deliver the industry's message so that Liberal members will understand that there is indeed a crisis in the industry. Maybe I have misunderstood, but I believe there is a problem with the fees, the taxes, and the rest. I think you should state that clearly.

We can always make specific recommendations with respect to Air Canada, but I am not so sure that another corporation can quickly replace Air Canada, which held 60 per cent of the market share. Even if Air Canada were to no longer exist tomorrow, reorganization and restructuring would still be required. The industry is not ready.

In the meantime, you will have to find a way to survive. Your company and all of the other ones must be able to weather this crisis that has been caused by the war in Iraq, among other things. There is a crisis in the airline industry.

So it is important for you to emphasize the fees, the taxes, and similar expenses. How do these extra costs affect your company?

À (1055)

[English]

Mr. Murray Leitch: That's a very good question. The charges are forming so much part of the cost of air travel at this point, whether they come in as a Nav Canada and fuel surcharge or they're right there as the security charge. The problem you see is you can have a base fare, as Air North does, of $390 return, Vancouver to Whitehorse, but when you add all the fees and other charges on, you're at $500, and that doesn't include the airport improvement fee that people pay when they're leaving Vancouver.

So it's a very significant portion of the cost that travellers are looking at, and other witnesses have made the point that it's a big disincentive to people to travel, particularly on the smaller routes. Certainly as I indicated, Air North is looking at close to a million dollars just for Nav Canada and airport fees this year on revenues of $20 million. That's a very significant portion of its expenses. I think a reduction could encourage people to travel more, and that would be useful, as you say, right now when travel is down. The number of people travelling either on business or for leisure is down fairly substantially.

[Translation]

Mr. Mario Laframboise: According to what you have said, your company is relatively new. I believe you started in 2001?

[English]

Mr. Murray Leitch: In terms of the southern service that we're providing, we started in June 2002. Air North has actually been operating in the Yukon for 25 years.

[Translation]

Mr. Mario Laframboise: Have you been able to determine the percentage of fixed costs represented by taxes? What was the cost three years ago, and how much do you pay in taxes today? The fuel excise tax is increasing, but it is a fixed expense that is increasing. Your ticket prices are not necessarily any higher because of the competition. Have you ever tried to determine how much the NAV CANADA and security taxes were costing you in terms of standing expenses?

[English]

Mr. Murray Leitch: Unfortunately, I'm not actually in a position to answer that question. I don't have that information with me. My reaction would be I think the fees have continued to increase. I know the rents at the airports are continuing to go up each year, but I really can't provide any more information on that. I'm sorry.

[Translation]

Mr. Mario Laframboise: But even though there are obviously fewer passengers because of the problems in the industry, you have not necessarily adjusted the fares to the fee increases. Or have you?

[English]

Mr. Murray Leitch: Air North, like many of the other carriers, has a fuel surcharge or a fuel and Nav Canada surcharge, but no, it doesn't get adjusted every time the fuel price goes up. There is, as you can appreciate, a level at which people really balk, and you have to start absorbing any additional costs in the base fare or you just lose too many passengers.

The Chair: Mrs. Desjarlais.

Mrs. Bev Desjarlais: Thank you.

I know my colleague Mr. Gouk indicated that there's just no way that NavCan can make adjustments to their charges, and I want to preface this by saying I've never agreed with NavCan operating as a separate entity and it operating outside the realm of being paid for strictly on a user-pay basis, because I think we all benefit from certain services within our country. However, I find it a bit shocking now that the same people who promoted this type of approach of a user fee as a business model are now suggesting that the business model of if you can't make it, the rest of the customers have to offset the cost just isn't okay, so somewhere we have to get the money.

So I just want to preface that. The business model would say that if NavCanada needs $44 million that another customer didn't pay, they usually get it from the other customers. It stinks, and I don't agree with it, but quite frankly, that's the reality of setting up NavCan the way it has been set up.

I do want to comment on the fact that the five top executive officers of NavCan make over $1.5 million among them. The seven or eight directors probably make another $250,000 among them.

So I do think there is room for movement with NavCan and the way that they operate. I'm not saying they haven't done a decent job; I'm just saying it's a little bit excessive in some areas, and at some point that needs to be looked at as well.

I have a few questions for you, and I'm going to take this opportunity because we may not have the chance to have Air North appear or we may not have a chance to get up there when we do further deliberations into airport legislation.

Does Air North feel there's a need for interlining agreements or access to Air Canada's Aeroplan? Should Air Canada still be around? Is that something Air North has been asking for?

Á (1100)

Mr. Murray Leitch: I'll deal with them separately.

At this point Air North is interlining baggage with Air Canada. You can't check in for your Air Canada flight at the same time you check in for your Air North flight, but you can put your bag right through to your final destination. That really deals with the concern that most of our customers had.

We've only started doing that recently. It was always open to us to do because we are a member of an international airline association, which allows us to do that.

In terms of Aeroplan, we looked at whether we wanted to participate in Aeroplan. The feeling we had from most of the Yukoners we talked to is they would prefer that we set up our own program, because particularly out of the Yukon you can never get seat availability. That's what we are looking to do and intend to do.

Mrs. Bev Desjarlais: Do you pay any kind of additional charge for the baggage interlining?

Mr. Murray Leitch: No. The agreement basically.... The issue Air North had is when you interline it's the end carrier that's responsible for baggage claims. Our fear was that Air Canada might lose more bags. That's not saying anything against Air Canada; they just deal with a lot more bags. It's just a function of size, in a sense.

Mrs. Bev Desjarlais: Fair enough.

I have just one more question. With regard to what is perceived as anti-competitive behaviour on behalf of Air Canada—and I'm saying perceived because we're public and I don't want to be taken to task—by putting on more flights with excess capacity, what do you think is the answer to addressing that without having to go through this whole process of the Competition Bureau?

Mr. Murray Leitch: I personally think, and I've made this point previously to some people, including Mr. Bagnell, that there need to be amendments to the Competition Act. What we're talking about is the abuse of dominance provisions. The problem is even if you finally get through the process—and the process, as you can see from the WestJet example, is lengthy and cumbersome, and they've been at it for three years and they're still not through it—all the tribunal can do is make orders that deal with conduct going forward. There's no real disincentive for a carrier such as Air Canada to abide by the rules, because so what if at some point they're found to be acting anti-competitively, and going forward they're stayed from doing what they'd done three years ago. By then it's way too late.

If there were a provision in the act that provided that if you get through that stage and they were found to have been acting anti-competitively, they're liable for two or three times the damages they caused to the other carrier, then I think you would find someone in their position, someone who is a dominant entity in any market--I'm not saying it's limited to the airline industry, I think it should apply to all industries--would be much more timid about taking steps like that.

Á (1105)

Mrs. Bev Desjarlais: Okay, thank you.

The Chair: Mr. Bagnell.

Mr. Larry Bagnell: Well, Bev asked one of my questions.

There were a number of witnesses who said that in this airline restructuring we want to make sure that the rural parts of Canada are still served. Almost half of Canada is made up of the three northern territories, which is probably the most rural and distant part of Canada. If Air Canada were not to be able to find a way to exist after this restructuring, would that mean the northern part of Canada, the most rural and the hardest part to serve, was not served any more?

Mr. Murray Leitch: Mr. Bagnell, as you may be aware, and the rest of the committee probably isn't aware, the three territories are mainly served by other carriers, by First Air, Canadian North. In fact, the only community north of 60 or in the three territories that Air Canada flies into is Whitehorse. Whitehorse is also served by Air North. I'm not suggesting at all that there will be a demise of Air Canada, but if it were to come to that, or if Air Canada were to withdraw from the Whitehorse market, people would still have air service.

Mr. Larry Bagnell: Could you outline for the record, related to the number of flights, exactly what happened when you came into existence?

Mr. Murray Leitch: Air North announced in January 2002 that it was going to start its new service to Vancouver and to Calgary and Edmonton. Shortly thereafter—probably two or three months thereafter—Air Canada announced that for the first time ever the dominant carrier, in that case the 100% monopolist carrier, was going to offer four flights a day in and out of Whitehorse in the summer.

In previous summers Canadian Airlines and then Air Canada had added a third flight for a short period of time, usually from mid to late June to early September. They announced they were going to add not just a third flight, but a fourth flight. Both of them were going to start earlier than previously and were going to continue later than previously. That was the first step.

In May, Air North received permission from the government to start actually selling tickets—there's a process you have to go through. And at virtually the same time—Air North had then announced its actual start-up date, which was June 7—Air Canada came out with a seat sale, which was basically to match Air North's price. They actually called it the 07 June seat sale. Again, they were trying to make sure that those important dollars that you need right at the start-up, when you're starting out, wouldn't be available because they would offer a sale at the same time.

Steps like that have continued. One of the more notable ones has a bit of a history to it. Back in about 1985, when Canadian Airlines was the only carrier serving Whitehorse, they would fly to Fort St. John and you would switch planes. If you were going to Vancouver you stayed on the 737 that was there; if you were going to go to Calgary or Edmonton you got off and you went on the plane that was right beside it. The prices from Whitehorse to Vancouver and to Calgary and Edmonton were all the same.

As part of this spoke and hub thing, they said it would be much more effective if we could just fly everybody to Vancouver and then you'd connect from Vancouver to go to Calgary and Edmonton, but don't worry, the price will remain the same. Well, the price remained the same to go to all three destinations—for about a year.

The Chair: Thank you, Mr. Leitch.

Mr. Rex Barnes: Thank you, Mr. Chair.

You mentioned in your report that the other carriers would come on board. You basically said, and Larry asked you the same thing, that if Air Canada decided to cut some of the routes they normally had into smaller areas, other air carriers like yourself would come on board.

If Air Canada happens to drop some rural areas up north or south because they're not making money, how could an air carrier like yourself manage to pick up routes that Air Canada claims do not make money?

Mr. Murray Leitch: There are a bunch of different parts to that question. Air Canada has a different cost structure from most of the other airlines operating in Canada. That's partly because of the losses they're carrying, partly because of the wages they're paying, and so on. Air North, like WestJet, has a much lower cost structure.

Á (1110)

Mr. Rex Barnes: At the high and low-cost end of it, are you saying that it's because Air Canada is unionized? Are you unionized? I don't know, this is why I'm asking. Is that partially the problem? Is it because of demands at the collective bargaining table that from your perspective you see have been a deterrent for Air Canada, or is it because Air Canada just made too many bad management decisions?

Mr. Murray Leitch: To answer your first question, Air North is not unionized. If you're asking my opinion, I would say personally that Air Canada's problem is mainly management-based, in decisions the management has made.

Certainly having a higher wage cost is something they have to deal with, but they have ways of dealing with it. They're a much bigger airline. They can get a lot of other economies of scale on other things. They pay less, probably, than we do for fuel, simply because they buy more. They can get other economies to make up for those things.

Mr. Rex Barnes: Okay.

The Chair: Thank you, Mr. Barnes.

Normally it's the chair who thanks the witness, but I'll leave that to Mr. Bagnell.

I appreciate your coming, Mr. Leitch.

Mr. Larry Bagnell: Thank you for coming all this way on short notice, and for giving give us an example of a small local airline with local ownership. And I think it's very visionary that you've involved first nation ownership in half the company. In these dismal times we're trying to find solutions for, at least you're having some modicum of success. And hopefully there may be some keys in what you're doing to helping us find a solution in a very difficult industry in very difficult times.

The Chair: Thank you, Mr. Leitch, for attending this morning and giving us this valuable evidence. Thank you.

Mr. Murray Leitch: Thank you, Mr. Chairman, and thank you, committee members.

The Chair: Ladies and gentlemen, since we're trying to come up with solutions to better the viability of the airline industry in Canada, one of the solutions that has been recommended is that we ask Industry Canada how best we can bring to the attention of the travelling public, not only in Canada but the United States, how they can assist in getting Canadians back to having assurance in the airline industry that it's safe, it's compatible with the transborder traffic, that it's not only a great means of tourism, but that it's vital to the future of Canada. It's vital to employment, to the number of people who are employed. We therefore asked Industry Canada to appear, and I thank them for attending on very short notice.

I welcome Mr. Penney, the vice-president of planning and product development for the Canadian Tourism Commission, which is under the jurisdiction of Industry Canada.

Yes, Ms. Desjarlais.

Mrs. Bev Desjarlais: Maybe I missed it, and I do apologize if I did, but I had it that Industry Canada was in another time slot and that we had the tourism association right now, and then the international.... Or am I missing this? I don't know.

The Chair: I'm sorry, Ms. Desjarlais, we went from Human Resources Development Canada to Air North. The Department of Industry could not attend at that time, and we've placed them after Air North. Then we have the Tourism Industry Association of Canada. We have two witnesses. This is from Industry--

Mrs. Bev Desjarlais: No, I understand that. I just had the tourism industry at eleven o'clock.

The Chair: Yes, I know, and I apologize.

Á (1115)

Mrs. Bev Desjarlais: But with all due respect, I'm following the agenda, and I would have appreciated the agenda time slot being followed accordingly by the witnesses who were listed. I'll leave it at that.

The Chair: With all due respect, we've carried on with Human Resources Development Canada, which is very important. And I apologize to the committee for the change.

We're going to hear from Mr. Penney, please.

Mr. Thomas Penney (Vice-President, Planning and Product Development (Industry Portfolio), Canadian Tourism Commission): Thank you, Mr. Chair. Thank you, committee members.

As the chair indicated, I'm from the Canadian Tourism Commission. That is a crown corporation within the Industry Canada portfolio. It is a marketing organization. Its mandate is to market Canada as a travel destination in key markets around the world, as well as to Canadians.

Our major operating principle is partnership, which means that whatever the commission does, it is in partnership with the Canadian or foreign industry.

As I'm sure the table knows, in terms of the tourism sector, we are in times of great uncertainty. We have the war in Iraq and potential repercussions around the world, we have SARS or the Hong Kong flu, and then, lastly, we have the uncertainty in the airline business. This, taken together, has dampened confidence levels in the tourism industry. And today, and for perhaps the next two or three weeks, we see a real slowdown in the tourism industry and the tourism activity.

What the commission has done is it has taken a leadership role with the industry, as it did after September 11, and we have tried to gather up pertinent information and convey it to the industry as quickly as possible.

In this respect, like most organizations, we have a website. On that website is a red button, which says “Iraq Update”. When you click into there, you go to a virtual micro-site, which has about five categories of information regarding the situation in the tourism sector. We have encouraged the industry to go into this site. We update it virtually on a daily basis, because, as you can imagine, circumstances do change by the day.

If I might just take a few minutes to explain to you the site, the first main category is market intelligence. We have offices in 15 countries around the world, and each week we get a market intelligence report about what those markets are doing, what is their view of Canada as a travel destination, and how can we best message out to those potential travellers.

The second area is we are in the process of reviewing all activities at the commission to establish what we have termed “a recovery program”, which is, in essence, a war chest, with which, when we are convinced the timing is right, we will go back into primarily the U.S. and Canada markets and try to what we call thump the markets to get people back travelling, to get people back on airplanes, and get the revenue being generated for the industry.

We're not quite finished that exercise yet; it's still ongoing, but by say Tuesday of next week we'll know where we stand. We have meetings with the industry regularly, and key members of the Canadian industry participate and give us their thoughts.

The third item is on research. We are, today, in the American market with questionnaires trying to establish attitudes, trying to establish future behaviour, trying to establish what kind of messaging should we go out with when it is believed that it is the appropriate time to go out and try to stimulate travel to Canada.

The final item has to do with key industry leaders, industries such as Hertz, such as Fairmont Hotels, such as Travel Alberta, and what they are saying about the situations, as they determine it. Most of the industry is being very frank and informative and we throw that up as the industry's side of information.

The only other item I would like to mention, Mr. Chair, is that some time ago we formed what we called a conflict task force, which is made up of about 12 people, both public and private sector, in terms of Travel Alberta, Tourism B.C., and the City of Montreal. We also have the head of the National Tour Association on it as well, to get some direct American feedback. We have a conference call every Monday, where it basically takes a three-pronged thrust. We give the best status report that we have from the intelligence we've gathered the past week. We also tell them where we're going with our marketing programs, what our feeling is, and then the final thing is we do a round table and we ask them to give their status reports as to what they're getting.

Á (1120)

Mr. Chairman, that's about where we're at. I will stop there.

The Chair: Thank you, Mr. Penney.

Mr. Gouk.

Mr. Jim Gouk: Thank you.

You market Canada in other countries and try to get travellers from those countries to come to Canada, right?

Mr. Thomas Penney: Yes.

Mr. Jim Gouk: Have you seen a curtailment between the United States and Canada as a result of our policy on Iraq, or is it too early to have any really significant feedback on it? Has that had an impact?

Mr. Thomas Penney: We have detected some resentment in the United States. It is not a major trend. There have been some 1-800 numbers that have received calls from people who are upset. We've had some brochures returned with comments on them, but I must emphasize that we're talking, three, four, five, six. So we have not detected a major trend regarding resentment of Canada, given our position.

Mr. Jim Gouk: Do you have any specific suggestions as to what we need to do in Canada in order to enhance the industry?

Mr. Thomas Penney: Right now the industry is in a wait-and-see mode, as is most of the world. They've hunkered down and they're hoping that these items will pass and they can get back into it.

I think the base thing is they understand they have the support of the federal government, and that the federal government is looking at the issues of concern and the residual issues, and is interested in that. I think that's probably the best message to them now.

Mr. Jim Gouk: When there's a situation like Iraq, and presumably people don't want to fly in, or anywhere near, the Middle East or some countries related to that, should that not in theory give some potential for almost a boom to destinations like Canada, safe destinations, as an alternative to where people might have otherwise travelled?

Mr. Thomas Penney: In a way you are right. Traditionally, while the activity is ongoing people tend to stay close to home. They do not travel. That's just a fact.

What we are looking at is that there is potential travel to Asia and to Europe that is not happening, and when we decide to go in market we will have formatted programs to redirect some of that travel to Canada. We believe that for the foreseeable future Asia will take a while to come back, given the flu situation, and we are working with tour operators to redirect.

So the expectation is there will be a rebound, there will be a boom. We're hoping that it starts to occur mid-May onwards. So yes.

The Chair: Thank you, Mr. Gouk.

Mr. Laframboise, we're going into five minutes, with the greatest respect to time allocations.

[Translation]

Mr. Mario Laframboise: You are probably very familiar with airline operations in Canada. Air Canada uses a hub approach, while other airlines have a spider web arrangement, from point to point, while others simply offer vacation charters and similar services.

Do you think that for the purposes of our tourist industry, Canada needs an airline to operate from a hub in order to, with established schedules, take on foreign passengers and fly them throughout the country? Do you think this type of large hub operation is necessary in Canada?

[English]

Mr. Thomas Penney: I think the answer would be yes.

From my perspective, if I may, in essence, we have three major points, which are Vancouver, Toronto, and Montreal. In essence, by and large, most international things come in there and then do go off. While in theory we may not have a hub, in essence we do. Similarly with Halifax: in Atlantic Canada, in reality you end up going through Halifax, whether you're going to Charlottetown, New Brunswick, or wherever, by and large.

The answer I think would be yes, and in reality we somewhat have it.

Á (1125)

[Translation]

Mr. Mario Laframboise: But we are aware that a hub is more expensive to operate than is a spider web, where only specific destinations apply. Is the industry aware of this fact?

[English]

Mr. Thomas Penney: I think, Mr. Chair, I'll have to confess that I'm getting somewhat out of my area of expertise as to the expense of hub versus spider, etc. I'm sorry, I really can't answer you.

The Chair: If it's not your area, it's not your area.

Thank you for those questions, Mrs. Desjarlais.

Mr. Barnes.

Mr. Rex Barnes: Thank you very much.

You mentioned in response to a question that with all the activities that are happening around the world today, which involve, I suppose, SARS, the war, and of course 9/11 back a year ago or so, people tend to stay close to home more, and they basically, I suppose, don't do their normal activities. What will be the turning point, and when will it happen? When are people going to start moving again and do what they would normally do within the industry?

Mr. Thomas Penney: I think we're all hopeful that the war is in essence winding down. To date there have not been repercussions around the world, and that will continue. Hopefully, medical technology can get a handle on this flu and isolate it, and the flu season will pass, and those will be the two major factors affecting when people decide they're more comfortable with moving farther away from home or going to foreign places or strange places. So I think we need those two things.

As I say, the news on the war is good. It appears to be winding down. Specifically on SARS, I'm not sure what the position is today, but hopefully that is being controlled. Right now, in essence, SARS has overtaken the war. There is more concern about it than there is about the war.

The Chair: Thank you, Mr. Barnes.

Mr. Gallaway.

Mr. Roger Gallaway: What are the top five countries in terms of Canadian tourism? What are the top five countries from which tourists come to Canada?

Mr. Thomas Penney: The United States, France, Germany, U.K., and then Japan.

Mr. Roger Gallaway: I'm quite aware of your organization. What effect can your intelligence reports and marketing do to encourage people to come to Canada on a Canadian airline?

Mr. Thomas Penney: More than anything, the intelligence reports will indicate to us when they believe people are prepared to get on any airline, including a Canadian one, and that's probably the most valuable thing.

The major question right now in the industry is when will people start to travel again. I think every tourism entity in Canada and around the world is now trying to judge when they can go back in market to stimulate that demand.

We had a sense that there was starting to be what we call normal bookings mid-April because the war dragged on a little bit and then we had SARS flare up. That has now been delayed to mid-May. So what happens with our intelligence reports is they check with local tour operators, or whatever, in terms of booking trends and then we relay that to the industry, which says it looks like people are starting to move, given the second week of May.

Mr. Roger Gallaway: Finally, of the aggregate of visitors from these top five countries who come here, can you tell us how many arrive on a Canadian carrier, what percentage?

Á (1130)

Mr. Thomas Penney: To be honest, I would have to say I'm guessing, but I would think perhaps 50%.

Mr. Roger Gallaway: Fifty percent arrive on a Canadian carrier.

Mr. Thomas Penney: Arrive on Air Canada.

Mr. Roger Gallaway: Thank you.

The Chair: Thank you, Mr. Gallaway.

I want to thank you, Mr. Penney. I have a couple of other questions. When you talk tourism that also includes, I'm sure, tourism from within Canada, getting people to move from Halifax to Vancouver to visit with their families and that type of thing. That's a major component of the tourism industry. Am I correct?

Mr. Thomas Penney: You are, and we have a specific program for Canada to do that, as well as to convince Canadians that they can probably find the same product they're looking for elsewhere in Canada, and by all means visit Canada.

The Chair: What would your budget be, approximately, on an annual basis?

Mr. Thomas Penney: Is that for the commission?

The Chair: Yes, for the commission.

Mr. Thomas Penney: It is $83.8 million.

The Chair: Of that $83.8 million, how much would you dedicate to print, radio, television, and that type of thing at point of sale?

Mr. Thomas Penney: Of the $83 million, probably $70 million is in pure marketing, and of that $70 million, I would think close to $60 million is on print—magazines, newspapers. We don't do as much TV as we used to because of the rising costs, etc. But it would be of that nature.

The bulk of our money is in that. The rest is in what we call public relations special events activities.

The Chair: What you're saying is that because of the uncertainty—and we're into a new year—now you are looking for new ways to start the program. What we're trying to achieve at this committee is how to enhance the airline industry within Canada. That would be a very important aspect of your endeavours. Is that correct?

Mr. Thomas Penney: Yes, it would be. Anything that causes uncertainty—and I'm sure, as you know, the uncertainty is not Canada, it is North America. I'm sure it comes as no surprise to this table that every major North American airline is either trying to avoid bankruptcy, is in bankruptcy, or is coming out of bankruptcy. That includes US Airways, American Airlines, United Airlines. Again, that puts a buzz in the marketplace, which is a perception and tends to dampen people's confidence in going to airlines in the United States or Canada.

The Chair: That's exactly the point I think this committee is getting to. We don't have to wait for the United States to correct its problems in the airline industry. We can correct these problems within Canada ourselves, using the facilities we have within Canada to show how an airline industry should operate. That's basically where we're headed.

Mr. Thomas Penney: Yes.

The Chair: Mr. Penny, thank you so much. Will you thank Linda in your office, whoever Linda is? I talked to her earlier this morning. I know that you came on very short notice. You've given us great evidence upon which to base a decision on how we're going to get this industry going again. I want to thank you for coming over, as I said, on short notice.

Mr. Thomas Penney: Thank you, Mr. Chair and committee members.

The Chair: The next group, to satisfy Ms. Desjarlais, who is gone, is the Tourism Industry Association of Canada. We have Mr. Williams, the president and CEO, and we have....

Mr. Randy Williams (President and CEO, Tourism Industry Association of Canada): I will introduce her. This is Margot Booth.

The Chair: We could make a card for her. Would one of the clerks make up a card for Ms. Booth?

We don't like you to go unnoticed, Ms. Booth.

Mr. Williams, thank you for coming.

You've heard the previous evidence of Industry Canada. You're the group that promotes tourism within Canada. We'd very much like to hear your evidence this morning.

The usual procedure is for you to take a few moments to make introductory remarks, and then I'm sure there will be questions from the committee.

Mr. Randy Williams: Thank you very much, Mr. Comuzzi. I appreciate the opportunity to speak with this group again. There are a lot of familiar faces around the table, and I appreciate the opportunity.

With me today is Margot Booth, who is our director of communications and public relations at the Tourism Industry Association of Canada.

I commend the committee for its initiative in examining the viability of the airline industry in Canada. A viable and sustainable airline sector clearly serves the public good. I am pleased to have this opportunity to address the committee on behalf of the Tourism Industry Association of Canada.

In my testimony today, I hope to accomplish two things. The first is to counter an apparent tendency at the federal level to look at Canada's airline industry in isolation from other sectors of the economy. The second is to convey the need for action in support of all Canadian airlines, which are struggling to survive at this time, and the government's responsibility to respond.

First, though, I want to point out that air travel is not a luxury. Time is a luxury, and in a country the size of Canada, where getting from point A to point B often means travelling huge distances, surface transportation is not always a workable option. In fact, for some remote and northern destinations it's not an option at all. Affordable air travel is a necessity in Canada.

It's also important to remember that the airline industry neither represents nor serves an exclusive special interest group or some narrow economic interest. Air travellers potentially represent all Canadians, as well as international visitors, whether the object of their travel is for business or pleasure or both.

When Canada's airline industry is in trouble, as it is now, the impact reaches far beyond its most obvious constituents—the carriers, their employees, shareholders, customers, and the communities they serve. It also hurts a major sector of the Canadian economy that depends on people's ability to travel affordably. That's tourism.

Businesses throughout Canada's tourism and travel industry are suffering. That includes hotels, conference centres, attractions, restaurants, retailers, tour operators, travel agencies, taxi companies, and the list does go on. The stakes are very high. Canada's tourism industry is worth $54 billion a year. Thanks to spending here by foreign travellers, who account for a third of that total, it is the nation's fourth largest export industry.

Tourism businesses employ directly 580,000 people in Canada. Over one million others depend on the industry for their livelihood, from coast to coast and in every community in Canada. Those jobs provide vital incomes for individuals and families and are the economic lifeblood of entire communities.

Tourism also generates significant tax revenues that contribute to the achievement of Canada's economic and social objectives. Those revenues are estimated at $19 billion going to governments overall and it includes another $10 billion that accrues to the federal government.

Having established the critical linkage between a viable airline industry and Canadian tourism, I encourage the committee to support positive measures to facilitate sustainable and stable air travel in Canada. The failure of three major airlines in three years is concrete evidence that what we are doing is not working in Canada.

There is of course no magic bullet. The airline industry's ongoing difficulties involve a complicated set of issues. It remains vulnerable to external events such as 9/11, the war in Iraq, and SARS. But it is well within the federal government's power to help the industry weather the effects of these events and normal downturns in the business cycle.

Á (1135)

Air Canada is redeveloping its business model to meet today's new realities. The federal government, I would suggest, has a responsibility to do the same thing. TIAC suggests that your tax policies and your operating regulations were built on yesterday's operating model. Just as Air Canada needs to rethink its business model, the government needs to rethink how it relates to the airline industry.

I won't belabour the point, but I want to repeat for the record a recommendation that members of the committee have already heard from my association and many others, and that is the removal of the air travellers security charge and the other special federal excise tax on aviation fuel and the reduction of airport rents. Those federal charges are clearly threatening the affordability of air travel and the viability of air carriers. Removing or reducing them is an opportunity to take the corrective action that is needed to ensure the health of Canada's important tourism and travel industry and its ongoing contribution to the Canadian economy.

Thank you very much for the time, and I look forward to your questions.

Á (1140)

The Chair: Thank you, Mr. Williams.

Just before we get into the questioning, the previous witness indicated that they embark on programs through Industry Canada through a cooperative venture. Does that cooperative venture include Tourism Canada?

Mr. Randy Williams: We work very closely with the Canadian Tourism Commission. We're not a marketing organization. We do have some of our activities that affect how Canada is marketed, obviously, but we are a private sector organization with an industry board, and we do not receive government funds, whereas the Canadian Tourism Commission is a crown corporation that is solely charged with the marketing and promotion of Canada as a destination. We have two different mandates. We obviously work very closely together with the CTC as the two national organizations that, with two different responsibilities, represent the industry in Canada.

The Chair: Thank you.

Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chair.

I have a question that I asked of our previous witness, and I'd like to ask it of you as well. Are you getting any indications or feedback that indicate any reduction in tourism business for Canada from the United States as a result of our policies on Iraq?

Mr. Randy Williams: Yes. I have received in my office at least once a day, five, six times a week, in the last three weeks to a month, comments from American citizens. Also, in talking to our members on an ongoing basis, they're getting promotional brochures sent back from Americans who are dissatisfied with our position.

Mr. Jim Gouk: Do you have anything further, not so much just in terms of attitude, but in terms of actual business cancellations or anything of that nature?

Mr. Randy Williams: No, we haven't seen it. It's mostly, as I'm suggesting, anecdotal at this point. We haven't seen any concrete evidence that's quantified the actual impact as yet.

Mr. Jim Gouk: Okay.

The Chair: Thank you, Mr. Gouk.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

We will be making recommendations to the government this afternoon. In your brief, you have targeted what the industry has been aiming at since September 2001, for more than a year now, namely, the tax problem.

It is important for the government and Liberal members to understand the efforts that the industry has had to make. Taxes represent a fixed charge, in the final analysis. Such expenditures directly affect the cost of an airline ticket. Increasing fuel taxes as well as the cost of the fuel itself are fixed charges that go into the cost of an airline ticket.

Some would like these costs to be abolished, and I would agree with you on that, but we could also recommend that they be suspended. The government can suspend the application of taxes over a certain period of time in order to allow the industry to recover.

Do you think we could recommend a suspension similar to rent controls? Could we suspend the security tax and the fuel tax for two years or for a period of time that could be reviewed, for one year, for example? Do you think that the crisis is so urgent that if the government does not want to abolish these taxes, they could at least be suspended for a certain period of time in order to give the industry an opportunity to get back on track?

Á (1145)

[English]

Mr. Randy Williams: Thank you very much for the question.

I would suggest that removing the taxes completely, which is never easy to achieve, is what we would want. Obviously abolishing them for any given period of time would be a step in the right direction. But what we're saying to this committee is that we've had three major airlines in Canada fail in the last three years. This should be an untenable situation for all Canadians. What we're saying here is that you're extracting close to $1 billion a year out of an airline industry that's failing. That is a contradiction you should make every effort to fix. And yes, Air Canada and others need to fix their business model and rework their business model, but the government should recognize that its regulations and the taxing it's doing is based on an old business model as well.

So show some leadership within the government by re-examining the airline industry and how you've looked at that industry in your taxation and regulating policies and say we need to rejig this as well, so we're going to put a freeze on all airport rents, fuel excise taxes, and the ATSC until we can figure out what the new airline industry looks like, and what can be charged against that airline to be sustainable. That's what I think this committee should recommend.

[Translation]

Mr. Mario Laframboise: If we compare our situation to what is happening with our American neighbours, we see that there is more support by the American government for their industry. People may say that the results are no better, because many airlines have sought bankruptcy protection. But do you think that the fact that the Americans have supported their industry means that we are loosing steam? Do you feel that the recovery will be easier in the United States or more difficult here in Canada? Do you see that, from your position, or is there no difference?

[English]

Mr. Randy Williams: Obviously the American government has offered more support in the U.S. than the Canadian government has offered to our major carriers. Whether or not that's just putting your finger in a dike that's breaking, I'm not sure, or whether that's just postponing the inevitable.

What we are trying to do is.... And I've heard this argument that they're failing in the States and their taxes are a little bit lower than ours, so that can't be the reason. I suggest that in many ways what they do in the States is the same as what we do in Canada, and it's crippling that industry as well.

What we need to do is not look to the United States, as the chair spoke about earlier, for leadership here. Canada should come up with its own made-in-Canada solution. We shouldn't accept mediocrity. We should be leaders in the world. We're good innovators. We're good entrepreneurs in this country. We should look at a Canadian solution.

Our problems in Canada are a lot different from those in the U.S. The U.S. is a smaller country, with ten times the population. They don't have the Northwest Territories and Yukon, as we do in Canada. Our problems are different, so we need different solutions. I just don't accept the notion that because American Airlines is failing, then we're in the same boat as the Americans and we should settle for that. I just think that's a cop-out.

[Translation]

Mr. Mario Laframboise: Thank you for your presentation, sir.

[English]

The Chair: Mr. Laframboise, thank you.

Ms. Desjarlais, if she can find her way clear to....

You go ahead, sir, and we'll come back to her.

Mrs. Bev Desjarlais: No, actually that's fine. You know what, I actually don't have a question. I'm going to speed up the process, because Mr. Williams knows I wholeheartedly agree with a number of points he's made. I think we probably saw this coming a long time ago. Thank you.

The Chair: Mr. Keyes.

Mr. Stan Keyes (Hamilton West): Thank you, Mr. Chairman.

There probably isn't enough time for me, for all of my questions, Mr. Williams, but thank you and Ms. Booth for appearing before the committee.

Randy, before I ask any questions I just want to thank you for what Jennifer Demers does for us in the government relations end of TIAC. Her cooperation and the information she provides to us makes our job that much easier. We think she's doing a heck of a job for us.

There have been many discussions on how we can try to make the airline industry as a whole more viable in this country and what we can do to help the airline along. Some of us, and it includes me, I suppose, think that one of the best ways we can help the industry along is to get out of the way of the industry, quite frankly.

I just look at, Mr. Chairman, the example of airport fees. The parliamentary secretary isn't here, but maybe he's watching a television screen. I have some concern about how much money the government is taking away from the industry and causing the industry more difficulty when, for example, on airport fees there was the original cost of building those airports to the Canadian taxpayer, so they've already paid initially. Then of course there are the airport improvement fees they are being hit with again when they decide to fly out of their particular airport. Then buried underneath all of that, as a charge, are of course the airport rents that the federal government charges to the airports that the consumer doesn't even see. All this kind of thing works, I think, against the opportunity we have to provide for a larger customer base for any airline that wants to do business in this country.

On competition, well, I have a different view from that of the Minister of Transport, as you are probably already aware. I see an opportunity for open skies. I see an opportunity for foreign investment limits being raised to 49%, which of course begs the question of how can Air Canada, for example, turn itself around, turn their debt into equity, if the majority of their debt is being held in foreign hands. We have to come to the realization that there are opportunities here such as raising the foreign investment level to 49%.

The question I have is this, and I'll only ask this one. For the tourism industry in Canada to blossom, with the assistance of and hand in hand with the airline industry in this country, what are your thoughts—I imagine you've read it before in the papers—of a continental perimeter for the airline industry, a North American continental perimeter that says Air Canada, if structured properly, can compete with the best of them? If an American airline wants to do business in Canada, or if Air Canada or WestJet or Jetsco or JetBlue or whatever is available can compete in the United States, I think and some other people I've talked to think we can compete and maybe we're just in part creating bogeymen in saying we can't go to 49% foreign investment or we can't allow Americans to fly in Canada—open skies, cabotage, boy, they'd cherry-pick, and we'd have all kinds of problems.

I've never been able to have anyone explain to me in detail exactly how it would be harmful to the airline industry in Canada. They can't provide for me the specifics of how this can be harmful.

Á (1150)

Insofar as blue-skying a little bit a North American perimeter, where the airline industry competes on a North American scale rather than just on the basis of there are the Americans, there are the Canadians, and we'll cut you little deals here and there to allow them to fly here and then right back, or us to fly there and right back, what are your feelings on that, and how would it affect tourism?

Á (1155)

The Chair: Thank goodness you only have one question, Mr. Keyes.

Mr. Stan Keyes: It's a good one, isn't it?

The Chair: It's a good one, yes.

Mr. Randy Williams: Obviously open skies was a boom to tourism. We've seen some rapid increases in American visitation to Canada as a result of open skies. We need to take that further.

I agree with you that we should be looking at ways to open up air travel between Canada and the U.S. even further than we've gone now. We're in favour of an open-skies-plus type of arrangement, where we enhance that open skies agreement we have.

We believe Air Canada can compete with anybody in the States. In fact, I think your problem is going to be more with fear of us going down there than of them coming up here.

We also support reciprocal cabotage. In other words, I don't think we'd want to go down the road of just opening up our skies to American carriers without having the equal right to go into the U.S. market as well. That's what we would support, and we're on record as stating that.

As I was saying to Air Canada's folks a while back, it seems as if there's this cherry-picking of the popular eight-city pairs, the Toronto-Vancouver and Toronto-Ottawa type of.... If we want to test this a bit, why don't we block those city pairs, and just open up the Saskatoon to Calgary route as an option?

Let's go to the secondary. It seems as if we're having problems in the feeder markets and secondary markets anyway, so let's talk about Whitehorse-Vancouver. Why don't we open that up for cabotage with the U.S., so that some of our small Canadian carriers can do a Minot, Minnesota, trip?

We could block out the eight major-city pairs and just say that we're going to have reciprocal cabotage, but we're not going to do the eight major-city pairs, although we'll do everything else. That, to me, is a solution. It's a way at least to go in and test the market and open up the skies a little more. It helps us to solve our problems a little bit.

Mr. Stan Keyes: Thanks, Randy.

The Chair: Thank you, Mr. Keyes.

Mr. Barnes.

Mr. Rex Barnes: Thank you very much.

First of all, I want to tell you that I think you're speaking to the converted. I think we realize the taxes that have been charged by government—the air security tax, the fuel tax, you name it—are having a major impact on the tourism industry.

I've spoken to a fair number of people. They've all said the same message. The problem is I don't think the government has got the message, and that is the cabinet. I don't think the cabinet really understands the impact all of these fees are having on the total industry.

Just look at the Marine Atlantic, the ferry crossing from Halifax to Port-aux-Basque. They have no concept. The Newfoundland contingent of tourism has criticized, criticized, and criticized, but government is not listening.

I would say, again, this committee truly understands the concern of the industry, so now we have to try to relay it to government so that they clearly understand.

I just hope, Mr. Chair, that this committee doesn't get scuffed off like the fisheries committee. If it does, my old saying, when I first came here, is these committees sometimes are a waste of time and energy, because we bring you people in, you tell us the stories, you tell us what should be done, but we don't listen. And it reflects on all of us. I think cabinet needs to get the message.

In saying that, I think there's a lot of concern out there that is not being addressed by tourism groups for the industry publicly. They're saying it behind closed doors because they're hoping the impact is not going to be as great.

The Chair: Will there be a question shortly?

Mr. Rex Barnes: Yes.

The Chair: I should have guessed that.

Mr. Rex Barnes: The impact is not as great. They're hoping the impact won't be as great with regard to the policies of the government, especially on the war situation. As a result of it, you mentioned earlier the dollar value that is being pumped into the industry. What do you think may happen in the tourism industry across this country with some of the decisions you're trying to get through to government? If the changes are not made, what impact do you see on the industry as a whole?

Â (1200)

Mr. Randy Williams: We employ 580,00 people directly in this country, and that's just not a made-up number. It's through StatsCan and a number of other sources. That's close to 600,000 people directly employed, not talking about the secondary--that's direct. We're a very labour-intensive industry, with restaurants, hotels, and airlines, and if there's a 5% or a 10% reduction, you don't need to have a calculator to understand that in a labour-intensive industry, if you're losing 5% or 10% in sales you have to cut that labour force. You're looking at 30,000 at 5%, or 60,000 jobs on a long-term difficulty.

So our message on the ATSC, we're suggesting to government.... We told them on April 1, when they put that in, that a 6% increase on the price of an airline ticket is going to result in at least a 6% decrease in the sales of airline tickets. Six months after that, you did your research, you found out the airline industry was down 10%. As we'd reported to this committee, and we'll take credit, 6% of that 10% shortfall is because of the ATSC. There's evidence out there from economists that will tell you a 1% increase in taxes results in a 1% corresponding decrease in sales.

So we need to make decisions on whether or not we want to decrease. Is it worth it to the Canadian economy and to that area to charge a 1% increase in taxes? Is it sustainable to have a corresponding 1% decrease in revenue? We're telling you that was a mistake and somebody made the wrong public policy decision when it was first talked about. There was a lot of panic after September 11, and we're just saying to government that they jumped on this train way too early.

The Chair: Thank you, Mr. Barnes. Do you have another question?

Mr. Rex Barnes: No, I just want to make I suppose a minor statement with regard to the foreign investment.

I think that before this committee, or anyone, jumps into allowing a higher degree and percentage of foreign investment--and this committee is going to be looking at that later on--we need to have the pros and cons of that. Because it's easy to say let them in here, but with that action comes a major price, and that's what we have to watch. As with any decision that's made by government, there's a price to pay, as Mr. Williams has just said. So we have to be very careful that we don't make the same mistakes.

The Chair: Thank you, Mr. Barnes, and I hope that as a member of this committee you realize that we report to the House of Commons and that we are already under some strain from some of the members of my government, our government, who are saying we're doing things a little different from what heretofore has been done. I would hope that our recommendations will be looked upon with some favour. And I know that there are some members on this side of the House who will push with some force to make sure the recommendations of this committee...

Mrs. Bev Desjarlais: Is there a question in there somewhere?

Mr. Rex Barnes: As I said, Mr. Chair, we are the converted. Now we have to convert the ministers of government to think in the same manner.

The Chair: And we'll be looking for your support.

Next is Ms. Yelich, and we're going to close off with Mr. Bagnell.

Mrs. Lynne Yelich (Blackstrap, Canadian Alliance): Yes, I wanted to pick up on something that Jim had started, and that is our relations with the United States. You should have probably anticipated, and I want to know if you did anticipate, an increase in your industry with the SARS and with the war in Iraq. You should have almost been thinking that this is going to be good for your industry, and on the contrary, it didn't increase at all. Would you say that? Is it fair to say that, not only because of our policy on Iraq, as Mr. Gouk had pointed out, but also the SARS...? Why is your industry not benefitting from...? Or is in fact your industry improving?

Mr. Randy Williams: Just yesterday I read that the Travel Industry Association of America, our sister organization in the United States, has completed a survey and found that Americans will be travelling in certainly a lot smaller numbers to Europe this year, this summer, than they've ever done before, and that Canada and the United States are their destinations. They're going to do domestic travel, and they're looking at Canada as part of that. They're looking at a North American solution to their travel buy decision. So that's great news. And I think you're right. I think Canada will benefit as a safe and secure destination in the eyes of the Americans. We need this SARS thing to go away.

Â (1205)

Mrs. Lynne Yelich: Consequently, we need real good relations with the U.S. As you have mentioned, the government's policy on Iraq has hurt us some. Therefore, do you think that might inhibit some of the possibilities? What can we do about it? What could we do to improve those relations in your industry? What is your industry doing to overcome some of the messages you're getting? What are you doing about that? Are you sending something back? Are you asking us to send apologies? What are you doing to help?

Mr. Randy Williams: We're doing a number of things. We're communicating with our sister organizations in the U.S. We sit on some of their boards, so we're telling them that some of the bad messages they're getting from some of the elected officials and some of the bureaucracy in Canada is not the way most Canadians feel. Those are very damaging. We can spend a million dollars in advertising in the U.S and have one silly comment made by somebody up here that hits the front page of a newspaper in the United States and it just destroys it all. So we need to be a little more careful in our remarks.

We are doing everything we can to ensure that we're delivering the message of a strong friendship with the United States. Anybody who suggests that we don't have a strong friendship with the United States is obviously living somewhere else. I think we're so directly tied to that country that we need to build the relationship and not look at ways to destroy it.

Mrs. Lynne Yelich: Thank you very much.

The Chair: Mr. Bagnell.

Mr. Larry Bagnell: Thank you, Mr. Chair.

I want to reiterate what Stan said about the great relationship we have with you, through Jennifer and yourself; it's a great working relationship.

I was curious about your complimenting yourself on your predictions on the security tax. Did it work the other way equally? When we cut it 40%, did the bookings go up that amount too, as in your predicted model?

Mr. Randy Williams: The 40% reduction was 40% of a 6% increase, which is the decimal point, and since then we've had SARS come on and so on, and the war. So it's tough to evaluate at this point.

If you need $400 million to pay for security of Canadians, just take it out of my income tax. And most people I talk to would rather pay $20 as a security line on their income tax statement and have that paid for by all Canadians, $20 once a year, than to have an ATSC charged on every ticket price, targeting air travellers only. When I call the police because I've had a break-in at my house, I don't expect to pay a user fee.

Mr. Larry Bagnell: I wish you hadn't used the Whitehorse route on your cabotage example. We have...

Mrs. Bev Desjarlais: It's good that you did use it.

The Chair: Do you ever get the feeling you've lost control?

Would you like to ask another question, or are you all through, Mr. Bagnell?

Mr. Larry Bagnell: No, I have another question, one other question.

The Chair: Do you have to?

Mr. Larry Bagnell: Yes.

The Chair: All right.

Mr. Randy Williams: I'd like to see First Air and Air North be able to use American routes as well and have that opportunity, because I think they'd compete very well with the U.S.

Mr. Larry Bagnell: I agree with my colleagues...

The Chair: Your time is up, but this has to be a short question.

Mr. Larry Bagnell: Yes, a very short question then.

You said the flying population wasn't any different--I'm paraphrasing--from the rest of the population, that it wasn't a special segment. Would you agree that on average the people who fly into Canada would have more financial means to pay the small cost fees we need for airports, NavCanada, gas, security, etc? Wouldn't they be better able to pay that on average than the single mothers and some of the poorer elderly people in Canada, the lower half of the general population in Canada, who would otherwise at least partly be paying those things in your general tax scheme?

Mr. Randy Williams: The tourism industry employs many women. I think it's 64% of our workforce who are women. It's usually second income in many cases. In many ways the front line is an unskilled workforce. So some of the people who are being directly impacted by the number of people travelling are the people you're trying to protect.

So what we're saying to you is, we need a strong travel industry and tourism industry to give jobs and incomes to those who desperately need it.

Â (1210)

The Chair: Thank you, Mr. Bagnell.

Mr. Williams, I have two very short questions. One is that we introduced the airline security tax, whatever we call it, and we formed another level of bureaucracy. But I notice in your advertising, through all of your association members, that you not only do air, you do train, bus, car, boats, ships. So you would be very much in favour of a multi-modal security system in our country that would be born out of the general levy, rather than what we're doing in Air Canada--would that be correct?

Mr. Randy Williams: Yes, very much so.

The Chair: Thank you.

I'm always interested in advertising, and you folks almost have on a weekly basis a travel supplement in the newspapers. Huge amounts of money are spent on advertising. Do you have some input into that, or do your members, or is this just a straight individual organization or business endeavour you don't have control over?

Mr. Randy Williams: No. The advertising that goes into the travel supplements of The Globe and Mail and other individual or local newspapers is supported by individual tourism businesses, and we'll sometimes place ads if we want a Canadian message to get out there. But we don't control that at all, no.

The Chair: Thank you very much for coming, Ms. Booth and Mr. Williams.

Mr. Randy Williams: Thank you.

The Chair: It's very important information. I think you'll like our recommendation.

Mr. Randy Williams: Thank you very much for the opportunity.

The Chair: I think you'll like it.

I got the right guys. Don't leave me now, folks.

Now we have, after some wait, the International Association of Machinists and Aerospace Workers in Canada. We have Mr. Ritchie, who is the Canadian vice-president. Welcome. And we have Mr. Erlichman, who is the research director.

I'm sure, Mr. Ritchie, that you've done this many times. You know what the process is. We're very appreciative that you could come today. We wanted you on the last day we heard evidence, and we wouldn't want to make any recommendations without your input into the committee.

Mr. Dave Ritchie (Canadian Vice-President, International Association of Machinists and Aerospace Workers in Canada): I certainly appreciate the opportunity to appear before the committee on behalf of our membership.

The International Association of Machinists and Aerospace Workers is the largest union in Canada's air transport sector, representing about 18,000 workers at Air Canada, other carriers, and the air transport service companies across Canada. In addition, we represent many thousands of Canadians working in the aerospace manufacturing, repair, and overhaul sectors. We are also the largest union representing airline workers in the United States. Between Canada and the United States, we represent 125,000 people in the airline industry.

We appreciate the opportunity to appear before this committee to present our views on the future of air transport in Canada. This is clearly a difficult time in the airline industry, in Canada and around the world. In addition to the normal cyclical downturn, we are facing the continuing impact on air traffic of the September 11 tragedy, the Iraqi war, and even the SARS outbreak.

We could speak, as we have in the past to this committee, on a wide range of issues, including the failure of the government's air transport policy, the problems of air governance, and the distribution of cost in the system. However, in light of Air Canada's filing for protection under the Companies' Creditors Arrangement Act, CCAA, on April 1, we are going to use our limited time before you to talk about the Air Canada situation.

In their CCAA filing, Air Canada's board and management blamed the unions, the federal government, the federal pension regulators, and just about everyone but themselves for the carrier's problems. We believe that it is time that Air Canada's management and board took some responsibility and tried to work with all the stakeholders to get Air Canada out of this mess.

Air Canada's management proposed to break this airline into pieces, to sell pieces of those pieces, and to convert the airline into a conglomerate of low-cost carriers and service providers. To facilitate the sell-off, they are trying to use CCAA to abrogate the collective agreements, even those just recently signed, and in particular to unilaterally reduce wages and pension benefits.

The IAM has represented workers at Air Canada, previously TransCanada Airlines, for over 60 years. We have a strong commitment to Air Canada's continuing existence as a national carrier, providing safe, convenient service across Canada. As a union, we have a legal and moral commitment to protect our members, but we also have a commitment to the future of Air Canada as a basic social and economic building block of this nation. Despite all of the talk of the new business models, if we no longer have a national carrier committed to servicing all parts of this country, there will be irreparable economic and social damage to communities across this country.

The conventional wisdom in the airline business changes regularly and dramatically. A couple of years ago, all of those so-called experts were saying that only the very largest international megacarriers would be able to survive. They also said that once Air Canada got over its minor digestive issues with CAIL, it would have a licence to print money. In fact, Transport Canada's recent ten-year blueprint document Straight Ahead still seems to be operating on the conventional wisdom. It is focusing almost exclusively on limiting Air Canada's monopoly power.

Now the story has changed. Now only low-cost carriers on the Southwest Airlines model will survive. We recognize the place in the market for low-cost unionized carriers such as Southwest, especially flying high-frequency, point-to-point city pairs with a single type of aircraft. In fact, our union represents over 10,000 Southwest employees. Unfortunately, this low-cost, low-fare model has its limitations. It is easy to copy, but very hard to duplicate successfully for an extended period of time. There is no evidence of it working for transporter and international business, which is, for Air Canada, more than half the market. It simply does not provide for interline service or service to smaller communities, which is essential for Canada.

Â (1215)

While WestJet is widely touted as a successful, faithful Canadian clone of the Southwest model, we question its continuing success, particularly if it continues to grow and become a dominant carrier. Southwest has been able to stick to its model and grow steadily for over 30 years in such large domestic U.S. markets, while still not a dominant carrier.

For WestJet, there is only a limited number of potential new high-volume city pairs in Canada that fit the model. If WestJet continues to grow, it will have to diverge significantly from its model, rising in cost and focusing on change in the way it does business. If WestJet stops growing, it may face problems with its employees' compensation, which is heavily built on profit-sharing and stock options.

Air Canada's management claims that the only way for the airline to survive is to chop it into pieces, sell off parts, and convert it to a shell, with interest in one or more low-cost carriers and a variety of service providers. We hesitate to call this a strategy, since the plans seem to change daily. A key element of the plan is to make the sell-offs more attractive to buyers by breaking the collective agreements, cutting wages and benefits through the CCAA filing.

We do not disagree with the proposition that Air Canada's operation could be improved. In fact, there is still a lot of work to do to complete the CAIL merger process. Unfortunately, our experience has been that Air Canada's management has little interest in moving cooperatively towards workable solutions to the carrier's problems.

The IAM is in somewhat of a different position from the other unions. At Air Canada, while the other unions have signed collective agreements—CUPE as recently as December—we are still in the process of negotiating with Air Canada, our main unit, on issues other than wages and pension. In fact, we have been in virtual continual negotiations with Air Canada for over ten months. We have made little headway because management has been unwilling to do even basic things such as providing information on the composite of the bargaining unit. We still do not know exactly who we represent or on whose behalf we are bargaining in the post-merger carrier. Frankly, if Air Canada's management were serious about dealing with the changes in the market, it would not have been delaying for years the resolution of basic bargaining issues at the bargaining table and the Canadian Industrial Relations Board. The latest round of bargaining by 12-hour ultimatum simply confirms their inability to manage and lead.

The IAM wants Air Canada to be an effective, profitable carrier. Our members' long-term security depends on it. As a union, we actively promote joint, high-proficiency work organizations—HPWO—programs to continuously improve efficiency and productivity. We have an in-house HPWO department that provides training, support, and has for many years been running cooperatively with Air Canada a highly successful HPWO program in aircraft maintenance. It seems now that Air Canada's management no longer believes in cooperation. Their idea of cooperation is apparently to put a gun to your head and tell you to surrender or else.

Â (1220)

The Chair: If you could just summarize the balance, we've heard about Air Canada and its unwillingness to cooperate with you. If you could, just summarize the other points so that the committee members have the opportunity to ask some questions, please.

Mr. Dave Ritchie: Okay, if you'd just give me a second.

The IAM has participated in restructuring the air transport and other industries, most notably, recently, US Airways and United Airlines in the U.S. We do not want this to be done, but we will insist that our members be treated fairly, and if there is pain to be shared, everybody should in fact share that pain equally, including the Air Canada management.

The federal government and the Minister of Transport have lamentably been consistent in dealing with the air transport issues, putting on rose-coloured glasses and pretending that nothing is wrong that the market cannot sort out.

We are in this current predicament because of what the market does in the airline industry. It leads to insecurities, bankruptcies, industry concentration, asset stripping. It does not lead to a system that provides stable, safe transportation across the country for all Canadians.

Is it too late? No, it's not too late. The government needs to step up and take an active role in the future of this sector. It needs to make clear that it will ensure the continued existence of Air Canada, not as a shell company, but as a national carrier, providing service across the country. It should be re-establishing a financial interest in the carrier that Canadians created and supported, and probably re-nationalizing Air Canada.

The government needs to tell Air Canada management to stop its bullying and blackmailing tactics with its workers. It needs to step in to ensure the future of Air Canada's pensioners and not to leave it to the whims of the shell corporation and to the corporate vultures.

There is clearly much more that could be said about the current situation. We have only had this time for some general comments. We wish to thank you for your interest, and we look forward to your questions.

Â (1225)

The Chair: Thank you, Mr. Ritchie.

Just before you leave, would you address the issue that the board of directors who hire the executive committee have indicated that they expect to get $650 million by way of renegotiating the union contracts.

We had Mr. Hargrove here...

Mr. Dave Ritchie: They have to have real rose-coloured glasses in order to put that. We'd be paying them to work there. It's absolutely incredible for these people to think they can get that.

They talk about trying to be competitive and the rest, but it's interesting to note what the wages are of the five top executives at Air Canada. The chief executive officer's wage is $1,125,000; the chief executive officer at WestJet is $300,000. He's talking about being competitive, he should look at his own frigging wages first, and the rest of his directors and all the rest who are there, instead of coming to the poor guy who's trying to pay a mortgage, send his kids to school, and have a little bit of decency in this world. It's incredible, the money is not there, it's not going to be there. The model they're proposing....

US Air just came out of bankruptcy, and they did not tear their company apart; they restructured. Yes, they're going to be doing some stuff, but they didn't make ten little companies. If they couldn't operate as a major company, why are we all of a sudden going to be able to operate with little companies? If we take one of them out, we've in fact taken and burnt out and put out to them that this industry, which is important, you've all heard in terms of economic survival.... We've really put it to the point that we could be wounding it.

That's not what the Air Canada Act was about. That's not what the government produced it for. And I call upon this committee to ensure that they don't allow the breakup of Air Canada, as they are trying to do. We need a strong carrier in this country from coast to coast; that's what Canadians want, that's what they believe they have. And if there's anybody here who still believes that somehow they own it, they don't. But you know what? They're proud of that carrier. And they always believed Air Canada is going to fly into these little communities and do the rest.

Cabotage, we've heard it talked about today, you want to put it into these air.... I'd be interested to see how these U.S. carriers want to come in and fly into a place that you're getting 20 or 30 people out of on a daily basis. And it just isn't there; they aren't going to those markets. They want the big lucrative markets. This is an industry that's in to make money, and I can tell you that it's on this particular basis of making money that they're all there.

Air Canada is in a situation that is worldwide; there isn't an airline out there that is not in trouble in some form or another. Their proposed restructuring is not right. We met with the lawyers yesterday, and they don't even have a plan, they still don't have a plan on what their restructuring is. They're telling us that they'll have it a month down the way, and yet they've come to us and said, but we do need this, this, and this. I don't know how, if you don't have a plan, you can say these are my needs. I just don't understand.

And I don't know how you expect people to respond if they don't have the facts. We've been at the table ten months with this employer, and they haven't given us the facts. If they'd have given them to us we would have had an agreement. They just signed an agreement with CUPE in December. Why would they have signed something they're now saying they can't live with? It's absolutely crazy. They are trying to use CCAA to abrogate collective bargaining. The CCAA doesn't allow that, and we're going to ensure that doesn't happen. And I would say that your committee needs to take a very strong view that this is not the intent of CCAA.

The Chair: I explained that to Mr. Hargrove when he was here that the one difference between the chapter 11 filing in the United States and the CCAA in Canada was the protection of the sanctity of the union agreement. Buzz didn't quite agree with me; he says you can't bargain with a gun to your head. But at least it's a little better protection than they have in the United States airlines, where the whole negotiating process and the union agreements are put on the table for a judge to decide.

Mr. Dave Ritchie: You see, the key is bargaining, and there's been no bargaining. Again, the key is if somebody is coming to the table they have to be able to say to you, look, these are our needs, this is why we need them, this is where we intend to go. We've had none of that, absolutely none of it, from this employer. You know what? My biggest fear is that they're going to continue the dance they've been dancing and people are going to say the union won't be cooperative. You know what, clearly when you go into something, you go into it with your eyes open, not closed. They expect us to buy a pig in a poke, and I can tell you our union has never done that and is not about to start.

Â (1230)

The Chair: Thank you, Mr. Ritchie.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

[English]

The Chair: I'm sorry, Mr. Laframboise. I can't read.

Ms. Yelich, I'm sorry.

Mrs. Lynne Yelich: I just have one question. I wanted to ask you, if you were to make some suggestions about restructuring--you said they haven't done any--what would be one of your suggestions? Putting aside your labour grievances, what would be something?

Mr. Dave Ritchie: I think the thing about the restructuring is that the government has to take more of an active role. I've heard here about the government charging this and the government charging that. If the government owned Air Canada, as they once did, they could then decide on a proportional basis that this portion of the country today.... Canada has evolved. What the railway once was, air traffic is today. We have to invest in it to ensure that it's going to be available to all Canadians. And if that means taking the money out of general revenue to do it, we need to do that.

There's only one taxpayer, and that's the average person out there. If we want to provide services to our fellow Canadians--there are no free rides in this country--then we have to take it out of general taxation and put it there. Let's know that that cost is there. Let's go and talk about a policy that's going to do that kind of stuff and move us ahead as a nation. When we do something, controlling a national carrier, it allows us to do that.

I don't think it should take the person in Newfoundland three or four days to get to Toronto. I'm going to tell you that if we don't keep a national carrier here and have a mainline that's going to feed, that's where we're going to end up. Shame on us, shame on us as a nation allowing that to occur.

Whatever you think about the free market system, it's proven that the free market system in this industry doesn't work. You just have to look from years and years.... There's a cycle. It's up and down and doing whatever. The fact is we need to take control and ensure a safe environment for everybody in and out, and tourism, and all the rest. That's the cost of doing business.

We're spending $83 million, I heard this morning, on advertising. But if we don't have a national airline, we're blowing that $83 million out the door.

The Chair: Are there more questions?

Monsieur Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

I would first like to thank you for your frank and honest presentation. What I have noted, and please correct me if I am wrong, is that the progress in your union's collective bargaining, which had not been completed before Air Canada sought protection under the Companies' Creditors Arrangements Act, will make it difficult for you to arrive at any agreement, if only because of the compensation related to voluntary departures or some program.

There are other unions that would like the government to invest in a compensation program for early departures. The CAW, for example, wanted a program for early retirement and voluntary departures. But it will not be easy for you since you have not yet merged the Canadian and Air Canada collective agreements. Is that not the case?

Â (1235)

[English]

Mr. Dave Ritchie: Not entirely. We have integrated a number of the collective agreement issues. We are working under one collective agreement for both groups. We just have a number of individuals who are still out there, and when we went to the Canada Industrial Relations Board there were issues that had to be done through the board.

We've been waiting not just for Air Canada, but we actually went to the Industrial Relations Board and we've been waiting over two years for decisions from that board. And, again, that's how efficient your Industrial Relations Board is--two years. In the court system they would have been thrown out: justice delayed, justice denied. I don't know how much delay you can talk about. It took us time to get there, and now it's been over two years we've been waiting on a decision. It's incredible, and this is Air Canada. Air Canada has stalled and done everything they possibly could not to get agreement.

In most cases you would call it “surface bargaining” if you were in regular bargaining. This was an unusual thing. You had to get information. They kept on saying they were doing this for this guy or that guy, and one delay came to another. But at some point in time you have to say no, you're stalling, and we've been saying they've been stalling.

We were still at the table the day Air Canada filed for CCAA. It wasn't us who walked away, it was them.

[Translation]

Mr. Mario Laframboise: Thank you. My second question...

[English]

The Chair: Thank you, Mr. Laframboise.

Ms. Desjarlais, five minutes.

Mr. Laframboise, do you have one more question?

Mr. Mario Laframboise: Yes, please.

The Chair: Fine. Go ahead. A short question, please.

[Translation]

Mr. Mario Laframboise: Thank you. You stated that your union represents United Airlines and US Airways employees, among others. Can employee concessions agreed to as part of the restructuring programs developed for these companies, which were under the protection of the US Bankruptcy Act, also be applied to your union, in so far as Air Canada is concerned?

[English]

Mr. Dave Ritchie: I would think so, because some of them were straight.... We looked at the whole parallel of what was there, what was needed. And again, we've said from the beginning that if our union is going to participate in a restructured program, then everybody needs to feel the same pain. We don't need to have, as Air Canada did.... They've gone to CCAA and they've asked that their managers receive retention bonuses at the same time they're asking my members to take a cut in pay. Come on, this is absolutely unbelievable. But that's the way they work. We want it over here.

In the meantime, if they're looking at being competitive in the industry, they're already paying these guys twice as much as their counterparts in Canada at WestJet.

Mrs. Bev Desjarlais: Yes, it's probably only in Canada at Air Canada where they could do that.

Mr. Dave Ritchie: Exactly.

Mrs. Bev Desjarlais: I have a couple of short questions. Do you presently have a contract in place with Air Canada, a signed contract that's in place right now?

Mr. Dave Ritchie: No. We have an agreement that came due in June of last year, which allowed for the opening of everything but wages and pension and term. We've been at the table since then to discuss those issues because a lot of them were a hangover from integration.

So is there a closed agreement? The quick answer is no.

Â (1240)

Mrs. Bev Desjarlais: Do you have concerns over being in that sort of limbo where you are? I'll call it limbo. It's an agreement you have in place, but are you concerned that you're in a worse position than the other unions are right now with Air Canada?

Mr. Dave Ritchie: Absolutely, and we're in a worse position not just because of that but because of their breakup. It affects us in ground handling. It affects us in maintenance. These other unions aren't there in these other areas. So it doesn't just affect us in that one area, it affects us here, here, and here.

So when we go back, they're asking for a separate company, a separate contract. That really means, for us, that we're going to have five or six different agreements where the others are still with one. So yes--

Mrs. Bev Desjarlais: And you actually answered part of my other question, because I was going to ask you who, specifically, are your members. I know who some of them are, but you're saying you have ground-handling crews, you have maintenance.... Which others are there?

Mr. Dave Ritchie: Yes. We have the finance group too in Winnipeg. We have about 600 people who work in the finance. We have, I suspect, cargo and office folks. Cargo is another separate unit they want to put into play, sell off.

Mrs. Bev Desjarlais: Can I sneak one more in there, Mr. Chair?

Have you heard some rumblings that airport authorities are talking about taking on some duties that airlines now do and the airport authorities want to take them on as part of their new scheme of things?

Mr. Dave Ritchie: We certainly heard that the airport authorities would like to take over baggage, and that would mean there would be a central baggage. They would do the work and whatever. In their initial offering, they weren't able to do that. We understand that they are lobbying to do it.

This bureaucracy is lobbying to get bigger. That's what happens under the government.

Mrs. Bev Desjarlais: Because the chairs are switching, I'm going to sneak in another one.

When you negotiated, when the airlines in the U.S. were under bankruptcy protection, did they bare their books to the union? Did they open up and say this is where we stand, this is what we have to do, we're going to be open with you so you can help us out here?

Mr. Dave Ritchie: The quick answer is absolutely. We sent people down to Air Canada. Air Canada told us they were going to do that. I can tell you, we sent the guy there, he was there for a week. We put a whole listing in of what we needed, and we're still waiting. We could not do a due diligence in order to meet.... When Air Canada came out with their original proposal on February 6, we had people in there. They wanted our agreement by March 15. It wasn't until March 10 that they told us what they wanted from us.

Mrs. Bev Desjarlais: Thank you.

The Chair: Thank you.

Mr. Barnes.

Mr. Rex Barnes: Thank you very much.

Further to a comment that was made, I think airport authorities should concentrate on trying to increase traffic at airports rather than taking over unionized positions of baggage handling and other activities, because I'm sure if they take it over, they're going to get a little incentive for doing so. That's not the way to do business.

Anyway, Air North was here, and I don't know if you were here listening, but one of the questions that was put to them was basically about ome of Air Canada's problems, and of course the representative from Air North did mention that he didn't think the union contracts were the problem. I'm wondering what your feeling on that was, because it seems like Air Canada wants to blame the employees rather than taking the responsibility for some of their mismanagement, and as a result of it, they're asking for the union to give things. I know publicly what Air Canada has said, but what does Air Canada say sitting at the table with your group with regard to what they want back from you?

Mr. Dave Ritchie: Literally the first play we got was about a week ago. They asked for a 22% across-the-board pay cut. They gave us 12 hours to consider that, and it was a straight 22% across-the-board on wages. There was no “we can find it here”, “we can do it there”--there was no bargaining. That's what they wanted. No union would come with it.

To your other question, do we believe that the wages are a hindrance, the absolute answer to your question is no. Do we believe that the industry is in a fluctual situation? Answer, yes. Do we need to get over a hump? Yes. That means to sit down and bargain and look at it with what we are. Again, this is my view, but I think they want to go in and take our collective agreements and rip them apart to make us a little bit more attractive to sell. They'll say they have this nice ground-handling company and the wages are such and such. People are going to beg to jump on. That's what they're trying to do. They're trying to use CCAA to abrogate the collective agreement to tackle wages and tackle benefits, and by doing so make those particular units better to be sold. That's what Air Canada is doing.

Â (1245)

Mr. Rex Barnes: I know that the chairman has touched base on this, and you have responded to a certain degree, but when you hear Air Canada asking for all these things and all of a sudden you find out that Air Canada still hasn't got a plan, it must really--forgive this--piss you off.

Mr. Dave Ritchie: Absolutely.

Mr. Rex Barnes: Because here they are trying to say they want this from you, but where's your plan, boys? Air Canada has to come clean and say this is their plan for the future. If not, Air Canada may have to go out of business, and we don't want that, because I think it's important that they stay here. But what are your feelings on Air Canada with no plan?

Mr. Dave Ritchie: It's awfully frustrating. How can I, as a representative of people, sit down and say to them, look, we want to be part of the solution, when there is no solution? You can't sit and do it if these people aren't giving it to you. It's like the guy who said he wanted to win the lottery and he said the good Lord wouldn't let him win and the good Lord said “Meet me halfway: buy a ticket.” Let us know here.

Some hon. members: Oh, oh.

Mr. Rex Barnes: But you have been cooperative in trying to reach a solution.

Mr. Dave Ritchie: Absolutely. We want to be part of the solution. We are not part of the problem, never have been. US Air is flying today because we were part of the solution. United will stay flying because we are part of the solution. But in order to be part of the solution, you have to know what you're dealing with. Air Canada, for ten months, hasn't told us that. Up until yesterday, with our lawyer, they still weren't able to tell them.

The Chair: Thank you, Mr. Barnes.

Mr. Erlichman, I want you to feel free to enter into the conversation if you find an opening in there.

I'm just jesting with you, Mr. Ritchie.

Mr. Gallaway.

Mr. Roger Gallaway: I want to thank you for being here. I must say that we've enjoyed your presentation. You've done a very good job of disguising and hiding your frustrations. I think many people in this room and around this table share your level of frustration. We've heard, although perhaps not in as direct and eloquent terms, those types of frustrations expressed by other people who have appeared here.

I have one question. I think what you're suggesting is that the government step up and nationalize Air Canada. Is that correct? Are you saying that we should nationalize Air Canada, or should we nationalize the air industry in Canada?

Mr. Dave Ritchie: No, because I do believe that there is a place for outside areas, but we only have one national carrier. The national carrier, we're talking about transporter, we're talking about internationally in doing with whatever. So is there a place for the WestJets, the Jetsgos, and CanJets and whatever? The answer is absolutely, but in order to stabilize an industry we have to have the government there on a national basis.

When people are talking about doing commerce and whatever in this country today, they want to know that they're able to get here. They want to know that they will be able to move, and in order to do that we have to have a national carrier and that's what it's about. We have to have them there, and the government needs to finance that, and we as Canadians need to do that.

We need to get out of the point we're at where we think we have to make money. You know what--if we can break even we're doing a hell of a job here as a national carrier, and that's what we should be trying to do. This is a good area for us as Canadians.

Again, we have to move from coast to coast. We are a large country. I know, I represent Canada from coast to coast to coast. The truth is that when my counterparts go into the U.S. they can do two or three states. If I'm going to Vancouver to attend a meeting, that's three days out of my schedule, because you just can't get back and forth at the same time. It's a large stake, and in order to give properness to the Canadians from coast to coast, the government needs to talk about Air Canada and the taxation of Air Canada out of general funds.

The Chair: Thank you, Mr. Gallaway.

I thank you, Mr. Erlichman and Mr. Ritchie, for attending this afternoon.

If I could summarize, the people you represent are willing to assist in the preservation of a national carrier...

Â (1250)

Mr. Dave Ritchie: Absolutely.

The Chair: But you have to have a plan in front of you before you make any commitment. Therefore, it behoves your partner at the negotiating table to put out such a plan, because you're both interested in the continuation of the future of Air Canada.

But let me ask a question now. Do you also represent people in and working at the airports in Canada?

Mr. Dave Ritchie: Sure. We have fuellers, the people who fuel the planes, because it's not done by Air Canada. In a lot of the places across the country we have people who do the de-icing, because that's not done by Air Canada. Security, the people you're going in and out with, we represent those folks as well. Yet it's not just Air Canada as such, or a national airline; we have people who are in the service areas throughout too who are baggage handlers for smaller areas that look after places Air Canada is not flying in or whatever.

The Chair: The reason I asked that question is because if you look at the horizon to see what's coming over the next hill, there is a real battle looming with respect to the way airports are operating in Canada today and the airline industry. That's something we're going to have to confront. It's not on the table now, but it's going to be a very serious problem. We have to anticipate it.

In so far as one aspect is concerned, security, all of a sudden, when we decided that we needed some assistance, we went out and did the security issue exclusively for airlines. Yet, as they tell you in all of the areas you represent in the United States, airlines are not exclusive. There are the pipelines going into the United States, the trains going into the United States, the cargo coming into Canada on ships, containers, and so on. They're all security issues. Therefore, we should have a national security policy borne by the taxpayers of this country, because security is important to all of us, rather than zero in on an airline and then charge the traveller $24 or whatever we have it down to now. That's looking at it as a very narrow issue and in very close isolation.

Would you want to comment on that before you...

Mr. Dave Ritchie: Yes. Let me say I don't disagree that we should have a national policy on security, and security is not just at airports. I walk across the border at Buffalo. The fact of the matter remains with trains and boats, or whatever, yes, we should have a good idea who's coming into this country and who's not, and doing the rest.

But again, it's such a massive country. We only have 30 million people in this country, and when you're looking at the types of needs we have, we need another 30 million to pay for it, and that becomes the bottom line. That's why we don't want to do a good job.... And I'm not trying to be smart with the government. It's not that we want to do a job; we want to a job and say we're looking after that--even though it's not answering our questions, we're looking at it. But you're not. When somebody can come in by a boat or a plane or something, and security is not there, no, you're not looking after it. Where is the big picture?

But the big picture, they keep telling us, is going to cost hundreds of millions of dollars, and they don't have it. Again, there are no free rides. You have to have a taxation policy so that you're there. But you know what, you can't keep taxing people. That's the problem with this government. This government, every time an idea comes up, says there's a new tax, let's put that on; there's another tax, let's put....

Let's look at general revenue and say these are our needs, this is what we have, and let's do it once.

The Chair: Thank you.

I have a final observation. You've indicated that your people work at United, US Air, and so on, and you alluded to the fact a few minutes ago that Canada is a big country and has special problems, and so on. Do you feel that the airline industry, the total airline industry in Canada, can come up with its own solutions that would make us unassailable to any competition?

Mr. Dave Ritchie: No, I do not.

The Chair: What do you feel?

Mr. Dave Ritchie: I feel that the government has to intervene. They have to intervene because without an intervention these smaller communities and whatever are not going to be serviced. Listen, if they're going to leave it to a market, the market is going after money. They're not going to serve these smaller communities and deal with whatever is there. Yet these smaller communities are paying into the tax base the same as I am. If they are, they should be getting a share like I am. Because I live in Toronto, that doesn't mean I should get all the services and the poor guy who is in Stephenville in Newfoundland is getting nothing. That's not right.

The Chair: I agree with you.

Â (1255)

The Chair: Thank you, all.

I think there's lunch back there for some deliberations on the committee.

That was very good information, Mr. Ritchie.

The meeting is adjourned.

Mr. Larry Bagnell: When do we reconvene?

The Chair: I don't know.

Thank you.