TRAN Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 2nd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Wednesday, May 28, 2003

1540

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

Hon. David Collenette (Minister of Transport)

The Chair

The Clerk of the Committee

The Chair

1545

1550

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance)

Mr. David Collenette

The Chair

Mr. David Collenette

1555

1600

The Chair

Mr. James Moore

Mr. David Collenette

The Chair

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

The Chair

Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.)

Mr. David Collenette

1605

The Chair

Mr. Joe Fontana (London North Centre)

The Chair

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

Mr. David Collenette

Mr. Roger Gallaway

1610

Mr. David Collenette

Mr. Roger Gallaway

Mr. David Collenette

Mr. Roger Gallaway

Mr. David Collenette

Mr. Roger Gallaway

Mr. David Collenette

The Chair

Mr. Mario Laframboise

Mr. Jacques Pigeon (Senior General Counsel and Head, Department of Justice, Department of Transport)

1615

Mr. David Collenette

The Chair

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

Mr. David Collenette

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

1620

Mr. David Collenette

Mr. Jim Gouk

The Chair

Mr. David Collenette

Mr. Stan Keyes (Hamilton West, Lib.)

Mr. David Collenette

The Chair

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.)

Mr. David Collenette

Mr. Joseph Volpe

1625

Mr. David Collenette

The Chair

Mr. David Collenette

The Chair

Mr. David Collenette

The Chair

Mr. Roger Gallaway

The Chair

Mr. Roger Gallaway

The Chair

1730

The Chair

Mr. Jean Pelletier (Chairman of the Board, VIA Rail Canada Inc.)

1735

1740

1745

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

Ms. Christena Keon Sirsly (Chief Strategy Officer, VIA Rail Canada Inc.)

1750

Mr. Jim Gouk

Ms. Christena Keon Sirsly

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

1755

Mr. Jean Pelletier

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

1800

Mr. Jean Pelletier

Mr. Mario Laframboise

M. Jean Pelletier

Mr. Mario Laframboise

1805

Mr. Roger Paquette (Chief Financial Officer, VIA Rail Canada Inc.)

Mr. Mario Laframboise

Mr. Jean Pelletier

Mr. Mario Laframboise

The Acting Chair (Mr. Joseph Volpe)

Ms. Liza Frulla (Verdun—Saint-Henri—Saint-Paul—Pointe Saint-Charles, Lib.)

Mr. Jean Pelletier

Ms. Christena Keon Sirsly

Ms. Liza Frulla

1810

Mr. Jean Pelletier

The Chair

Mr. Stan Keyes

Mr. Jean Pelletier

Mr. Stan Keyes

Mr. Jean Pelletier

Mr. Stan Keyes

Mr. Jean Pelletier

Mr. Stan Keyes

Ms. Christena Keon Sirsly

Mr. Stan Keyes

Ms. Christena Keon Sirsly

Mr. Stan Keyes

Mr. Jean Pelletier

1815

Mr. Stan Keyes

Mr. Jean Pelletier

1820

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Roger Paquette

Mr. Jim Gouk

Mr. Roger Paquette

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

1825

Mr. Jean Pelletier

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

Mr. Jean Pelletier

The Chair

Mr. Joseph Volpe

1830

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

1835

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Jean Pelletier

The Chair

1840

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

Ms. Christena Keon Sirsly

Mr. Joseph Volpe

Ms. Christena Keon Sirsly

Mr. Joseph Volpe

Ms. Christena Keon Sirsly

Mr. Joseph Volpe

Ms. Christena Keon Sirsly

Mr. Jean Pelletier

Mr. Joseph Volpe

The Chair

Mr. Jean Pelletier

Mr. Joseph Volpe

Mr. Gerry Kolaitis (Director, Financial Services, VIA Rail Canada Inc.)

Mr. Joseph Volpe

Mr. Gerry Kolaitis

Mr. Joseph Volpe

Mr. Jean Pelletier

1845

Mr. Joseph Volpe

Mr. Jean Pelletier

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Ms. Christena Keon Sirsly

The Chair

Mr. Joseph Volpe

The Chair

Mr. Joseph Volpe

The Chair

Mr. Marcel Proulx (Parliamentary Secretary to the Minister of Transport)

The Chair

Mr. Marcel Proulx

The Chair

Mr. Joseph Volpe

The Chair

Mr. Jean Pelletier

The Chair

1850

Mr. Marcel Proulx

The Chair

Mr. John Christopher (Committee Researcher)

The Chair

Mr. Jean Pelletier

The Chair

Mr. Marcel Proulx

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

The Chair

Mr. Mario Laframboise

The Chair

Mr. Marcel Proulx

The Chair

Mr. Marcel Proulx

The Chair

Mr. Roger Gallaway

Mr. Jean Pelletier

Mr. Roger Gallaway

Mr. Jean Pelletier

Mr. Roger Paquette

Mr. Jean Pelletier

Mr. Gerry Kolaitis

Ms. Christena Keon Sirsly

Mr. Roger Gallaway

1855

Ms. Christena Keon Sirsly

Mr. Roger Gallaway

Ms. Christena Keon Sirsly

Mr. Roger Gallaway

Mr. Jean Pelletier

Mr. Roger Gallaway

Mr. Jean Pelletier

The Chair

Mr. Roger Gallaway

The Chair

Mr. Roger Gallaway

Ms. Christena Keon Sirsly

Mr. Roger Gallaway

Ms. Christena Keon Sirsly

Mr. Roger Gallaway

Mr. Jean Pelletier

1900

Mr. Roger Gallaway

Mr. Roger Paquette

Mr. Roger Gallaway

Mr. Roger Paquette

The Chair

Mr. Larry Bagnell (Yukon, Lib.)

The Chair

Mr. Jean Pelletier

1905

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jim Gouk

Mr. Jean Pelletier

Mr. Jim Gouk

Mr. Jean Pelletier

The Chair

Mr. Mario Laframboise

Mr. Jean Pelletier

The Chair

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

Mr. Jean Pelletier

Mr. Rex Barnes

1910

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jean Pelletier

The Chair

Ms. Christena Keon Sirsly

The Chair

Ms. Christena Keon Sirsly

The Chair

Ms. Christena Keon Sirsly

The Chair

Mr. Roger Paquette

The Chair

Mr. Jean Pelletier

The Chair

Mr. Roger Paquette

The Chair

Mr. Jean Pelletier

Mr. Paul Côté (Chief Operating Officer, VIA Rail Canada Inc.)

The Chair

1915

Mr. Paul Côté

The Chair

Mr. Marcel Proulx

The Chair

Mr. Paul Côté

The Chair

Mr. Paul Côté

1920

The Chair

Mr. Jean Pelletier

The Chair

Mr. Jean Pelletier

The Chair

Mr. John Cannis (Scarborough Centre, Lib.)

The Chair

Mr. Jean Pelletier

The Chair

Mr. Terry Twentyman (President, Airline Division, Canadian Union of Public Employees)

The Chair

Mr. Terry Twentyman

1955

The Chair

Mr. Terry Twentyman

2000

The Chair

Mr. Terry Twentyman

The Chair

Mr. Kevin Beaith (Secretary-Treasurer, Airline Division, Canadian Union of Public Employees)

The Chair

Mr. Terry Twentyman

The Chair

Mr. Rex Barnes

The Chair

Mr. Rex Barnes

The Chair

2005

Mr. Terry Twentyman

The Chair

Mr. Terry Twentyman

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Marcel Proulx

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

The Chair

Mr. Mario Laframboise

2010

Mr. Kevin Beaith

The Chair

Mr. Kevin Beaith

The Chair

Mr. Kevin Beaith

The Chair

Mr. Kevin Beaith

The Chair

Mr. Terry Twentyman

Mr. Kevin Beaith

The Chair

Mr. Jim Gouk

Mr. Terry Twentyman

Mr. Jim Gouk

Mr. Kevin Beaith

Mr. Terry Twentyman

2015

The Chair

Mr. Rex Barnes

Mr. Terry Twentyman

Mr. Rex Barnes

Mr. Terry Twentyman

The Chair

Mr. John Cannis

2020

Mr. Kevin Beaith

Mr. John Cannis

The Chair

Mr. Terry Twentyman

The Chair

Mr. John Cannis

Mr. Terry Twentyman

The Chair

Mr. Terry Twentyman

The Chair

Mr. Larry Bagnell

Mr. Terry Twentyman

Mr. Larry Bagnell

Mr. Terry Twentyman

2025

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

The Chair

Mr. Larry Bagnell

Mr. Terry Twentyman

The Chair

Mr. Terry Twentyman

The Chair

Mr. Marcel Proulx

Mr. Kevin Beaith

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

The Chair

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Kevin Beaith

The Chair

2030

Mr. Kevin Beaith

Mr. Marcel Proulx

Mr. Kevin Beaith

Mr. Marcel Proulx

Mr. Jim Gouk

Mr. Marcel Proulx

The Chair

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

The Chair

Mr. John Cannis

Mr. Joseph Volpe

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Mr. Kevin Beaith

The Chair

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

Mr. Terry Twentyman

Mr. Marcel Proulx

The Chair

Mr. Terry Twentyman

The Chair

2035

Mr. Terry Twentyman

The Chair

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

Mr. Marcel Proulx

The Chair

Mr. Marcel Proulx

Mr. Jim Gouk

Mr. Marcel Proulx

The Chair

Mr. Joseph Volpe

The Clerk

Mr. Jim Gouk

The Chair

Mr. Larry Bagnell

The Chair

Mr. John Cannis

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

The Chair

CANADA

Standing Committee on Transport

NUMBER 030

2nd SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, May 28, 2003

[Recorded by Electronic Apparatus]

¹ (1540)

[English]

The Chair (Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.)): Pursuant to an order of the House dated Wednesday, February 26, 2003, we are considering the estimates for 2003-2004.

We welcome the minister and Mr. Pigeon, Mr. Grégoire, and Mr. Ranger.

Minister, you brought lots of help today. Did you think that was necessary?

Hon. David Collenette (Minister of Transport): I want to be well prepared.

The Chair: Perhaps we should start off, Minister, by relating the events that bring us here this afternoon.

Correct me, Mr. Clerk, if I'm wrong on the dates.

On December 3 the committee, while studying the problems within the airline industry, called the Canadian Air Transport Security Agency as a witness. At that time we were studying the user-pay cost items. Those user-pay items were, I think, $12 each way and were being charged to the passengers because of the policy of Transport Canada on cost recovery.

I don't want to put any words in the.... The committee members can correct me if I'm wrong in what I'm going to say next, but the committee was a bit taken aback by the chairman at that time and the inference given that the first year's budget had been approved and as long as everything was within the budgetary process and the expenditures were correct, there would be no change, and the $12 fee, unless it was changed by yourselves, would stand because it met the costs that were at that time assumed to be charged to the passengers in Canada.

We asked several questions of the chairman at that time. There were some answers given that were not correct, but they were not intentionally not correct. They were not correct because of the lack of knowledge we think the chairman had of his agency. Since we were not talking about estimates, the evidence was taken. Then the committee made some recommendations about either reducing or eliminating the service charge.

Subsequent to that, Minister, we met with persons from the Auditor General's department, the staff of the Auditor General's department. It was reported to the committee that they were a bit concerned about the revenue being received and the expenditures being taken. There was some difficulty in reconciling both figures to ascertain that the actual cost of the expenditures met the money that was collected by the airlines.

We wanted to get some reconciliation of that, which l think was still the cause for some concern in our discussions yesterday with representatives from the Auditor General. They would like to see more tightening up on that.

We were also advised at that first meeting that most of the answers would be bound by security issues pursuant to a section of the act, the enabling legislation. When we got to the estimates....

On what date was that? Mr. Clerk, what date was the first meeting with CATSA on the estimates? Do we have that date?

The Clerk of the Committee: May 7.

The Chair: May 7.

Someone asked on this side of the table for a question on a contract that was let to a particular company for somewhere between $200,000 and $300,000, and we were advised that section 32 of the Canadian Air Transport Security Authority Act prohibited the chairman from answering that question on grounds of security. At that time they also said that if any information had to be given, the information would have to be approved by the Minister of Transport. At that time we pointed out to the chairman of the committee that the transport committee was responsible to the House of Commons and was responsible for all expenditures of public money and that we thought he should answer the question.

There was a discussion that ensued, at which time we suggested that the meeting be adjourned, which it was, and we suggested to the chairman that perhaps he should get legal counsel and get an interpretation of section 32. Our committee would then also get the law clerk from the House of Commons to give us an interpretation of section 32, and we would like to see it, because the estimates have to be completed by tomorrow night. We are quite anxious to get this out of the way.

We invited the members back—I think we invited them on the Friday for the following Tuesday—but we were advised that the three members, the chairman and his two partners, would be travelling in Europe and couldn't appear before the committee. As a result, we met Monday of this week to talk about those estimates.

We had the law clerk from the House of Commons give us an interpretation of section 32. That interpretation was what the committee felt was the proper interpretation. We asked the legal counsel that came with the CATSA committee if he agreed. I think he agreed with the interpretation by our legal counsel. We then asked the chairman if we could ask questions with his legal counsel present. I think Mr. Gallaway asked the original question, and I asked Mr. Gallaway to continue with the question that was being put to the chairman at the time the meeting was adjourned.

The issue at hand was the contract given to IBM to test the security measures with respect to those people who would be entering the secure zone of airports but would not be passengers of airlines. The contract was for $207,000. The chairman then answered the question for which at the previous meeting he had invoked section 32 of the act.

The next question involved other matters, at which time the chairman of the committee invoked section 32 of the act and said he could not answer for security reasons. We asked the chairman of the CATSA whether, if we went to an in-camera meeting, his answer would still be the same. He assured us that his denying the answer to that question on a budgetary matter would still be the same and that he was bound by a secret memo or a secret letter delivered to him by you, Minister, telling him that he did not have to answer that particular question.

¹ (1545)

We then asked our legal counsel to give us an interpretation of where we were and what was the process. The only process was to be able to call the minister and have him respond as to whether the secret memo or letter was in fact a fait accompli. Was it a letter? Was it a memo?

The question arose that if this was something that was sent to the chairman of the committee, perhaps it could have been resolved if the chairman and the members of the committee were apprised of that situation. Then perhaps we could have avoided this unfortunate situation.

I think I'm trying to accurately reflect the events as they happened to that point in time, and you are here today. Before you answer, Minister, I'd like to ask members of the committee who were present whether they have anything to add or subtract as to the accuracy of our recollection of what happened at that time.

Mr. Moore.

¹ (1550)

Mr. James Moore (Port Moody—Coquitlam—Port Coquitlam, Canadian Alliance): In brief, I just ask the minister, is he fully aware? Has he read Hansard transcripts of what happened, or did he have officials in the room who have briefed him on what...? Is he fully up to speed on the goings-on of the committee?

Mr. David Collenette: I'm going to make an opening statement that will encompass some of the things you've said, Mr. Chairman and Mr. Moore.

The Chair: Minister, that's what brings us here today, and if you have an opening statement we'd be prepared to....

Mr. David Collenette: Thank you very much, Mr. Chairman. I am glad to be here today to clarify some of these issues.

First, I would like to just make a couple of comments on some things you said by way of introduction that I feel perhaps inadvertently might be misleading.

The fact is that the air security charge is something that was mandated in the budget from 2001, which was voted on in the spring of last year, as was the enabling legislation for the security agency, CATSA. The issues of the administration of the program fall under my purview as Minister of Transport. With respect to the question of fees and all of that--I think we covered this with my last appearance--that is the Minister of Finance, and the actual way it's collected and disbursed is Madam Caplan as minister of CCRA.

On the issue of reconciliation of figures and revenues, I'd be interested to hear what the AG's people have in mind here. But as I said before at a previous meeting, obviously in the first year more money was collected, even with the downturn in traffic, than was spent, because it takes a while to ramp up. But this has to be looked at as a five-year $2.2 billion regime of cash in, cash out. And it's not the intention of the government to use the moneys in any way other than for what is mandated by the legislation.

With respect to the concerns you have on financial information that CATSA is not in a position to disclose, I want to make some comments, although I do understand that the original problems that you had at the May 7 meeting with respect to the IBM contract on random screening of non-passengers were sufficiently answered by CATSA earlier this week.

As members of the House, you'll recall that the CATSA Act is a law of the land. It was passed as part of the 2001 budget. In adopting the act, we did so by enacting section 2 of chapter 9 of the Statutes of Canada 2002, and that of course was the budget. It came into force April 1, 2002.

There is a subsection in that act--and some members may be aware of it, because I know that most of the members here today actually voted for the budget and therefore I am sure would be fully aware of the contents of the budget and the act. Subsection 32(2) states:

The Authority, authorized aerodrome operators and screening contractors must keep confidential any information the publication of which, in the opinion of the Minister, would be detrimental to air transport security or public security, including financial and other data that might reveal such information.

Under the scheme of subsection 32(2) of the act, Parliament delegated to the Minister of Transport the responsibility to express an opinion as to what would be information the publication of which would be “detrimental to air transport security or public security”.

As Minister of Transport, I have expressed an opinion in writing to the CEO, Mr. Duchesneau, of CATSA, to the effect that certain information would be, for the purposes of subsection 32(2) of the act, “information the publication of which would be detrimental to air transport security or public security”--in other words, security-sensitive information.

It's Parliament, not the Minister of Transport, that prohibits under subsection 32(2) of the act the disclosure of such security-sensitive information. It is acknowledged that under the law of Parliament a parliamentary committee has the privileges, immunities, and powers of the House, which has constituted the committee, including the power to summon witnesses to appear, the power to require a witness to take oath, and the power to compel witnesses to answer all questions put by the committee. I think if you look at page 692 of Erskine May's 19th edition, which is the one I have available at home and I read at bedtime, you'll note that this is clearly delineated. That includes questions put by the committee on the one hand and the power to send for papers and records on the other hand. All of this the committee has the right to obtain.

Whether the Standing Committee on Transport should press to obtain the security-sensitive information, in our view, should not be governed by legal consideration but rather by policy consideration, taking into account not only the intent of Parliament, but also the long-standing practices and conventions that govern the relationship between the executive and Parliament.

¹ (1555)

Parliament has made it clear, by enacting subsection 32(2) of the act, that it did not intend that any security-sensitive information should find its way into the public domain. So in expressing the opinion I did to the CEO of CATSA, for the purposes of subsection 32(2) of the act, I tried to strike the appropriate balance between your committee's need for information and the need for protection of the confidentiality of security-sensitive information.

I know certain members of the committee are already on record as having acknowledged that it's not desirable that security-sensitive information be disclosed. In fact, I spoke with one member of the committee last week who seemed to be quite reasonable on that and understood the security concerns.

What I would submit is that the approach taken, in my opinion, is striking the appropriate balance that needs to be struck. In other words, I think it is incumbent upon us all as parliamentarians to exhibit a collective common sense as to what really should be in the public domain and what should not.

It's my opinion that the publication of financial information that indicates the cost of the Canadian air carrier protection program, as well as any information that would identify the sites where explosives detection equipment is deployed, would be detrimental to security. I would also like to confirm that CATSA followed the appropriate protocol in not disclosing security-sensitive information when they came to you in the last week or so. Therefore, the issue is not with CATSA; the issue is with my opinion expressed to them.

Both Transport Canada and CATSA officials have formally consulted with the Office of the Auditor General, specifically on how to present financial information in a way that preserves and addresses security concerns while maintaining transparency to the maximum extent possible. The Auditor General agreed with the way CATSA proposes to report--that is, through budget numbers that are aggregated in a discrete category that includes several budgetary items.

I'd like to just digress. I'm sure honourable members recognize that the Auditor General, as an officer of Parliament, is the one who has access to all the facts and figures, and does so in private, then issues reports as to whether or not improvements could be made. So the AG is our agent appointed by Parliament to oversee the specifics of budgetary items of all government spending to ensure the taxpayers' money is properly spent.

We also have oversight for other agencies. We have SIRC, which performs this for CSIS--it's composed of privy councillors.

When I was Minister of National Defence, one of our members, Mr. Derek Lee, brought forward a motion asserting that there was not enough parliamentary oversight of the operations of the Communications Security Establishment. This, of course, is a very important body, which, as you know, is part of the group from the United States, Britain, Australia, and New Zealand on intelligence gathering and sharing. As a result of his pressure and the pressure of other parliamentarians, we agreed to set up an oversight under a retired justice of the Quebec Superior Court.

So I think we should keep in mind that there is an issue as to how much information parliamentarians need to do their jobs, how much should be kept secret, and how Parliament's interests are safeguarded. And we have these oversight bodies, including the Auditor General.

I should say that our approach is consistent with that of other countries we deal with, and in particular on the air security front with the United States and Australia.

Obviously, as members of Parliament you have a right to get the information you want, and certainly I'm prepared to be as open and transparent with you as I feel I can, given my responsibilities. But I would say that to go any further than has been gone by Mr. Duchesneau or by me in this initial statement, I would ask that we move to an in camera session.

º (1600)

I will do my best to provide you with as much information as I can, because I think there is an essential point here the members are concerned about, and I feel the members are absolutely right; that is, the issue of whether or not sensitive information can be entrusted to parliamentarians. Well, I'm a member of Parliament. I have taken an oath of office as a cabinet minister, and I have certain information, some of which I cannot share. But members of Parliament are elected and they have a responsibility. In other jurisdictions, such as the U.S. and Britain, for example, it's not unusual for sensitive security information to be discussed with parliamentarians--to a certain point.

Therefore, I'm prepared to go further, but I would only do so, Mr. Chairman, if you would agree that we go in camera. Not that I need to remind you, but I was noticing in preparation for the meeting that pages 650-51 of Erskine May's 19th edition state:

Where a witness considers that the publication of his evidence given in private to a select committee or part of it would be prejudicial to the public interest or injurious to character or undesirable on similar grounds, he may request that the evidence in question should not be published; and the committee at its discretion may refrain from reporting that evidence to the House....

I understand there are a number of latter discussions on this in Mr. Marleau's treatise in chapter 20 with respect to committees meeting in camera and how we should proceed. So I would ask the committee to allow me to proceed further in camera.

The Chair: Thank you. There will be no questions on those issues.

Mr. Moore.

Mr. James Moore: I don't have a problem with going in camera, if--and this is the question.... We were told by CATSA that on instruction from the letter you sent to CATSA, they could not disclose the contents of 17% of the budget allocated to CATSA. If we do go in camera, is the minister prepared to tell us the contents of the 17%?

Mr. David Collenette: Well, Mr. Chairman, I'm prepared to go quite a bit further than Mr. Duchesneau was able to go and than I'm prepared to go in public. If we get to the in camera part, you can ask me a lot of questions and you can make the judgment as to whether you're getting the answers. I do believe I will satisfy you enough for you to actually say you know where money is going--in other words, you are discharging your duties.

The Chair: Mr. Laframboise, were you on the list?

[Translation]

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): I am ready.

[English]

The Chair: Mr. Jackson first, please.

Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.): Thank you, Mr. Chair.

I have one question I would ask. It would appear from what you said, Minister, that information you divulge should not end up in the public domain. Are there any consequences, should somebody squeal? If somebody from this committee goes out to the media and says exactly what you say, are there any consequences to that?

Mr. David Collenette: Well, perhaps I could just read this paragraph on committees from chapter 20 of Mr. Marleau's book. I think Mr. Pigeon has it here. It reads as follows:

On occasion, a committee may decide to hold an in camera meeting to deal with administrative matters, to consider a draft report or to receive routine background briefing. Committees also meet in camera to deal with subject matters requiring confidentiality, such as national security. Often a committee which has several items on its agenda will hold part of the meeting in public and part in camera. At in camera meetings, neither the public nor the media is permitted, and there is no broadcasting of any kind. The committee decides, either on a case by case basis or as a matter of general policy, whether a transcript of in camera proceedings is to be kept.

It goes on. Specifically to the point, it says that divulging any part of the proceedings of an in camera committee meeting has been ruled by the Speaker to constitute a prima facie case of privilege. That was from Speaker Fraser's ruling of May 14, 1987. I won't give you the context, but it's been well documented.

I think as members of Parliament we respect our rights and we expect our privileges to be respected by other members, and in turn we would respect those of others. Therefore, I don't think we should really talk about penalties, because I have no reason to believe any member here would say or do anything that would be injurious to the national security.

º (1605)

The Chair: Mr. Fontana, do you have a comment?

Mr. Joe Fontana (London North Centre): I just wanted to make the point that I'm prepared to make the motion if you need a formal motion to go into camera.

The minister is generous in wanting to disclose and talk a little bit. I think the committee has a duty, especially after Auditor Generals have been a little critical of committees not essentially doing their work, not essentially asking the questions of the administration as to where the public money is being spent and how it's being spent. In that light, obviously when one.... Initially you couldn't get 87% of the answers or 87% of the money. We couldn't even get to that point. I mean, at the last meeting we moved to 87%; hopefully today we'll move to 100% or 99% or whatever. I guess the proof will be in the pudding.

I would appreciate--because I think there is a responsibility on both sides, as the minister has indicated.... The committee and the Parliament are the people, and the government in fact is accountable also to the same group. Therefore, we need to ensure in our discussion important matters such as security, but also the other parts that go with the estimates in your department so as to make sure that those moneys are indeed being spent wisely and so on.

The Chair: Before you make your motion, let me hear from other members.

Mr. Gallaway.

Mr. Roger Gallaway (Sarnia—Lambton, Lib.): Just as a general point directed to the minister, you have stated that the Auditor General is an agent. Specifically, the Auditor General is the accountant or auditor for the public accounts of Canada for the House of Commons.

Mr. David Collenette: For Parliament.

Mr. Roger Gallaway: Well, in the act it specifically states that it is the House of Commons. You referred to the AG as our agent. So would you agree as a matter of general principle that it would be very peculiar for an agent to have greater access to information than that agent's principal?

º (1610)

Mr. David Collenette: No, I would not agree. In fact, it's been quite consistent with parliamentary practice under the examples I have given in security going back to Westminster that members of Parliament recognize that they are seized of overall policy matters to ensure that they are satisfied as to what money is appropriated for what particular expenditure. But the actual details of expenditures in the case of security are such that the tradition is that the officer of Parliament, in the case of the Auditor General, or SIRC, or the agent who oversees CSE, has access to confidential information and then is a sworn officer of Parliament.

So, no, in answer to your question, I don't think it's odd. I think members of Parliament really shouldn't have to concern themselves with all the intricacies, but they should ensure that there is an agency, that there are people who have the means to ensure that taxpayers' money--in the case of the Auditor General, for this act or any act--is spent properly.

I know the Auditor General is currently doing an audit of value for money on all dollar items from the 2001 budget, including CATSA, and will issue a report. The Auditor General obviously goes to committee and does answer questions. But the Auditor General herself is not obliged to disclose all information. It's a deferral of authority. In effect, we ask these people to act in confidence on our behalf to take the examination of the public accounts out of public policy debate or partisan debate, as the case may be.

Mr. Roger Gallaway: Mr. Minister, when you refer to “our”, do you refer to yourself as a member of the House, as opposed to a member of the executive?

Mr. David Collenette: I always consider myself first and foremost a member of Parliament who has transitory duties to administer the Department of Transport.

Mr. Roger Gallaway: I believe in your opening statement you referred to particular sections of the Standing Orders with respect to committees. And I may be mistaken, but you referred to the authority of committees, and I don't know what you're quoting from.

Mr. David Collenette: I was quoting Erskine May's 19th edition of Parliamentary Practice on the power of the members to ask questions and have them answered.

Mr. Roger Gallaway: I would ask again, as a question of general principle, that the powers of both the House and the subsequent committees of the House in fact derive from the British North America Act, section 18. Would it not be peculiar for section 32, then, as a matter of general principle, to override or amend a basic constitutional document such as the British North America Act?

Maybe you've read about this in your bedtime reading.

Mr. David Collenette: No, but members of Parliament at this committee--and I'm speaking of you now, rather than me--sit as a committee of the whole House, but this committee is subservient to the collective will of the House and Parliament. You must uphold and discharge the law. We have to do this.

The law was passed that gives the minister the right to exercise a certain opinion under subsection 32(2) of the CATSA Act, and I have exercised that. Now, where we have fallen into a bit of a grey area, which, you're correct, predates the British North America Act--it really goes back to the Magna Carta, to jurisprudence throughout--

Mr. Roger Gallaway: The Charter of Rights.

Mr. David Collenette: Yes, the Charter of Rights. Mr. Gallaway's entirely right that we're talking about the Charter of Rights in Britain--and I forget the year, but Mr. Gallaway probably knows it. Was it 1786?

A voice: 1689.

Mr. David Collenette: 1689--I apologize.

The point is, he's absolutely correct that it enunciated the rights and privileges of members and there's been accumulation of those rights. So there's inevitably a bit of an odd grey area between the unfettered rights of the members of Parliament to ask questions and have their privilege upheld and the powers conferred under statute.

Generally what happens--it certainly happened in Britain, and it happens in the U.S. Congress--is what I call common sense prevails. In other words, everybody agrees that going beyond a certain point is not in everyone's interest. There's usually an accommodation, and this is the kind of approach I'm coming forward with today.

The Chair: Just to interject, if we go down this road much further on the interpretation of law, starting with the Magna Carta and going on, we may have to adjourn and get some legal advice. Let's try to avoid the interpretation. The advice we received when we were here the other day was that section 18 has paramountcy over other statutes. Paramountcy, if there are some lawyers here, is....

The chair recognizes Mr. LaFramboise. We're just not going to go back; we're going to give every member an opportunity to speak once.

[Translation]

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

My question is for Mr. Pigeon. You obviously have some experience with the legal context. I can understand that a minister might have highly confidential information that must not be disclosed. Here is an example. If we were to ask CSIS to tell us whether or not they have a budget for agents in a given country, they would certainly never tell us, and I can understand why, because it could jeopardize the lives or safety of certain people.

But how do we ensure that the money is properly spent? Would it be up to CSIS, or the Auditor General? What is the procedure? I imagine there must be something similar to clause 32 in other legislation. How do we find things out if we can never ask certain questions in committee?

Mr. Jacques Pigeon (Senior General Counsel and Head, Department of Justice, Department of Transport): I believe, Mr. Laframboise, that you're not simply asking a legal question. There is some policy content there, as well.

All that I can say is that the minister, in his opening remarks, stated that while the law is indeed an important consideration, there are other aspects that must be taken into account, including Parliament's stated intention in clause 32(2), as well as all of the conventions and practices that have evolved over the years between the executive, on the one hand, and Parliament, on the other.

In researching this issue, I have seen it stated many times in Hansard that if security is involved, this is an area where, usually, committees, for practical reasons, agree not to cross the line, even though legally and constitutionally, they might be entitled to do so.

I believe that the minister, in his opening remarks, recognized that the committee did have the authority, by virtue of parliamentary privilege, to summon witnesses to appear, to compel them to answer questions and to order them to produce documents. But I don't think that is at issue.

From a legal standpoint, I believe that we agree that the committee does have this power, but we should be asking to what extent, as a general policy, the committee, even though it does have this power, should be bent on having sensitive security information disclosed. I think that is the question.

º (1615)

[English]

Mr. David Collenette: Mr. Chairman, if I may, I am not here to contest any rights of members to ask questions. What I am suggesting is that we move to another forum so you can determine whether or not the answers I give satisfy your basic needs as parliamentarians.

The Chair: I wanted to give every member an opportunity to speak. There are some members on this side who have had their questions answered.

Mr. Pigeon, I would not have expected you, as a very good lawyer, to give an answer any different from the one you've given, inasmuch as you wrote some of this stuff for the minister when he was interpreting his legal issues. You were just backing up your opinion, which is fine. That's why you're here. You just had another chance to gild the lily, Mr. Pigeon.

Mr. Gouk.

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, Canadian Alliance): Minister, this committee, under estimates, was tasked with examining the estimates related to various transport sectors that come under our jurisdiction. As such, we called for CATSA to answer certain questions. They refused the first time around to answer some questions, quoting security, not making any reference to you. We asked them to go talk to their lawyer and come back, and told them we would get a legal opinion. When they came, we first had our legal opinion, which said they were compelled to answer. We called them back to the table, and that's when we were blindsided. We were told the minister had written a letter telling them not to answer, and they were asked specifically--

Mr. David Collenette: May I respond, Mr. Chair?

Not to interrupt you, but I didn't tell them not to answer. My opinion was that certain things should not be disclosed.

I mean, CATSA is not the issue here. The issue is the minister and the minister's opinion.

Mr. Jim Gouk: Well, I'll get to that if you let me complete my questions here.

The Chair: Did you table that document?

Mr. Jim Gouk: Joe, let me ask mine first. Don't make half of my presentation for me, because that's my next statement. If I am misquoting the letter, it's because we've never seen it. They refused to table it.

Now, the head of CATSA was asked specifically if he would have answered the questions had he not been prohibited from doing so by the minister, and he answered yes. Right after you have finished, we are going to have VIA Rail come forward, another government agency under examination on estimates. My question is, have you advised VIA Rail of any questions they are not to answer, or any area on which they are not to answer questions from this committee, in our examination under estimates?

I ask you this now because obviously we don't, nor should we, have you on a string to pull you back every time we hit a bump in the road. So I would like to know now.

º (1620)

Mr. David Collenette: Whenever you want me.

Mr. Jim Gouk: Okay, I'll keep that in mind.

The Chair: The minister can answer if he wishes, but I think it's off the subject of what we're talking about, Mr. Gouk.

Mr. David Collenette: Mr. Chairman, can I answer the question of Mr. Gouk about the letter?

The letter is a cabinet confidence. It's stamped “secret”; therefore I am prohibited from making it public. However, I have summarized the issues that are germane to the committee--in other words, the two areas where I believe we should not have public disclosure of information.

I'm prepared to go further in camera to answer your questions.

Mr. Stan Keyes (Hamilton West, Lib.): Does “further” mean all the way?

Mr. David Collenette: I leave that up to your judgment after I give my answer, Mr. Keyes.

The Chair: Mr. Volpe.

Mr. Joseph Volpe (Eglinton—Lawrence, Lib.): Thank you, Mr. Chairman.

I think the minister has essentially answered the question I wanted to ask, without getting into the discussions of the lawyers. We've had legal opinion on both sides, and I'm just waiting for a judge to come here to tell us we're right, or the other ones are wrong. It's immaterial to me.

My question was more or less the same as that of Mr. Keyes. Until yesterday, the invocation of section 32 meant that we couldn't get an answer on any of $459 million plus. Yesterday we got access to 83%. I wondered about this yesterday, and I'm just repeating it for the minister, but what happened between last week and yesterday allowing secrecy to be reduced 83% without endangering public security?

With that in mind, I'm going to go into the session afterwards to find out how we can reduce the 17% outstanding to zero, Mr. Minister, especially as we offered yesterday to go in camera with the officials. We offered to go in camera with them to pursue that line of questioning, whereupon we were provided with a statement by them that there's a secret document prohibiting them from giving us any answers. I'm assuming that the secret document won't impede any of the answers to the questions that will flow.

Mr. David Collenette: As I say, I don't think we should make CATSA the issue. They obviously get a letter from the minister to whom they report, expressing an opinion under subsection 32(2) of the CATSA Act that they should not divulge publicly information on those two areas, the protective officer program and the EDS program. So I'm telling you they have in effect kicked it upstairs.

You rightly have called me here. I am here to answer the questions they could not answer in camera, and that's why I would hope I could satisfy you in camera.

Mr. Joseph Volpe: I understand, Mr. Minister. The only point I was trying to make is that prior to giving us any information on any of the $459 million, they were under the same interpretation. We were getting zero answers. Now we've moved beyond that, and I'm quite happy to have you here in order to address the rest of the line items.

I appreciate that you're coming here to address the issues the officials couldn't. Our position isn't against them; it's just to find out material or information for Parliament, as is every parliamentarian's right.

I think every parliamentarian around the table understands the need for a particular balance; there's no need for us to be reminded of it. But we have the right to have that information. And we can't rely on the fact that the Auditor General, who reports to Parliament and to the press, says that parliamentarians are doing this job or the government is doing that job, the implication perhaps being that parliamentarians haven't done their job thoroughly enough to ensure that the Auditor General wouldn't find lapses in spending.

So I thank you. I'm anticipating forthright answers.

º (1625)

Mr. David Collenette: Mr. Chairman, I think we are getting a bit hung up on the procedure, rather than the substance. The members want to know the answers to questions that CATSA could not answer. I am prepared to move a long way—and perhaps you can judge whether it is all the way—to satisfying you with respect to those.

The Chair: Minister, I have to allow every member of the committee to speak once.

Mr. David Collenette: CATSA knew in general terms that there were areas that should not be made public. But because they came to the committee and were directly questioned, they came and sought clarification, in effect so they would know there was no equivocation or uncertainty as to what they were entitled to divulge. That's why I obliged Mr. Duchesneau last week, by writing the letter.

The Chair: Although I'm sure there will be a motion to go in camera, the question now is whether you will allow the chairman of CATSA to come before us to answer all of our questions without restriction. That would allow you folks to leave.

Would that be an order of the committee?

Unless you want to do it?

Mr. David Collenette: Let's be quite clear: Mr. Duchesneau has been a police officer, and he is not unfamiliar.... But I don't really want to put him or his officials in a position where they feel they might be going beyond a certain point. So frankly, who better to answer the questions than the one who is really on the hook in Parliament, and that is me?

The Chair: We have a motion from Mr. Fontana, seconded by Mr. Moore, that the committee go in camera.

Mr. Roger Gallaway: And that all strangers be excluded from the room.

The Chair: Thank you, Mr. Gallaway, that's very good: “and that all strangers be excluded from the room”.

Who are strangers? Does that mean your committee are strangers?

Mr. Roger Gallaway: Everybody except members of Parliament.

The Chair: Everybody except members of Parliament. Thank you.

[Proceedings continue in camera]

» (1730)

The Chair: Order.

[Public Proceedings Resume]

The Chair: Pursuant to an order of the House dated Wednesday, February 26, 2003, we are considering the estimates for 2003-2004, and the votes so listed.

I apologize to our next witnesses. I have no idea what the time is, but we must be an hour late. I apologize.

I welcome Mr. Pelletier, an old friend of ours, and Mr. Paquette, and Ms. Sirsly--the last time I saw her, I was in Thunder Bay looking at those marvellous rail cars she was instrumental in refurbishing, which are on the road now and operating very well. They need a little insulation and they have to double-pane the windows, but other than that everthing is okay. And I welcome Mr. Côté and Mr. Kolaitis.

Mr. Pelletier, you are here today because you've lost the honour in Transport Canada of being the number one expenditure. You're now down to number two in Transport Canada.

I'm sure you understand what the process is. There will be some questions after your statement, if you wish to make a statement.

The microphone and the floor are yours, sir.

Mr. Jean Pelletier (Chairman of the Board, VIA Rail Canada Inc.): Thank you very much, Mr. Chairman.

Mr. Chairman and members of the standing committee, thank you for the opportunity to appear before you today to discuss the 2003-04 main estimates for VIA Rail.

Allow me to introduce my colleagues who have joined me here today. They are Christena Keon Sirsly, our chief strategy officer; Mr. Paul Côté, the chief operating officer; Roger Paquette, the chief financial officer; and Gerry Kolaitis, director of strategic and financial planning. I must say that our CEO, Mr. Marc LeFrançois, is in Europe for VIA, and was unfortunately unable to be here at this moment.

We are pleased to have this opportunity to describe our performance and plans, and to provide you with any detailed information you may need to assist you in your deliberations.

I'd like to begin with a few brief remarks in order to provide context to the information you have in front of you in the estimates. First allow me to touch briefly upon the road travelled from 1990 to the present day. I will then outline the current state of the corporation and talk about the visions and plans for the future of VIA Rail.

[Translation]

While VIA is celebrating its 25^th anniversary this year, I would like to focus my comments on the corporation's performance since 1990, when the current network was introduced. Over this period, VIA Rail has enjoyed steady and strong growth both in terms of ridership and revenues.

Our strategy has been simple: focus on reducing costs while continuing to grow the business and improve customer service. We have made consistent gains towards the achievement of both these goals; however, the journey has not been without its challenges.

[English]

At the outset, it is important to remember that VIA Rail Canada pays the operating railways, primarily Canadian National, for the right to operate its trains over their tracks.

In 1995 Canadian National was privatized, and this was not without consequences for VIA Rail. Not unlike our own goals, their objectives were growth-oriented and their strategies were to increase reliability and traffic. The result has been that much longer freight trains have marginalized passenger rail operation, making on-time performance an enormous challenge for VIA Rail. For all practical purposes, freight rail services enjoy priority over passenger rail services.

Despite these challenges, VIA Rail continues to enjoy sustained growth and development, and I will detail these for you in a moment, when I speak about our results for 2002.

Before I do so, I should point out that the year 2000 was another important milestone for VIA Rail. In 2000 the government made the decision to keep VIA Rail Canada as a crown corporation and it confirmed annual operating funding of $170 million per year for a 10-year period, allowing VIA, for the first time, to plan its operation beyond a one-year period.

At the same time, the government earmarked $402 million in capital improvements for the corporation. This money has been used to secure and stabilize the existing network. I would like to take a moment to itemize some of the key expenditures to date.

The fleet modernization component has begun, with the purchase of the Renaissance cars in 2000. The chairman was referring to these cars in his opening remarks. This new equipment was introduced on the Enterprise overnight service between Montreal and Toronto in June 2002 and on day service between Quebec City, Montreal, and Ottawa in the fall of 2002. The fleet program also included the addition of 21 new GE locomotives purchased from GE in 2001. In 2002 the Treasury Board approved the acquisition of five specialized passenger cars from BC Rail for use in western Canada.

VIA continues to upgrade and modernize passenger stations across the country. Major projects included the completion of a new station in London and Fallowfield-Barrhaven, in the west end of Ottawa, as well as significant upgrades to stations in Vancouver, Prince George, Thompson, Kitchener, Brantford, Kingston, Campbellton, Bathurst, Moncton, and Halifax.

The four-year redevelopment of Union Station in Toronto, started in 1999, will be completed this year.

In 2002 VIA completed the $28 million modernization to the infrastructure between Montreal and Ottawa, improving safety and making it possible for VIA to have trains and improved trip times.

Throughout the introduction of these renaissance initiatives VIA has implemented a comprehensive environmental policy and has taken a number of steps to continually improve its environmental practices.

» (1735)

[Translation]

Finally, the introduction of Bill C-26, including legislation for VIA Rail Canada, has provided the basis for future stability and certainty for the corporation. Taken together, these measures have strengthened the foundation that will allow VIA Rail to move ahead with long term planning for the future of the corporation.

I would now like to turn your attention to the year 2002. This was, without a doubt, VIA Rail's most successful year, marking another in a series of consistently strong year-over-year results since 1970.

VIA's 2002 Annual Report, which was tabled in the House of Commons in April this year, detailed our financial and operating performance, and demonstrated that on almost every key indicator, VIA once again met or exceeded its set performance targets.

» (1740)

[English]

Despite the global slowdown in the travel market that began early in 2001 and increased following the September 11 terrorist attacks, VIA actually increased ridership and revenues. In 2002 VIA carried 4 million passengers, 116,000 more than in 2001, and half a million more than in 1990.

With increased ridership came increased revenues and better yields. In 2002 total revenues increased by $17 million to reach an all-time high of $270.8 million. Operating revenues increased by 90% compared to 1990, while operating expenses have gone down 15% over the same 12-year period.

Since 1990 VIA has reduced its needs for operating funding by 63%. Cost recovery improved again in 2002, reaching 64.5% for the entire network, including regional and remote services, compared to 28.9% in 1990. Systemwide, the cost-recovery ratio is now at an historic high, up by more than 123% since 1990. In the Quebec-Windsor corridor, the cost-recovery ratio reached an even higher 84%.

I am particularly pleased to note that in 2002 alone, passenger traffic in the corridor between Quebec City and Windsor increased by 10% in a year, which is a very big increase.

Where does VIA Rail Canada go from here? For 2003, VIA has set targets for operating funding of $171 million, and it will continue on its capital program, investing $95.2 million of the $402 million approved in the year 2000.

We believe there are many opportunities for passenger rail service to assume a greater role in Canada's transportation infrastructure. Canadians are asking for more service in all parts of our country, and VIA is increasingly in a position to respond to these opportunities. We believe that rail service can be approved without increasing the cost to the Government of Canada, even in more difficult times such as our industry is experiencing in 2003.

In western Canada, VIA will increase its frequency between Jasper and Prince Rupert, improving local service to communities in northern British Columbia and providing more choice for the important tourism industry in that region. VIA is examining the possibility of offering year-round inter-city rail service between Calgary and Vancouver, providing scheduled train service to many communities in southern Alberta and British Columbia.

VIA is working with many partners to examine the business case for higher-speed rail passenger service between Calgary and Edmonton.

In Atlantic Canada, VIA is working with provincial governments to understand better where opportunities exist for improved rail service to communities in that region. In the Quebec City and Windsor corridor, VIA feels that passenger rail service can play a significantly greater role as part of an integrated public transportation system. However, to do so VIA must invest to increase track capacity for more frequency and to improve trip times to meet travellers' expectations.

» (1745)

Thank you, Mr. Chairman, for the opportunity to speak about VIA Rail. My colleagues and I would now be pleased to entertain your questions.

The Chair: Thank you very much, Mr. Pelletier. I wonder if any of your colleagues would like to add anything to what you've just said.

Thank you.

We'll begin questioning with Mr. Gouk.

Mr. Jim Gouk: Thank you, Mr. Chairman. Believe me, I could take much longer than we're going to have.

In 2000 VIA Rail was given $401.9 million in capital funding, and while there's some discrepancy--$1 million or so--in terms of the amount, they spent approximately $130 million on an untendered purchase of 139 passenger cars from Alstom, known as Nightstar.

According to VIA testimony before the Canadian Transportation Agency, they claimed they would only have been able to purchase 39 rail cars from another source for that $130 million. They further claimed that purchasing cars from another source would have resulted in considerable delay.

The purchase was made December 1, 2000, and many of those cars are still not in service. Canadian-built cars would have been available by last year. The Alstom cars, which are renamed the “Renaissance” cars, have 50 seats per car, versus 162 on GO Transit Canadian-built cars that were supplied from--and the company had the capacity to build more, and in fact was looking for work--a company located in Thunder Bay.

I also understand that VIA has awarded another untendered contract--this time to Bombardier--to assemble, modify, and maintain the Renaissance cars.

First, how much has been spent on the assembly and modifications to date, and how much is projected to be spent by the time all the cars are assembled and presumably modified?

Mr. Jean Pelletier: Mr. Member, this was before my time, but I will start to answer, and I'll ask my colleague to complete, if you allow me to.

These cars were built originally for British use between London and Paris and London and Brussels through the Chunnel. But between the day they were ordered and the day they could be delivered, British Rail was privatized, and nobody was actually interested in taking them. So they were offered on the public market.

It was felt by VIA that VIA could acquire these cars at a very low price compared to what it would have cost if we had ordered specific cars. It was a deal to take advantage of, and VIA decided to do so. They were brought back to Canada and sent to Thunder Bay, actually, to be put to North American standards, which are different from the European standards.

On the overall cost, I think these 106 cars that will be put in service will cost globally $162 million.

Mr. Jim Gouk: That will be the final cost after they've been assembled and modified?

Mr. Jean Pelletier: Right.

Mr. Jim Gouk: Speaking in terms of putting them to Canadian standards, on car body buff, which is compression strength within the car, the Canadian standard is a static 800,000 pounds. The Renaissance cars have a static body buff of 450,000 pounds--just slightly more than half.

For the coupler used on those cars, in terms of tensile strength, Canada's standard is 500,000 pounds. On the Renaissance car, it's 66,000 pounds.

For coupler buff, the Canadian standard is 800,000 pounds; for the Renaissance cars, zero.

For coupler torsion, the standard for Canada is 200,000 pounds; for VIA's Renaissance cars, zero.

What has VIA Rail done to bring those cars up to standard, and are they at standard now?

Ms. Christena Keon Sirsly (Chief Strategy Officer, VIA Rail Canada Inc.): I cannot answer to the specific numbers that you quote. I can tell you, from the perspective of buff strength, the cars were rated when we looked at them, before we started modifying them, at 730,000 pounds.

The modifications that Transport Canada has requested we make to bring them to Canadian standards were minimal, and Transport Canada has judged that the cars, with the modifications we have made--which is extending posts, and so on--will be sufficient to meet Canadian standards.

I can't respond on coupler strength. Again, Transport Canada's safety group has examined the cars, has looked at the design of the couplers and all other mechanical aspects of the cars, and has judged that the modifications we are making will allow us to meet Canadian standards. And in fact, we are in operation in Canada.

» (1750)

Mr. Jim Gouk: When did they make this declaration that your cars are now up to Canadian standards?

Ms. Christena Keon Sirsly: It was when we presented them the plan for modification.

Mr. Jim Gouk: So this was some time back?

The Chair: These are highly technical questions. I don't--

Mr. Jim Gouk: Joe, let me ask them, and if they have a problem answering it, then let them say so. Okay?

The Chair: Just a moment, please. They were highly technical questions. I'm sure it's on the record, and I just--

Mr. Jim Gouk: Do you hear me objecting to their answers?

The Chair: No, I just want to give the witnesses the opportunity that if they don't have the answers to those highly technical questions, they will undertake to provide the answers to the committee. Thank you.

Mr. Jim Gouk: There's a reason for these questions.

The Chair: Mr. Pelletier.

Mr. Jean Pelletier: I want to reassure the honourable member that the board of VIA has always taken the position that we wouldn't put anything in service without the proper certification from Transport Canada.

I've personally looked into the file, and the proper authorization had been given in writing by Transport Canada before all the adjusting work had begun in Thunder Bay. Before putting them in service at the end of these modifications, they were also looked at by Transport Canada, and we got due authorization.

The Chair: Mr. Gouk, we have to be fair with the witnesses.

Mr. Jim Gouk: Okay.

On October 17, 2002, Transport Canada's rail safety division wrote to you pointing out that the Renaissance cars do not meet the standards prescribed in the railway passenger car inspection and safety rules. The letter required a response not later than November 4, 2002, with corrective action to remove the identified threats.

What response did VIA Rail make to that in terms of corrective action, and have they carried out that corrective action, if they indeed identified it?

Mr. Jean Pelletier: The problem was raised by Transport Canada in regard to the security of the washrooms. Corrections were identified to the satisfaction of Transport Canada. The transformation that will be needed will take place this summer, after we receive the necessary material, which has been ordered. In the meantime, I personally don't think there's a great problem, but to cope with Transport Canada's wishes, we have put cars as buffers in the operation so that we would meet all safety requirements, and we got the permission of Transport Canada to put the trains in service that way, with these special adjustments.

Mr. Jim Gouk: Can I ask you to provide any written material you have from Transport Canada authorizing this operation and specifying what exactly you do, and table that with this committee?

Mr. Jean Pelletier: With great pleasure.

Mr. Jim Gouk: You identified in your report that you're looking at western Canada, the route specifically from Calgary to Vancouver, to provide some kind of service. That service is now provided on a seasonal basis, based on demand, for tourism purposes.

In Edmonton, where the train operates now, from Edmonton to Vancouver, of three modes--air, bus, and rail--rail is the most expensive. It is 37% more expensive than it currently costs to fly, takes 16 times longer, and is the least environmentally friendly on a passenger-per-kilometre basis. So there is no reason for someone to go on the train from Calgary to Vancouver except for tourism purposes.

Is it the intention of VIA Rail to go into competition with existing tourism services provided by the private sector?

» (1755)

Mr. Jean Pelletier: We have made very clear to Rocky Mountaineer Railtours--I think you're referring to that service--that we're not in competition for the tourist market at all in that region.

Between Calgary and Vancouver, there are some communities that don't have passenger service and are asking us to provide them with a regular year-round service. As you said, Mr. Member, the existing service is operated only in summer and for one week around Christmas. It's not a year-round service. So it's absolutely a different service that we're planning and hoping to put in place.

It's a regular service, three days a week in one direction, three days a week in the other direction. It's a plain rail passenger service, not at all devoted or oriented to the tourist market. It's a plain service, as we have between major cities in Canada.

Mr. Jim Gouk: First of all, just for clarification--

The Chair: This is your last question, Mr. Gouk, but I've put you on for the other round.

Mr. Jim Gouk: Yes.

Just for clarification, Rocky Mountaineer doesn't operate just in the summer. They actually operate from April to October, which is quite a bit more than three months.

Mr. Jean Pelletier: I'm ready to adjust my comment to that.

Mr. Jim Gouk: It's actually double the summer alone.

I still maintain that--

The Chair: You had one last question.

Mr. Jim Gouk: That's what you said before, Joe. I'm trying to get--

The Chair: We are into the second question, but go ahead.

Mr. Jim Gouk: No. What question did I ask?

The Chair: Just ask the question, Jim.

Mr. Jim Gouk: I'll take as long as needed, as people keep interfering with my trying to ask that one question.

I still maintain that VIA is primarily a tourism service in western Canada. There is a bus service already there, and going out of Calgary, nobody is going to jump on the train from Calgary to Banff. So possibly Revelstoke could get service and probably would like to have service.

Once you get a little closer to Kamloops.... You can go to Kamloops already. You can take the bus or you can fly to Kamloops. You have the service. Your train service, your rail service, costs more and takes longer. Why would anybody ride it except for the experience, which is a tourism operation? There are no captive communities on that line.

Mr. Jean Pelletier: We get some requests from communities, Mr. Member. I'm sorry for you to hear that, but it's the reality of things, and we are not trying to put anybody out of business. I personally have demonstrated along my career that I'm an intermodal man. I'm not fighting against anybody.

Canadians need good transportation services. Sometimes it's air, sometimes it's rail, and sometimes it's bus. It has to be a very well integrated system where the need justifies that it happen. We' re not trying to compete against any existing or private enterprise--not at all.

We are solicited on that route to put back a service that was discontinued in 1990. I want to make clear to the committee that we are not in the process of trying to reinstate all the services that were cancelled in 1990. It would be absolutely foolish on our part, and we are not doing that. We are simply trying to service the communities that are interested, when it makes sense to do it.

The Chair: Before Mr. Laframboise begins, I want you to know, Mr. Gouk, you think I treat you so unfairly, but you have been given now twice the amount of time normally given on a line of questioning.

Mr. Jim Gouk: If you deduct from that, Joe, the interventions--

The Chair: Absolutely. I took the time out of there, Mr. Gouk, and I want you to know that you got six minutes over the allotted time.

Is that okay now? Now we are going to move on.

Mr. Jim Gouk: Thank you, Joe.

The Chair: Mr. Laframboise.

[Translation]

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

First of all, Mr. Pelletier, thank you for appearing before our committee.

I listened to your remarks and I have read your brief. On the last page, you say:

We believe that rail service can be improved without increasing the cost to the Government of Canada [...]

And then you go on to deal with the Quebec City-Windsor corridor and you say that rail can play a more important role in the system and that you must increase rail capacity.

I know you are a former mayor of the City of Quebec, and I am convinced that you are well aware of the project that has been discussed and written about in the newspapers for some years now. There is a demand for high-speed service between Quebec, Montreal and Windsor. The intention is to have a fast train rather than high-speed service.

Today you are saying that this will be a VIA budget expenditure. I thought that large-scale federal government investments would be required for the upgrading of the network between Quebec, Montreal and Windsor.

Could you clarify that for us, please?

¼ (1800)

Mr. Jean Pelletier: I was probably not clear on that, Mr. Laframboise. I said that this could be done in such a way as to not create any further expenditures for the Government of Canada. I think it is clear that if we want a rail infrastructure to meet our needs, both in terms of frequency as well as capacity, then investments will be have to be made. And if we don't invest in rail, then we will have to invest elsewhere, in other modes, which will be far costlier than rail.

In the United States and Canada, since the end of World War II, very little has been put into the rail networks. Airline networks were developed, and highways were built. I have nothing against that; it happened, and that's just the way it is. But today we realize that, for a whole host of reasons, there might be other solutions to the demand for transportation.

Air travel is expensive. It takes longer and longer because of the increased security measures. And the highways leading into our cities are incredibly congested, making it difficult to drive into town. People are realizing that the train, as long as we have the readily available technology, a technology that has not changed very greatly in Canada but that, in other countries, not only Europe, has evolved... We can look at what the French have done, but we can also learn from the Japanese experience as well as from the Americans. We see that with advanced technology we can improve the organization of our public transportation system.

We would like to improve the intermodality of our various modes of transportation. The government will have to make some choices. Any way you look at it, money will have to be spent on improving transportation.

Should we invest only in roads and airlines? We don't feel that is a balanced approach. I am not saying that they should not keep doing it, that they should no longer invest in air and road transportation, that is not what I am saying. I feel that, for distances under 600 miles, some public funding could go into rail, which would result in a better quality, better balance and more productive passenger service. That is what I am saying.

Mr. Mario Laframboise: So what you stated in your presentation is what VIA intends to spend? When you say, for example: "VIA is working with many partners to examine the business case for higher speed rail passenger service between Calgary and Edmonton" and you don't say that the same would apply for Quebec-Windsor, that does not exclude...

M. Jean Pelletier: With respect to the Quebec-Windsor corridor, sir, the minister asked us, perhaps 15 or 18 months ago, I don't quite remember, to prepare specific answers to the following question: What can we do in the Quebec City-Windsor corridor in order to improve service, frequency, travel time, etc.? We prepared a very complete document for the minister, which is, at this time, being examined by the Department of Transport and by the government.

In the case of Calgary-Vancouver, a foundation has taken the lead in examining what must be done for that route and VIA is only one of many partners involved. So I cannot deal with a study that is not yet complete in that case, even though we are taking part in it.

Mr. Mario Laframboise: Thank you.

I have a more detailed question on the estimates. In the 2002 expenditures, I see that you will be spending about $27 million on marketing and sales.

Could you supply the committee with your advertising expenditures? Exactly how much do you spend on advertising? Do you have that with you?

¼ (1805)

Mr. Roger Paquette (Chief Financial Officer, VIA Rail Canada Inc.): It's about $12 million.

Mr. Mario Laframboise: Could you table that, please?

Is that acceptable, Mr. Chairman?

Mr. Jean Pelletier: Obviously, Mr. Laframboise, you are asking for an answer and I want to be agreeable; I have nothing to hide. However, I prefer not to divulge any information of a confidential nature, as this is a competitive business. We must take care.

I'm sure that other segments of the transportation industry might be interested in knowing how much we spend on one item as opposed to another. Therefore, if I may, with respect, I would prefer not to answer. But I will try to do that nicely.

Mr. Mario Laframboise: Thank you.

The Acting Chair (Mr. Joseph Volpe): Have you any other questions, Mr. Laframboise? No.

Ms. Frulla, please.

Ms. Liza Frulla (Verdun—Saint-Henri—Saint-Paul—Pointe Saint-Charles, Lib.): Thank you, Mr. Chairman.

I'd like to discuss the Renaissance cars. The Renaissance cars were brought up to standard upon their arrival here. They were bought from ALSTOM and the work was done in Thunder Bay.

I would like to know why you chose to do this in Thunder Bay, without calling for bids, when you know full well what is happening at ALSTOM. I will not hide the fact that ALSTOM is located in my riding, the rail heartland of Canada. ALSTOM, which once employed 600 people and now only has 100, is in need of assistance and is anxiously awaiting the AMT decision.

I would like to know if, at the time, there was some reason why you had to choose Thunder Bay rather than send some of those cars to ALSTOM in Montreal. I would like to know whether those reasons still apply and if it might not be possible, in the future, for ALSTOM to be awarded some VIA contracts.

Mr. Jean Pelletier: I will ask Ms. Sirsly to answer that question, Mr. Chairman, because the decision was made before my arrival.

Ms. Christena Keon Sirsly: When the decision was made to purchase equipment from ALSTOM in Europe, as Mr. Pelletier said earlier, some of the cars were almost complete, some were only half finished, while others were incomplete. We bought the entire lot; that was part of our agreement with ALSTOM. We bought 139 shells, seats and the material that was required to complete the cars.

When we sent our feelers out into the market, ALSTOM did not have the technical capabilities to finish these cars. The ALSTOM representatives in Canada admitted that, at the time, they would not be able to do the work. However, Bombardier was able to finish the cars at that time.

In view of the changes now underway at ALSTOM, I am sure that the company will be able to do that type of work in the future.

Ms. Liza Frulla: We know that ALSTOM can now operate in the passenger rail area, while previously it specialized in freight.

I believe that at one point, the company was so desperate for contracts that it would probably have done the necessary work, particularly since you were buying their cars. ALSTOM Canada could not have done the whole job, but only part of it; I understand.

Do you think there might be something available in the future?

¼ (1810)

Mr. Jean Pelletier: Ms. Frulla, we will, of course, require equipment in the future. Our equipment is aging. It will have to be replaced. VIA's policy is to request tenders once we have the specifications. Nothing would prevent us from asking ALSTOM to bid, and we will do that . There will no doubt be other bidders beside Bombardier and ALSTOM. We are now looking at equipment manufacturers worldwide, for both locomotives as well as rail cars, so as to benefit from competition without becoming prisoners of a sole-source market.

[English]

The Chair: Thank you, Ms. Frulla. You have some more time if you like. Thank you.

Mr. Keyes.

Mr. Stan Keyes: Thank you, Mr. Chairman.

Nice to see you again, Mr. Pelletier.

There are great pictures of you in the annual report of April 3. In the third paragraph of your press release, in your annual report, and in the presentation you made to us today, you said that ridership in the Quebec-to-Windsor corridor increased by 10% last year over 2001. By what percentage did your total ridership increase in that same year for all of Canada?

Mr. Jean Pelletier: If my memory is right, I think it's 3%.

Mr. Stan Keyes: It's 3%. If as you claim, 85% of your total passenger ridership emanates from the corridor, you can understand the difficulty I'm having with the math. You can claim a 10% increase in ridership in the corridor while only enjoying a 3% increase overall, unless of course passenger traffic has declined by some 40% in the rest of the country.

Mr. Jean Pelletier: There is some decline on certain routes. I think that after September 11 there was a decline in the number of passengers, for instance, in western services. We didn't see as many Japanese or as many Americans as we used to see. There was a decline on certain routes. Overall it went higher by 3%, but in that portion of the corridor between Quebec City and Windsor it was a 10% increase.

Mr. Stan Keyes: Then what you are telling me is that your ridership in the rest of Canada has decreased by almost 40%.

Mr. Jean Pelletier: I don't have the mathematics in front of me, but it's absolutely the fact that on some lines it decreased. It did not decrease everywhere, but there is some decrease, yes, sure.

Mr. Stan Keyes: Okay. By a percentage, how much passenger activity does VIA constitute in total passenger activity in Canada, no matter what mode of transport there will be? Are you aware of that number?

Ms. Christena Keon Sirsly: Approximately 2%.

Mr. Stan Keyes: From what I understand in the audited version, it is about two-tenths of 1%.

Ms. Christena Keon Sirsly: It depends on how you define the market. We look at the markets we serve, and we assess our market share in relation to the markets we serve.

Mr. Stan Keyes: Okay, I'll give you 2%.

Of total passenger activity in Canada, 2% of all that passenger traffic moves on VIA, and yet the Government of Canada provides for VIA.... Let me put it another way: VIA receives about 35% of all federal transportation subsidies. That's quite a bit of money for 2% of the passenger traffic.

Mr. Jean Pelletier: I'd be interested to make comparisons over a 50-year period, because rail was not subsidized heavily since the end of World War II. It's the same in the United States. But I have not taken and I won't take the time to search what kind of public money has been invested in the air systems for 50 years compared to what has been invested in the highway system, compared to what has been invested in the rail system. It will probably and surely be to our advantage, but I don't want to do this kind of in-fighting.

I think Canada needs an intermodal integrated system, and I think if we provide rail with the kind of product that is available, which is hopeful, I think the ridership of rail will go very much higher. I think this would serve the cause of the environment. I think this would serve the cause of taking a lot of cars off the highways. I think it would better the quality of service, because people would reach downtown to downtown more rapidly and more safely, and it would also serve.... But you know, it's like toothpaste. No, it's not a joke. If you have the right toothpaste and you offer it, it will create its market. But if you don't--

¼ (1815)

Mr. Stan Keyes: You have to have enough customers for the toothpaste. As we have known over the years on the transport committee—Mr. Chairman, myself, and others on the committee—we have travelled Europe and we've seen in the past how it is countries can justify the amount of money they spend on their rail lines. It is because there is a built-in population to move people on rail. There is a mindset that says you can get from point A to point B more quickly in France or even in Britain because there is a huge population to be served.

Many, for example, are best served intra-city. Say if you want to hop on a GO train between Hamilton and Toronto, that is an effective service because it does take cars off the roads. People can jump on a bus and go from Hamilton to Toronto, and that too is an opportunity to move high numbers of people at less expense than it would cost to have a VIA train that runs the entire country.

When people want to move from Toronto to Calgary or Kamloops or Montreal, they want to get there fast. They don't have five days or five hours to travel or six hours to travel any longer. They want to get there in an hour and a half. There's going to be maybe one day in the future, when we have a lot of money, when we can move in a higher-speed rail and move people along. As I say, they don't care how fast the train is going; they just want to know they can get there in three hours. It's the time, not the speed, they're concerned about.

When I see 35% of the entire federal transportation subsidy going to rail service, I start to wonder, should we be taking some of that money and putting it into other modes of transportation where we know passenger volumes exist?

That's my statement, my question, and everything all rolled up into one.

Mr. Jean Pelletier: First, you said that it was very important to have density of population before making a decision. You're quite right on that, Mr. Keyes. This is the reason why when we were asked by the minister to bring him some possible solutions in the corridor between Quebec and Windsor, we studied carefully all the studies that had been made on the TGV, the very high-speed train.

We decided to put that aside—I call it the Ferrari of rail—because I think we don't need it. We don't need it and we don't have the resources to buy it. On the other hand, between the little, very tiny Volkswagen that we have and the Ferrari, is there something else? That was the origin of our study. I think if you would have frequencies between Quebec and Montreal, and Montreal and Ottawa, and Ottawa and Toronto, and Montreal and Toronto, you would have frequencies of almost a train every hour.

If you could take three hours from Montreal to Toronto, downtown to downtown, and if you could take two hours and 15 minutes from Toronto to Ottawa, and between Montreal and Ottawa it could be one hour and 15 minutes, I think we would easily build very good clientele, very happy to take the train, riding safely from downtown to downtown, and thus taking out of the very congested highways all these cars that are burning fuel and creating a safety problem.

When I said that if you have the right toothpaste, it will build its market, it's exactly what happened in Japan with the Shinkansen. It's exactly what happened in France with the TGV. It's exactly what happened recently south of the border with the new train operated by Amtrak between Washington, New York, and Boston.

¼ (1820)

The Chair: Thank you. You have another couple of minutes, Mr. Keyes.

Mr. Gouk, then Mr. Volpe, then Mr. Gallaway.

Mr. Gouk, these are five-minute rounds.

Mr. Jim Gouk: I'll be as brief as I can. Thank you.

You mentioned that the Alstom cars were built for British use and then not required. I'd like to read to you from the British press, at the time cars were being sent over for consideration and testing. It says:

The coaches have been an embarrassment to Alstom for many years. A total of 139 vehicles were ordered, and construction started in the early 1990s.... However, the trains never ran because of persistent faults in the design of the vehicles and over-optimistic targets for the market, and Alstom has been looking for buyers ever since.

That was the early 1990s.

I'd like to go to what Mr. Keyes raised, because, man, your figures look very strange. I refer to your presentation, on page 4, first paragraph. You said that in 2002 total revenues increased by $17 million, to reach an all-time high of $270.8 million. Those figures are correct?

Mr. Jean Pelletier: Yes.

Mr. Jim Gouk: Okay.

Now, in the nice little charts you gave us, you said your operating subsidy for 2002 was $154 million, for a total revenue of $270 million. Are you telling me you have to spend $3 to make $1? Maybe that's a little out. You spent.... It's just incredible. You had $270 million and you still had to get $154 million subsidy, plus your document says it's going back up to $171 million this year. Is that correct?

Mr. Jean Pelletier: I'll pass that to our chief financial officer, sir.

Mr. Roger Paquette: Revenues are $270 million. That represents 64.5% of our cash operating expenses. That's what the presentation says. When we talk about cost recovery, we're talking about what we get out of the fare box and other revenues and what this amount in total represents of total operating expenses.

Mr. Jim Gouk: What do you have for retained capital for the year 2002, retained earnings? You wouldn't have any, I gather, if you in fact have a deficit of $154 million. You wouldn't have any retained revenue, right?

Mr. Roger Paquette: We've always been in a deficit, so I guess the answer to your question is yes.

Mr. Jim Gouk: Okay. So your figures just don't add. That's fine.

I just have a couple of quick things; I don't want to overstay my welcome this time.

The Chair: You can have a third round, Mr. Gouk.

Mr. Jim Gouk: You mentioned there were requests for service from communities in the southern B.C. route, Calgary to Vancouver. Could you provide to this committee any documentation you have to show these communities have requested this, both in terms of community and in terms of weight of request--in other words, did you get one letter from one person, or...? To the extent you have requests, could you provide that to this committee, so we can understand how much these communities are pushing for this service?

¼ (1825)

Mr. Jean Pelletier: I will think about that, Mr. Chairman.

Mr. Jim Gouk: Okay.

Finally, then, if I may, I'll simply ask, if 85% of your business is in the corridor, and the other 15% is from one end of this country to the other, obviously it is a huge loss. The corridor presumably is viable, because when the minister mouthed the possibility of commercializing or privatizing, there were 40 requests from outfits that were interested, primarily in the Quebec-to-Windsor corridor.

Notwithstanding what you said earlier, at this point in time--there are lots of things that were done in the past--we don't subsidize the airline industry. It's in deep trouble. It's asking for help. The minister has made it very clear we're not going to help. We do not subsidize the highway system for buses. They pay their fuel tax. They pay their operating licences and everything else. So why should these private sector businesses operate without subsidy, and VIA Rail get a subsidy that amounts to a third of its total expenditure--particularly if it has a potential of making profit from 85% of its business--to operate 15% in the rest of this country, requiring a huge subsidy, almost half a million dollars a day, from the Canadian taxpayer?

Mr. Jean Pelletier: You assume that buses and airlines are paying 100% of the cost of public money devoted to the services they are getting. I'm not too sure about that. I'm not too sure the fees paid by buses through their registration fees and the tax and gasoline and what not covers the cost of their use of the highways in Canada. I think the public authorities in certain parts of the country are thinking of getting more revenue because of the damage they create in the system, the physical damage.

So I'm sorry, sir, I don't assume your starting point when you say they're not subsidized. They're subsidized indirectly. I'm absolutely sure of that. They are not given a cheque, but they're not asked to pay 100% of the cost of the service they get from the public routes or the public airports.

If you look at our figures, you will see the revenue-to-expense ratio was 29% in 1990. It's steadily going up to 65%. So we're on the right route.

If you look at the government funding chart that you have, you will see that in 1990, for operations it was $410 million. It's now $154 million. I think we are on the right route.

Mr. Jim Gouk: Now, that was $400 million in capital expenditures paid for by the taxpayers--

Mr. Jean Pelletier: Yes, but wait one second. Don't do as some journalists do, mix operating revenues and capital investments. If you run a business, you won't mix the money you are investing in your business to get the product and the revenue year after year you get from your product. Those are two different pages, and when you add the two, a little simplistically, it's a bit strange to my ears.

The Chair: Thank you, Mr. Gouk.

Mr. Volpe.

Mr. Joseph Volpe: Thank you, Mr. Chairman.

Mr. Pelletier, I guess it still means if you are going to spend a dollar, you still have to have a dollar of income, right?

I was really pleased to hear you talk about the Ferraris. I have a special love affair with anything that's red and fast. I ask my wife to wear red all the time.

I'm looking at some of these figures, and I have two sets of questions. I may have to go a second round, Mr. Chairman.

If I can go back to your news release, there were 116,000 additional passengers in 2002 over 2001. I found that was a really interesting number. I went back to your report, page one, and that represents a 300% increase over the average of the previous 11 years. So I don't know what it is you're doing that's right, but that's not bad, because it means you're trying to increase your market share--although the number of additional people who have been travelling on VIA in 2002 over the number travelling in 1990 is only half a million.

I'd like you to keep those figures in mind, because Ferrari pays its way and they make investments of over an additional $120 million a year in research and development and produce a brand-new car for their racing circuit every single year. They have a winning combination every year and still spend all that money, all the capital improvements, research and development, etc., but they still have to match income with expenditures.

I'm looking at total government funding. I don't want to separate it out, so I'm going to be simplistic. I'm looking at $257 million and total revenue of $270 million. I'm looking at total number of passengers carried, and by my simple calculation it means that the Canadian taxpayer is subsidizing every passenger to the tune of $64.30.

¼ (1830)

Mr. Jean Pelletier: Once again, if you run a business, you have to invest in shares. The debt service of the shares might be incorporated in your annual operating financial sheet, but you won't incorporate in your operating financial sheet 100% of your investment for that year.

Mr. Joseph Volpe: My point, Mr. Pelletier, is if you don't have the passengers, and you don't have the income, unless the government were supporting you, you wouldn't be in business.

Mr. Jean Pelletier: Sorry, sir...?

Mr. Joseph Volpe: I'll repeat it. My sense is if you don't have the passengers and you don't have the income, and the government weren't making up whatever shortfall, you wouldn't be in business. It's that simple, right?

Mr. Jean Pelletier: But you do that for all public services also. You'd not have roads--

Mr. Joseph Volpe: We're very familiar--

Mr. Jean Pelletier: --you wouldn't have any sidewalks, you--

Mr. Joseph Volpe: You're right. We're very familiar with establishing public priorities and public policies. We're probably headed in that direction. Because we're headed in that direction, you talked about Ferraris, and you talked about developing a market share for Montreal-Ottawa, Montreal-Toronto.

Mr. Jean Pelletier: I talked about Ferrari in comparing the TGV to Ferrari, and I thought that--

Mr. Joseph Volpe: I'm headed in that direction.

Mr. Jean Pelletier: But I don't think we can buy the Ferrari, nor the TGV. I don't have any way, personally. I--

Mr. Joseph Volpe: You've submitted a request to the transport minister--and it's been widely publicized, so I don't think I'm letting any secrets out of the bag--about a higher-speed train facility

Mr. Jean Pelletier: Which would cost 25% of the TGV. So I made an effort on 75%. I don't feel too bad--

Mr. Joseph Volpe: The $3 billion, is this the figure that--

Mr. Jean Pelletier: It's $3 billion compared to at least between $12 billion and $15 billion. I think $12 billion to $15 billion would be a hell of a mistake. And I'm not advocating that at all.

Mr. Joseph Volpe: I'm glad to hear you say this, Mr. Pelletier, that $12 billion to $13 billion would be a hell of a mistake, because only four years ago, the Premier of Quebec, in making a similar assessment about a similar facility, thought you couldn't get off the ground for less than $5 billion.

Mr. Jean Pelletier: It was $5 billion on what?

Mr. Joseph Volpe: Just to get started. And it was about establishing the same kind of proposal you're talking about. Where's the ridership going to come from to pay for that?

Mr. Jean Pelletier: Are you talking about $12 billion, sir?

Mr. Joseph Volpe: I'm talking about the $3 billion that you say would make sense. You said $12 billion wouldn't make sense, and I've said that the former Premier of Quebec had put in a proposal where he thought $5 billion was the starting point for discussions on building the kind of travel service you're suggesting.

¼ (1835)

Mr. Jean Pelletier: Yes, but he was talking about Montreal-New York. We're not talking about Montreal-New York.

Mr. Joseph Volpe: The corridor, as you've defined it, doesn't include New York.

Mr. Jean Pelletier: No. I'm sorry, I never read or witnessed any statement of a former Quebec premier stating that $5 billion for the corridor.... I'm sorry.

Mr. Joseph Volpe: Let me go again to the public record. There have been proposals like this on a public record ever since I got elected in 1988. The cheapest one, which came on the table in 1989, was for $5 billion. It was for Toronto-Montreal-Quebec, and didn't include Ottawa. That was those three cities, a straight line, $5 billion, 1988.

Mr. Pelletier, I'm prepared to understand and to accept the argument of public policy that serves a specific need and a specific purpose, and maybe even a larger purpose than what is specific. But when I see increased train passenger travel going from $3.4 million to $3.9 million over a 12-year period, still costing the taxpayer a minimum of $64.30 per passenger, and I hear of the $3 billion as a starting point because these things are always going to increase, I ask myself whether in fact we're headed down the right track--pardon the pun--in investing public dollars. Because unlike some of the higher-speed train routes in Europe, where there's a lot of opportunity to move people from point A to point B because of the critical mass of population, outside of Toronto and Montreal, there isn't anybody who lives between Toronto and Montreal. Over 500 kilometres of distance--

Mr. Jean Pelletier: I hope the citizens of Kingston don't hear you.

Mr. Joseph Volpe: You have 115,000 people in Kingston. If we're talking about a critical economic mass, Mr. Pelletier, then we can talk about that. I think of them as Canadians just like everybody else, but the fact of the matter is that we're talking about providing a base value, a base resource for building the kind of vision that you have in mind. I don't think we can consider that unless we put in place the fundamentals that are required to make the thing work. If we can't make this work as it currently is, how would anyone justify spending an additional minimum $3 billion to put in a higher-speed train travel system? Where are you going to get the passengers?

Mr. Jean Pelletier: Sir, you're quite right in saying that until the moment when we have for passenger rail transportation on very used routes dedicated tracks for passenger service, we will be in trouble. We're actually using the same tracks as the freight trains. The capacity of the network is limited. We cannot put the frequency that the market is asking for and wants. We cannot meet our timetable because we're always on the siding.

The freight trains are longer than ever. I said that in my release. The freight trains are longer than ever. I don't blame them for that; they're doing their business. But the consequence for VIA is that the only damn train that can go on the siding is the passenger train. So we're stuck and we're waiting until that freight train, which travels at 40 miles an hour, passes. So until we get the right infrastructure with a dedicated track enabling VIA to put the frequencies they need and cut the travel times, the market won't be all ours.

I'm very realistic. I maintain, and our studies are to this effect, that if we have the right product and the right operation conditions, we will be able to have the right frequencies. We will be able to have shorter travel times, and the market will largely take the train. We're absolutely convinced, and all our market studies are to that effect.

Mr. Joseph Volpe: Will you share those market studies with us?

Mr. Jean Pelletier: I think it's up to the minister to share our documents.

The Chair: The maître d' is asking us to go in for dinner, is he not?

I'm sorry.

¼ (1840)

Mr. Joseph Volpe: I asked if we could have information about some of their market studies and feasibility studies, and I think the answer--because I couldn't hear it over your voice--was that it's up to the minister to provide those for us.

However, it's VIA Rail that's conducted those studies, and presumably you could make those available to us, just as you can with this unless they're marked secret.

Mr. Jean Pelletier: I would have to consult on that. Personally I don't mind giving them away, but in all courtesy to my minister, as I sent the document to him, I'd like to ask him what he thinks about giving it to others.

If you were a minister you would understand that.

Mr. Joseph Volpe: I'm sure, but I want to ask the chairman if he would do the committee the courtesy of asking our witnesses to communicate with the minister and to ask the minister to release that information to the committee so that everybody can follow the appropriate protocols and we can all respect what the minister and his staff must do.

I wonder if you would allow me one last question, Mr. Chairman.

I noted here on your annual report, Mr. Pelletier, that your average passenger load factor is about 57% . It hasn't changed appreciably since 1990. If you were able to put together the infrastructure for $3 billion--I think you're singular in the marketplace in that figure--does that mean you think you can get close to 100% load factor, or that you're going to exceed that load factor, and if so by how much?

Ms. Christena Keon Sirsly: You have to understand that trains stop in a lot of places, and our load factor reflects the fact that many of our trains actually serve intermediate communities. When we look at what we would call an origin destination train, like an express train between Montreal and Toronto, our load factors are between high seventies and high eighties, depending on the day, which is very similar to an OD air service. So the extent to which we would operate more direct services will have a big impact on what our load factors would be. We absolutely are not forecasting to go to a hundred.

Mr. Joseph Volpe: I suppose you won't be in a position to give us an indication of what the number of passengers carried will have to be in order for you to be able to operate at the same rate, or at break-even, if you spend $3 billion plus to build the infrastructure.

Ms. Christena Keon Sirsly: Yes.

Mr. Joseph Volpe: What's the passenger load you have to have?

Ms. Christena Keon Sirsly: Obviously, we have done our forecasts based on--

Mr. Joseph Volpe: Can you share that with us?

Ms. Christena Keon Sirsly: I will defer to the chairman.

Mr. Jean Pelletier: Mr. Chairman, I will consult the Minister of Transport and we'll be happy to give an answer.

Mr. Joseph Volpe: I'd really look forward to receiving that answer, Mr. Chairman, because we can't really have an assessment of whether some of these things are as good as they are presented unless we have the facts and we can judge them ourselves. We can't even agree on the numbers that are on the pages that are provided to us.

The Chair: Thank you.

Mr. Jean Pelletier: I want to assure the committee that the figures we provided are very strict, honest figures. They are not fudged, don't worry.

Mr. Joseph Volpe: That wasn't what I wanted to say, nor did I intimate that. I think Ms. Sirsly or Mr. Paquette indicated earlier it depends on what you mean by those figures. That's why I asked the questions about what those figures mean to me. I'm looking at numbers and I want to make sure that I understand them to mean what they are intended to mean. Our intentions may not be the same.

Mr. Gerry Kolaitis (Director, Financial Services, VIA Rail Canada Inc.): Everything in the annual report is audited by the Auditor General and Ernst & Young--every word, every comma, every number.

Mr. Joseph Volpe: Not the news release, though.

Mr. Gerry Kolaitis: It's the same as the annual report.

Mr. Joseph Volpe: The operative words being “based on”. I think we understand what the word “spin” means--come on.

Mr. Jean Pelletier: I have a copy of the annual report here. If you want it, I would be very happy to get it to you.

¼ (1845)

Mr. Joseph Volpe: Is that the same one?

Mr. Jean Pelletier: Yes.

Mr. Joseph Volpe: That's the one I've been reading from.

The Chair: Gentlemen, if I could interfere with this conversation....

Mr. Volpe, let me be accurate with the request you've made of Mr. Pelletier. You are requesting information from VIA Rail on studies for higher-speed rail. Is there any specificity to which studies you're asking for?

Mr. Joseph Volpe: They've conducted a feasibility study. They've done a market study.

The Chair: Just a minute. Feasibility study.

Mr. Joseph Volpe: Market study.

The Chair: Market study.

Mr. Joseph Volpe: I wanted to get an indication of what the ridership would have to be in order to justify the expenditures of the $3 billion, which I gather is going to come from the marketplace.

The Chair: Ms. Sirsly, you indicated that you have done an assessment of that, have you not? What did you call it, a volume assessment or something?

Ms. Christena Keon Sirsly: We've done a forecast.

The Chair: Boy, I wish I'd remember those words, a forecast.

So what you're asking for, Mr. Volpe, is the feasibility study, the market study, and the market forecast based on a $3 million expenditure.

Mr. Joseph Volpe: It's $3 billion.

The Chair: Yes, $3 billion.

Mr. Joseph Volpe: It's $3 billion to $12 billion, but I've taken the $3 billion.

The Chair: Expenditure.

Mr. Marcel Proulx (Parliamentary Secretary to the Minister of Transport): I have a point of order.

The Chair: Yes.

Mr. Marcel Proulx: My colleague is referring to figures from $3 billion to $12 billion. There is quite a bit of difference. What I heard from VIA this afternoon is that their plan is $3 billion, in comparison to an amount that could have reached $12 billion or $15 billion on a totally different project. I'd like to know what my colleague is asking for. Is he talking of the $3 billion project or the $15 billion project?

The Chair: I understand your question, Mr. Proulx. We're requesting information from VIA Rail on the studies that have been completed for a higher-speed, not high speed, rail system, which I would assume is something a little faster than what we have now. So this is information on the feasibility study, on a market analysis, and on a forecast of revenue based on an expenditure of $3 billion.

Mr. Joseph Volpe: I want to thank Mr. Proulx for clarifying the situation for us.

The reason the $12 billion was raised, in my estimation--and I don't mean to intimate or imply anything untoward--is to give a comparison with another product in order to enhance the product that's being presented to us. So presumably there is as well a comparative study. If the comparative study is good enough to be presented before this committee by way of enhancing the position of the project that's proposed, then I think it's also good enough to be presented to the committee as evidence so that we can, on our own, make the comparison between what we could get for $12 billion and what we could get for $3 billion, and then draw our own conclusions about whether either of the two, or something in between, is feasible, desirable, and doable.

I thank you for doing that for me.

The Chair: So what we have now is a request for information from VIA Rail on studies for a higher-speed rail, on the feasibility, the market analysis, and the forecast based on an expenditure of $3 billion in order to adequately compare the feasibility, market analysis, and forecast on a $12 billion expenditure that has already been done.

Am I correct?

Mr. Jean Pelletier: I want to make it clear, this $12 billion to $15 billion is not a project of our own. It was a project that has been studied by a private group in 1998, if my memory is good, called the Lynks project. This is not something we've worked on ourselves, not at all.

An hon. member: I have a point of order

The Chair: Let me get one thing straight at a time, please. I'll come back to you.

Mr. Proulx, if that project by the private group in 1998 was completed on a high-speed rail system--I think Mr. Keyes was part of it, and I don't know who else was on the committee at the time--will you undertake to get that study from the Minister of Transport?

¼ (1850)

Mr. Marcel Proulx: Of course. There's no problem. As long as it's there. Whatever is available, we'll get. They must have it.

The Chair: Do you have a copy of it? You would have a copy of it. You were on those studies?

Mr. John Christopher (Committee Researcher): Absolutely.

The Chair: We will undertake to do that.

Mr. Pelletier, your group will provide the study on the $3 billion project.

Mr. Jean Pelletier: With the permission of the Minister of Transport, because we're reporting to him. Personally, I have no objection.

The Chair: So there would be no objection, and the Minister of Transport would have no objection, obviously.

An hon. member: Will he run it by the minister?

The Chair: He doesn't want to come back and see us again.

Mr. Marcel Proulx: He'll have to come back so that we can get an answer.

The Chair: Thank you.

Now I have Mr. Gouk on a point of order.

So far, does that satisfy?

Mr. Jim Gouk: Seeing your efforts to do due diligence in acquiring the reports for Mr. Volpe, which I very much would like to see myself--

The Chair: It's for the committee.

Mr. Jim Gouk: Yes. Could I ask if you took the same due diligence efforts to record and follow up on the various requests I asked for an undertaking on, that the VIA Rail gentlemen provide us with as well?

The Chair: Mr. Gouk, I've asked the clerk of the committee to review the transcripts and everything you've asked for--

Mr. Jim Gouk: Perfect.

The Chair: --including the specifications that were highly technical. And the only reason I intervened at that point was I thought it was unfair to the witnesses because maybe they should have brought their engineer. Are you okay on that?

Mr. Jim Gouk: No, I'm fine, Joe.

The Chair: Now are we okay? Can I proceed?

Point of order, Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: On a point of order, Mr. Chairman. I would like to ask for the advertising budget, if I may.

[English]

The Chair: For VIA Rail? What is it that you want?

[Translation]

Mr. Mario Laframboise: I would like the detailed advertising budget for 2002.

[English]

The Chair: Is it not in the annual report?

Mr. Marcel Proulx: The clerk is going to dig out whatever has been requested, whatever VIA has accepted to supply. It will all be supplied. Everybody is in good faith around this table, Mr. Chair.

The Chair: Just keep your cool, Mr. Proulx.

Mr. Marcel Proulx: We're getting impatient. It's seven o'clock.

The Chair: And nobody has eaten. Will you undertake to get that?

Does that satisfy you, Mr. Laframboise?

Now we have Mr. Gallaway.

Mr. Roger Gallaway: I have one question. I am trying to come to grips with all these numbers that have been tossed around here. As I understand it, on the Quebec-Windsor corridor the increase was 10% in ridership. Is that correct?

Mr. Jean Pelletier: Yes, for 2002 over 2001.

Mr. Roger Gallaway: Yes, and that represents roughly 85% of your passenger volume. Is that correct?

Mr. Jean Pelletier: What do you mean, 85%?

Mr. Roger Paquette: That's volume. I don't have it with me.

Mr. Jean Pelletier: Gerry, would you have...? I want to be very clear and very up to the point.

Mr. Gerry Kolaitis: I think the 10% increase relates to VIA 1 traffic, which is a portion of our traffic that is the higher paying, higher yield, more business-oriented traffic. Perhaps it should have said that in the text, but the 10% increase was related to VIA 1 traffic, not coach traffic. Therefore, the mathematics work.

Ms. Christena Keon Sirsly: It represents about 40%.

Mr. Roger Gallaway: So you're qualifying what you say in your report, then. Am I to understand that? The report says 10%. It doesn't talk about VIA 1. It just says 10%, a blanket statement.

Having said that, I must ask this question. You must keep statistics, particularly on the corridor. You must have passenger volumes in that area, having regard to the fact that you're studying a major project in that area. You must know what the volume is. What is the percentage of passenger volume on the Quebec-Windsor corridor relative to your aggregate passenger volume?

¼ (1855)

Ms. Christena Keon Sirsly: To a couple of percent--

Mr. Roger Gallaway: Yes, that's all I'm asking.

Ms. Christena Keon Sirsly: --the corridor will vary between 70% and 80% of our volume.

Mr. Roger Gallaway: So you refer to the 10% increase, which apparently is on VIA 1. Can you tell me, then, in the regular coach service what the increase is in that same time period?

Mr. Jean Pelletier: We could tell you. We could have these figures. We don't have them with us, but we could have them.

Mr. Roger Gallaway: You have those figures. You can provide them.

Mr. Jean Pelletier: Yes.

The Chair: I'm having the clerk make another undertaking on those.

So that we're sure, you've asked for the total revenue on the corridor. Is that correct?

Mr. Roger Gallaway: No. I've asked for the aggregate passenger volume. I'm trying to determine what is the percentage of their travellers' use over the corridor, travelling the corridor.

The Chair: Thank you.

Mr. Roger Gallaway: I've learned it's somewhere between 70% and 80%.

Ms. Christena Keon Sirsly: That varies, depending on the year.

Mr. Roger Gallaway: Okay, this is where I'm trying to go. If the increase in that same period was 3%, and VIA 1 increased by a large percentage, 10%, in the corridor, there must have been, as pointed out, a corresponding drop in other parts of the country. Why is that occurring, and what do your studies indicate?

Ms. Christena Keon Sirsly: We are reporting a reduction in some parts of the country. It will vary from year to year. For instance, in eastern Canada in 2002 we had a difficult year. In western Canada we basically held our own. So we can give you the breakdown of what happened to our ridership in 2002 versus 2001. That's fine.

Mr. Roger Gallaway: Okay.

In 2002, 2001, or whatever the year was, you saw this 10% jump in VIA 1 travellers. Having regard to the fact that my colleague here, Mr. Volpe, has talked about this number of $64, or whatever, and Mr. Pelletier has referred to the business traveller, do you think, as a matter of public policy, it's right for the Government of Canada to be subsidizing, obviously, a large segment of the travelling public who are already travelling on business? In other words, they're probably claiming a business expense in any event, and that cost is not relevant to them.

Mr. Jean Pelletier: Mr. Gallaway, I think we are trying two things: we are trying to serve better the needs of the traveller, and we are trying to do that at the lowest public cost. If we have a better product that attracts more people, that serves them better, and that increases the revenue so that our ratio between revenues and expenditures gets higher overall than 64.5%, which was the fact for 2002, I think we are going in the right direction.

I would be very happy, one day, if I could come to this committee and say that because we have invested, the ratio is now 90%. I think it went from 29% 12 years ago to 65%. I think it can go better than that, providing that we make the right decisions. I am absolutely convinced that we will get there step by step, if we give the right service that Canadians want. They want more frequency and they want less travel time, and we are not able to meet that in our present operating conditions.

So how do we get out of it? I maintain that overall for our country, it would cost less doing that than otherwise.

½ (1900)

Mr. Roger Gallaway: I have one more question.

Mr. Pelletier, I think this is more for Mr. Paquette.

I am trying to understand, and it doesn't matter about the numbers, Mr. Paquette, per se, but you have income from ticket sales, right? You have other income. I believe you referred to it as other income. I understand that part of that is compensation from CN and presumably from CP for passenger train delay as a result of freight trains. Could you tell me about that?

Mr. Roger Paquette: We have an arrangement with CN, in particular, whereby we pay 65%. It's a flat fee based on tonne-miles and train-miles and the balance is an incentive scheme for them to make up some of the time that perhaps is caused by delays we are responsible for, or sometimes by others.

Monsieur Côté would be better to ask, because he is the operating guy.

Mr. Roger Gallaway: Correct me if I haven't perhaps asked the right question, then. I live in Sarnia, where there are a lot of freight trains going to Chicago, and I get constant complaints every week about the VIA service because it's being delayed by freight trains, and every week the number of freight trains is increasing. And as you know, CN removed the double track between London and Sarnia some time ago.

So I appreciate what Mr. Pelletier has to say in terms of growing the service, but how do you grow a service when you have 120 freight trains that are 10,000 feet long rolling through every day? At the same time, the VIA manager in Sarnia tells me that VIA receives compensation from CN because it is delaying passenger service within its allotted time slot. That's what I'm looking at.

Mr. Roger Paquette: Yes, I know, but Paul will explain to you how it works. What I can tell you is of the 35% incentive that CN could earn year in, year out, we pay them about 95% of that, which means that for some of the delays they are causing, they are making up for some of these delays in some other fashion.

Mr. Pelletier has said that because the mode of freight operation has changed over the years, the trains being longer and longer, they have tended to have more failures. And any time there is a failure we have to get into the hole, because we are the short train.

If we can do this project you referred to earlier, we'll essentially have a dedicated track that will avoid this competition for this capacity between us and the freight trains. Our figures show that some 75% to 80% of the delays are caused by freight trains.

The Chair: Now we have Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): Thank you.

I just have two short questions. The first one is really easy. If you could leave a business card for me, that would be great.

Secondly, as you know, there is a line that goes to northern B.C. and there is a passenger freight train in Alaska. The U.S. Congress has approached Parliament or the Government of Canada to do an international commission just to study the feasibility or the viability of joining the two. As you know, it's the dream of many Americans at the end of their lives to go to Alaska, and of many Canadians to go to the Yukon. I think this could be one of the most exciting projects since Confederation. And I'm not talking about Air North.

I hope you would support Canada just investigating the feasibility or viability of such a project, because it would be very exciting if you happen to be one of the carriers on the route.

The Chair: Thank you for that succinct question, Mr. Bagnell.

Mr. Pelletier.

Mr. Jean Pelletier: We're not informed about such a request from the American government. If we are informed of it and are asked to cooperate, we will do so.

½ (1905)

Mr. Larry Bagnell: Basically, two years ago Congress passed a bill called the Rails to Resources Act, sponsored by Murkowski.

The Chair: He said he wasn't informed.

Mr. Larry Bagnell: That's why I was informing him.

The Chair: I undertake to do this because I have a letter on my desk I just recently received. This has been an ongoing situation that I think was requested several years ago. It went from The Department of Transport to the Prime Minister's Office back to somebody else and somebody else and the Department of Foreign Affairs. It eventually ended up in Ron Duhamel's office when he was whatever he was and then bounced back to somebody else. Now I have a new letter from now Governor Murkowski, who would like to be.... I will send it to you, Mr. Pelletier. I undertake to do that.

Mark it down. I will give that undertaking. Will you answer me?

Mr. Jean Pelletier: I will answer you, Mr. Comuzzi, with great pleasure, but please also send the letter to the minister.

The Chair: Oh, yes, yes.

Now we move to Mr. Gouk--and this will be the last round.

Mr. Jim Gouk: I'd like to make one observation in answer to a question posed by Mr. Volpe. He asked, on higher-speed rail, where are you going to get the passengers, and the answer was, from Air Canada, for whom the Montreal-Ottawa-Toronto triangle is their biggest single revenue in this country, second only to their international routes. This is airline in trouble, and that's where some of the passengers are going to come from. The rest are going to come from the bus lines, who have said they are looking at a new $21 million terminal in Toronto, but they're not going to put a dime in if they think the government is going to come along and put billions of dollars into a government rail operation to take passengers away from them.

Tourism rail we know is viable, because private sector tourism companies make money. They wouldn't stay in business if they didn't. Commuter rail is viable. There are lots of these operations and they stay in business. They wouldn't stay if they weren't making money.

When the minister mused about the possibility of privatizing VIA Rail, there were all kinds of inquiries, he said--most of which were specifically about the Quebec-Windsor corridor, because they know they can make money there. Beyond that, why should the taxpayer of this country subsidize the other parts of what VIA Rail does--the transcontinental route, the Edmonton-Vancouver, and the rest of that sort of thing? Why should they subsidize them, when the only viability they have is competing against an unsubsidized private sector?

Mr. Jean Pelletier: I think you're talking about policies, and policies are not a responsibility of VIA Rail. We deliver the service the government asks of us after it has decided the policies. So I think your question should be more addressed to the minister than to the operating crown corporation.

Mr. Jim Gouk: That's fair enough.

Mr. Jean Pelletier: We're not making the transport policy in this country, I'm very sorry to say.

The Chair: Thank you.

Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: You are no doubt using a forecast balance sheet. I imagine September 11^th has changed things somewhat.

Do you intend to return to your previous forecasts or do you think that the ridership that you have had since September 11^th will be maintained?

Mr. Jean Pelletier: We have had the same ridership since September 11^th. There was a rapid upswing and it has since fallen, but it has stabilized and since that time, it has been slowly climbing.

Of course, there was the war in Iraq, and the Americans stopped travelling. The Europeans stopped travelling. That has affected us, as has the SARS outbreak in Toronto, but when we compare our case to others in the transportation and hotel sector, we see no need to be overly concerned. We are feeling the effects; there is no doubt about that. Everyone is feeling it, ourselves included, but there is no reason to be worried and I think that, eventually, everything will fall back into place.

[English]

The Chair: Thank you, Mr. Laframboise.

Mr. Barnes.

Mr. Rex Barnes (Gander—Grand Falls, PC): I apologize, I had to leave.

My name is Rex Barnes. I'm from Newfoundland and Labrador. We don't have VIA Rail, but--

Mr. Jean Pelletier: You have no complaints.

Mr. Rex Barnes: I have no complaints in Newfoundland on VIA Rail. I have two staff members who hate to fly. They've travelled to Halifax and travelled on VIA Rail when they go to Ottawa every time they go because they don't like flying. They don't think it's safe. They enjoy the service on VIA Rail and they've told me to tell you that they think you have a great service and it's very safe.

½ (1910)

The Chair: Thank you, Mr. Barnes.

Now the chair has just a few questions.

Can you tell us, Mr. Pelletier, do you rent out Union Station in Toronto? Does VIA Rail own it?

Mr. Jean Pelletier: No. The City of Toronto owns Union Station.

The Chair: So you have to rent from them.

Mr. Jean Pelletier: Yes.

The Chair: Yes, thank you.

Mr. Jean Pelletier: Union Station also has the GO Train system in it.

The Chair: But you're not responsible for the GO Train system.

Mr. Jean Pelletier: No.

The Chair: Do you still provide through VIA Rail those--I think it's seven--constitutionally guaranteed train services, the one between Sudbury and White River, between The Pas and...?

Ms. Christena Keon Sirsly: Yes, we do.

The Chair: Is that in your budget?

Ms. Christena Keon Sirsly: That's correct. We operate the E&N Railway on Vancouver Island. We operate Winnipeg to Churchill, The Pas to Lynn Lake. We operate Sudbury-White River, Montreal to Senneterre, and Montreal to Jonquière.

The Chair: There's very little ridership on those. Am I correct?

Ms. Christena Keon Sirsly: Yes.

The Chair: It seemed to me the last time we looked it was costing you about $60 million a year.

Mr. Roger Paquette: The cost recovery on those routes is only 20%. It brings down the average.

The Chair: That would reflect in your numbers.

We talked about this several years ago. There is substitute transportation available, and I think the Constitution required that these lines continue until such time as alternative transportation routes were created. I've looked at all those areas, and they have roads now, and airports in some of them, and we're still providing the rail service.

I wonder why we continue to provide this service when there's alternative service available. If you don't know the answer, I think it's worth looking at, because I know it's very expensive.

Mr. Jean Pelletier: It's always difficult to take out a service, as you know, but I agree it should be looked into.

The Chair: The last time we sat here, some years back, VIA Rail was paying CNR about $70 million a year for track rental. Has that changed?

Mr. Roger Paquette: It's between $45 and $50 million.

The Chair: It's been reduced. Okay.

What have you done, Mr. Pelletier, with respect to increased security since 9/11?

Mr. Jean Pelletier: Mr. Côté, the chief operating officer, will answer, Mr. Chair.

Mr. Paul Côté (Chief Operating Officer, VIA Rail Canada Inc.): Mr. Chairman, we have focused most of our efforts on staff vigilance. We believe the competitive advantage we have over other modes in terms of security, safety, comfort, and so forth should be preserved.

We want to be realistic as well. When compared with the air mode, for instance, our environment is not as controlled, in the sense that if we were to secure a place like Central Station in Montreal, similar to the airports, once we hit the next station--Dorval or Cornwall or Kingston--then we are into a different environment altogether. It would be impossible to secure them at the same level.

We've focused essentially on the benefits of our mode and the vigilance of our staff to observe suspicious behaviours, individuals, and objects. I will say to you, Mr. Chairman, without revealing any details, because I don't have them, that it's paid off in many situations. We have also worked closely with the RCMP on a program to raise the awareness of our staff on those particular issues. That's essentially what we've done.

The Chair: Has 9/11 added appreciably to your costs, Mr. Côté?

½ (1915)

Mr. Paul Côté: No.

The Chair: That's very good, and it leads me to my final question.

Mr. Pelletier, you talked many times today about your intermodal transportation systems. As you know, one of the big arguments we have been having is the exclusivity of CATSA, the Canadian Air Transport Security Authority, which deals exclusively with the air travel. Yet we have concerns--not as much on passenger rail, but we have concerns on cargo, especially on marine cargo. We don't know what the situation is with marine passengers and the crossing points between Canada and the United States.

The Americans have gone into a transportation safety agency that covers all modes of transportation. It's an intermodal program. We are trying to ascertain at this level--I know Mr. Proulx won't agree with this--whether we should be exclusively in the air transport security business, or whether we shouldn't be looking at a complete intermodal security system for all.

Mr. Pelletier, I'd like your opinion on that, or Mr. Côté.

Mr. Marcel Proulx: I have a point of order. Why did I not agree?

The Chair: Because you were looking at me every time I asked you, and I just assumed.... Maybe it's the expression on your face, my friend.

Why are we doing this exclusively for an airline? In different places we have travelled to, especially in the United States, they say when you close off the terrorists in the airline business, they are going to find another way to do what they want to do, whether it's trains, buses, roads, pipelines, whatever. If we are going to have a transportation security agent, what's your opinion with respect to an intermodal transportation security system?

Mr. Paul Côté: Well, there are two things I should have answered in my previous answer. One, we are coordinating our efforts; I had mentioned the RCMP, but we're coordinating with Transport Canada as well. We don't necessarily operate on our own. And we don't do that from a company point of view; we do it from an industry point of view. We are a member of the Railway Association of Canada. We work with CN and we work with CP and associations in general. We are very much involved with them in the efforts to manage this.

Another point, which Ms. Sirsly just mentioned to me, is that we absorb the costs of our own security in our stations, as you know. We pay for it and we have to deal with it, either through contracts with CN where they own stations or lands, or that type of thing....

More specifically, as to your mandate and your general question from this committee, I don't know. All I want to put forward to you is that we are doing this in an integrated fashion, both from an industry point of view and from a transport community point of view through Transport Canada.

The Chair: Mr. Côté, what I'm getting at is this: this airline security, CATSA, whatever, is an expensive operation, $1.9 billion or whatever it is. I'm looking, and I think the committee is looking, for a way to provide adequate security at a reasonable cost over all modes of transportation. That's our aim. We think we can.

And I'm anxious for your opinion as to whether you get a subsidy and so on. It's all taxpayers' money. Shouldn't we be looking at this from an intermodal perspective, rather than staying exclusively with one area of transportation?

Mr. Paul Côté: Well, probably there are benefits to doing that. However, as I said in my previous answer, the situation with our mode--and it's the same with buses--is that we operate in a different environment from the airlines, clearly. But you know, we have discussed with other colleagues and partners how to keep up with the increased awareness of security. I would think it would be a different approach from the one you or the airlines have been looking at.

½ (1920)

The Chair: Mr. Pelletier.

Mr. Jean Pelletier: I wouldn't mind at all if the same authority dealt with all modes, provided that what they decided for air was not transmitted strictly to rail, as we cannot act the same way because we don't have the same situation at all. I don't mind having a central authority, but it would have to be tailored to measure for each mode.

The Chair: Exactly. You wouldn't have one fits all, but it just seems emimently sensible to our committee to have one security agency handling all modes of transportation.

Mr. Jean Pelletier: I wouldn't at all be against that, provided its action were tailored to measure to each mode.

The Chair: Yes. I think that's the pattern they have in the United States.

Mr. Cannis.

Mr. John Cannis (Scarborough Centre, Lib.): Mr. Chairman, on your thought here, I like what Mr. Pelletier is saying. What they have in the United States is the Department of Homeland Security, I think is what they call it. I agree with Mr. Pelletier that it should be custom-designed to suit the type of service, not necessarily applying what we are doing for air to rail, etc. It's a wonderful idea.

The Chair: Gentlemen, Mr. Pelletier, and Ms. Sirsly, I thank you all very much for coming this afternoon. I know it was on short notice, as the budget has to be done tomorrow. We didn't want it to be on such short notice, but I'm sure you realize there will be no change—at least I don't think there will be a change when the committee meets.

These are interesting times and interesting questions. I think it was important, because in the parliamentary system, Mr. Pelletier, as you well know, we have been under the gun a little bit for sometimes letting programs getting away on us and for not doing the proper scrutiny. The committee has made it a point that if things have happened elsewhere, we want to be sure we avoid them happening in the future. The Auditor General has indicated to us that there are some concerns, not about VIA Rail, but in areas of transport, and we are now scrutinizing in great detail the estimates before us.

I don't know what's going to happen at the end of the day, but the whole purpose of the exercise today was to satisfy the committee and the people of Canada that you are running a fine operation of passenger rail service, in my opinion.

And contrary to Mr. Gouk, we like those new rail cars that were refurbished in Thunder Bay, which is just my parochial observation. I think they are very good.

I'm allowed to make that comment, Mr. Bagnell, am I not?

Thank you. Thank you all very much for coming.

Mr. Jean Pelletier: Thank you for having us today.

There's one thing of great concern to me personally. Too often in public decisions we take decisions envisaging short times only, or the shorter period. We hope we have given you an idea of a vision for tomorrow for transport that we have in our mind. Sometimes it takes some courage and some hard decisions, which prove to be the right ones—not next week, not next month, not next year, but a few years later. That's our perspective.

The Chair: Thank you, Mr. Pelletier.

½ (1924)

½ (1954)

The Chair: Order.

Pursuant to Standing Order 108(2), we are making an examination of the viability of the airline industry in Canada. We have as our witnesses Mr. Twentyman, president of the Airline Division, and Kevin Beaith, secretary treasurer of the Airline Division.

Welcome, gentlemen. We're sorry we're late.

Will you tell us please what the Airline Division is?

Mr. Terry Twentyman (President, Airline Division, Canadian Union of Public Employees): It's the airline division of CUPE.

The Chair: Oh, okay, that makes sense. I see this clerk of ours didn't put that in there.

It's CUPE, Mr. Clerk.

Mr. Terry Twentyman: Mr. Chairman, distinguished committee members, I'd like to thank you for inviting the airline division of CUPE here tonight to speak about the viability of the airline industry in Canada.

My name is Terry Twentyman. I'm the president of the airline division of CUPE. We represent approximately 10,000 flight attendants at Air Canada, Air Transat, First Air, Cathay Pacific Vancouver base, and Comair. With me today is Kevin Beaith, secretary treasurer of the airline division of CUPE.

We'd like to give you some insight as to what is happening in the airline industry and how it's affecting the flight attendant group.

Before the tragic events of September 11, 2001, the airline industry was in financial trouble. We were faced with hundreds of layoffs at most of the airlines represented by the airline division. However, after September 11 we were faced with a situation that has changed the airline industry forever.

Security measures had to be hastily changed to meet the new challenges to the industry. Disruptions to travellers in turn caused many to stay at home or make alternate arrangements via other modes of transport. Several airlines after September 11 did not survive the financial blow that struck the already fragile industry. By now we would have hoped the airline industry would have recovered and we would be moving forward. Unfortunately, the industry has not recovered. In fact, due to higher taxes, additional user fees, a slow global economy, the Middle East situation, and the outbreak of SARS, we find ourselves in a much worse position than ever before. Most of our airlines in Canada are in dire financial straits, and the future doesn't seem to look much brighter.

Our largest concern, as always, is a safety aspect. As airlines attempt to stay viable in these horrendous conditions, we caution the regulators to ensure that safety is not compromised for profit. It's in times like these we have to be more vigilant to ensure our operations are as safe as possible for the travelling public. I will not belabour this point, as I trust everyone's main focus will be maintaining the safest operation in the world.

At present, we see the largest airline, Air Canada, in CCAA protection, with thousands of flight attendants on the verge of losing their jobs. Air Transat, our largest charter carrier, is downsizing and laying off hundreds of flight attendants as well. Cathay Pacific, which has 150 locally hired flight attendants based in Vancouver, is cutting its staff by 25%.

To add insult to injury, on April 1 this year HRDC changed the interpretation of the EI rules to no longer qualify flight attendants as full-time workers. Hence, the benefits have been either cut or non-existent. We have been attempting to work with HRDC to overcome this problem. However, we continue to run into roadblocks. At this point in time we are requesting that the minister step in and rectify the situation immediately. However, to date our request has been unanswered.

½ (1955)

The Chair: Are these people you're talking about paying UI benefits?

Mr. Terry Twentyman: Yes. We're all full-time employees and we're all paying full-time benefits.

¾ (2000)

The Chair: But they're not receiving any benefits.

Mr. Terry Twentyman: It's been a bit of a nightmare. We'll touch on that as soon as I'm finished, if you don't mind, sir. Thank you.

We will be looking at long-term layoffs for most of these flight attendants, and job retraining will be a priority. However, we will be needing the assistance of HRDC to organize training and job placement.

So far the government has not taken any action to stimulate the industry or to rectify any of the problems. Realistically, the government will not be able to solve all of the problems of the industry, as a portion of these problems fall within the scope of airline management and their board of directors.

Currently, the industry is financially burdened with the fuel excise tax, landing fees, NavCan charges, security fees, airport improvement fees, GST and PST, etc. The airlines have become tax collectors for the government. Ticket prices have not been increasing; however, the taxes and fees have. This is where the government can assist immediately. These taxes and fees have to be waived so the industry can start recovering.

Without tax relief, we will see the industry shrink or in some cases disappear. In turn, many more employees will find themselves collecting EI, which puts a burden on the EI program and affects the personal income tax revenue going to the government.

I'm of the understanding that the transport committee has already put this tax relief idea forward. However, this has not yet been implemented. Time is running out, and the government has to act quickly to start the recovery process.

Further, if there are any federal programs that are going to be implemented to deal with the financial losses due to the SARS outbreak, the airline industry has to be included. SARS has caused many airline workers to be laid off due to drops in passenger loads. Workers cannot be expected to pay the ultimate price for something that is out of their control.

Regarding the situation at Air Canada, the Air Canada component of the airline division has been negotiating with the company all week to assist in bringing Air Canada out of CCAA protection. The talks have been gruelling, with major concessions being asked by the company. I have not been privy to these negotiations. Therefore, once they're completed, I would suggest you call upon the Air Canada component leadership to report to your committee.

In closing, I'd like to recap the following recommendations.

First and foremost, safety standards have to be maintained during this time of uncertainty. We can never afford to compromise safety for profit.

Second, we ask this committee to put pressure on HRDC and the minister to rectify the EI situation for flight attendants and to assist our laid-off members in retraining and job placement.

Third, immediately implement tax and user-fee relief for the airline industry. It is imperative that this recommendation be carried forward.

Fourth, include the airline industry in any programs that are designed to financially assist workers who have been placed out of work due to the SARS outbreak.

Finally, I'd like to thank the chairman and the distinguished committee members for their time and interest in our presentation. I ask that you feel free to ask any questions.

Thank you.

The Chair: Thank you.

Mr. Beaith, do you care to add anything to that report?

Mr. Kevin Beaith (Secretary-Treasurer, Airline Division, Canadian Union of Public Employees): No. If questions come forward I'll answer them at that point, because I think there is some stuff we would like to talk about.

The Chair: Were you here when the minister was here and we talked about the fact that the recommendations this committee made are presently being discussed in front of cabinet, and hopefully--

Mr. Terry Twentyman: It was in camera.

The Chair: I suspect the four recommendations we made--and I was told this before the meeting today--are being considered, and some of them with favour. They know there has to be some support given to the airline industry.

Our position has always been that we cannot treat one airline better than we treat another. It has to be for the whole industry.

Third, you should be aware that we have already addressed the HRDC problem, and--

Mr. Rex Barnes: Did you say you addressed the EI problem?

The Chair: Well, I wanted to come to that.

Mr. Rex Barnes: Then I suggest you changed your mind.

The Chair: The committee had the recommendations in hand, but we didn't want to do them at the same time as we asked for the other four recommendations, for the simple reason that we didn't want either the unions or the companies using our recommendations in the bargaining process. We didn't want to interfere with what you folks are doing among yourselves. We didn't want one side saying yes, but you are going to get this, that, and the other thing. So after those negotiations are all complete, then we will release our recommendations on that.

So I'm not betraying any confidence that we are talking about and we have looked at some plan for retraining, because the people who are now involved in the airline industry will no longer find a place or a future working within the airline industry, and they need retraining, and that's what we're considering. We also know that there are some senior members in the airline industry who have made a substantial and a long contribution to the airline industry and that sometimes it does not behove them to be retrained because they are close to retirement. We are suggesting a reactivation, and you may want to review this, of what we call the older worker adjustment program, which assists people who are close to retirement but not yet ready to retire. It augments their income. So we're doing that.

We were aware, and thank you for drawing it to our attention, that there was this conflict about people who were paying UI and not being able to receive any benefits. I think the committee will certainly go to bat on this item and will recommend to the minister on that.

¾ (2005)

Mr. Terry Twentyman: Well, they are laid off right now for months, and for them it's been a total nightmare.

The Chair: Yes, we have to get to that. We have to do that really fast.

Mr. Terry Twentyman: Yes, I would really appreciate that.

The Chair: Yes, we'll do that.

Now, having said that, are there any questions?

Mr. Jim Gouk: Yes, I have a couple, Mr. Chairman.

The Chair: I thought so.

Mr. Jim Gouk: Well, there we go. It's going to take me that much longer because we are having this repartee conversation, Joe.

With regard to the EI problem, if we get a chance to talk, that is something we can move very quickly on, frankly, because I don't think this skews negotiations. In fact, for the committee members' interest, if they don't recall, the flight attendants were considered flight crew and were subject to full EI benefits up until a very short time ago, when somebody re-examined it and said, wait a minute, that's not really the right definition. On the fact that it's been changed, nobody really wanted to do it, but it's a matter of definition.

Now, the problem, of course, is it's EI, which is HRDC. It's labour. It's everything.

I raised it in committee with the Minister of Labour, and I had raised it with her before.

The Chair: Who was the Minister of Labour?

Mr. Jim Gouk: Minister Bradshaw.

And she said that she'd checked and in fact the responsibility for that designation of flight crew rested with the Minister of Transport. That was her response on the record.

It does fall to our committee to do something about that, and I believe we should act quickly on that.

The Chair: Let's do this.

Could you canvass that?

Mr. Jim Gouk: Certainly.

The Chair: Thank you very much. In fact, by reporting we can report for the whole industry.

Mr. Marcel Proulx: I'm very surprised to hear that.

Mr. Jim Gouk: I was too, frankly, Marcel. But that was the word, and I didn't spring it on her. I had gone to her before and said I wanted to do something about this because I was the labour critic, and she was the one I most often talked to. She said she would check into it. She talked to Jane Stewart, and when we got back at committee that was--

The Chair: Done.

Thank you for that, Mr. Gouk. That's very good information.

Monsieur Laframboise.

[Translation]

Mr. Mario Laframboise: I have a great deal of sympathy for you, in view of what is happening within the industry. I think you have managed to target the needs that are out there.

The problem is that the government is not listening. It stopped listening on September 11^th.

Because of the air travel security tax, the government is making more money on air travel than it did before September 11. The only assistance that it has agreed to give is in the form of refunds on insurance premiums. The entire government aid package—let's be generous—totals about $200 million. The tax brings in $400 million per year.

I truly hope that the government will help you, but I wonder what you must do to convince them that you are having a harder time than softwood lumber industry workers, or the fishers, with neither group having received anything whatsoever in terms of assistance.

On the second page of your document, you refer to the problems in the airline industry. Here is what it says:

Realistically, the government will not be able to solve all of the problems of the industry, as a portion of these problems fall within the scope of the airline management and their board of directors.

We have been told that Air Canada should have done some housekeeping. According to a number of Liberal members, Air Canada should never have agreed to take on Canadian at that time. The workers that you represent are not to blame. It was Parliament's choice, and today, you are experiencing the consequences.

[English]

The Chair: Please, Mr. Laframboise, if there's a question there, would you pose it? We're going to close off this meeting. It's not a filibuster. Please ask the question.

[Translation]

Mr. Mario Laframboise: I will ask my question, Mr. Chairman.

Why do you think HRDC changed its mind? Is it because since April 1, your flight attendants are no longer eligible? Can you tell us what you discussed before that?

¾ (2010)

[English]

Mr. Kevin Beaith: What has happened, to our knowledge, to this date, is Canada Customs and Revenue Agency reread the regulations. It was section 11 in the act itself. It stated that where any type of work was regulated by the government and their hours were less than 35 hours a week, it was to be reported that they worked 35 hours a week, if they were full-time workers.

So at that time air crew went under that regulation. When this was reread at this point, it was believed, prior to this interpretation, that air crew were flight attendants and pilots together. But flight attendants are not regulated by the government. We are only regulated by our management itself, as well as within our own collective agreements, if we have any regulations in there that dictate our working conditions.

What happened at this point was it was interpreted that flight attendants were not included in this; it was only pilots. Therefore we do not fall under the ruling of working 35 hours a week, which we had prior to this interpretation.

When we brought it forward to HRDC, after this moment, and explained our position on it, they came back and said, “Well, we could put you under section 10”.

It's very difficult to explain. Flight attendants, like pilots, don't necessarily work what we call block to block. That's when your plane leaves off the chalk and your plane arrives on the chalk. Our day always begins an hour prior to departure time. We have an hour between flight legs, and then we have 15 minutes after our arrival time. Now, if you can imagine, if you can picture a day when a flight is going leg after leg, the time really adds up. You could have a 14-hour day, but block to block you've only worked five hours, essentially.

So the ministry came back and said “We'll put you under that”. The companies came back and said no, that's too difficult, because once again they only pay us as per 75 hours a month, and that's all they want to put us down for.

They came back with another interpretation--

The Chair: Who is “they”, Mr. Beaith?

Mr. Kevin Beaith: It wasn't HRDC. It was Canada Customs and Revenue Agency.

The Chair: They were dealing with your union.

Mr. Kevin Beaith: Yes, they were dealing with us.

The Chair: I have to tell you folks, your union was asleep.

Mr. Kevin Beaith: Sorry?

The Chair: I think your union was asleep to allow that to happen.

Mr. Terry Twentyman: We were trying to--

Mr. Kevin Beaith: We were trying to deal with HRDC, but it was--

The Chair: I mean, to allow that to get in, folks, the change that absolutely eliminated you from any benefits. You're asleep at the switch.

Anyway, let's carry on.

Mr. Jim Gouk: Just for your information, the explanation I had through HRDC was that they never were supposed to be considered that under the definition. But they were considered that anyway, and nobody ever caught it.

Nothing changed. They simply started going through the regulations when they knew that this huge impact was coming and suddenly said wait a minute--these people aren't flight crew.

That's where the problem came from. It wasn't a result of--

Mr. Terry Twentyman: We had to give 30 days' notice. All of a sudden they pulled the carpet out from under us.

Mr. Jim Gouk: Just so we're straight.

Mr. Kevin Beaith: Right now the problem is the situation in Canada, as we mention in our report, with the massive layoffs, companies not having enough money to upgrade their computer systems to be able to change the ways they did it before.

The position of the union that's come forward is to go back to the old way, as it was, and have us considered under the same regulation that we always were under before, because the companies can work with that. But the interpretation has come forward that this stands as of now, and that's the position it's at right now.

Mr. Terry Twentyman: The other thing is it's not just that flight attendants are being laid off. There are also women going off on maternity leave. We represent five airlines as well. Some people who go off on long-term disability have to go on EI as well. There's a whole multitude of people who are going off for different reasons, and they're all being caught in this trap.

¾ (2015)

The Chair: Mr. Barnes.

Mr. Rex Barnes: We know because of the media reports that some of the organizations that represent the airline industry have come to agreements with regard to concessions, layoffs, accommodations. We know very well right now that the unions don't like it, but for survival of their unions they've decided to take the drastic step to help out the airline industry.

CUPE hasn't made any move right now, to my understanding, to see what they're going to do. I know there are negotiations. I don't expect you to release any negotiations, but where do you see CUPE's position going with regard to concessions and helping out the airline industry so that survival of your membership is a must and survival of the industry is a must? It serves no purpose if all of a sudden there is no airline industry. Everyone is affected then. I'm just wondering where you see it going.

Mr. Terry Twentyman: My history is I started with CP Air. This is my third merger. I was also with Canadian Airlines, obviously. I'm very used to concessionary bargaining and trying to save the airlines. That's our focus right now. We are going to have to bite the bullet, obviously, to have the airline industry survive.

It's unfortunate that the way it's going, though, we're having to subsidize the passenger ticket. The ticket prices still aren't going up because there are other costs that are attached to these tickets. We are the ones who are subsidizing the tickets now. The ticket prices will never go up. There's too much competition right now.

Plus there is a combination of other things involved. We have SARS now, which is basically wiping out the industry. The economy right now is tanking out, not in Canada but more so around the world. We understand that, and we are working with the company to try to come to some sort of a resolve to keep our people employed and keep flying.

Mr. Rex Barnes: Government slowly acts. That's just the thing with government--no matter who is there. Government acts slowly because it wants to make sure it doesn't make a decision it's going to regret for another industry.

Our key, as we've said before, is that we want to help out the total industry, not just Air Canada or another industry. The key is to help out the whole airline industry. As a result, if government will act more quickly on the fuel excise tax and rents and all those areas that could make a big impact, do you think that will make a big impact immediately for the benefit of the airline industry so they know where they're going?

Mr. Terry Twentyman: I represent the flight attendants of five airlines, so it has to be even. I can't say let's stay for Air Canada or let's stay for Air Transat. It has to be even. That's why we have to look at some of the fees and some of the excise taxes and so on, so it's fair to everybody. That's the way we are looking at it.

The Chair: Mr. Cannis.

Mr. John Cannis: Thank you, Mr. Chairman.

What I think is a fact is that even prior to 9/11 the airline industries as a whole were having problems. If we start with that premise, maybe it was exacerbated even more after 9/11, SARS, and what have you.

I'd like to start with a point the chairman made so eloquently, that this committee has made some very good recommendations. Of course we have tried to put forth good, creative ideas to help overall. In doing so, I received a letter from one of the presidents of one of the airport authorities--I'm not going to mention who--who was talking about increasing and adding levies to offset the shortfall they are experiencing. It goes counter to what this chairman and this committee and all of us have been putting forth as ideas.

Mr. Chairman, I think you have it. If not, I'll be very happy to give you a copy of that.

When I read that letter I was shocked, simply because I felt that everybody has to chip in here—this government, as Rex has said, your associations, everybody. And there have been some concessions. I think that's something we have to pick up, Mr. Chairman.

I have a question I asked to other witnesses who came before the committee. It was awkward for me to accept that when they negotiate they negotiate differently for different airlines, depending on the size of the airline, the revenue of the airline. I found it very difficult to accept that if you have, let's say as an example, a stewardess or a mechanic on this airline and on another one, why should there be different negotiations for one or the other? Can you explain that to me, please?

¾ (2020)

Mr. Kevin Beaith: I may be able to explain that, because I come from a very small airline, and you are looking at the difference between Air Canada and.... I come from First Air. We just organized our own airline back in 1991, whereas Air Canada flight attendants have been organized for many, many years. They started out with their first contract probably comparable to our contract. We have made huge leaps and bounds. We are on our third contract now, compared to what Air Canada probably did back when they made their first three contracts. It's what both parties are able to work to and agree upon at the end of each bargaining session.

Yes, our wages are very different from those of Air Canada, and I can never see, especially in my lifetime, that we'll be up to the same wages. But when it comes to safety, security, and issues of working conditions, we are all in the same boat and we all try to work towards this. Ironically, we were able to achieve some working conditions in our last negotiations that are the best across Canada. They even beat Air Canada.

We all try to work towards the same goal, but there is a huge disparity between Air Canada, which has been organized for many, many years, and an airline such as First Air, which has only being organized for 12, 13 years.

Mr. John Cannis: Beyond the points and beyond the recommendations you made here in terms of the tax relief and the EI, etc., as Rex pointed out, we know they've made some concessions. We heard Mr. Hargrove yesterday on the news, saying we now are asking the government to come to the plate--not in those words. What do you think the government should do?

The points you are making here, as the chairman clearly stated, have been in essence recommended except for the EI that we are about to clear. What else can the government do? What else do you think Mr. Hargrove is asking? Can you give us any--

The Chair: Wrong union, John.

Mr. Terry Twentyman: I can't answer on behalf of Mr. Hargrove, but our position is that all the airlines have to be treated equally. I can't see big money thrown at one over the other. It just makes it unfair to the others, and actually at the end of the day it will also pit worker against worker as well. You can't do that.

The Chair: Do you have your answer to that?

Mr. John Cannis: No. It's a guess. We all are trying to get at what he meant.

Mr. Terry Twentyman: It's mostly tax law.

I don't know about Mr. Hargrove, but our submission is for tax relief and fee relief, and these are in your control. The management is out of your control; what they do with it and how they operate their business is out of your control.

The Chair: We made those recommendations.

Mr. Terry Twentyman: To tell you the truth, I don't know exactly what they were.

The Chair: They have to do with rents in the airports and the excise tax on fuel, and getting rid of the security agency, which we've been battling with for the last three days.

Mr. Bagnell.

Mr. Larry Bagnell: I want to thank you for your excellent presentation.

As the chair has said eloquently, I and my colleagues are very compassionate and empathetic towards your situation. I don't think you were in an overly great situation to start with, so anything backwards certainly doesn't help any.

Did you come before us when we had the whole day on airline restructuring, or was it a different group?

Mr. Terry Twentyman: I was here in June 2000.

Mr. Larry Bagnell: No, it was a few weeks ago, because we had a union representative with the other flight attendants. Right?

An hon. member: Yes.

Mr. Larry Bagnell: You didn't bring this up, but I want to bring it up because I think it concerns you. It's related to the pensions, at least the Air Canada pension system. Is that part of your responsibility?

Mr. Terry Twentyman: I'm with Air Canada, and yes, I'm affected by the pension plan. However, they are discussing pensions right now as we are sitting here.

¾ (2025)

Mr. Larry Bagnell: Maybe the chair can update me, but I know we made a really big thing out of the pensions. It was very important to me.

Subsequent to the meetings we had, I read in the paper that Air Canada had not yet paid what the federal government officer of pensions had told them to pay. I'm wondering—

The Chair: They hadn't paid $300,000.

Mr. Larry Bagnell: No, it was $200 million. Right?

The Chair: Yes, actually that's right. There are lots of zeros.

Mr. Larry Bagnell: I assume our committee is still strongly behind the fact that they should be paying that right away, as ordered by the government.

A voice: They are under bankruptcy protection.

The Chair: I'm told they've brought a motion in court that while they're under bankruptcy protection, the pension person who was in front us can't make a demand on that. Some lawyers are making $50,000 to argue that....

But it's interesting that when they filed in the United States, they included in their filings a pension liability. They didn't include the pension liability in Canada, for whatever reason.

Mr. Larry Bagnell: I just want you to know that we're behind you on that, and it's certainly very important to us—

Mr. Terry Twentyman: Me too. I'd like to retire one day.

The Chair: The secret on the pension plan is to get the airlines working profitably. Unless they get up working and are profitable, and the market goes up with the money already in the pension plan, it's touch and go.

Mr. Terry Twentyman: I think when you look at a country like Canada, where 80% of the population is right along the Canada-U.S. border or stretched from sea to sea, we absolutely have to have a viable airline industry—and we have to service the smaller communities up north. It's a huge thing. It's basically the veins and arteries of this country, and we have to maintain it.

The Chair: Mr. Proulx.

Mr. Marcel Proulx: Thank you, Mr. Chair.

I want to touch on two subjects. On the first one, I want to come back to your human resources problem. What article were you saying it was under?

Mr. Kevin Beaith: Subsection 11(3) of the EI regulations was the original subsection we fell under.

Mr. Marcel Proulx: I just want to understand something. What you're saying in essence is that if you only count the hours for which you're paid, you don't make enough hours to be considered under EI.

What's the average annual revenue of a flight attendant?

Mr. Terry Twentyman: Depending on what airline--

Mr. Marcel Proulx: No, but on average.

Mr. Terry Twentyman: Okay, it's between $30,000 and $40,000 a year.

Mr. Marcel Proulx: If you're making between $30,000 and $40,000, you must have sufficient hours.

Mr. Terry Twentyman: Yes.

Our hours are basically a formula, and that's what confuses the people who are calculating it. Basically, if we were paid from the time we left to the time we got back home, we'd be in the range of 150 to 200 hours a month, way beyond what any other worker works. But we have a pay formula, and that's what confuses a lot of people.

At Air Canada, they actually pay us by the minute. So it--

The Chair: Are you serious?

Mr. Terry Twentyman: I'm serious. On our pay statements, we are paid by the minute.

Mr. Marcel Proulx: Do you punch in and punch out?

Mr. Terry Twentyman: No. It's from when the plane pulls away until the time it touches down. Our paycheques are broken down into, for example, 1,600 minutes. So you can imagine the confusion it causes HRDC.

Mr. Marcel Proulx: I'm curious, in the sense that a couple of weeks ago, on our way back from Vancouver, we sat on the tarmac in Ottawa for an hour and a half because there was a red alert for an electrical storm. Were you or whoever was on board paid during that time?

Mr. Terry Twentyman: Probably not.

Mr. Marcel Proulx: You're kidding.

Mr. Kevin Beaith: This is where it is a little confusing, because we're paid under a “greater of” formula: either one hour of pay for every two hours on duty, or strictly block to block. So if that crew was on duty for five hours, yet the flight was four hours, they'll get four hours' pay for that.

The Chair: Wheels up to wheels down, is that it?

¾ (2030)

Mr. Kevin Beaith: It's a “greater of” system. All the airlines pay that way.

Mr. Marcel Proulx: I wonder if we could get that system here in the House? We'd save a lot of money in our budgets. We could have more than the Tories.

Mr. Kevin Beaith: It worked for you tonight.

Mr. Marcel Proulx: Of course I was joking. I'm against that. Don't worry about it.

Mr. Jim Gouk: Marcel, it wouldn't work, because some people's wheels are spinning all the time.

Mr. Marcel Proulx: Then it would compensate for the hot air.

The Chair: Do you have another question?

Mr. Marcel Proulx: Yes, I do have another question.

With your recommendations to remove the taxes and reduce the charges, and so on, we've had representations made here at this committee, and our committee has made a unanimous recommendation to the minister--no problem with that. You're bringing this up--do you have any surveys or studies? On what do you base your recommendation, the fact that you think it's costing too much, or the fact that you have scientific studies or surveys that tell us Mr. So-and-so is not travelling any more because he thinks the tax is too much? Do you have anything on that, or is it just a gut feeling?

Mr. Terry Twentyman: No, it's from ATAC.

Mr. Marcel Proulx: So you've used the studies carried out by ATAC?

Mr. Terry Twentyman: Yes, and it's quite clear. Their ticket prices haven't increased for years, and everything else has.

Mr. Marcel Proulx: Okay, thank you.

The Chair: Thank you, Mr. Proulx.

Mr. John Cannis: Mr. Chairman, isn't EI based on hours employed, and we passed legislation some years ago that even part-time workers were eligible for EI benefits?

Mr. Joseph Volpe: You might as well ask them what their problem is with it if it's measured in minutes.

Mr. Jim Gouk: If I may, Mr. Chair.... I've looked into this.

The Chair: Yes, could you just explain that?

Mr. Jim Gouk: There's a formula that says you have to work so many hours with a certain period of time, and that's what catches them.

Mr. Kevin Beaith: It's not based on income. This gentleman said it exactly the way it is.

There's a formula within Canada. It's divided down regionally. The minimum to qualify is some 700 hours a year, and I believe it goes right up to 1820 hours a year. Then you fall under wherever that formula is. Some flight attendants, like at Air Canada, get 65 hours minimum a month, and they don't fall under that.

The Chair: Thank you, Mr. Beaith and....

Yes, Mr. Proulx.

Mr. Marcel Proulx: This will be very short.

Does that change anything as far as sharing of benefits by Air Canada is concerned? If you work five hours, and instead of paying you five hours at $20, they pay you only one hour at $100, the bottom figures are the same for you, but is it the same for them in the sense of do they have to pay less in benefits if they pay you a higher rate?

What they're actually doing is paying you a higher rate per hour, right? So you're getting the same money, but on paper you don't have as many hours.

Mr. Terry Twentyman: The hours on paper is a fallacy.

Mr. Marcel Proulx: Okay. Are they saving any money by that?

Mr. Terry Twentyman: No, it's just a pay formula. You're still getting between $30,000 and $40,000 a year. It's just a matter of how you--

Mr. Marcel Proulx: But they're not saving any benefits or saving any money on saying you've worked fewer hours.

Mr. Terry Twentyman: No. Most of our benefits are based on a percentage of our earnings.

Mr. Marcel Proulx: Thank you.

The Chair: I thank you, Mr. Twentyman and Mr. Beaith, for coming here. We understand a lot of the problem, but let me just make one statement.

I tell you what happens when you start hearing evidence and you get these airlines coming in. If they'd just come in and tell the truth, it would be a lot simpler.

We sat here and had four or five guys sitting down at the end of the table, and we were told unequivocally that this airport security tax is the thing that's killing business. We had people from British Columbia all the way through to the east.

You're listening to them and you're putting some faith in the witnesses' veracity, until you go and buy a ticket and you find out that to go 220 miles from point A to point B, it's $596 for being in the air 30 minutes--$596, plus all the other things.

What happens is the airlines are screwing themselves out of the business, because they figure they have a captive market and they have it up so high.

Where is their thinking? We were led down the garden path. It wasn't the security fee. It wasn't the air navigation fee. It was a little bit of greed, because they have you by the you-know-where. So in the business they have lots of work to do.

Mr. Terry Twentyman: Yes. I think if you notice in my report, I've mentioned that part of it falls on the management and the boards of directors of these companies as well, and that's out of our control. It's out of your control, which is unfortunate.

The Chair: Thank you very much.

¾ (2035)

Mr. Terry Twentyman: I appreciate it. Thank you very much.

The Chair: It has been a long day. We're going to meet tomorrow morning. We're not going to suspend the meeting.

Where are we going now?

Mr. Jim Gouk: We were going to discuss future business--and the Rocky Mountaineer trip, for one thing--that we put off from the last time.

The Chair: We will discuss future business tomorrow morning.

Mr. Jim Gouk: Joe, I don't even have my schedule. We weren't scheduled to have a meeting tomorrow and I have a bunch of other commitments already.

The Chair: For the report tomorrow, Room 209, West Block, has been booked at 9 o'clock. We should not be any longer than 9:30. We're going to discuss what the recommendations with the estimates shall be, any changes, and future business.

Mr. Proulx.

Mr. Marcel Proulx: We have quorum now, don't we?

The Chair: No, we have only six people.

Mr. Marcel Proulx: Yes, except that I'm not available in the morning.

Are you available tomorrow morning?

Mr. Jim Gouk: Not for long.

[Translation]

Mr. Marcel Proulx: Would you be available tomorrow morning?

[English]

We have nine people here. That's plenty for in camera.

The Chair: There are only eight of us. We need nine people.

Mr. Joseph Volpe: On a point of order, if I may, would the clerk please clarify for me--and maybe the committee as well--whether we in fact do have quorum once we start with a quorum, even if other members have left?

The Clerk: No. If you lose quorum, you cannot decide on anything, because you don't have quorum. At the moment you want to decide, you need nine members.

Mr. Jim Gouk: To have a meeting at 9 o'clock tomorrow morning, if we don't have quorum and the only people we can tell about the meeting are the ones who are here tonight, then we don't have quorum in the morning, especially if some of the people who are here can't make it in the morning. Then we would have even fewer.

The Chair: Larry.

Mr. Larry Bagnell: What if we finish the discussion tonight, and then tomorrow morning, in the lobby of the House of Commons, just pass the motion passing everything we pass tonight?

An. hon member: If you have quorum.

Mr. Larry Bagnell: We'll get nine of us together in the lobby of the House of Commons tomorrow.

The Chair: Is the House sitting?

Mr. Larry Bagnell: I'll be on House duty.

The Chair: What time does the House begin tomorrow?

An hon. member: It meets at 10 o'clock.

The Chair: Let's meet in the--

Mr. John Cannis: In the entrance lobby.

Mr. Jim Gouk: Right in the centre of the upper lobby.

The Chair: All right, we'll meet there tomorrow morning at 10 o'clock.

Mr. Jim Gouk: Wait a minute, we have to settle everything first and just ratify it tomorrow morning. We'll settle it now and ratify it in the morning.

The Chair: What are we going to settle? What do you want to talk about? Are we in camera?

[Proceedings continue in camera]