TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 2, 2000

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[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Okay, colleagues. We can't wait much longer. It's already almost twenty to four. I don't know where a lot of the opposition members are, but...

Colleagues, we welcome our first witnesses to the table: representing British Airways, Malcolm Freeman, the vice-president and general manager in Canada; and representing British Airways, Air France, and Cathay Pacific, Mr. Robert Russell.

Gentlemen, welcome to the Standing Committee on Transport. We look forward to your presentations. You have five minutes each so that we can get to some questions for both of your organizations.

When you're ready, Mr. Freeman, please go ahead.

Mr. Malcolm Freeman (Vice-President and General Manager (Canada), British Airways): Thank you, Mr. Chair and honourable members. My name is Malcolm Freeman, and I appreciate the opportunity to appear before this committee. Appearing with me is Robert Russell, a competition law specialist, who will address proposed amendments to the bill supported by British Airways, Cathay Pacific, and Air France.

I will provide a brief background of British Airways' history in Canada and the subsequent impact of the merger.

Previous submissions before this committee on Bill C-26 have focused only on competition within the domestic markets. Air Canada now has an unprecedented monopoly, as is illustrated by the fact that Air Canada now has over 85% market share in domestic markets; control of over 5 million, or 99%, of all Canadian frequent flyer program members; a monopoly on key domestic routes; over 80% of the slots at Toronto; and the ability to leverage its near-monopoly position within the Canadian marketplace.

The competitiveness and presence of international carriers is also vital to the competitiveness of the domestic airline industry in Canada. Any new domestic competitor to Air Canada that eventually emerges will need to develop relationships with competing international carriers, which will provide it with the necessary international feed.

British Airways has been serving Canada since 1947, and we currently operate 28 flights per week. As a result of the merger, Air Canada now holds 72% of the market and operates 108 flights per week. Following the merger, all code-share and competitive interline arrangements between Canadian Airlines and British Airways have been cancelled.

British Airways' ability to continue to compete with Air Canada is anticipated to decline absent legislative relief addressing the following points: number one, the need to be able to purchase frequent flyer points from Air Canada; number two, the need for competitive interline arrangements; and number three, effective legislation aimed at preventing anti-competitive behaviour.

British Airways and other international carriers must be able to purchase points in Air Canada's program at a reasonable rate for redemption by Canadian consumers on domestic flights.

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The second area of concern is interline arrangements. British Airways had interline and code-share agreements with Canadian Airlines for over 1,000 flights per week, including flights from London to each of 12 cities in Canada, including Ottawa, Halifax, Quebec City, Winnipeg, Edmonton, Calgary, and Victoria. These arrangements have now all been cancelled, giving Air Canada an effective monopoly on flights between London and the 12 cities in Canada that were previously competitively served by Canadian Airlines and British Airways.

We are greatly concerned to learn that Air Canada has recently filed new airfares to be charged to international airlines between key Canadian cities that are almost 200% higher than the previous levels. For example, if these fares are utilized for the calculation of the domestic portion, a ticket for travel from Ottawa to London via Toronto on British Airways in business class would currently include $389 as Air Canada's portion for the Ottawa-Toronto one-way fare. This level has been increased from $389 to $1,143, thus effectively pricing international airlines completely out of the Ottawa market.

A final area of concern is the potential for other anti-competitive conduct by Air Canada, specifically the abuse of loyalty programs by Air Canada to reduce competition. Air Canada has instituted loyalty programs that offer discounts on domestic travel within Canada in exchange for a higher share of international business. As a result, Air Canada's near monopoly in the domestic Canadian market is being leveraged against international competition to permit Air Canada to secure a further share of the international market. I have a copy of Air Canada's recent loyalty program for your review.

To sum up, these are significant issues that must be addressed in order to ensure that domestic and international markets remain competitive for the benefit of all Canadian consumers.

With that background, Mr. Russell will address the concerns with regard to Bill C-26 and the proposed amendments. Thank you.

The Chair: Thanks, Mr. Freeman.

Mr. Russell.

Mr. Robert S. Russell (Competition Law Specialist, Borden, Ladner, Gervais, LLP; British Airways, Air France, Cathay Pacific): Thank you, Mr. Chair and honourable members. My submission is with regard to the proposed amendments on behalf of British Airways, Cathay Pacific, and Air France, the three largest international carriers coming into Canada. I provided the clerk with copies of letters to that effect.

As Mr. Freeman has pointed out, the merger between Air Canada and Canadian not only drastically affected competition in domestic markets, but also it has led to a monopoly on many international routes to various cities in Canada, with significant economic disparity between regions in Canada. Air Canada has acquired an unprecedented dominance in this industry, more accurately a near monopoly in most domestic markets and a monopoly on key domestic routes.

Our submissions with regard to Bill C-26 focus on three areas: the failure to adequately address access at competitive rates to ground handling services and interline arrangements for Air Canada's frequent flyer program, the failure to address competition on international routes, and the need to identify as anti-competitive conduct the leveraging of domestic dominance against international competitors. These inadequacies fail to meet a number of key recommendations of this committee in its report in December 1999.

Your committee also recommended that there be greater foreign competition through liberalized ownership restrictions and elimination of restrictions against cabotage. These restrictions were not removed, making it even more important that the other recommendations be addressed.

Without legislative relief, Canadian consumers will face a monopoly not only on domestic routes but also on routes from international destinations to all cities in Canada except the main gateways in Vancouver, Toronto, and Montreal.

The amendments we have suggested to provide access to essential services and facilities are consistent with the approach taken in a number of other jurisdictions, including the U.S., Australia, Germany, South Africa, Europe, and the U.K. Referred to as the essential facilities doctrine, it prevents a dominant competitor from refusing access to essential facilities or services that other competitors require to compete. For example, this principle was applied by the European Commission to require Aer Lingus to make its network available to competing carriers.

While Canadian competition authorities have recognized the need for an essential facilities doctrine, the Competition Act does not provide an equivalent remedy. We have set out in detail in our written submissions the inadequacy of the provisions of the Competition Act to deal with these issues and have proposed amendments to the act to ensure that competitors are provided access to essential facilities and services that Air Canada now controls. Providing access to essential facilities is found in other Canadian legislation, such as the provisions of the Canada Transportation Act in respect of rail transportation. Similar relief has been applied in respect of telecommunications. Air Canada's network facilities and services are essential to all domestic and international carriers.

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It is important to note that the failure to address this issue is confined to not only international competitors. The undertakings given by Air Canada with respect to domestic carriers do not provide the access that the minister and the competition commissioner expected. For example, the undertakings to enter into interline agreements with domestic carriers—and I quote—“in accordance with IATA standards” on “commercially reasonable terms” does nothing to provide for competitive interline arrangements.

The rules of IATA, the International Air Transport Association, do not govern the competitiveness of the price or the pro-ration at which airline interline agreements are entered into. Therefore all carriers are at the mercy of Air Canada with respect to the price-setting for interline arrangements.

Further, the limitation of Bill C-26 to domestic markets only implies that anti-competitive conduct in international markets is permissible. With respect, this is a particularly glaring inadequacy of Bill C-26. It is unheard of to engage competition policy that protects only domestic competitors and ignores anti-competitive effects on international routes that directly impact on consumers.

It's too easy to assume that international markets have less impact on consumers than competition in domestic markets. However, approximately one-third of all dollars spent on air transportation by Canadian consumers is for international travel. The impact on Canadian consumers with respect to competition on international routes is just as critical as the lack of competition on domestic routes.

Bilateral relationships between nations are premised on effective competition policy. In fact the bilateral treaty between Canada and the United Kingdom includes as one of the governing principles an obligation to eliminate all forms of unfair competition adversely affecting carriers of both nations. There are similar requirements in the bilateral treaties between Canada and both France and Hong Kong.

I don't have—and I apologize for this—a French translation, but we just received today a press release from England that indicates Air Canada's acquisition of Canadian Airlines has been referred to the Competition Commission in England:

Kim Howells, Minister for Consumer and Corporate Affairs, has decided, in accordance with the advice of the Director General of Fair Trading (DGFT), to refer the acquisition by Air Canada of Canadian Airlines to the Competition Commission under the provisions of the Fair Trading Act 1973.

Finally, with respect to the abuse of dominance and anti-competitive conduct, we support the draft regulations submitted by the competition commissioner to this committee on April 12. We have provided comments and potential amendments to those provisions to the competition commissioner, as he requested. We have also attached draft language for further regulatory provisions that would identify the anti-competitive conduct raised by Mr. Freeman.

These amendments will ensure a level playing field for all competitors—competitors who are necessary to deliver fair pricing, good levels of service, and product choice—to ensure all Canadians enjoy the benefit of a competitive marketplace. I would note none of the solutions proposed will cost Air Canada anything other than the ability to extract monopoly profits from consumers in Canada.

For example, British Airways paid approximately $80 million to Canadian in respect of its interline and code-share arrangements in 1989 alone. Time and time again it has been shown that monopolistic markets lapse into poor product, few choices, and high prices. However, this committee can do something to prevent that result and ensure competition is preserved in important air transportation markets. We are not hostage to Air Canada's monopoly unless we let ourselves be.

Thank you for the opportunity to address our views concerning the proposed amendments. If you have any questions, we'd be pleased to answer them.

Thank you.

The Chair: Gentlemen, thank you both for your submission to the standing committee.

I'll move right to questions with Lou Sekora.

Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): Thank you, Mr. Chairman.

I have to apologize; I did not circulate this morning the letter I received from British Airways. It was a letter to me from you people outlining the problems you have with Air Canada. It looks to me as though over the next few days, just as we've had over the last few days, that's all we'll be hearing about: the problems we're having with Air Canada.

You're precisely correct that we either step in and do a whole lot of things or we have a lot of problems. For example, I'm from British Columbia, and we have problems with Air Canada in British Columbia.

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The fact is, at every gate, if you come to the gate 19 minutes before departing, your ticket is given up. You don't have a ticket to board. Many tourists and many businessmen have to move from one place to the other, never mind the MPs who have to be in Ottawa at certain times and not be in Ottawa at certain times. They must be able to get to and from. They have meetings when they go to their constituencies. You know, they can fly all night from one city to the other and so on. We need competition in the worst way.

As a committee member, I'm looking forward to making a lot of changes in legislation. I hope every side of the House stands up to be counted. Really, I'm looking forward to seeing Milton here on Thursday. I'm not going to need a sandwich; I'm going to have him as a sandwich on Thursday. I'll tell you, it's brutal what's happening, with 45 people left at the gates.

The Chair: Lou, do you have a question for these witnesses?

Mr. Lou Sekora: If we as a committee or as a legislative body opened up the skies in Canada for airlines to come in and compete with Air Canada, just opened up the skies, how would you feel about that?

Mr. Robert Russell: British Airways would support any further deregulation in Canada. I don't think we can respond at this moment as to whether British Airways would have any plans to fly domestically within Canada.

The difficulty with the market in Canada is the sparse population. That's why we've focused on network access. In places such as Ireland, for example, with smaller populations, you have only so many flying passengers from each city. So the necessity of going to the network approach, which has been done in other countries, is to ensure that the consumer in Winnipeg and the consumer in Saskatoon have a choice. They can have that choice through the access to the network. That's really what we're bringing to this committee today.

There is a way of solving the problem and making sure the competition at least remains as healthy as it is today by allowing access to the network.

Mr. Lou Sekora: You may not be able to answer some of the things I'm asking you, but because you're in that business, you may be able to steer us and say, “Okay, I think it's a good idea for certain airlines to be able to come to Canada and compete with Air Canada.” I don't say it should be British Airways, but do you feel there's room for somebody to come in with some foreign airlines?

Mr. Robert Russell: British Airways has invested in domestic airlines in other countries and certainly would be in a position to consider that in Canada if the opportunity existed.

Mr. Lou Sekora: Thanks very much.

The Chair: Thanks, Lou.

Jim Gouk.

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

Certainly a lot of people toy with the idea of opening up Canadian skies to foreign competition, but Mr. Sekora won't have to worry about how he's treated with Air Canada. If we open up Canada to cabotage without reciprocation, there won't be an Air Canada, and he won't have to worry about them.

Gentlemen, first of all I would like to know if you could give me some general idea of the ratio of travellers between, say, British and European passengers coming to Canada versus Canadian passengers going to Britain, or Europe by way of Britain. Is it a relatively equitable ratio or is it kind of skewed?

Mr. Robert Russell: Well, it has been an equitable ratio, but the difficulty now is the imbalance. Air Canada has code-share and full interline capability with British Midland, which is the second-biggest domestic carrier in the U.K. It has everything it needs in terms of access to network to serve smaller cities in the U.K.

What we're pointing out now is that there is a complete imbalance on this issue. There is no access to international carriers—Air France, Cathay, or anybody else—to be able to fly to smaller cities in Canada. The flip side for Air Canada, however, is that they have the benefit in these other countries.

Mr. Jim Gouk: But what is the ratio of travellers? Is it relatively equitable?

Mr. Malcolm Freeman: It's very difficult to give that figure. I don't have it on me at the moment.

Just to give you an example, British Airways trades in 95 countries around the world. We would carry Canadians to those 95 countries, and we would certainly bring in an enormous number of tourists and business people from those countries into Canada. Currently, under the system we had before this, we could bring them into 12 cities within Canada at very good rates. That is now gone away, and we will be confined to three cities: Montreal, Vancouver, and Toronto.

Mr. Jim Gouk: If you were partnered to some degree with Canadian Airlines, which has now been cut off... British Midland still is partnered with Air Canada. Had it been the other way around, I assume we would have Midland sitting here and you guys would be quite comfortable.

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Mr. Robert Russell: There's a lot of precedent in Europe to do exactly what we're asking this committee to do in Canada. In fact there are examples with KLM, Alitalia, Lufthansa, and SAS to do exactly what we're talking about: put rules and regulations in place to ensure access to the local domestic network.

So on the other side of the pond it has been dealt with. I gave you the example of Aer Lingus. The European Commission stepped in and said Aer Lingus had to give the access we're asking for in Canada from Air Canada.

Mr. Jim Gouk: Have you talked with any other Canadian companies, such as WestJet, about the possibility of perhaps investing in them and becoming involved in some way in the expansion of their market so that they in fact could become a feeder for British Airways?

Mr. Malcolm Freeman: We haven't discussed an investment in WestJet at all. We would certainly welcome the facility to do something with them. Unfortunately WestJet is what we would call a low-cost carrier in Canada, and they lack the ability to provide the sophisticated computer reservation system the big airlines have. This would make the interlining of passengers from WestJet onto international carriers extremely difficult if not impossible.

Mr. Robert Russell: Perhaps I can point out one thing on that question to make sure the committee understands. A computer reservation system does more than give access to travel agents. It takes care of the meals on the planes and it organizes the scheduling, the weights, the loads, the baggage going through seamlessly, etc. It costs an airline about 12% of its total cost base to go on a CRS. As long as their model is low-cost carriage, these airlines, the charters and WestJets, will not go onto a CRS and therefore will not provide the interline capability we're talking about.

Mr. Jim Gouk: Do you think there's any potential for re-forming a partnership with Canadian at some point, given Air Canada's claim—and I do emphasize that word—that it will operate “independently” of Air Canada?

I'm not a big fan of what's taking place in terms of this acquisition as opposed to an alternative plan. Given the plan that is in place right at the moment, they are in deep financial trouble. They're making a lot of changes to try to come to terms with that. If they do manage to become financially sound and continue to operate independently of Air Canada, do you feel there's potential for a future alliance with them again?

Mr. Robert Russell: The key word would be “independent”. The problem is to talk about commercial relationships at all. For example, Air Canada currently has ground services agreements with BA. The question is what price those agreements will be next year, when you only have one party to negotiate with. It's one thing to talk about it being a commercial relationship. Unless there are two independents from Air Canada, there are not two people competing for your business. There's no such thing as an ordinary commercial relationship with a monopoly. That's the problem.

We've seen that south of the border with Microsoft. All these big technology companies were forced to include things on their operating systems because there was no other game in town.

Mr. Jim Gouk: Thank you.

The Chair: Thank you, Jim.

Joe Fontana.

Mr. Joe Fontana (London North Centre, Lib.): Mr. Russell and Mr. Freeman, I start from the premise of who we are trying to protect here. If we want to protect the consumer ultimately, both domestic and the consumer who wants to travel internationally, then we need to put in place the right policies to make sure the consumer is protected. That's been the preoccupation of this committee right from the start.

I don't like to boast, but I think our committee report was more far-reaching in terms of protecting the consumer and providing some degree of competitiveness and choice to the consumer than this legislation is. Therefore we're looking for ideas on how to make sure we do have competition and on how the consumer is protected. Because at the end of the day, listen, any CEO with 80% of the domestic market and 80% of the international market... if you can't make any money under that scenario, I don't know what more you would need. It's a licence to print money, and that's exactly what Air Canada has.

As Mr. Sekora says, we already have a number of concerns on what's transpired over the past three or four months. I want to get to your question, because at the end of the day we want to talk a little about how we can introduce competition, how we can protect the consumer, and how we can give that consumer that much more choice.

So I'm looking at the frequent flyer program and the access to it, which is controlled by Air Canada also. I'm looking at the interline and code-sharing agreements that you think are absolutely necessary in order to provide that competition and the choice for the consumer. I'm also looking at the anti-competitive protection we need in this legislation to stop a dominant carrier from doing that.

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So, Mr. Russell, I wonder whether you could just tell us a little about how your amendments specifically will help us achieve competition in Canada in the Canadian airline industry. What would be the effect of some of those amendments in terms of competition and benefit to the consumer?

Mr. Robert Russell: First of all, I'd say I entirely agree that your focus should be on consumers. You have no interest, nor should you, in protecting BA or any of the other carriers before you today.

The carriers today are competitors. They're the ones that actually compete to lower the prices, to make sure there's good service, and to make sure there's choice. That's what we're doing; that's what the Competition Act does.

The way in which the provision would work is simply this. The chair asked a question on the day the competition commissioner was here, on April 12. He said he had a letter in his hand from Canada 3000. Let me use them as an example, not BA, not Air France, not Cathay. They were cancelled at three airports for ground services. That was the problem. What's going to happen? Canada 3000 is not going to be able to compete in those cities where they were cancelled. The essential facilities provision would say, “Air Canada, you have to do a deal with them on ground services and it has to be at a competitive price”. That's what's being done in every other nation that's faced the problem. Then Canada 3000 is in those three markets and is competing to deliver all the things you want to deliver to the consumer.

Mr. Joe Fontana: With regard to the essential services provision, I think Mr. Milton, in his magnanimous way, before the merger, was prepared to offer and guarantee Canadians and everybody else anything in order to get this deal, and we delivered it to him. Since then I think he's forgotten about those commitments, so we'll remind him a little about those commitments that he made publicly and under oath and in testimony.

Before I get to him, I want to know whether you have made attempts to enter into agreements with Air Canada with regard to those ground services and those interline and coding agreements. Have you been flatly shut out, rejected, or have they given you a price to completely make it unreasonable?

Mr. Robert Russell: As you may recall, a $50 million offer for slots was flatly rejected by Air Canada. We've told the members of this committee about that before. For seven weeks British Airways representatives have attempted to contact Air Canada to talk about pro-rates. They have not been able to get their calls returned.

Three weeks ago, we're telling you today, they published J1- and J2-class fares that were $397, compared to $1,126 at the time when IATA picked up the rates for the purposes of pro-rate. I can think of no other reason—and I hope you ask Mr. Milton this—that Air Canada would have published those rates three weeks ago other than to increase the pro-rates by 300%.

It cost me $900 before taxes to fly from Toronto to Ottawa. Mr. Milton is saying to BA, “Pay me $2,300 to include that portion of the flight on your travel for passengers between Ottawa and London.” That's what Mr. Milton said by publishing those fares three weeks ago.

Mr. Joe Fontana: One of the reasons he may do that—and we have an awful lot of prices to ask him about, as well as certain behaviour in the past three or four months—is that none of these provisions takes effect until this legislation has royal assent. I hope this is not the case. That's why an awful lot of these things are being done pre-royal assent: because all of these anti-competitive and predatory pricing provisions, all of these behavioural sorts of things, don't kick in until this legislation passes.

You talked about Air Canada's ability to leverage its domestic market to benefit its international traffic. I wonder if you could just expand a little bit on that, Mr. Freeman.

Mr. Malcolm Freeman: Yes, certainly I can. I'll give you a fictitious, hypothetical case of a travel agent who, say, has a turnover of $1 million. About $300,000 of that $1 million would be for international travel and about $700,000 would be for domestic. An airline that would have a dominant position in the domestic market could go to that agency and say, “I will give you a 10% discount on your domestic business in exchange for all of your international stuff.” The 10% discount on the $700,000 would equal $70,000. For the international guys to come back and compete, they would have to raise their commissions by 123% to do it, which would just make it totally not feasible.

The example we've given you is the other way around: they would say to the same travel agent with a turnover of $1 million, “We'll set you a very high target for that $300,000 for international. If you achieve that on the dominant airline, we will then pay you a commission on the domestic side.” That is something we cannot compete with. It's as simple as that.

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So it's quite a simple equation, “You scratch my back and I'll scratch yours” at the end of it, and there's no way we can compete.

The Chair: Thanks, Joe.

Speaking of back-scratching, just as a supplementary, when Air Canada flies into Britain, who looks after its ground handling in Britain? Does it have its own people there, or does another airline do it for them over there?

Mr. Malcolm Freeman: I can't answer that, but I would assume Air Canada would contract that off. They would probably have one of several ground handling companies look after them, as British Airways do.

The Chair: All right.

Mr. Malcolm Freeman: We subcontract ground handling all over the world.

Mr. Robert Russell: One of the differences of course is there are a number of domestic carriers in the U.K., not just British Midland and BA. Of course British Midland has now become a full partner with Air Canada, so we would suspect they would have a number of arrangements with British Midland to accomplish those issues.

The Chair: Would it be fair to say Air Canada's access to Britain is lucrative?

Mr. Malcolm Freeman: Absolutely!

The Chair: It is.

Mr. Malcolm Freeman: Absolutely.

The Chair: Again, on the subject of back-scratching, if there is a bilateral agreement between Canada and Great Britain, what's to prevent BA from going to its transport minister in Britain and saying, “Look, if these guys are going to be this way in Canada to us, then I think it's time we turned up the heat a little bit on Air Canada from our perspective at the next bilateral”?

Mr. Robert Russell: First of all, the bilateral issue is an agreement between two nations, and BA has no direct impact on that. But speaking to the issue, we had an unfortunate step backwards. The U.K. is one of the few countries Canada has an open-skies policy with, and the reason Air Canada is able to have the opportunities it has to the U.K. is it's open skies.

We're not in a bilateral—one plane goes one way, one plane goes the other—with England here. We have an open-skies policy, which for that reason, as I mentioned in my submission, is premised on the application of competition policy. As soon as you deregulate any industry, you have to enforce your competition policy, or you have these problems. So what England and Canada said to each other was, “We're going to have open skies here, but we'll each undertake to ensure we have active, proper, and fair enforcement of competition policy on both sides of the pond.”

The Chair: Okay. Thank you.

Mr. Asselin.

[Translation]

Mr. Gérard Asselin (Charlevoix, BQ): As you know, gentlemen, we are presently experiencing some turbulence due to the restructuring of the airline industry, starting in December with Canadian's financial difficulties and continuing in the wake of its takeover by Air Canada. Certain regional carriers, such as InterCanadian, no longer fly regional routes while others, such as Regionnair, have taken up the slack as others still, such as Air Nova, have decided to increase the number of flights they offer.

A while ago, you spoke of the recommendations we submitted to the minister, and that you have had a chance to read. Do you think that Bill C-26, in its current form, will bring about a significant improvement in air travel in Canada?

Bill C-26 does not contain all the recommendations formulated by the committee. I have regrettably not had the opportunity to read all of your brief, but would you tell us what are, among those recommendations, the ones that opposition members should focus on in response to the needs of both carriers and passengers in order to ensure we have a service that is both good and affordable while maintaining passenger safety?

[English]

Mr. Robert Russell: First, you asked whether Bill C-26 made a slight improvement or a major improvement in range of choices. The first thing I differentiate are comments.

First of all, in terms of this merger, there were various public policy issues for this committee to consider. There were jobs at stake. There were a number of issues, which British Airways and the other carriers I speak to today do not quarrel with. There were 17,000 jobs at stake in Canadian Airlines, and this government had to do something to try to preserve the industry.

However, the next question is financial health. The competition commissioner appeared here before you on April 12 and said, “Don't worry about Air Canada's financial health, thank you very much. They're in great shape, and they will continue to be so.” And I think anybody in the industry thinks so today.

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Finally, was there anything missing? If it were up to me, I would trade every undertaking that was obtained on the competition front for the essential facilities provision, because it solves all of the issues this committee addressed in terms of access. Unfortunately the undertakings from Mr. Milton do not tie his hands with respect to price, and as long as you don't control price, he can charge what he wants for everything he's going to do for anybody else who's in this industry, and the consumers will ultimately pay the price, because ultimately they pay the price of the ticket.

[Translation]

Mr. Gérard Asselin: You are quite right to say that Mr. Milton and Air Canada should be held to a certain number of requirements. We have noted that since Air Canada's acquisition of Canadian, there is more competition at the regional level. It seems that Air Canada, but not its Air Nova/Air Alliance subsidiary, is trying to eliminate competitors by offering flights to regions where the market does not necessarily justify such an increase in service. Once Air Canada achieves a monopoly position and remains the sole carrier, we will certainly see prices more in line with business requirements.

Do you think the Competition Bureau is fully fulfilling its role and does it have all the tools it needs to carry out investigations? I do not believe that the Competition Bureau should have to wait for directives from Parliament or for instructions from the Minister of Transport before acting. The Competition Bureau must be completely independent and should directly investigate the complaints it has received in order to ensure free and fair competition. If it does not do its work, we may find the big fish eating all the smaller ones.

[English]

Mr. Robert Russell: The first part of your question was, was the competition commissioner playing an active role? The competition commissioner has expressed himself very clearly about his concerns, and not all of his concerns have been addressed. He showed up at this committee only a few weeks ago to say he believed additional requirements were needed in this industry.

Secondly, we have to remind ourselves that from a competition policy standpoint, this merger was approved on the failing-firm basis. That means all other factors that would ordinarily be considered under the act were not applicable here. It's a complete defence to the application of competition principles to the merger.

Finally, with respect to Air Canada, I would remind you that none of these things we're seeking cost Air Canada a penny. I can sincerely say that. If Mr. Milton stands here and says this will cost him money, then he is simply misunderstanding—which I don't think he will do—what BA and the other carriers are seeking. It is access. It's not access at a cost to Air Canada.

The suggestion by certain ministry officials today that this is some sort of subsidization by Air Canada is completely wrong. It's not done that way anywhere else in the world. Air Canada will lose nothing. BA provided $80 million to Canadian last year for what we're talking about, and Canadian didn't lose money on that $80 million worth of feed. It was a very important part of their business.

The Chair: Mr. Dromisky, please.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Thank you very much.

My chief concern is about the consumer. If a company can't compete and it goes under, that's in another realm of responsibility and concern over which I really have no control.

Mr. Gouk introduced a very important area of concern, and that's your negotiations with other Canadian carriers. WestJet was the only one emphasized in your response. I don't know whether you really tried to make any contact with any other carrier in Canada to make long-range plans.

The stage is being set. In your presentation you place a very heavy emphasis on one key factor as far as the customers are concerned, and that is the fact that Air Canada is starting to gouge. Air Canada is increasing dramatically the prices of fares, and the international carriers won't be able to take advantage of the network they had prior to this period.

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If Air Canada is moving in that direction, if Air Canada is gouging—in other words, charging exorbitant fares—don't you think that would be setting the stage effectively for you to start negotiating with other carriers and making long-range plans to undercut Air Canada in what they're doing by providing more economical rates?

Mr. Robert Russell: I can guarantee you that if a full-service carrier were to emerge in Canada, BA, Cathay Pacific, and Air France would be sitting down at the table with them tomorrow. But it's my respectful submission that it's a complete misunderstanding to suggest you can interline with charter companies or low-cost carriers. We have expressed that on a number of occasions to transport committee officials. You cannot expect the business traveller from Calgary who is taking a trip from Calgary to Toronto to pick up their baggage and move their baggage to another flight.

Their schedule is irregular. Low-cost carriers fly in at times when it's less expensive to fly in. They fly into airports that are not the prime airports. You're asking the time-sensitive traveller, which is what we're talking about here, to pick up their baggage and spend another hour or two for a six-hour flight to London. It is not going to happen. They want more convenience.

At the same time, under those sorts of arrangements, you would be expecting BA to compete with Air Canada for seamless travel from Calgary. It's never happened anywhere else in the world. Why would we believe that in Canada, linking up with charter companies is going to work? It's never happened anywhere else. If anybody could point to interlining with charter carriers anywhere else in the world, we'd like somebody to do it. It's never happened.

Mr. Stan Dromisky: You're referring to charters. I'm referring to sitting down and working with a group, making long-range plans, and providing the financial support from the consortium you have in Europe to help establish a coast-to-coast domestic service in Canada to compete with Air Canada. Is that possible?

Mr. Robert Russell: First of all, none of the carriers we're talking about have a consortium in Europe. It's a misunderstanding to suggest that. The strength in Europe, if there is any, is in the dominance of Star Alliance partners. One of the things that has never been identified here is that the Star Alliance now has a monopoly to Germany. It may not be our issue, but Lufthansa and Air Canada are the only scheduled carriers on that route. Lufthansa has 60% of its market.

To go on to your question, there has never been a low-cost carrier... There has been interline service with Southwest in the U.S., which is a very successful carrier. WestJet is and will continue to be a very successful low-cost carrier, but they don't interline with scheduled carriers. That's the difference.

The Competition Tribunal ruled on this in 1993 and 1994. It said these are two different markets. We've had a ruling in this country on what the competition is. They've said we should not consider charters and low-cost carriers part of the same market; they are not. We have some thought process these days that they're all in the same bag, and they're not. They never have been. Every competition authority in the world has said you're dealing with two separate markets. The consumer pays a totally different price for a totally different type of service.

Mr. Stan Dromisky: What you're saying is there is no alternative but some type of alliance with Air Canada.

Mr. Robert Russell: There is no alternative except a requirement, which would only apply as long as Air Canada is in a monopoly position or a dominant position, that they enter into agreements with other carriers. It's not below cost. That's what we're trying to explain. This is why it's been done in other countries. It says that as long as you have that dominance, you're going to give access.

Let me give you an example. When the digital service came in telecommunications—we have Fido and Clearnet—they didn't have analog service. They didn't want to build analog service, because it was so expensive to put it across the country. What did we do in this country? We said Fido and Clearnet had the right to have contracts with Cantel and with Bell for analog service. To this day, they have to provide their networks to Fido and Clearnet. That's what an essential facility is. It provides that network access at a fair price.

Mr. Stan Dromisky: Thank you very much.

The Chair: Thank you, Stan.

Bill Casey.

Mr. Bill Casey (Cumberland—Colchester, PC): Thank you.

I find some of this stuff hard to believe. I wouldn't want to ever suggest you were wrong, but it's hard to believe this example you've used. From London to Toronto to Ottawa is $389 now for your portion of that flight, and it's going to go to $1,143. Is that right?

Mr. Malcolm Freeman: That's the way it's been filed, and we are greatly concerned about that. The airfares were filed on March 28, and they were withdrawn again about three weeks later. They were put into position in the airfare filing system so that the data could be captured by a very sophisticated computerized system that all airlines internationally have. Once that data is captured, it stays there.

• 1620

They filed those fares specifically for the calculation of pro-rates. What that basically means is those would become the benchmark figures they would charge other airlines for access to those flights as of June 1 this year. It's done every quarter.

Mr. Bill Casey: That makes you non-competitive for that flight?

Mr. Malcolm Freeman: Absolutely. Well, obviously Air Canada will have the right to charge that to us. The bottom line of that is if they stipulated that and if they said, “This is what it's going to cost you”, which is what they've indicated by the fares they have filed, British Airways simply would not fly passengers to those destinations.

Mr. Bill Casey: That's higher than full retail price, isn't it?

Mr. Malcolm Freeman: Absolutely.

Mr. Robert Russell: I think you may be misunderstanding what we've said there. That is the add-on to BA.

Let's say the BA portion from Toronto through London, London to Toronto, was $1,000 one way. You would then add the $396 for the leg that would be with Air Canada to Ottawa. Then on the way back, it would be the same $396 plus $1,000. So the combined fare before would have been approximately $2,700 or $2,800. What's now happening is that you would take $1,000 each way on the BA portion and you'd have to add $1,126 each way on the Ottawa portion. The price of your ticket is now somewhere in the neighbourhood of $4,300. That's what's happened. That's what we're talking about in terms of that increase.

Mr. Bill Casey: From what old price?

Mr. Robert Russell: There is a price they publish, they file, that is picked up by IATA just for the general pro-rate. This isn't a negotiated pro-rate but the standard pro-rate. By publishing the two rates, they actually did something unusual. They published two, a J and a J1. The J is the higher one that is picked up by IATA during this period of time. That will have application as of June 1.

Mr. Bill Casey: So before that publication, the charge was $389?

Mr. Malcolm Freeman: That's correct.

Mr. Bill Casey: And now it's $1,143.

Mr. Malcolm Freeman: It will be $1,143 effective June 1 if they wish to do it. They've filed it specifically for that purpose, and we have no reason not to believe that is what they intend to do.

Mr. Bill Casey: You used to have an arrangement with Canadian Airlines, which you've lost now. Why can't you fly to those cities? Now that you aren't competitive, why can't you fly directly to them?

Mr. Malcolm Freeman: If you take destinations outside Vancouver, Montreal, and Toronto... The international carriers into those three gateways have difficulty making a profit on those. Can you imagine how it would be if we flew to one of the smaller cities in Canada? It simply would not be viable for us.

Mr. Robert Russell: If I could turn that around onto the consumer issue you mentioned, maybe there are only six people a week who want to fly to London, England from Saskatoon. It's those six consumers who no longer have the choice, because no international carrier—not just the three that are here today, but no international carrier—has access without proper interline.

The reality check is on those $1,126 add-ons, which add up to about $2,300. A few days ago, the price for me to fly on Air Canada, just buying a full J-class ticket, was $900 plus tax. The number is more than twice what I pay by just buying the ticket. So we can think of no other reason for the add-on but to say, “You are now out of this market if you're an international carrier who wants to interline from Toronto to Ottawa.”

Mr. Bill Casey: Mr. Dromisky was proposing that a new airline be established to compete head to head with Air Canada. How tough do you think it will be in the future for Canadian or another company to establish a competitor for Air Canada?

Mr. Malcolm Freeman: First of all, for a new airline to establish itself in Canada, it would be absolutely essential that you have a strong international group of players operating into this country. They would need the feed from those airlines. For example, a substantial portion of the passengers who get off our aircraft travel on to domestic destinations. If airlines such as British Airways and others were not here, that would not happen. That is the first thing.

The second thing is we would welcome it if somebody could come up with that. We would certainly talk to them. I think all the other international airlines would do exactly the same. You would have competition again, and then the fun would begin. You'd have seat sales and lots of discounted prices and the way in which we normally are used to contracting business.

Mr. Robert Russell: To illustrate how important that is for a new entrant in the domestic industry, on a Canadian Airlines flight from Calgary to Toronto, one-third of its passengers were taking feed to other international carriers. When you're talking about filling a plane, if you want that domestic carrier to fill that plane, you're going to have to have strong international carriers to interline with, to go off to Paris on Air France, to go off to London on BA, to go off to Hong Kong on Cathay Pacific. Without a strong international carrier base in Canada, it is hopeless to think you will have the emergence of a full scheduled domestic carrier in Canada.

• 1625

Mr. Bill Casey: I have just one more question.

The Chair: I'm sorry, Bill; your time's up.

Charles Hubbard, please.

Mr. Charles Hubbard (Miramichi, Lib.): Thank you, Mr. Chair.

I too was looking at this figure Mr. Casey brought up, which is quite unbelievable. You also made the statement that those at Air Canada don't return your calls at any level. Whether it's the president, vice-president, or whatever, they just will not return any of your calls. Is that what you told this committee?

Mr. Malcolm Freeman: It's not as drastic as that. We have a system of communications, as all airlines do. To discuss this particular issue—in other words, to get around a table to discuss what the pro-rate fares would be—we've been attempting to contact Air Canada for something like the last seven weeks. That's head office to head office, London to Montreal, I guess, or Toronto, whomever they were talking to. They could not get a response from them, which is unfortunate.

We haven't escalated it higher up than that, but the indication was that they would wait until all of this was over and then possibly talk to us.

Mr. Robert Russell: Just in terms of the level, a letter went out to Canadian and Air Canada regarding the slots issue at Christmastime on the $50 million offer from the chairman of British Airways. The response through other channels was they were not even interested in talking.

Mr. Charles Hubbard: So when your officials got this price increase, which was three times what it was before, and you wrote them a letter, sent them an e-mail, or tried to communicate with them, you couldn't resolve whether it was a mistake or whether it was the real thing.

Mr. Malcolm Freeman: It couldn't have been a mistake.

Mr. Charles Hubbard: Did you ask them to find out? That's what I'm asking. If I were a businessperson, I would have asked whether it was a mistake: “Did your computer go wrong? Did you get a new person doing it who didn't understand?”

Mr. Malcolm Freeman: The reason it was not a mistake is that precisely the same fares were filed for Canadian Airlines.

Mr. Robert Russell: They both would have had to make the same mistake.

Mr. Malcolm Freeman: Yes.

Mr. Robert Russell: So the computer people at both airlines...

Mr. Malcolm Freeman: If you look in the system, the Canadian Airlines fares are still there.

Mr. Charles Hubbard: So you're describing this as arrogance, unapproachability—

Mr. Malcolm Freeman: It's scary.

Mr. Charles Hubbard: —a total inability to deal with...

Mr. Robert Russell: I wouldn't describe it as arrogance, other than monopolistic behaviour. If you don't need to negotiate against anybody, you can set whatever price you want. That's all they're doing. It's exactly what the consumer has to avoid.

Mr. Malcolm Freeman: They could charge $5,000 for that ticket and that would be it. We just simply wouldn't operate it.

Mr. Charles Hubbard: With your airline, you land basically in three places in this country. Is that right?

Mr. Malcolm Freeman: Yes.

Mr. Charles Hubbard: Everything else is feeding into those three destinations.

When this whole issue came up, we dealt with it in a report we gave to the minister and the House on ownership. As partners of Canadian, there might have been ways you could have kept Canadian a bit more solvent than it became in 1999. What efforts did your company make to see that your buddy or your partner continued as a working company? Was it because of our foreign ownership that you were unable to assist Canadian when it was encountering all those financial problems?

Mr. Robert Russell: Just following the demise of the Onex bid for Canadian, British Airways offered support of over $110 million. You have to understand that was in the circumstance of not being able to acquire any shares in the company, because of the 25% limit. BA would have simply given money to Canadian without any form of security. If you put it in context, the unsecured creditors of Canadian today are being offered 12¢ on the dollar. So if BA had offered $110 million last October, it would have got 12¢ on the dollar today if Canadian had not survived.

Canadian told BA that was not enough. They wanted over $500 million for Canadian. That was simply in the circumstances of having $3 billion worth of debt, no ability to invest in the company because of the restrictions... I don't have to finish the sentence really. There's the answer for you.

Mr. Charles Hubbard: It's a really simple answer.

But also, looking at this situation—you talk about the $100 million, and I was aware you made an offer to Canadian—you and the other partners of Canadian must have felt you would have been getting involved in a very difficult enterprise; that whatever relationship you had with Canadian, it wasn't making any money. We saw the result of that.

Of course as a government we're now faced with trying to deal with the situation where a monopoly has developed. Really, in the airline industry, all the players certainly had a role in seeing that we have only one today. We can't blame it all on the government. You were the players, but the players let the whole situation deteriorate to the point where we did have Air Canada merging.

• 1630

I know we have to look at this bill, but we have to look at those details. They can't blame all of this on the government and look for the government to give all the responses to the situation today. I feel sorry for British Airways, but if they're only landing in three places, it's going to be very difficult to serve a country as big as Canada.

Mr. Robert Russell: This government should not take the blame for what has happened with this merger, and we are not suggesting that. We're asking them to take the responsibility to ensure competition remains. We want to make our position very clear on that.

Since you've asked what more BA did, it was in a joint venture with Canadian. BA gave Canadian good time slots it had to itself before that joint venture. It basically sacrificed its own frequent flyer program to support Canadian's in this country over the last decade. So there's been a lot of support for Canadian.

I don't think anybody should take the blame. It was a very difficult situation. The company had acquired significant debt in the acquisition of Wardair; we all know about that. People will say the worst mistake Canadian ever made was to acquire Wardair, but of course Wardair was approved as a failing firm 11 or 12 years ago.

The Chair: Thanks, Mr. Hubbard.

Gentlemen, thank you very much. We have to move along; we're behind time now. We want to thank you very much for your submission, and in particular for your suggestion of the essential facilities doctrine. We will have to carefully examine that proposal. It will be considered by the committee.

Again, thank you very much.

All right, colleagues, let's welcome our next witness, Mr. Steve Smith, to the table, please. He is president and CEO of WestJet Airlines.

Mr. Smith, welcome back to the Standing Committee on Transport. We look forward to your intervention, especially because we've lately been getting some correspondence about the situation with WestJet and Air Canada at Moncton. We'd like some input on that too, if it's possible. It might help the committee.

Welcome. Begin whenever you're comfortable, sir.

Mr. Steve Smith (President and Chief Executive Officer, WestJet Airlines): Thank you very much, Stan. It's nice to be back to address the standing committee and talk about Bill C-26.

Since I was here the last time, things have changed a little bit at WestJet. We've gone upwards and onwards since that time.

• 1635

I want to remind everybody that the whole focus of WestJet is really to stimulate a marketplace. It's not trying to take passengers from Air Canada or Canadian. Air Canada and Canadian are 45 times our size. So we consider ourselves an alternative, and primarily an alternative to the family car, not necessarily to Air Canada. So we are not trying to say we are competition to Air Canada.

The analysts say—and we have to say that, because we're a public company—that WestJet will carry over 3 million passengers this year. We now serve 14 cities in Canada and are very pleased to be in Hamilton for Stan and Tony.

The Chair: And the thousands of passengers who use your service.

Mr. Steve Smith: Yes.

Currently out of Hamilton we are serving Thunder Bay and Winnipeg, and on April 19 we started service to Moncton. We've also announced that on June 8 we will start service from Hamilton into Ottawa, and in the fall we'll start service into Montreal. So our airline continues to grow and expand.

Since the last time, we've announced our annual results in 1999, which came in at $15.3 million of profit, bottom line. On a margin perspective, that was 17.7%, which is one of the best if not the best in North America.

In terms of our employees, we're now up to 1,200, and we'll be hiring an additional 200 to 300 people this year.

We've also announced the single largest aircraft order in the history of Canadian aviation in the interim since we last talked. We've placed an order for up to 70 737-600 or 737-700 aircraft, of which 30 are firm and 40 are options. That's really to guarantee ourselves our future, to guarantee ourselves the ability to continue growing at the kind of pace we believe Canada will accept WestJet.

We are strong, we are capable, and we are an alternative carrier to Air Canada or primarily the family car, as I indicated.

In terms of your role and the role of Bill C-26, you need the ability to ensure competition is able to grow and develop, given the overwhelming dominant position of Air Canada and Canadian Airlines in the marketplace. The two airlines, as you well know, have over 90% of the market in Canada. That is in excess of what Microsoft controls in their marketplace in the United States. In the United States United Airlines controls 19%, and they are the single largest carrier in the United States.

WestJet is very supportive of your role and of this bill. Bill C-26 will govern the future of aviation in Canada and therefore is a very important bill.

We would like to comment on two proposed sections of the bill primarily. The first is proposed section 64, the notice of discontinuance of service.

As an entrepreneurial company and a risk-taking company, we try a number of different things. We experiment. That's what an entrepreneurial company does. One of the tenets behind proposed section 64 is that if you decide to get out of a marketplace, you have to give four months' notice. To us that would be prohibitive. The reason you want to get out of a market is probably that you're not making money at it. To be held in there for another four months would basically tell us, don't try anything that might be risky, because you know for sure you're going to at least lose four months.

So one of the thoughts we've had is, for up to one year, because we would always give one month's notice—we would always want people to make alternative plans if in fact they'd booked on our airline—we would give at least one month's notice. We don't have a problem with that. After a year, the four months' notice may be viable. But having it up to a year would allow WestJet, as a risk-taking company, as an entrepreneurial company, to try some things, and if they didn't work out, we'd have a year to make that decision. At that point we would give at least one month's notice, which we believe would be good customer service. After we'd been there a year, in the long term, four months would be viable.

In addition, if we currently serve, for instance, Thunder Bay to Calgary on a non-stop basis but decide, for aircraft routing time or frequency or lack of aircraft, that we want to do Thunder Bay-Winnipeg-Calgary, that should not be considered withdrawal of service, even though we're the only carrier on Thunder Bay-Calgary. So I'd also point that out to the committee.

• 1640

In terms of the amendments to the Competition Act covered by Bill C-26, let me give you a real-life example. I'm going to use Moncton, something that's going on. I believe you and Bill C-26 are basically saying that's not the type of thing you want to see.

On February 29 we announced we would be starting service on April 19 from Hamilton to Moncton, one return flight a day, with fares ranging from $129 to $339 on a one-way basis. At that time Air Canada's one-way fare was $678. Air Canada had reduced the capacity on the Toronto-Moncton route by 9.3%, which is relatively consistent with their decrease in the domestic service of about 15%.

In early April they reduced their fares in the Toronto-Moncton marketplace and matched the WestJet fences, which are very unique in the industry. We have a ten-day advance purchase requirement, a five-day advance purchase requirement, and a walk-up fare—three types of fares. They reduced our one-way fare from $339 on a walk-up basis to $249, a reduction of 27%. At the same time they increased capacity by 67%.

Toronto to Halifax, which is all of 50 miles further, is still $678 one way, as compared to $249 from Toronto to Moncton. Montreal to Moncton, which is an awful lot closer, still remains at $517 one way. Obviously this has not been a system-wide seat sale. And there are also fare reductions in places such as Fredericton, Saint John, and Charlottetown, all the catchment area Moncton services.

We believe the fare reductions and the capacity increase are for one purpose and one purpose only, and that is to either drive us from the market or make it very difficult to for us to grow and expand by cross-subsidizing from their very profitable monopolistic routes. We don't believe this is an example of predatory behaviour; we believe this is the definition of predatory behaviour. So our recommendations to the committee are as follows.

First, there has to be a cease-and-desist trigger for the dominant carrier, because most start-up carriers and smaller unique carriers a lot of times cannot withstand the kinds of losses Air Canada can obviously withstand. So the first trigger would be that they could not lower fares lower than a competitor; otherwise they would be free to match fares and fences. We don't have a problem with matching, but to go below us is predatory.

Secondly, capacity increases should be limited to the average increase across the domestic network. That would cause a cease-and-desist order, to say to the dominant carrier, “That's it. You can't do that, but give us time to analyse it.” One of the concerns we've always had is the Competition Bureau takes some time to analyse what they consider predatory behaviour. So that would put the cease-and-desist in for those reasons, and then they would be able to go in and analyse that situation.

Up until now the Competition Bureau has been talking about avoidable costs, and we start to get into a little bit of wordsmithing in terms of what's avoidable, what's incremental, what's marginal, what is fully allocated, and so on. One of the problems we have is you're going to have an army full of bureaucrats all analysing and crunching numbers and trying to come up with what they define as costs, and it's a real shell game in the industry. Particularly when you have all different aircraft types and different routes, the costs are actually a lot of times very difficult to analyse.

Therefore what we're saying is they should be on a fully allocated operating cost basis, as opposed to avoidable, because avoidable in different companies changes completely, whereas if you go fully allocated operating, that doesn't include Robert Milton's salary, but it includes all your pilots and all your operating costs. As soon as you try to go to incremental or avoidable, then it gets into a real shell game.

• 1645

So you have the two triggers—the fares and the capacity—and then you have the analysis work that would come afterwards. But in addition, in order to create competition, the dominant carrier should not be permitted to initiate new non-stop services on non-stop routes started by a new entrant or smaller niche carriers.

I'll go to the example of Air Labrador, which I'm sure you have the example of. They started a service, and a couple of weeks later, I believe Air Nova started a service right on top of it. All these years, they'd never done it, and all of a sudden Air Labrador starts it, and Air Nova comes on top. From our perspective, we don't understand that.

While in some ways this goes against the concept of competition, we are in a very unique situation in Canada, with one airline controlling 90% of the domestic revenue. Bold steps are needed to create competition, and bold steps will have to be taken. Bill C-26's effectiveness will be measured by the ability of new entrants and smaller niche carriers to continue in or enter markets, provide new services, and create a competitive alternative with sustainable fare reductions across Canada.

Thank you.

The Chair: Thanks very much, Mr. Smith, for your submission to the committee. We always welcome your ideas. We've seen at least one of your suggestions already dealt with in Bill C-26, and that is the competition commissioner being able to step in immediately on a cease-and-desist order in those situations—for example, like you on the Moncton run. He wouldn't have to wait and do the six months or nine months of paperwork, etc.; he could immediately do that.

On the other matter, we've heard from other witnesses on the sixty-day rule as opposed to the four-month rule that is in place. We've had more than a few presentations to the effect that if an airline such as yours wants to take a chance, go into a community, and start up, because, say, a mine opened up there and maybe there's an increased population and a workforce that can move, so an airline such as WestJet takes its opportunity to fly out of that mining town into another major city... If then suddenly the mine shuts down, I can't see why we would ask an airline that's decided to go take a chance to suddenly have to stay at that location for four additional months. It just doesn't make any sense to many of us.

So in all likelihood there will be an amendment, even though in the bill there is an opportunity to make application to the CTA to ask for a reprieve from that four months right down to... I think it's thirty days, isn't it? Actually there's no limit. It could be a week if you wanted it to be. But instead of making these applications, it would be better just to have the rule there for thirty or sixty days and then make an application if you wanted to lower that. That is being seriously considered by the committee.

Colleagues, we'll go to Roy Bailey first for questions.

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Thanks, Chairman.

I suppose my first reaction out of the west is congratulations.

Mr. Steve Smith: Thank you very much, Roy.

Mr. Roy Bailey: We're very pleased to see what's happening. And I see my colleagues from Hamilton are also very pleased.

I want to deal with some complaints that have, in an indirect way, been tossed at WestJet, and I want to get your reaction to them. But before I do that, the chairman, Stan, has mentioned the new powers in this act for the competition chief to be able to move quickly. To me, moving quickly means at the snap of your fingers, if they find what is happening, and you've mentioned some instances. So I hope that's the case. But I would suggest your recommendation on the one year to get out after being there and the four months is a good recommendation.

We have heard you do not pay your employees the same rates as the major carrier. We have heard in some quarters, or it's come back to me at least, that they use that as a negative thing. You just announced that you're increasing your employees from 1,200 or whatever it is; it's going up. Therefore you're not having any trouble hiring people at this juncture. The unions of course are not totally in agreement, because you are paying less and so on, so they're a major factor in presenting their cases to me and coming to my office and so on.

• 1650

Do the pilots you employ belong to the International Air Line Pilots Association?

Mr. Steve Smith: No, they do not.

Mr. Roy Bailey: They do not. Okay. I seemed to remember that.

What is the smallest jet you have?

Mr. Steve Smith: We fly only one aircraft type, Roy. It's a 737-200, a 120-passenger aircraft.

Mr. Roy Bailey: Okay. The reason I asked that question is we're hearing from the committees that have come before us that some of the smaller outlying runs are in jeopardy. They're having real difficulties, and of course they use in most cases maybe even a smaller aircraft than that. In the purchase of the new jets, your new order, these are larger aircraft coming in?

Mr. Steve Smith: Yes, they are. They're 137-passenger aircraft.

Mr. Roy Bailey: Okay. You mentioned the expansion that has taken place this summer. Are you eyeing any other areas at the present time?

Mr. Steve Smith: Roy, I think I'm on public record saying WestJet sees approximately 100 aircraft it could deploy in Canada alone. We service cities as small as 25,000, such as Grande Prairie, and there's no reason to believe we can't service most cities above 25,000 in Canada at one point or another eventually, because of our market model, which basically is a stimulation model, as opposed to a share-swap model.

Mr. Roy Bailey: Do you have any desire to get some slots in some of the major airports in Canada?

Mr. Steve Smith: Well, there's only really one airport you require a slot in, and there are only three major airports in Canada we don't serve right now: Toronto, Halifax, and Montreal. We will be in Montreal in the fall and in Halifax down the way. As for Toronto, you never know, but we service Hamilton right now, and it's capturing its own unique marketplace, which we believe will do very well for us.

But let me touch on your other question, which I guess was more a comment than anything, about the salaries we pay at WestJet. We have an agreement with our people, which they've entered into freely, that we do a market study every year and we pay 95% of the regional airline's salary for a given occupation. In our last profit-sharing, which was distributed in November—and there will be one distributed in two weeks—we paid out $3.7 million, which equated to 30% of the salaries. So they gave up 5% and got 30% back. In addition, we have a share purchase program that for every dollar they contribute, we contribute a dollar, so there's another 20% on top of that. It goes up to 20% of their take-home pay.

So we've actually had very little concern from our employees or our people about the compensation levels, because in most cases they're well above their regional counterparts.

Mr. Roy Bailey: Thank you very much.

The Chair: Thank you.

Lou Sekora, please.

Mr. Lou Sekora: Thank you. That was a great presentation.

I have a couple of questions. Number one, you're the first one I've heard say you support Bill C-26. All the others before said they certainly weren't supporting it, or many parts of it they weren't supporting.

The one thing I'd like to ask you is, why don't you fly from Ottawa to Vancouver? What I mean is, there were two airlines flying to Vancouver, one at 6 o'clock in the evening and one at 6:30, and both of them were full. Now one run has been eliminated and you have 45 people always waiting for a cancellation, the tickets are not there, they've been cancelled, they've been wait-listed—you name it, many, many things. What would prevent you from giving this service, let's say from Ottawa to Toronto or from Ottawa to Vancouver?

Mr. Steve Smith: If we're talking about a non-stop service from Ottawa to Vancouver, only two things stop us. One is the aircraft. The 737-200 will not make it. The 737-700 would definitely make it.

Secondly—and it's the biggest problem we have—is the allocation of scarce resources. We have all of 16 aircraft right now, and all of Canada is lining up at our door, airports and communities, saying, “Please, please, we want you in our communities.” Our rate of expansion is controlled by our ability to bring in what we call WestJet-type people.

It's really our culture that has got us to where we are. We are not a low-cost airline. We are a low-fare airline, but we are a high-quality airline, as anybody who's had the opportunity to fly with WestJet knows. We believe the difference between WestJet and any other airline is the customer service we give, and that comes from our people. So that's our limiting factor.

• 1655

I'm not saying it's our intention to fly Ottawa to Vancouver. We believe that's a share-swap game. We're much more in the short-haul business. But still, I'm not saying we would never fly between Ottawa and Vancouver or Hamilton and Vancouver.

Mr. Lou Sekora: But if you had the planes, you would consider some of the shorter routes and maybe even a route such as Ottawa-Vancouver on a daily basis?

Mr. Steve Smith: We would consider it. I don't think it would be our focus. People don't drive between Ottawa and Vancouver or between Toronto and Vancouver or Hamilton and Vancouver. It's too far. So while you're thinking there are people who would have flown with somebody else, that's not really our game. We're in the stimulation game. We take people from the car, people who wouldn't have flown at all, through our low fares. I'm not saying we would never consider it, but it would not be high on our priority list. We tend to be after the short-haul business.

Mr. Lou Sekora: Thank you very much.

[Translation]

The Chairman: Mr. Guimond.

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): Mr. Smith, let me take this opportunity to congratulate you and the members of your management team on the outstanding success of WestJet, especially in western Canada. I must admit that I have not yet had the opportunity to fly with you, but I wish to go on record as saying that my colleagues from western Canada have often spoken of your corporate vitality.

You mentioned your plan to expand into Montreal by the fall. Il imagine that you would be using Dorval. Would you tell us how your negotiations with ADM are going? Do you find their attitude open? Are the talks going well? When Ms. Pageau-Goyette testified before the committee, three weeks ago, she seemed to be saying that all was well. But when we spoke with people from the industry and other stakeholders, including other airlines, except for Air Canada, we were told that it is not always easy to deal with Aéroports de Montréal's management, and that it is sometimes even difficult. This discourages certain airlines from expanding into Montreal and inhibits competition.

[English]

Mr. Steve Smith: Thank you very much for your question.

We are actually considering three different airports in Montreal and have not made a decision yet among St. Hubert, Mirabel, and Dorval. At this point we are really the bride. We are being courted by all three, by ADM and St. Hubert. At this point we have not established a working relationship. Therefore at this point our relationship is what I consider very rosy, because we are a potential purchaser of facilities. My guess is that once that courtship is over and we've made a decision, the relationship may change. But up to this point the relationship has been good and they've been very cordial.

Having said that, they're obviously a lot more interested in having us in Mirabel than in Dorval. The rates at Dorval are probably twice to three times as much as they are at Mirabel. So we have to make some tough business decisions, and we'll be doing that over the next couple of months, prior to our commencement of service into Montreal.

[Translation]

Mr. Michel Guimond: When you answered Mr. Bailey's question—I was perhaps at the time paying attention to something else—I understood you to say that you would continue to use only Boeing 737-200's and that you would be operating a fleet of approximately 100 planes. I imagine that you have opted for this type of aircraft to facilitate maintenance. It is easier to operate only one type of aircraft. In the foreseeable future, you would be using only Boeing 737's even on the Montreal-Hamilton route.

[English]

Mr. Steve Smith: That's correct. We currently only operate one aircraft type. For a period we'll operate the 737-200 and the 737-700, but eventually we'll only be a 737-700 operator. What we get from that are tremendous economies of scale in terms of pilot training, maintenance, spares, and operational efficiencies, which we then pass on to our consumers or to our guests who fly with us. We then can keep the fares low, which again is part of the reason for our being. If we didn't have the low fares, I don't think we'd be here talking to you today.

• 1700

[Translation]

Mr. Michel Guimond: Are your employees, including pilots, flight personnel, machinists and ground crews unionized? Have you signed a services contract with any organization such as Hudson General Aviation Services Inc.?

[English]

Mr. Steve Smith: No, they are not. No function at WestJet is unionized.

The Chair: Tony Valeri, please.

Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chairman.

Thank you for coming before the committee. Your company has certainly brought some innovation to the airline industry from which I think consumers will benefit.

You mentioned proposed section 64 of this particular piece of legislation. You also talked about the Moncton example. From your example concerning fares and capacity going into Moncton, I take it your analysis of it is that Air Canada is not providing that same type of fare structure across all its routes but essentially focusing on you as new entrants into a marketplace.

That being said, I'm looking for a reaction from you to how we should deal with your definition of predatory pricing, which I think was quite clear, in an effective and an efficient manner, where the rules are known before someone enters the market, rather than a situation where we have a cease-and-desist order and then there is an actual review of whether this was or was not predatory pricing.

What I'm leading to is this: How do you react to a change in the exit notice provisions that would attach them solely to the dominant carrier? For instance, in a situation such as Moncton, if the dominant carrier increased capacity and reduced fares, they would know full well beforehand that this kind of predatory behaviour would require them to continue that service at that capacity and at that fare level for a period of time before being able to provide an exit notice.

It would apply only to a dominant carrier, so that you wouldn't have this selectivity, where a dominant carrier is able to go in, do this type of thing, and then have the review take place. They would know beforehand, before they entered that market, that if they went into Moncton, they'd actually be making an economic case for going into Moncton, and if they could go into Moncton at that fare rate and at that capacity level, they'd be able to sustain that.

How do you react to that?

Mr. Steve Smith: My comment there, Tony, is that is a possibility. When you think about it, though, what it doesn't do is create competition, really. If they're successful at knocking out the incumbent, what's the penalty? Well, they have to continue this service for a period of time, and at that point they are free to do what they want to do.

I think what both Bill C-26 and this committee are looking at doing is encouraging competition. I don't believe, if somebody's going to act predatorily, you should say, “Well, the penalty is that you have to keep going.” In a cost benefit analysis, that might make sense for them. What you have to do with the dominant carrier—being 90%—is limit his ability to...

In the scheme of things, for a $9 billion company, if they lose a couple of million dollars on Moncton, that just gets lost in the rounding, even if that's for two years. So I don't believe that's a big reason for them not to do something.

I think what you need to do is say, if up until now you've had only 100 seats a day Toronto-Moncton, you can't all of a sudden go to 200 seats a day and discount the heck out of them to try to remove someone else from the marketplace.

Mr. Tony Valeri: I have just one final point, Mr. Chairman.

Is there anything beyond the new provisions with respect to the Competition Act that you would like to see to help a start-up, or a company such as WestJet?

Mr. Steve Smith: At WestJet we're very pro-competition. We were born in an era of competition and we'll survive in an era of competition. So I'm not one to come here and say, okay, handcuff them here, handcuff them there, don't let them do this, don't them do that.

• 1705

There are some pretty obvious things on the predatory practice side, and other than that, the potential protection of some of the markets we're establishing, or the markets that Air Labrador or whoever else may come along may establish, to give us a head start. Basically Air Canada has the country already mapped out and has been there with Canadian and the regional carriers, so they've already done all that. For them to come in and create a new market they've never been into before, which someone else has already started, just doesn't seem right.

So I'm saying other than that, let's not get into this real anti-competitive behaviour. Let's everybody out there compete, because we want competition in the airline industry. That's what we're here for.

Mr. Tony Valeri: Thank you.

The Chair: Bill Casey.

Mr. Bill Casey: Thank you.

Air Canada has never had a run from Moncton to Ottawa. You're planning on starting one in June?

Voices: Oh, oh!

Mr. Steve Smith: Let me write that down, Bill.

Mr. Bill Casey: So your proposal would be that Air Canada would be prevented from initiating a new flight from Moncton to Ottawa.

Mr. Steve Smith: Only if WestJet starts a Moncton-Ottawa flight—

Mr. Bill Casey: And Air Canada has never had one.

Mr. Steve Smith: —and Air Canada has never had one, right. If we started that route, they wouldn't be able to come on top, because that would be a unique route for us. If nobody's flying Moncton-Ottawa and they decide to do it, go ahead. That's not a problem. It's just when somebody else comes in and starts, and then they come on top.

Mr. Bill Casey: Right. So what happens now if you start in June and Air Canada all of a sudden initiates new flights to go head to head with you? Right now there's no protection, but under your proposal there would be.

Mr. Steve Smith: Right.

Mr. Bill Casey: Okay.

I'm really interested in an awful lot of things about your business. You must be having a great time.

On the pay plan, did you say you pay 95% of the current rate of those in the industry around you?

Mr. Steve Smith: The regional airline industry. We consider ourselves a regional carrier, so we pay 95% of the median salaries in the regional airline industry, based upon studies.

Mr. Bill Casey: Who do you negotiate with if your staff isn't unionized?

Mr. Steve Smith: We don't actually have negotiations. We don't have contracts. We have discussions that lead to an agreement.

Mr. Bill Casey: Who do you have those discussions with?

Mr. Steve Smith: We have a group of employees called PACT, seven employees. PACT stands for pro-active communication team. Their whole role is to communicate with the rest of the organization. So we decided to talk about compensation and we turned it over to them and asked what they would do.

At our company we're very big on turning everything over to our people. We basically said to them, “Here's our dilemma. We want to create wealth and then distribute it, which is a concept everybody in WestJet has bought into. How would you structure the compensation program?” The first one we came back to our PACT people with they rejected, because they said it was too rich. So we said, “Okay, how would you do it?” They went out, did the study, and this is what came back, the agreement of 95%, which has really been a basis behind WestJet.

Mr. Bill Casey: Has there been any attempt to unionize your people?

Mr. Steve Smith: I believe there was one attempt about two years ago on the flight attendant side, and it did not go anywhere.

Mr. Bill Casey: Did they vote on it or anything?

Mr. Steve Smith: No. My understanding is they walked in the same day the profit-sharing cheques were being handed out—

Voices: Oh, oh!

Mr. Steve Smith: —and therefore it didn't get very far. The timing was poor.

Mr. Bill Casey: You mentioned two types of models. One was the share swap. What was the other type of model?

Mr. Steve Smith: We have two. We have the profit-sharing program—

Mr. Bill Casey: No, but you were talking about the model of your business. You said you're modelled after...

Mr. Steve Smith: Oh, okay. We stimulate the marketplace, as opposed to playing the share-swap game.

Mr. Bill Casey: All right.

Mr. Steve Smith: The industry used to grow at about 3% a year historically. Right now, since we started in 1996, our markets have grown an average of 250%. So we're creating a whole new marketplace.

Mr. Bill Casey: Creating markets, rather than getting market share.

Mr. Steve Smith: Rather than trading it between us and Air Canada and Canadian.

Mr. Bill Casey: What's a WestJet type of person?

Mr. Steve Smith: A WestJet type of person is somebody who will never ask, “Why am I doing this?” They will say, “What else can I do? How can I help out?” For instance, on every one of our turns, our pilots come back and groom the aircraft. You won't find that in any other airline.

Mr. Bill Casey: The pilots?

Mr. Steve Smith: The pilots come back and clean the aircraft. Our aircraft, for anybody who has flown WestJet, are immaculate, absolutely immaculate, because our pilots and the flight attendants and all the ground crew—we don't have groomers—come back and clean the aircraft.

That's all part of people who belong to a company, working with a company.

Mr. Stan Dromisky: Vacuum once in a while.

Mr. Steve Smith: Actually, you will.

Mr. Bill Casey: Back on the pay plan, what percentage of the profits do you turn back to employees? How do you work that?

Mr. Steve Smith: It's based on a margin basis. Between 10% and 20% of our pre-tax profits are given back to our people. It always matches the margins, so this time 17.7% of the profits were given back, pre-tax.

Mr. Bill Casey: You had a 17.7%—

The Chair: Bill.

Mr. Steve Smith: Margin, and it's out of the profits we take this.

The Chair: Bill, I'm going to have to bring you back on topic. The bill's not going to be dealing with legislation on whether an airline should be unionized.

Voices: Oh, oh!

[Editor'Note: Inaudible]

Mr. Bill Casey: —

The Chair: Well, that's interesting. But buy him a beer after work and talk about it.

You have one minute.

• 1710

Mr. Bill Casey: Part of our problem in Atlantic Canada—and it's probably the same across the country—is no competition on the regional lines. Now you've come into Moncton, and CanJet apparently is going to start a discount airline into Atlantic Canada. But what can we do to stimulate competition from Halifax to Saint John, New Brunswick and from Saint John to St. John's, Newfoundland and Charlottetown? How can we stimulate regional airlines?

Mr. Steve Smith: In WestJet's case it's a matter of time. If you want it faster than that, I would suggest it's going to be very difficult, because those very short-haul routes with very little connection traffic, because you need to build the network, are very difficult to turn profitable on a quick basis.

Mr. Bill Casey: Are you actually considering eventually addressing those routes?

Mr. Steve Smith: With 100 aircraft, absolutely. We see a lot of those short-haul markets, and that's what we're experts at. We're not great, with all due respect, on the long-haul routes. We're good on the short-haul routes. That's what we do in western Canada, and that's what we believe we can do across Canada.

Mr. Bill Casey: Why is—

The Chair: Thank you very much, Bill.

Stan Dromisky, please.

Mr. Stan Dromisky: Thank you very much, Mr. Chairman.

Mr. Smith, I'm from Thunder Bay, and on behalf of all the people in Thunder Bay and that whole region, I thank you very much for the excellent service you're providing from our community both west and east.

The Chair: Thank you, Stan.

Bev Desjarlais.

No, I'm kidding.

Voices: Oh, oh!

Mr. Stan Dromisky: You're young, and from everything I've read about you in the business magazines and everywhere else, I get the impression you're energetic, ambitious, very thoughtful—

Mr. Lou Sekora: How much for the ad?

A voice: He can't play golf, though.

Mr. Stan Dromisky: —and intelligent enough as far as your work is concerned and the kinds of activities you're involved in and in your relationship with people.

So there I look at you and I say to myself, in light of the kinds of questions I asked the last group that was before us, here's a man with a vision. I can see you leading the company or whomever you're working with and your colleagues and this pack group you have and getting to the point where you're going to say, let's keep on expanding or let's make an alliance of some type with international carriers to expand our network in Canada domestically to connect with international carriers. What are the obstacles in the future as far as that kind of plan is concerned?

I'm not even asking you if you're thinking in those terms, but I think growth will take place, and the demand will have a great bearing on the kinds of decisions you and your colleagues make in the years to come. I think you might be heading in that direction. What do you foresee, as far as this bill is concerned, as obstacles to that type of venture, besides money?

Mr. Steve Smith: Actually money is not an issue for us at the moment.

Firstly, thank you for the ad. I appreciate that. I'll take a copy of that to my board of directors. Secondly, nothing is stopping us from having a relationship with international carriers, nothing at all.

Mr. Stan Dromisky: Very good.

Mr. Steve Smith: It's a matter of focus and time.

Mr. Stan Dromisky: In light of everything that has been happening since December 21 with the letter of understanding, from your knowledge and the way your system is operating and the kinds of communication systems you have built into your system with your colleagues, are you aware of any type of strategy, undertaking, or measure that Air Canada has implemented since December 21 that's having some type of impact on your operation?

Mr. Steve Smith: No, except Moncton. Air Canada matched us on our Thunder Bay-Toronto and Hamilton-Thunder Bay routes. That's what competition is all about. We're pro-competition. That's what this bill should do: ensure there's competition in the airline industry. Other than Moncton, everything else has been as head-on competitors without a problem. It's when you start to do predatory-type actions that the ball field becomes unbalanced toward the big guy.

Mr. Stan Dromisky: Thank you very much, Steve.

Mr. Steve Smith: Thank you, Stan. I appreciate it.

The Chair: Bev Desjarlais, please.

Ms. Bev Desjarlais (Churchill, NDP): Following up on the international carriers, we had British Airways appear, and they indicated it would be almost impossible to align with, say, the WestJets or charter carriers, because of the way reservation systems and those things are set up. Is that a fair statement, or do you think it is something that's feasible?

Mr. Steve Smith: It's absolutely feasible. Having said that, we don't service Toronto, and they do service Toronto. I'm not saying it would happen tomorrow, but in the long term it could absolutely happen.

Ms. Bev Desjarlais: Would that be an extremely high increase to your costs? Would you still be able to provide that low-fare service?

• 1715

Mr. Steve Smith: Not if BA paid for it.

Voices: Oh, oh!

Mr. Steve Smith: Seriously, it may be worth it to them, as opposed to paying Air Canada $1,000 to fly from Ottawa to Toronto. There are ways around this type of stuff.

Ms. Bev Desjarlais: You talked about the situation with Moncton and Air Canada coming in. At what point would it be possible for another airline to come on? You have that Moncton-Hamilton route. At what point would another carrier be able to come in there without it being seen as predatory behaviour? Would you be in existence for a year and then another carrier could come on and offer a route, or would the capacity have to reach a certain level, or should they just not be able to come on that route?

Mr. Steve Smith: I'm saying that from a predatory side it won't be other carriers. You have one dominant carrier with 90%. That's the one we're concerned about creating competition with. If CanJet, for instance, starts up on Hamilton-Moncton, I don't think you could have predatory practices from a CanJet.

Ms. Bev Desjarlais: At what point could Air Canada come in there and it wouldn't be considered predatory? If they come in and offer the same rate, it's fine.

Mr. Steve Smith: Right. I'm saying match fares without a problem and don't increase capacity beyond the normal increase domestic-wide. Otherwise you're going after a particular market. Then we compete.

Ms. Bev Desjarlais: The other comment I wanted to make follows up on Mr. Guimond's question about Mirabel and Dorval. I was certainly of the impression that WestJet wasn't even considering Dorval after the presentation by Pageau. It was certainly my impression that she felt Dorval was much too costly and WestJet wasn't even considering it. Maybe I misunderstood. So it was interesting to hear your comment.

Mr. Steve Smith: No. We are considering all three airports at the current time, and we have not made a decision.

The Chair: In fact that witness said she was open for any kind of business.

Jim Gouk, please.

Mr. Jim Gouk: Certainly your recommendation with regard to exit notice seems to make a lot of sense. I don't think anybody is going to have trouble with that. I would say without much doubt that recommendation will come forward from someone on the committee.

With regard to the other one, I'm surprised at the mildness of your request with regard to predatory action by a major airline. With the example you gave, where the fare to Moncton was dropped but the others remained high, is there an alternative in terms of regional pricing on the part of, in this case, Air Canada, to say, “If you want to drop your fare to Moncton, you can go ahead and drop it down to $50 if you want, but all your regional fares in the area must be at the same relative rate”? Is that an alternative? Is it viable to do it that way on a regional basis, by saying, “If you think you can service Atlantic Canada at those kinds of rates, go right ahead, but you can't single out one airport to be dirt cheap and everything else to be expensive”?

Mr. Steve Smith: To be honest, that's a good point, except I would then say all routes of the same distance and of equivalent distance should be discounted the same amount.

Every airline in existence normally has what's called a fare formula. That's based on their costs, and the costs are usually a function of the distance they fly. There's always a fixed cost. So there's a fixed cost and a variable, depending on the mileage they fly. Every airline, including WestJet, has a fare formula based on their costs.

For them to come in and really abrogate on the basis of that distance, there's something different there. If you then said, “Everywhere you fly you have to charge that same fare,” that's one way of looking at it. That then becomes their fare formula, and if they can make money at that kind of level, then I don't think anybody can say anything, because at that point it would pass that test we talked about, which is the fully allocated operating costs.

But my guess is that for all these years, these fares have been put in place and the airlines have not made money, so to drop it all of a sudden and to increase capacity is not about to make them more money, with all due respect.

Mr. Jim Gouk: Sure it wouldn't, but I'm just looking at what's the most viable way to deal with an unfair predatory action.

Mr. Steve Smith: Again I would suggest to you that's not necessarily going to create competition. All it's going to do is make the big guy take losses on a number of routes.

• 1720

Mr. Jim Gouk: I didn't hear a termination point on your suggestion of protection for a new start-up route, where someone piggybacks on top of it. I would assume you're not saying they can never fly that route ever.

Say you started a route from Ottawa to Moncton. You're saying Air Canada should not be able to come along and piggyback on you, because you did it after all the time they didn't. Is there some point somewhere down the road at which they would then be able to do that, if it were a growing market?

Mr. Steve Smith: That's a good point. I would say about a couple of years. After that point, it should be a mature market. You'll have gotten everything you could out of that market. You'll have stimulated that market and it will now be there. Then to have somebody else, such as the dominant carrier, come in could be an alternative.

Mr. Jim Gouk: I would suggest to you if someone were about to put in a recommendation or amendment such as that, there would have to be some point of terminus on it. Obviously you're starting routes yourself that are not piggybacking on new routes Air Canada is running, but you are running on routes they are running. So the argument is going to be, if you're allowed to do it to them, why can't they do it to you? You've explained that to a point, but there has be a terminus for it. You're suggesting two years would be a realistic figure?

Mr. Steve Smith: Yes, I think after two years you would have established a foothold in the marketplace in that particular route. But again, understand the whole concept behind that was really to allow your start-up carriers and your smaller regionals some monopoly routes so that they can start to build competition. So when they go head to head against the big guy eventually, because they will not always be starting up those kinds of routes, at that point they'll be able to create a profit base on which they can then expand.

You know, you can't walk into a Toronto-Montreal or a Toronto-Halifax and make money on day one, particularly against an air carrier such as Air Canada. So you're going to need a profit base on which to build.

The Chair: Thanks very much, Mr. Gouk.

Steve Smith, thanks very much for your presentation to the committee and thank you for answering all our questions. If we have any more questions, individually or collectively, I know we can call on you and you'll have a straightforward answer for us. We appreciate it.

Mr. Steve Smith: Thank you, Stan.

Thank you to all the committee.

The Chair: Thank you.

Now, colleagues, the bells will start to ring in about eight minutes, so that leaves time for a presentation from the International Air Line Pilots Association before we have to leave here to go for a vote. So shall we hear from them for eight minutes, then go and vote? Then we'll come back and ask the witnesses questions, okay? So if we could have Captain Weeks before us, we'll get this done.

Colleagues, just for your information, after the vote, get right back here, because we're going to take 20 minutes to eat and then come right back in here and start asking questions so that we don't delay our witnesses too much.

Mr. Roy Bailey: And leave everything here.

The Chair: Oh, yes. But we're hearing the witness right now.

Okay, colleagues. Our next witness is Captain Robert Weeks, president of the International Air Line Pilots Association.

I hope you will would pass along our best wishes to Mike Lynch, the former president, who is now retired and I guess out there sailing somewhere, God bless him. We look forward, Mr. Weeks, to your presentation of five to eight minutes, and then we can come back after our vote for questions.

Captain Robert Weeks (President, Canada Board, International Air Line Pilots Association): Thank you very much. I'm sure Mike's enjoying the beautiful spring weather that the national capital region is enjoying today.

I'm Captain Bob Weeks. As stated, I'm the newly elected president of the Canada Board of the International Air Line Pilots Association. With me today are Captain Pierre Orlak from Canadian Regional Airlines, Captain Bruce McConchie from Canadian Airlines, and Captain Michel Alexandre from Air Transat.

With the important exception of our pilots at Canadian Regional Airlines, many of the issues affecting our members that have arisen in the restructuring process have begun to be dealt with and in many instances have been resolved successfully through the channels of collective bargaining. We are pleased to report that ALPA has entered into a number of agreements with the various employers involved in the restructuring. These agreements provide job security guarantees for our pilots and make provisions for various operational changes that have arisen from the transition.

• 1725

In the case of the regional pilots, agreements have been made that establish the procedure by which the seniority lists and the operations of the new, merged regional carrier will take place. The pilots at Canadian Airlines have negotiated, subject to pilot ratification, a long-term agreement with Canadian Airlines and Air Canada that provides for job security during the integration of the two airlines. While the critical issue of seniority is still to be settled, preliminary confidential negotiations have begun on this issue. We are hopeful that an agreement can be reached that will provide for a fair and equitable seniority resolution, and we do not consider it appropriate at this time to comment specifically upon seniority integration.

Much remains to be done, the most obvious of which is the integration of the seniority lists at both the main line and regional carriers. These are likely to be the most difficult issues we will face; nevertheless, we wish to bring to this committee's attention that collective bargaining has once again proven an effective method for the resolution of extremely difficult labour issues. We would like to thank the committee for including in the legislation articles that have encouraged both labour and management to reach these agreements.

As I indicated at the outset, the situation at Canadian Regional Airlines is an exception to the relatively positive direction in which the collective bargaining process is proceeding, which, we respectfully submit, highlights a serious weakness in the bill. The sale of Canadian Regional Airlines remains pending. This leaves the 2,200 employees at the airline, including the 550 pilots we represent, with an uncertain future.

As we stated in our November 15, 1999 submission before this committee, the business case for the divestiture of Canadian Regional Airlines is far from clear. To date, we are unaware of any further studies that would support the claim that a divested regional carrier could be viable. Further, we have yet to hear any clear arguments as to how the divestiture of this airline would create a more competitive environment. It is apparent that the policy underlying the sale of Canadian Regional Airlines has not been sufficiently studied.

The job security and employment protections accorded the CRA employees are completely inadequate. Unlike any of the employee groups at Air Canada or the Air Canada regional airlines, the pilots at Canadian Regional Airlines do not enjoy Air Canada's job security guarantees. Air Canada's undertakings, incorporated into the bill in clause 19, are not applicable to these employees in the event of a sale. In fact the conditions that have been stipulated for the sale effectively prevent us from negotiating agreements that are necessary to deal with the day-to-day collective bargaining, let alone the difficult issues arising out of the restructuring.

We have been repeatedly told by CRA management, and perhaps with good reason, that there is nothing they can do without jeopardizing the conditions of Air Canada's undertaking. In the extreme case, if the CRA employees were laid off the day after a sale, it would appear the government and Air Canada would have washed their hands of their responsibility to the employees.

As a result, unlike any of the other employee groups directly affected by the restructuring of the industry, the employees at CRA are left without adequate job security. The Competition Bureau, through its legislation, is singling out the Canadian Regional Airlines employee group as a direct result of their insistence that the airline be divested. We consider this situation completely unfair.

It is noteworthy that Air Canada has consistently expressed its preference not to have the airline sold to a third party and has made it clear in its agreements with us that absent the Competition Bureau's insistence, it would be fully integrated into Air Canada's regional network.

We see no reason that these employees alone should bear all the risk of the government's experiments in competition policy. Further, we do not understand the policy rationale for providing the least amount of labour protection to those employees who have been made the most vulnerable. It is absolutely necessary to thoroughly review the protections that are provided to the CRA employees, especially since the circumstances of the CRA pilots are the immediate and direct result of government's competition policy.

We consider it essential for the government to ensure these employees are provided employment protections at least comparative to those received by the employees at the Air Canada family. We therefore strongly urge the committee to make this recommendation.

• 1730

As a final issue, we think it appropriate to address the recommendations for amendment made by the Commissioner of Competition in respect of reciprocal cabotage or modified sixth freedoms between Canada and the United States. The Competition Bureau is suggesting that Canada attempt to negotiate with the United States what it terms “modified sixth freedom rights”. These rights would allow U.S. carriers to provide air transportation between two Canadian points via a point in the U.S., an example being Vancouver to Montreal via Detroit. Presumably in this scenario, Canadian carriers would be able to provide air transportation between two U.S. points via a Canadian point, an example being Seattle to Boston via Toronto.

The commission's proposal would completely redefine the concept of sixth freedom rights. Those rights have always been limited to international air traffic. The commission's proposal, on the other hand, is plainly a proposal to permit cabotage in Canada's domestic air services. This is a proposal that must be rejected out of hand.

First, United States laws preclude foreign air carriers from selling air transportation in the U.S. domestic market. As the commissioner is certainly aware, there is virtually no likelihood these laws will be changed in the foreseeable future. Hence any reciprocal aspect of this proposal is open to serious question. Indeed we are unaware of any initiative whatsoever on our government's part to seek changes that would be considered by U.S. lawmakers.

Moreover, in ALPA's view, reciprocal modified sixth freedom rights make little sense for Canada if we wish to maintain viable air carriers of our own. The vast majority of Canadian domestic traffic is east-west. Much of it can be carried from one point to another via the U.S. carrier hubs, as the commissioner suggests. The size and scope of the U.S. carriers in a modified sixth freedom environment would position them to attract enough Canadian traffic to have a detrimental effect on the viability of Canadian carriers.

The potential for loss of Canadian jobs at all levels of the airline industry is real. In particular, the current strength of the Toronto hub would be considerably weakened. The proposal to use modified sixth freedom rights for domestic competition would be inconceivably bad aviation policy. We therefore urge the committee to reject the Competition Bureau's proposal on modified sixth freedom rights.

ALPA thanks you for this opportunity to make our views known to the committee. We would be most pleased to answer any questions after the vote. Thank you very much.

The Chair: Thanks very much, Captain Weeks.

The situation now is that the bells are ringing, calling us to a vote, so we will heed the call of the bell and return right after. We'll probably join you back here at, say, 6:30. So, gentlemen, you have an hour, and we'll be back at 6:30, after our recess.

We're recessed until 6:30.

• 1735

• 1838

The Chair: Colleagues, we're resuming meeting number 51. We have received a presentation from the International Air Line Pilots Association, Captain Robert Weeks, Canada Board President. We'll now go into questioning from the members.

Roy Bailey, please.

Mr. Roy Bailey: Thanks, Mr. Chairman.

I took a break from this committee and went to another committee that dealt with some severe problems in my own area, on a different topic, and that was people and how they were affected. From the very beginning of this, which started last fall, I've been extremely concerned, more as an individual, about the welfare of people down the line and what's going to happen.

In talking to different people as I move around, everything isn't exactly harmonious. I suspect no one thought it ever would be. But it seems to me that some of the people in the big arena are being left out of the picture totally. I feel very bad about that. I don't know if it was totally impossible to bring them in, but I guess the Canadian regional people, as you mentioned... Was there no consultation that ever took place in this whole thing that would take a look at the whole picture, with all of the people involved, to bring it to some kind of a conclusion or to some place, from last summer till now, whereby people could have at least some hope on the horizon? Even between those who have some sort of guarantee, do you know if there has been any professional attempt through the Pilots Association that would bring a harmonious relationship as this merger proceeds? Is there any professionalism, or has anybody been involved at all?

• 1840

Capt Robert Weeks: To address your second question, certainly the International Air Line Pilots Association has made progress by negotiating with the corporations Canadian Airlines and Air Canada in regard to Canadian airlines. The pilots at the regional carriers have reached agreements between themselves on how they will proceed in the event the Air Canada regional airline system is put together.

Unfortunately those agreements at the regional airlines have one clause in them that deals with the divesture of the Canadian Regional Airlines group. Until that divesture question can be settled, there can be no peace or comfort for the pilots at Canadian Regional Airlines as to where they're going. That's the principal issue.

Mr. Roy Bailey: Has your organization made any attempt with management as such to present the views of all your group, plus other people in the total picture?

You see, I'm concerned about those pilots who work for the regional airlines, who are part of your group. As you have stated, your organization wants to pull them together, but that's a different thing from the management coming at the same time. That's what worries me. I'm not concerned about your association. I appreciate what you're doing and what you've done, but it may fall short of protecting the total scene, as I see it.

Capt Robert Weeks: I can't really speak on behalf of management, but management has signed those agreements with the regional air carriers. The reason for the one clause that isolates the Canadian Regional Airlines pilots is the Competition Bureau's insistence that Canadian Regional Airlines be put up for sale. If that insistence were removed, then of course the transaction of putting together the Air Canada regional airlines system could take place from a pilot organization point of view, and those pilots would then be able to have comfort.

Mr. Roy Bailey: Thank you, sir.

The Chair: Thanks, Roy.

Mr. Guimond, please.

[Translation]

Mr. Michel Guimond: Thank you, Mr. Chairman.

My question is directed to captain Alexandre, who is representing Air Transat. We have had the opportunity to meet with your employers, that is to say with management. They have complained about certain of Air Canada's current practices. Canada 3000 has also described for us certain practices, including the fact that it can no longer use, as it was able to do for several years, the training facilities that Canadian has in this country. That is why certain employees—I am not sure whether they were pilots or flight personnel—have to be trained in the United States. Air Transat told us that it had opened up a route in the Far North, to Whitehorse or Yellowknife. The airline is encouraging Europeans to come and view the snow, take in polar bears and igloos and find out more about the Inuit culture. It had signed a number of agreements with Canadian and for several years was able to use its facilities, including ramps and ground access facilities.

We know that charter companies such as Royal, Air Transat and Canada 3000 are going to play an important part in enhancing competition. Would you outline your position as a pilot with respect to the cabotage issue?

• 1845

Captain Michel Alexandre (Senior Executive President, Air Transat, International Association of Airline Pilots): Your first point has to do with the problems we have experienced with Air Canada. It is true that there have been problems, but I cannot speak for our company's management because I am not here in that capacity. You are right to say that we have opened up the Whitehorse and Yellowknife market, but we cannot use the ground services that are there, including the ramp, the airplane tractors and the plane cleaning services that Canadian used to offer exclusively and that are now being operated by Air Canada. There has been a breach of contract and, as far as I know, we can no longer make stopovers in those two cities because of the lack of ground services since, obviously, there are no alternative suppliers in such small communities.

Similar problems have occurred in Toronto where we operate Boeing 757's and where Air Canada operates Boeing 767's which belong to the same family of airplanes. We had agreements which have not been renewed. When we needed parts, we could trade and repair our planes without causing passengers any undue delay. I understand from what the company and my pilot colleagues have said that whenever there is a breakdown, we must find some other way of obtaining the part we need and that this caused much greater delays for our passengers.

Your second point concerned the cabotage issue. Mr. Weeks indicated earlier on that the sale of Canadian Regional might jeopardize the jobs of some 550 Canadian Regional pilots, whereas Mr. Smith, speaking on behalf of WestJet, spoke of a considerable expansion which would enable his company to increase its domestic fleet from 16 to possibly 100 planes. The Canadian domestic market is only part of the market our company operates in and certain other airlines operate charter flights. That market is obviously not, for Air Transat, a major part of its activity. Canada 3000 and Skyservice offer many domestic flights.

I believe that the competition commissioner's recommendation concerning a bilateral cabotage agreement might enable our American neighbours to compete with us on our own routes. As a pilot, I believe that many new seats will become available and that many airlines will be competing, including American airlines, even though we do not presently know how all this is going to come about. As far as I know, the United States have not yet offered this type of bilateral agreement.

[English]

The Chair: Ms. Desjarlais, please.

Ms. Bev Desjarlais: In your presentation, Captain Weeks, you mentioned that the critical issue of seniority is still to be settled. Since that seems to be the biggest issue with all of the labour groups concerned, what exactly is happening with the issue of seniority with the pilots? What's the status of it?

Capt Robert Weeks: Currently negotiations are going on, and these negotiations are very sensitive in nature. We would prefer to let the committee at Canadian Airlines and the committee representing the pilots at Air Canada, ACPA, negotiate these in some security of confidentiality.

Ms. Bev Desjarlais: Okay. Without knowing exactly the specifics, is there an intent that the issue of seniority will be settled in the near future, or will it be settled, oh, say, after the merger fully takes place?

Capt Robert Weeks: There's no official timeline on how long this process will take, but I'm sure both parties are anxious to get on with it and see what the result will be.

Ms. Bev Desjarlais: Okay.

Captain McConchie, you're with Canadian Regional, right?

Captain Bruce McConchie (Former Chairman, Master Executive Council, Canadian Airlines; International Air Line Pilots Association): No, Canadian.

Ms. Bev Desjarlais: Canadian, okay.

To the representative from Canadian Regional, how many communities does Canadian Regional fly into that would obviously be affected if there were a divestiture of the regionals?

Captain Pierre Orlak (Chairman, Master Executive Council, Canadian Regional Airlines; International Air Line Pilots Association): Canadian Regional flies coast to coast right now. I'm not sure of exactly the number of communities we fly into, but I think it's about 55. So it may be a change in how we do business.

Ms. Bev Desjarlais: Roughly—and you can be really rough with this—how many of those communities would have less than 25,000 people? The majority?

Capt Pierre Orlak: No, I would say probably one-third would be a fair number.

• 1850

Ms. Bev Desjarlais: The reason I'm asking that question is that I know Mr. Smith from WestJet indicated they normally wouldn't go into a community unless there was roughly 25,000 people. I'm just concerned as to how many communities may not have that additional service.

Capt Pierre Orlak: Right. There's a lot of companies that are affiliated with Canadian Regional, Calm Air in Manitoba, Pacific Coastal on the west coast of Canada, Air Georgian in Toronto.

Ms. Bev Desjarlais: But although those companies are affiliated, Canadian Regional still goes into those communities, is that right?

Capt Pierre Orlak: Right. But they in turn go to other smaller communities on our behalf. So there's a lot of communities that are probably under that 25,000.

Ms. Bev Desjarlais: If Canadian Regional had to be divested—and this is purely in your opinion—are there buyers out there for Canadian Regional? Or do you think those affiliates might possibly take up the Canadian Regional routes so there would be, say, fewer carriers as such going in, or...

Capt Pierre Orlak: The biggest concern we have as employees with respect to the sale of CRA is that there may in fact be somebody out there who would like to buy us. I think that's what has caused the delay in the sale. The concern then is how would we compete against somebody the size of Air Canada. In the domestic market it would be very difficult, and we would probably end up maybe a year or two down the road being into bankruptcy or insolvency again.

The Chair: I'm sorry, Mr. Orlak, what was it you said about the Canadian Regional and a buyer?

Capt Pierre Orlak: Right now, with Canadian Regional Airlines being potentially in a sale process... an undertaking of Air Canada buying Canadian was that CRA must be put up for sale for a period of time. The delay in that sale process has caused an extreme amount of problems internally with the staff, etc.

The Chair: Yes, because there certainly have been a number of people who've written to me, I know, who work at Canadian Regional Airlines. If any of them are listening to this particular show today they should know that this is a stepped procedure. One of the most important steps is the fact that there is evaluation being done on Canadian Regional Airlines at this moment, or the price could be set at an amount that no one would be interested in it and Air Canada wins and folds it into their tent. Before you know it, they'll have more than 85% of the market in Canada when it comes to flying around in this country.

Sure, we don't like uncertainty—no one does—but this has to be a stepped process and it has to be done responsibly. That means forming evaluation on the company, and then that means eventually taking the 60-day period in order to find a buyer for Canadian Regional.

It would help tremendously if the union, or those who are involved with the employees at Canadian Regional on a daily basis, would transmit that message to them, instead of having them write to committee members complaining about uncertainty. We know about the uncertainty. We feel for these people. But there still has to be a process. It would really help if you people would correspond with them to let them know what the story is so at least there's some confidence in where they are in the process.

Capt Pierre Orlak: We've done that numerous times, Mr. Chairman. The problem lies in that the original sale process has not been followed by any of the parties. The employees feel very skeptical about the process because everything that was written down in the original sale process has since come and gone and nobody's following the rules.

The Chair: Well, the first—

Ms. Bev Desjarlais: Mr. Chair, remember I have—

The Chair: Just a minute, Bev—

Ms. Bev Desjarlais: Please. You stated on behalf of—

The Chair: Bev, until you sit in the chair and make a decision on who speaks next, you're going to have to wait your turn. That's the way this runs.

Bill Casey, please.

Mr. Bill Casey: Thank you.

I want to continue on the questions about contracts in general, not your contract but in general, because there are other contracts that are being negotiated. The seniority question has come up several times, and it came up in our earlier committee meetings. What are the options between date of hire and Air Canada employees versus Canadian Airlines? Is there an in-between there that can be... Is there a compromise that can be... I'm not talking about yours; I'm just talking about in general—the flight attendants in yours and all the other contracts. Is it just cut and dried date of hire, or is there an option?

• 1855

Capt Robert Weeks: The interesting part of seniority in an airline environment is that it's commonly said that seniority isn't anything; seniority is everything. It not only determines what you do on a day-to-day basis, it determines what you do for vacations, for pay, and for the future.

Seniority is a very important issue, and I believe the first option in determining the seniority process should be left up to the individual association through the negotiating collective bargaining process. If that fails, then it's best to use other forms of mediation arbitration. How somebody feels about seniority is a very individual thing and shouldn't be related to a whole group.

Capt Bruce McConchie: May I comment?

The Chair: Yes, you may.

Capt Bruce McConchie: Mr. Chairman, as a Canadian pilot I have worked through the seniority issue with ACPA and their pilot group, as the MEC chairman over the past number of months, and have made contact in this regard. We have actually established two working groups that are now meeting together to discuss that.

Their very first task in this issue is to develop the process by which they will come to the seniority decision. It will possibly go to an arbitrator. I've lived through four mergers myself, all of which went to arbitrators. Perhaps the process will work its way through. It's inevitable that the two companies will merge, so pilots look at the problem and say, “Well let's get on with it and get it solved”.

As a result of that outlook on it, the two committees were established, and they are now working. ACPA has one, we have one, and they're now working on that process. So we hope they're successful. We've done it five times.

Mr. Bill Casey: If you can't come to an agreement, is there an automatic mediation process? Do you have to agree to a process?

Capt Bruce McConchie: They're working right now on that particular process. We're also very aware that the Air Canada pilots have never gone through this process before. It's brand new to them. Their learning curve has to become exponential. We're walking into this as the scarred, trusty veterans and asking, “What's the big deal?” We realize that. It's a little slower than we want, but we know it's inevitable.

Mr. Bill Casey: Who will negotiate? Does the same association represent pilots for Canadian Airlines and Air Canada?

Capt Bruce McConchie: They are two different unions.

Mr. Bill Casey: That's enough of that.

You mentioned, Mr. Orlak, that the sale was held up because you were afraid they might find a buyer. Could you expand on that?

Capt Pierre Orlak: Maybe I can clarify that. I think the reason for the delay in the sale process is because they cannot come up with an agreement between the Competition Bureau and Air Canada's investment banker as to the value of CRA. That has delayed the potential sale.

In the meantime, because of the time, it has probably spurred efforts to find a buyer.

Mr. Bill Casey: Do you know of any interested buyers?

Capt Pierre Orlak: They wouldn't give us the names, but we are aware that some potential buyers have come forward.

Mr. Bill Casey: Is it your preference that they not find a buyer? Is that right?

Capt Pierre Orlak: That's right. We've already negotiated a collective agreement with Air Canada if we're not sold.

Mr. Bill Casey: It must be quite a time.

Capt Pierre Orlak: It's a very stressful time for our employees.

Mr. Bill Casey: It must be. Thanks.

The Chair: Thank you, Bill.

Val Meredith, please.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): Thank you. You have already negotiated an agreement or are in the process of doing it. It's my understanding Canadian employees—I'm not sure about Canadian Regional—were required to give a 10% payback. Has this been settled in your pre-negotiated agreement with the company, or are you still obligated to give up that 10% until a certain time? My understanding was that at one time you were buying shares, but obviously the shares have no value and there's really nothing to buy in shares, so are you still giving up 10% of your income?

• 1900

Capt Bruce McConchie: First of all, I was before you once before during a very critical time of Canadian's history, and I appreciate the opportunity to come before you again. I would like to express my sincere thanks, on behalf of the pilots at Canadian Airlines, to this committee for taking so seriously this industry restructuring.

As an employee at Canadian Airlines, I appreciate—and we appreciate—the support you have indicated for the employees and workers and their families at Canadian Airlines, in your recognition and support shown in your recommendations to the Minister of Transport with regard to layoffs, buy-outs, and the protection of the workers. That was very heartening to us and was, I believe, critical support to enable us to do...

To answer your question, Ms. Meredith, last fall all we had in our hands were verbal commitments from Mr. Milton, and even in December... It's still a verbal commitment with this legislation for protection of employees. However, we were able to translate that, through the collective bargaining process, into a very good working relationship with Air Canada management. It has resulted in a tentative agreement that has gone out to our pilot group for ratification.

This agreement does a number of things. It provides for job security. In fact, there's a no-layoff clause within it for the duration of the contract. It provides recognition of the jobs we do as pilots for Canadian Airlines. Mr. Milton alluded to the fact that if we're doing the same work as Air Canada pilots on the same contract, we should be paid accordingly. We're moving to their contract, and all according aspects of that, dispute resolutions, and primarily stability within at least our part of the industry, and finally a little bit of stability for our employees.

I can't thank you enough for your support in putting the pressure on to help move in this particular direction. We've also taken that through the collective bargaining process and been very successful to this point.

Ms. Val Meredith: You didn't answer my question. Are you still required, until the end of your contract, to make that 10% payback on your...

Capt Bruce McConchie: This new interim agreement recognizes that as of April 1, if we go on the Air Canada contract and their working conditions, we'll be paid accordingly.

Presently, until that's ratified, there's a 10% wage reduction plus 5% to buy shares that aren't worth an awful lot. WestJet referred to profit sharing, but it's sort of non-existent. In essence, we're down 15% until that's clarified.

Ms. Val Meredith: You mention “until it's ratified”. Who has to ratify that agreement—just for a non-union type like me?

Capt Bruce McConchie: That is presently going out to our pilot group for ratification. It's in the process right now and we expect that vote to come back within the next month.

Ms. Val Meredith: So it's directed at the Canadian pilot group.

Capt Bruce McConchie: That's correct.

Ms. Val Meredith: Okay. Thank you very much.

The Chair: Thank you, Val.

Are there any other questions for these witnesses, colleagues? All right.

I see this as almost a parallel process to what's going on overall. Again, Mr. Orlak, I just want to make it clear so you can pass along the message to the employees. On the divestiture of Canadian Regional Airlines, the first bullet is that within ten days following the transaction date, Air Canada and the commissioner shall each designate a person to value Canadian Regional Airlines and oversee it.

The first question I had was, “What the hell does the transaction date mean”? That means the date on which the offer, or I guess this numbered company that holds Canadian, takes up at least the majority shares of Canadian Airlines. That being the case, you can imagine that Air Canada is going through the process of dealing with all those creditors of Canadian Airlines.

I imagine it must be one hell of a process trying to go through all the creditors of Canadian Airlines and deal with all those people who are owed money, etc., and then establish the transaction date of buying the shares. Then you get the orderly procedure of the valuation of the company, etc. Do I have that right?

Capt Pierre Orlak: The transaction date related to the shares you mentioned was January 22, I think. That was when Air Canada, as a numbered company, took 82% of the shares.

• 1905

The Chair: With the transaction date being January, and since it was laid out that 10 days following that they'll do this, and 20 days, and 15 days, and 60 days, etc., what you're saying, then, is that Air Canada has been dragging its heels.

Capt Pierre Orlak: I would say that all the parties to that document have been dragging their heels. That's what's caused the problem for the employees at CRA.

The Chair: Okay.

Gentlemen, I don't see any other questions. I thank you very much for your presentation and the input you had to the committee.

Give Mike Lynch our best.

Capt Robert Weeks: We will.

The Chair: Colleagues, while the witnesses from CUPE are getting comfortable, we should deal with a couple of motions that our colleagues have.

You'll recall that on April 11, when we had that last meeting, Michel Guimond provided us with a notice of motion but we said we would discuss it after we got back.

Michel, do you want to briefly give us your motion and we'll vote on it?

[Translation]

Mr. Michel Guimond: Mr. Chairman, a brief question please just to guide the management of ADM the opportunity to clarifying a number of points, I would say that we realized this would raise some serious issues with respect to industrial relations, transparency and ethics. I do not think that these issues can be reviewed in a single day. I would like my colleagues to support the motion asking ADM to appear again in six months' time, that we may see if any progress has been made in the interim.

[English]

The Chair: Is there any other discussion on this motion?

(Motion agreed to—See Minutes of Proceedings)

The Chair: Our second motion is from Val Meredith.

Val, it was just having the minister here on the estimates, right?

Ms. Val Meredith: Yes.

The Chair: That's the short of it.

We in fact already have a tentative date set up of May 16 for the minister to appear before us with regard to this motion by Val Meredith.

(Motion agreed to—See Minutes of Proceedings)

The Chair: Thank you, colleagues.

We welcome to the table representatives from the Canadian Union of Public Employees.

Mr. Twentyman, the Canadian component president, is going to be speaking.

Sir, welcome to the Standing Committee on Transport. If you'd like to introduce the people you have brought with you, we then can have a five- to eight-minute presentation from the group and then get to questions.

Thank you very much.

Mr. Terry Twentyman (President, Canadian Component, Canadian Union of Public Employees (Airline Division)): First of all, Mr. Chairman, I would like to thank you very much for allowing us to appear before the committee.

My name is Terry Twentyman. I'm the component president for the airline division of CUPE. I represent 3,500 flight attendants at Canadian Airlines nationwide. I'm also a customer service director for Canadian Airlines, and I have been working for Canadian for approximately 20 years.

Ms. Sheena Murdoch (Secretary-Treasurer, Canadian Component, Canadian Union of Public Employees (Airline Division)): My name is Sheena Murdoch. I am the Canadian component secretary-treasurer, representing flight attendants across the country. I am also a flight attendant based in Vancouver, British Columbia.

Mr. Tom Slade (National Representative, Canadian Union of Public Employees (Airline Division)): Good evening, everyone. My name is Tom Slade. I'm the national representative of CUPE, and I'm assigned to the airline division, western region.

[Translation]

Mr. Denis Montpetit (Vice-President, Canadian Componant, Canadian Union of Public Employees (Airline Division)): Good afternoon. My name is Denis Montpetit. I am a flight attendant and also vice-president of the Canadian componant. We represent 3 500 members based in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Montreal and Halifax.

• 1910

Why are we here? On August 13 1999, the federal government invoked section 47 in order to facilitate the restructuring of the airline industry. On December 21 1991, Air Canada guaranteed that there would be no layoffs and no involuntary relocations of any of Canadian's or Air Canada's unionized employees.

In approving Air Canada's takeover of Canadian, the federal government must ensure that Canadian, Air Canada and their regional carriers' employees' seniority is protected. On February 17 2000, Bill C-26 went through first reading. In this piece of legislation, the federal government deals neither with the future of Canadian employees, nor with the seniority issue.

I yield to our chairman, Mr. Twentyman.

[English]

Mr. Terry Twentyman: As indicated in the policy framework for airline restructuring by the standing transport committee and the recommendations, the government stated that “the employees are to be treated fairly, and will require some commitment from the dominant carrier to this effect.”

The Chair: I'm going to have to ask you to slow down a little bit. There is interpretation, and if you go too fast...

Mr. Terry Twentyman: Okay. That helps me as well.

The Chair: But you still have eight minutes.

Voices: Oh, oh!

Mr. Terry Twentyman: Hmm. I don't know how I'm going to work that—Evelyn Wood's speed-speaking.

To date, the only protection that was promised to us by Mr. Milton came from his message in December of 1999, when he stated that no unionized employees would be laid off and no involuntary relocation would take place for a period of two years. We believe the transport committee is backing away from the principle outlined in the recommendations to the Minister of Transport, Mr. Collenette, and the Canadian government.

We, the employees of Canadian Airlines, remember quite vividly the promise Mr. Milton gave the Air Canada employees during the Onex takeover bid, that “no Air Canada workers would lose their jobs”. This was restated on March 21, 2000, at the Fairmont Hotel in Vancouver, when Mr. Milton was addressing employees of both companies. He stated that we would keep Air Canada and Canadian Airlines operating separately for the next two, five, and ten years. He further stated that he would be the sole person to decide when the two companies would merge into one.

Mr. Milton then proceeded to inform employees that he would treat the employees of both companies in a fair manner. He then went on to say, however, that a merged seniority list based on date of hire was not fair to the employees of Air Canada.

Some of the decisions of Air Canada regarding the future of Canadian Airlines have caused major concerns.

First, Air Canada management is currently using a persuasive campaign to bring the different unions at Canadian Airlines under the Air Canada collective agreements. They have asked the unions to work under the rules of Air Canada collective agreements, while keeping two separate seniority lists, in exchange for wage increases. The unions must waive their right to file a common employer application before the Canada Industrial Relations Board. Voluntary separation packages, which initially had been promised, have to now be negotiated into the deal.

Canadian Airlines has phased out five DC-10 aircraft earlier than originally planned, and is replacing them with three 767 aircraft, causing a surplus of employees at Canadian Airlines. The least disruptive interim solution would be to provide flights and aircraft to Canadian Airlines in order to alleviate the surplus.

At the same time, Air Canada is faced with a shortage of flight attendants. Currently the Air Canada/Canadian solution to this “surplus-shortage” problem is to encourage mostly junior language-qualified flight attendants to transfer to Air Canada on a leave of absence program and be placed at the bottom of the Air Canada seniority list. Those who do not speak French or any other desired language need not apply.

In order for this program to go forward, Air Canada signed a memorandum of understanding with the Air Canada component. This agreement includes provisions that place all Canadian flight attendants at the bottom of the seniority list. This agreement also specifies that the employees who transfer must surrender their accrued seniority at Canadian Airlines or return to Canadian Airlines at the end of a one-year period. This is all being done at a time when the procedures and processes for integrating seniority lists have not yet been determined.

We are now witnessing a drain of junior language-qualified flight attendants from Canadian Airlines to Air Canada. The effect of this cherry-picking will be to deplete the language capabilities from Canadian Airlines and further erode the ability to serve the present foreign routes and destinations. This will relegate senior and unilingual Canadian Airlines employees to further erosion of our once stable and evenly balanced working conditions.

• 1915

Air Canada has currently blended our fleet and routes to create a summer schedule. This has radically altered our route structure, further deteriorating working conditions and earning potential of the Canadian Airlines flight attendants. The handling of the schedule realignment and surpluses has been destabilizing. The result of these decisions has been high levels of anxiety amongst our members.

Workers should not be pitted against workers. The federal government has a role to play to ensure a fair and just process. The protection of worker seniority is the recognition that in the airline industry seniority has a direct correlation to the earning potential and the quality of life. Along with the skills and dedication, union seniority is the greatest single determinant of career progression, income, and working conditions for airline employees.

Ms. Murdoch.

Ms. Sheena Murdoch: So where do we go from here? We believe that the federal government has a key role to play in order to ensure a stable and equitable airline industry restructuring. We have seen in the first draft the important step the government has taken with regard to price gouging and consumer protection, but when it comes to the employee protection clauses, our government falls short. We believe the government should include a process of determining seniority in the form of an amendment to Bill C-26.

The history of merging union seniority lists in the airline sector in both Canada and the United States is fraught with difficulty and delay. The exercise has typically subjected airline employees to years of uncertainty about this fundamental aspect of their careers, while negotiations, arbitrations, labour board proceedings, and even judicial appellate reviews have dragged on. In some cases, the final outcome has left animosities that persisted long after the seniority list was determined.

Bill C-26, as currently drafted for a review by this committee, has many provisions protecting stakeholders in the corporate integration of Air Canada and Canadian Airlines, but it is remarkably silent on the inevitable integration of employee bargaining units. The Air Canada-Canadian Airlines consolidation is the largest in Canada's history and it must ultimately involve consolidating the seniority lists of a number of unionized groups. The issues for different bargaining units are in some ways different, but all require a mechanism of fair, expeditious, and final third-party mediation resolution.

In Bill C-26, Parliament will enact special provisions to regulate many aspects of the corporate integration, instead of leaving them to existing statutory rules and procedures. For the following reasons it is appropriate to enact the seniority integration amendment to Bill C-26 to facilitate a speedy and peaceful integration of union seniority lists.

The seniority integration amendment is consistent with the other public policy concerns addressed in Bill C-26. Parliament will see fit in Bill C-26 to modify the existing statutory framework to protect the public interest in regard to Air Canada's control over domestic airline services by regulating fares, continuation of scheduled services, credit for frequent flyer points, route competition, or lack thereof, Canadian ownership, and official languages.

The enforceable undertaking by Air Canada annexed to the commissioner of competition's letter of December 21, 1999, which is incorporated by reference in Bill C-26, includes a special arbitration procedure as between the commissioner of competition and the corporation for disputes over corporate merger issues. This corporate arbitration procedure is not unlike the union proposal and the seniority integration amendment. Employees have been given an assurance that for two years there will be no layoffs or involuntary relocations. However, the government policy framework for airline restructuring in Canada noted that input from labour leaders went beyond this. Labour leaders believe that the government should play an active role in any restructuring of the airline industry and in regulating it to protect employees and consumers. The concerns raised by the Canadian public have confirmed the need for a clear government role in any restructuring and have helped identify conditions to apply in the event of industry restructuring.

Union seniority integration in the airline sector has historically been resolved by unions, with employer participation. Such exercises have been generally difficult and slow and the results have been contentious. The scale and many layers of complexity of the pending integration of Air Canada and Canadian Airlines, including the new overlay of legislated changes to the airline industry, take the ordinary problems associated with seniority integration to a whole new level.

• 1920

Relying on the existing tools of negotiation, arbitration, the Canada Industrial Relations Board, and the courts guarantees years of destabilizing litigation and employee distress. Eventually these problems can play out in collective bargaining and labour disruption, affecting employer and consumer alike.

Surely, if Parliament can secure frequent flyer points for customers, then this committee can examine our proposed amendment to Bill C-26. Addressing the sensitive issue of seniority integration is fundamental to a seamless transition of two mainline carriers into one mainline carrier.

Terry.

Mr. Terry Twentyman: The proposed seniority integration amendment provides for a fair and equitable process for all appropriate parties without stacking the deck.

It's important to understand that the proposed amendment suggests a fair and neutral process. It takes into account the fact that the affected bargaining units within the same union, or in different unions, will have different concerns to negotiate and will take different positions in an arbitration hearing.

The amendment does not stack the deck in favour of one or another set of issues or legal arguments by establishing fixed criteria for the seniority integration. The proposed amendment does provide a special expert on seniority integration, and a mediation arbitration board will be formed after an appropriate notice to the Minister of Labour. This board will have a mandate to attempt to mediate a solution with the appropriate bargaining agents and will involve the affected employer. If litigation is necessary, the board is given the “powers to determine the matter before it, in a fair, full and expeditious manner”.

The amendment provides a reprieve from costly legal battles before the publicly owned Canada Industrial Relations Board. Further, this amendment will allow for future labour peace. All we are asking for is a process.

Attached to this document we have the amendment that we'd like to propose. We open the floor to questions.

The Chair: Thank you very much, ladies and gentlemen, for your presentation to the Standing Committee on Transport.

As a matter of clarification for yourselves and for those who have been listening to this presentation, at the very beginning of your presentation, at the bottom of the page in “The Future of the Airline Employees”, you said that “in the policy framework for Airline Restructuring by the Standing Transport Committee”, and then you mentioned that:

We believe that the Transport Committee is backing away from the principle outlined in the recommendation to the Honourable Transport Minister Collenette and the Canadian Government.

I know you have things confused here because, hell, we haven't even dealt with this yet, so we can't be backing away from something that we haven't laid down yet. The fact of the matter is there was a policy framework laid out. That's done by the Ministry of Transport. Then we did a study, “Restructuring Canada's Airline Industry”. It took us six weeks prior to Christmas and we put it all together. To be quite honest, we went a lot farther than step three, which was the minister's response in the form of Bill C-26.

So that's just to clear the matter that the Standing Committee on Transport in fact has gone a lot farther than this bill has, and now we're at the stage where we ask how many of our recommendations we fold back into the legislation. That's going to be an interesting period of time starting next week.

The other issue I wanted to take up with you is that when you mention how by striking this amendment you're going to somehow solve the problem of integration... I fail to understand that. The government can play a role in the integration process, Ms. Murdoch, in that, as you have mentioned quickly, the Canada Industrial Relations Board has provisions within the CLC to deal with things like the merging of seniority lists, etc. Are you telling me that this particular venue to deal with that situation is going to take too long and your suggested amendment, which I've run through, line by line—creating and appointing members and chairs and boards and bargaining agents and all the rest of it—is going to take any shorter period of time than going through the structure that already exists through the industrial board?

• 1925

Mr. Terry Twentyman: As for my experience with seniority mergers, this will be my third merger. My first merger was with CP Air, Eastern Provincial Airways, Pacific Western, and Nordair. When we came to merge the four air carriers together, seniority was the biggest contentious issue outstanding. That process took over a year to complete.

We had Vince Reddy, a mediator, who tried to solve our seniority issue. We had an arbitrator, Mr. Katz; he couldn't resolve it. We ended up in the B.C. Supreme Court, and then finally Don Munroe, an arbitrator from British Columbia, bashed our heads together and came out with a date-of-hire proposal at the end of this one-year period.

During that one-year period, that cost our union members over $300,000 in legal costs, and it cost the airline millions of dollars to keep us separate in groups.

The Chair: I don't mean to interrupt—

Mr. Terry Twentyman: Oh, I'm sorry.

The Chair: No, no, don't be sorry. But that was a process you went through back in the old days of Nordair and CP.

Mr. Terry Twentyman: Right.

The Chair: This new process through the Industrial Relations Board is only two years old and not even tested yet, and it was supposed to refine all the problems you spoke of. So are you aware of whether or not going through this system, the new system that hasn't even been tested yet, is going to take as long as the old system, or in fact is going to take as much time as the system you're putting through as an amendment?

Mr. Terry Twentyman: Our concern when we looked at Air Ontario was that took over two years in front of the Labour Relations Board. We were just looking for an expedited vehicle to get the seniority integration happening.

Our experience with the Industrial Relations Board is that everybody can join in as an interested party. This would just focus it down to the two parties, the Air Canada and the Canadian flight attendants or the Air Canada and Canadian agents, working out their seniority issues without having everybody else jumping on board and stretching the process out to a year or two years. That's our big concern. We just want to try to get some sort of expedited process.

The Chair: Okay. Well, because this new system is untested, I don't know how you can gauge. I guess you've looked at the way it's structured and you're saying it still leaves itself open to these particular situations?

Mr. Terry Twentyman: Obviously the Canada Industrial Relations Board is open to us to file a common employer application, which we are planning to do should this amendment not go through, and we will have to test it.

The Chair: Yes, okay.

Mr. Terry Twentyman: We felt this would expedite the process.

The Chair: All right. Thank you very much for answering my question.

Ms. Meredith, please.

Ms. Val Meredith: Thank you, Mr. Chair.

Thank you for appearing before the committee, folks.

Not being a union member, I have difficulty understanding how your division, in the same union as the division of Air Canada, can't come to some mediation process on your own without having to go through the CIRB and some other kind of mediation process. Why can't you have this mediation process within your own union? Why do you have to take it outside the union structure? Isn't the union there to get fair and equitable results for all union members, including both Canadian and Air Canada union members of the same union?

Mr. Terry Twentyman: Yes. Unfortunately there's no vehicle within our union structure to force an integration process, and this is what this amendment would do. It would put a vehicle in place.

Right now the position of Mr. Milton from Air Canada to the unions is he's willing to keep us separate for the two, five, or ten years. However, he told us, “If you guys want to merge, come and tell us, and we'll merge you. But if you don't want to merge, we'll keep you separate, and we'll keep you flying separate forever.”

Ms. Val Meredith: So you're looking for something that will force the merging of the seniority lists sooner than later.

Mr. Terry Twentyman: Correct.

Ms. Val Meredith: You're trying to force this thing to happen.

Mr. Terry Twentyman: Correct.

Ms. Val Meredith: I have to ask, how does the other side of this debate feel about this amendment? I guess it would be the Air Canada component of your union. How do they feel about having this mechanism to force the issue?

• 1930

Mr. Terry Twentyman: We've tried to negotiate with our counterparts from Air Canada, but they don't want to negotiate seniority. If they do want to resolve the seniority issue, their position is that we go directly to the bottom of their seniority list.

Ms. Val Meredith: So in other words, they would not support this amendment to force it to an arbitration or mediation process.

Mr. Terry Twentyman: No. They just want to keep separate right now.

Ms. Val Meredith: This is a follow-up to the chairman's position. Is the reason you don't want to go to the CIRB cost or time or both? And how will this new structure not cost you money and time?

Mr. Terry Twentyman: Our biggest concern is the time. As I say, our experience with integrations was two years with Air Ontario. Right now we have no-layoff clauses, guarantees, for two years, and we've already gone into six months of those two years. So if we started tomorrow, we'd only have a year and a half to go. Should this process drag out, I have concerns for my members that we're not going to get through the process before these job guarantees wear off.

Ms. Val Meredith: We heard from the Pilots Association that they have negotiated to go under the Air Canada contract. You indicated in your presentation that there's pressure for unions such as yours or divisions of unions such as yours to do the same thing: to negotiate and end up under the Air Canada collective agreement. Have you started that process or have you done anything to go into the Air Canada collective agreement?

Mr. Terry Twentyman: As a matter of fact, we were invited just recently by Air Canada to start to negotiate to go under their collective agreement. Just this weekend we were in Ottawa pulling apart the Air Canada collective agreement to understand it so that we can perhaps move over. That's the inevitable end, to go in the Air Canada collective agreement. Even if we do go to the Canada Labour Relations Board, they will probably put us under the Air Canada collective agreement. So that's going to be the end result.

Ms. Val Meredith: So does that lead into the issue of seniority structure or seniority lists? I'm trying to understand. Do you get partway there, and then there's a side issue that you have to deal with? So you all become part of the same collective agreement, you're all sitting in the same division, but this issue is sitting off to the side?

Mr. Terry Twentyman: We could be under the Air Canada collective agreement—our members could vote to go for it—but the seniority would still be separate, so they'd still have to operate as separate. As a Canadian flight attendant, I would still be mandated to work on Canadian Airlines aircraft, and the Air Canada people would be working on Air Canada aircraft.

Ms. Val Meredith: But what part of the union represents you then? Is it the division for Canadian or the division for Air Canada, or is there a new division?

Mr. Terry Twentyman: We're a component of the airline division, the Canadian component, and then there's the Air Canada component.

Ms. Val Meredith: Okay, but if you come under the same collective agreement—

Mr. Terry Twentyman: Right.

Ms. Val Meredith: —then what division do you come under?

Mr. Tom Slade: Pardon me, Mr. Chairman and representatives. In the structure of CUPE, the airline division is a separate division for all of the airline workers. It sets its own priorities, policies, and work rules. Within that structure are the different bargaining units representing the different airlines.

What is actually being proposed—and it's probably similar to what the pilots have already come up with—is that we move to the work rules of Air Canada but remain in our separate bargaining units. So we would have a similar collective agreement for length of duty day and types of flights and credits, but we would be a separate bargaining certificate and staying on our own aircraft.

Ms. Val Meredith: Okay, thanks.

The Chair: Thanks, Val.

[Translation]

Mr. Asselin, please go ahead.

Mr. Gérard Asselin: The integration of the collective agreements would mean that everyone would receive similar salaries and benefits. If you integrated the seniority lists, what benefits would you get that you are not already entitled to with Canadian? Once they have been recognized negotiations, seniority rights eventually entitle you to bid on jobs and to choose when you will take your holidays. This is called bumping and does cause management problems for the employer. He must decide who has greater seniority and who has the right to go on holiday before anyone else.

• 1935

How do you deal with this? As far as salaries are concerned, it's easy; two, three, four or five weeks of holiday leave, people can agree on that sort of thing, but as far as planning is concerned, as far as operations are concerned, how do you deal with job bidding, or with seniority rights in case of layoffs or in matter of holiday leave? How can this sort of thing be managed?

Mr. Denis Montpetit: Mr. Asselin, by coming under Air Canada's collective agreement, we would lose our seniority rights. Our seniority is not indexed. In other words, the Air Canada component maintains its seniority and the Canadian component maintains its own as well. The two types of seniority are not integrated. This is the major point of these collective agreements.

In negotiating pilot contracts and other collective agreements, Air Canada does not include seniority.

Take the example of a Canadian member with 30 years of flight experience. He is based in Montreal. His son has been an Air Canada flight attendant for a year. If the seniority lists are not integrated, his son will have more seniority than he does.

Mr. Gérard Asselin: You spoke of the proposed legislative amendments in terms of identifying and describing the bargaining units which are seeking to integrate the seniority lists.

Mr. Denis Montpetit: As you said earlier, we have already begun negotiations in order to come under Air Canada's collective agreement. All these agreements, on the other hand, and in particular the pilots' agreement and the Air Canada agreement contain no seniority clause. This legislative amendment would include a process that allows us to maintain our seniority.

Mr. Gérard Asselin: In that case, would seniority be used only for determining promotions or layoffs or would everything be based on it, holidays for instance?

Mr. Denis Montpetit: Mr. Asselin, for flight personnel, seniority means everything. It determines the routes you fly, salary increases, pension rights, holidays. As far as flight personnel are concerned, everything depends on seniority.

Mr. Gérard Asselin: You spoke of flights. The work schedule is drawn up once a year. I imagine that if you fly to Vancouver and a plane is returning and there is overtime to be done, you would the one to do it.

Mr. Denis Montpetit: At Air Canada, the schedule for flight personnel is drawn up a month in advance. This is how it is done: all the employees choose their monthly schedule and the one that they actually get depends on their seniority; the attendant with 30 years' experience gets first choice, the one with 29 years gets second choice and so on.

Mr. Gérard Asselin: And that schedule can change from month to month?

Mr. Denis Montpetit: Yes, that is how it is done.

Mr. Gérard Asselin: So you could be on the Toronto-Vancouver run and, the following week, on the Toronto-Montreal run?

Mr. Denis Montpetit: It is a complex issue. It depends on the flight schedule. Mr. Slade would be able to tell you more about it. He knows how these timetables are drawn up.

Mr. Tom Slade: If you do not mind, Mr. Asselin, I would rather answer in English.

Mr. Gérard Asselin: No problem.

[English]

Mr. Tom Slade: One of the big differences in front of us with separate seniority lists is that with separate companies, at one time there were six flights for Air Canada, four flights for Canadian—same direction. With the integration of the schedule, what has happened to affect both the flight attendants and the customer is that there is a total of eight or nine flights, and at one point Air Canada is doing all of one route and Canadian is doing all of another.

From a work choice point of view, the day before yesterday we were informed, in dividing up the pie of flying, that to be efficient—and we agree with the efficiencies—the Canadian flight attendants were assigned flights to Paris out of Toronto. As of the day before yesterday, that has been withdrawn. Those flights have gone back to Air Canada and Canadian is now being assigned to other flights. This is the dogfight that goes back and forth as to what are considered good or bad working conditions. It also affects the efficiency of the airline, which is of concern to us because we've seen what happens when an airline doesn't stay efficient or runs into problems.

• 1940

We have a situation where a flight operates from one city to another, for example Vancouver to Toronto. There is no return flight on an aircraft belonging to the airline that went out. The crew in effect... Let's take Air Canada to Toronto. It now has to return the crew. Travels on a dead-head flight, which pays us less, block the seat for revenue passengers, which creates a bit more of a problem.

If there is no Canadian crew to take over the flight to work back, it actually delays the flight and has them sit there while they have perfectly qualified people who are equal in seniority, equal in qualifications, equal in experience dead-heading on the flight to go back. So if Canadian has no one in place and an Air Canada crew is there and could do the turnaround, in effect they have to wait until they find another crew.

The divvying up of the pie seems to us in some ways to be our gift. In reality what it also says, and what is happening and what we've explained in our brief, is that they are taking the language flight attendants who are surplus to Air Canada. It's only the language, and they're doing it by language. This means they have culled out some of the Japanese-speaking flight attendants from Canadian, for example, which reduces our ability to fly to Japan, which now assigns us flights going a hop, skip, and a jump to other cities.

The Chair: Bev Desjarlais, please.

Ms. Bev Desjarlais: My understanding, certainly from your presentation and the pilots union, is that without question seniority is the biggest issue when the mergers take place, in all your experiences of mergers in the past. You've had a few. I will clarify that the new seniority rules... I understood that there already had been a case under the new seniority guidelines in the Canada Industrial Relations Board.

Mr. Terry Twentyman: With our union, Air Nova and Air Alliance merged. They followed our airline division policy and they just merged date of hire, and there was...

Ms. Bev Desjarlais: But under the Canada Industrial Relations Board there have been no cases?

Mr. Terry Twentyman: No.

Ms. Bev Desjarlais: All right.

Your biggest concern is not the fact of what will happen. I imagine that everybody wants to see an equal divvying out of how the seniority works, but the way it sounds right now, Canadian employees are going to be stuck at the bottom of the pole and Air Canada will be at the top. That's the way it seems it's going to be. Is that your impression of it? That's the impression I'm getting.

Mr. Terry Twentyman: That's our biggest fear. We've invested our lives into the airline industry just as much as my colleagues at Air Canada have, and we just want a level process. All we're really asking for is a process to deal with this issue.

Ms. Bev Desjarlais: What would you see happening if we have a situation where seniority isn't resolved with the pilots? I know they're negotiating, but let's say seniority is not resolved right now with IAM or with CAW and it's left until say two years down the road at bargaining time and the seniority hasn't been resolved. What do you see happening two years down the road when the seniority issue comes to the table?

Mr. Terry Twentyman: Right now, Mr. Milton has stated that just keeping the union groups separate will cost $130 million a year, because we have to work on our separate aircraft. They don't have the same licensing to put it together. We still have to remain separate. I don't know what will happen two years down the road.

Ms. Bev Desjarlais: Are you telling us that he's saying you can't go together because of the licensing?

Mr. Terry Twentyman: Right. I cannot work on the same aircraft as an Air Canada flight attendant at this point because we haven't resolved the seniority issue. We still remain separate. I can sign a collective agreement with Air Canada representing just the flight attendants at ex-Canadian and my colleagues at Air Canada can have their collective agreement. So we're still—

• 1945

Ms. Bev Desjarlais: What would be the reasoning behind it costing $130 million to keep it separate when the whole intent of this merger was to be financially stable?

Mr. Terry Twentyman: You can probably ask Mr. Milton when you have a chance to ask him.

Ms. Bev Desjarlais: Okay.

Mr. Terry Twentyman: All we're asking for is to get this whole process happening yesterday. We want to get it together and move on.

Ms. Bev Desjarlais: Mr. Milton certainly gave an indication on numerous occasions, as was mentioned publicly, that everything was going to be quite fair for both groups of workers no matter at what point—

Mr. Lou Sekora: He said “Trust me”.

Ms. Bev Desjarlais: Trust me, absolutely. I'm sure we will have questions for Mr. Milton.

Mr. Tom Slade: I'd like to add a comment, if I can. One of the things that is quite different in this merger is that right at the very start Mr. Milton said that if the two groups wish to merge, work it out amongst yourselves and come and talk to me. The pressure we're facing in this particular bargaining unit is that the other group is taking advantage of it and saying goodbye.

We are being asked to negotiate a long collective agreement in exchange for the instant salary catch-up, and in exchange we will not be bargaining until 2003, 2004, or 2005. The two years that were offered as protection under this change of legislation will have been exhausted. On top of that the inefficiencies will have been there while we're fighting with each other. In normal processes in the past before the Canada Labour Relations Board, we would go for an appeal for a determination that it is a common employer and then ask for their assistance on how to do it. We have an employer here that is reticent, and we're not going to have that. We are not having cooperation from the other group.

In the meantime we're also watching the work shift back and forth. It's only in a short period of time that they've announced the new schedule, and they've changed that several times. So we're fighting with each other over the work before we've even started it.

Ms. Bev Desjarlais: Do I have time for one more? How many employees are there—

The Chair: Thanks, Bev. You're cutting into somebody else's time.

You have one union, CUPE. You have two factions. You can get the Air Canada union agreeing with you on your amendment being brought forward to our committee so that you guys can talk. You're coming to us and saying, we need to have this amendment so that we can create a process for the resolution between ourselves and the other members of CUPE.

[Editor's Note: Inaudible]

Ms. Bev Desjarlais: —

The Chair: I know, but they're still in the same union. This is what I don't understand. You have two factions within the—

[Editor's Note: Inaudible]

Ms. Bev Desjarlais: —

The Chair: Bev, I'm not having this debate with you here. I'm trying to get a point across to the witnesses. All right, Bev? Relax.

So what you have is one union, CUPE, and you have two factions, Air Canada and Canadian. Canadian employees bring forward a suggested amendment to try to resolve the problem they're having with Air Canada's employees. Air Canada's employees agree with the view of Canadian, which has brought forward the amendment. Why can't you just talk?

Ms. Sheena Murdoch: We have already taken steps to meet with the Air Canada component. The Air Canada component has given us every indication that they're not interested in talking with us.

The Chair: Those are your brothers and sisters in the same union.

Ms. Sheena Murdoch: Yes. Mr. Milton has made it very clear to the Air Canada and Canadian employees that date of hire is not fair and equitable to his core employee group. So he has fostered the separation between the groups, as far as we're concerned.

The Chair: Next is Mr. Bailey, and then Mr. Dromisky.

Mr. Roy Bailey: Mr. Chairman, I think the picture is clear enough. As I move around and talk to people who are in the union and ask them a few questions at different airports, I've found that what you're saying here is what they're telling me individually. So you're all singing from the same song sheet. That is the union with Canadian.

When Mr. Milton said two, five, or ten years, I'm suspicious that he is using you people and the other portion of CUPE with Air Canada to his own advantage, and in doing so he is breaking his fundamental promise he made before this committee, not once but at least twice that I can recall. He wants you to fight this thing out, and he doesn't want to pay the seniority because he's already picking off the cheaper employees and taking them in. I think that's quite evident, from talking wherever I've been.

• 1950

The difficulty for me to understand is we belong to the same union, yet the wedge that has been driven between Air Canada CUPE and Canadian CUPE is a very dangerous thing. It's a very helpful thing to Air Canada right now, but very dangerous for both sides of the issue in CUPE.

Do you understand what I'm saying?

Mr. Terry Twentyman: Yes. I can answer that. It's the exact same situation that took place when Canadian Pacific, Pacific Western, Eastern Provincial, and Nordair merged. We were all under the airline division... well, actually we were CALFAA back then. We were under the same union, but we still had separate collective agreements. We were still under the CALFAA umbrella. And the situation was no different back then from what it is today. What we're doing is just repeating history.

I thought I was clever when I put together a merger policy for the airline division of CUPE to deal with these mergers, and we passed it at a convention. Air Canada did back it 10 years ago, which is how long we've had this policy on our books, but now it doesn't suit them.

They've totally ignored this policy and they don't want to have anything to do with us. I think a lot of it too has been fostered by the comments from Mr. Milton during the Onex takeover bid. He made all sorts of promises to his employees, and I've always said he's painted himself into a corner with these promises. He's just waiting for the paint to dry or for somebody else to do the dirty work for him to get this process in place. Unfortunately, here we are trying to get this sorted out.

Ms. Val Meredith: So you're asking us to do the dirty work.

Mr. Tom Slade: One of the things facing us right now as well is that the other unions within the Air Canada-Canadian group, except for the pilots, are under the same structure or the same problems. They have managed to start talking or start putting together some agreements. But those agreements are being accepted wholeheartedly on one side and rejected on the other.

The one thing that happened with the flight attendants is that it happened right from the start. We didn't wait until we saw what the dowry was going to be and then start the fight.

The machinists and the CAW with the passenger agents are also under the same umbrella unions, but they are also having their internal problems. The leadership, even in spite of their policies, cannot impose what they gave as a vote to the members. The members are outnumbered at Air Canada. And Mr. Milton said in a public statement that he could not agree with date-of-hire seniority, because they were his core employees and they would have labour relations problems for years.

One of the questions that arose from that was whether he would not have labour relations problems for years by ticking off the other group, and he said, but they're a smaller group.

Mr. Roy Bailey: If we solved your particular problems here, we would still... It looks to me as if you have a whole group on both sides of the fence, so you might as well do it all at once, rather than just one.

Mr. Tom Slade: What we're proposing here for the amendment is a process that says if I serve notice, they have to get a representative, and we have to get together, take a nominee, and then find a chairperson and work it out. What's happening now is that it's at the leisure of one of the parties or it's through a longer process. And we're running out of time.

We are also having the on-board—for flight attendants—and on-ground—for ground staff—conflict that's going to come up with the integration of the Terminal 2-Terminal 1 concept in Toronto on June 3. It's not as critical for flight attendants right away, because we fly separate airplanes. In earlier comments we made about pilots, we noted the pilots usually stick with their airplane type. So they would work their airplane type if they're with one airline or the other. Flight attendants can work five or six different airplanes in the same day. They go from one to the other, and that's where the efficiencies are lost, by having them non-productively operate or dead-head home. And the credits are lower for us.

It's not a pleasure to sit in a passenger seat for half of your duty day and make less money. You have to work more days to catch up on the salary. So we would rather work and get it over with, and do our work well, than sit there... Well, you probably travel more as a passenger than I do, so you know exactly what I'm talking about in regard to sitting on airplanes.

Mr. Roy Bailey: Thank you.

The Chair: Thank you, Roy.

Stan Dromisky, please.

Mr. Stan Dromisky: Yes, Mr. Chairman. Thank you very much.

I can appreciate your position, and I realize that you've come here to ask for help to solve a problem that should really be solved outside of this room and outside of the House of Commons.

It really should be solved between the various parties, not by regulations from any authority such as a government. It should come from the members of your own union.

• 1955

A clear indication has been presented by you people here today of how the unions have become, sticking to their own dogma and their own philosophy, you know, brotherly love and united we stand—all of the expressions they use to indicate how strong they are and how united they are in their quests. You have really revealed to us and to the listening public that this is meaningless. Union members of the same union cannot even sit down and talk because they're so afraid that somebody is going to get a little bit more than they're going to get. Seniority is what we're talking about here—years of service in the aviation industry—no matter whether it's Air Canada or Canadian. It shouldn't matter, but apparently it does drastically.

You're bright enough, all of you, to make the minor adjustments as far as credits are concerned regarding some of these discrepancies and the different contracts you have regarding flight time, how many flights you have to put in, the hours and everything else. Those kinds of adjustments could easily be made. You could program that in a computer and solve that problem for every single person in the company. But the idea of seniority I think is a simple one: unite.

We're going to find out on Thursday afternoon exactly what Mr. Milton meant regarding the date of employment and putting you people together all in one list—date-of-employment seniority. I'm talking about seniority lists here, you understand. And we'll see whether or not he still has the same message to give to us that he gave before, the way you interpreted it. I think that has to be resolved Thursday morning, when he appears all morning before this committee.

Thank you very much.

The Chair: Lou Sekora, please.

Mr. Lou Sekora: Thank you very much.

When you're talking about the two unions, I can understand what's happening very clearly. You drew a perfect picture of what's really happening. Keep in mind that Canadian Airlines people don't make the money that Air Canada people do; it's somewhat less. To keep you apart instead of united, the minute you do get into one union, you'll probably be getting more money.

We are going to put a whole bunch of amendments forward, and I'm looking forward to those amendments, because I think my friend Milton has been getting away with murder. I think the one thing we have to do is to look after the customers also.

And I'll tell you, I've flown with both airlines—or I used to fly both airlines; now I have no other choice but to fly Air Canada. The Canadian Airlines staff are far friendlier as far as I'm concerned. They certainly do a much better job, and I've said this over and over again. But I think there's a bigger picture than that in here.

The picture is very simple. Milton is keeping you guys apart, number one because two years from now, a year from now, or some months from now, he'll sink Canadian Airlines. That is my own version of it. I've said over and over again in this committee that he's going to sink Canadian Airlines, and he'll have everything his own way. If he merges, then he'll have a problem. If he brings the staff together on both sides, he'll have a problem, because seniority will be a big hand, and you people are more senior to Air Canada's staff. Therein lies the problem.

Those are the things that we as government have to do something about. I think at the beginning I said there would be no job losses and a few other things. They still mean the same thing. I think you people need protection. You need protection from the most vicious kind of organization that you have ever seen in your life, and it's happening right now. You know, there's—

The Chair: Lou, do you have a question here?

Mr. Lou Sekora: The fact is, I think those are the reasons you are kept apart. Do you agree with me, or do you think there is some other kind of hidden agenda?

Mr. Terry Twentyman: We feel there's obviously another agenda happening, and our concern is the longer they keep us apart, the more turmoil there is going to be. That's not just for the employees of Canadian Airlines or Air Canada, it's for the travelling public as well.

If there's going to be a merger, it has to be a successful one. It has to be clean and it has to happen quickly. We're down to one airline in this country now, and to have one airline with all these different labour groups fighting amongst one another... it's not going to be successful. We've worked hard to bail out Canadian twice in 10 years, because we want to keep the airline industry going. We want this to be successful as well. We're not trying to put a stop or a fence up for Air Canada to hit a wall; we want this to work.

• 2000

Mr. Lou Sekora: I for one can tell you that I hope there are some good amendments that will give you people some protection. I'd definitely be supporting it.

Mr. Terry Twentyman: Thank you, sir.

Mr. Lou Sekora: I'm from British Columbia also.

The Chair: Charles Hubbard, please.

Mr. Charles Hubbard: When it's all been said, I have some difficulty when two unions under the same umbrella can't resolve an issue and you have to go to court and spend a lot of money to decide what's what.

This morning I looked at what Canadian Airlines is worth, and if I were working for them and I had the chance to get into some other group, I would do it very quickly. There was an article in yesterday's paper that said the shares in Canadian Airlines, the ones that are left, the 20% that are still outstanding, apparently have almost no value. The stock market says they're worth about 25¢ or 27¢, somewhere in that range.

I know the governments have a lot of responsibility, but first of all, if I were a union member who paid into a union for 20 years, I would hope that union at its head office could decide seniority. How long did the brother pay in? How long did the other brother or sister pay in?

Mr. Chairman, I think what you said when you questioned this is really the crux of the matter. CUPE, which is one of the largest public unions in this country, should have the resources to be able to sit down and resolve this issue and to present to Mr. Milton the solution they want. You can't leave this open-ended. That's my perception of it.

Maybe Mr. Slade could reply to that. You have thousands of people who have paid into your union over the years. Why can't you, as the organizer of all that effort and the protector of all those employees, try to resolve the issue?

Mr. Tom Slade: Mr. Hubbard, that's a valid question. The structure of CUPE is a gathering of independent groups. There's nothing that is imposed; the members have full direction as to where it goes.

I would draw your attention to the fact that other unions that have different structures or policies have spent millions of dollars in court over seniority integration. Maybe I'm being cheeky in saying this to the committee, but our position is that in merging seniorities, it's such a large group, such a visible group, such a sensitive product. There are passengers, customers, and the taxpayer always watching what's going on. This will go on for years.

We don't want to go through the process that: (a) one group will be exhausted or bankrupted before the other going through the board procedure; (b) the time it takes will exhaust the two years you gave us as an opportunity to protect us; (c) Mr. Milton is put into a position where he does and can and will play one party off against the other. We're not looking at what our flying is, what you're giving us. We're saying that what's going to happen has to be fair.

The policy within our own airline division is date of hire. Air Canada members participated and built that policy and now ignore it. It doesn't matter. Our problem is timelines. We need a process from you. In reality, by starting this, the transport minister has allowed what was there to be moved around. What happens out of this is that there is fallout saying this is a real mess. So we're saying that with the normal processes and procedures, we don't have the time and it won't solve our problem. Because it's so visible... We're trying to solve your problem.

Going through the board costs the Canadian people, taxpayers, lots of money. Everyone who has intervener status, the delays that come up with it, everyone having their say, costs the taxpayers a lot of money. We want a process where we'll pay our nominee, we'll share the cost of the chair of whoever makes up the board, and get on with it.

The Chair: Thanks, Chuck.

Ms. Sheena Murdoch: Further to what Tom was saying, Mr. Milton has said that he's prepared to keep the operations separate, but for all intents and purposes both operations are fully integrated except for seniority integration. This $130 million will be transferred ultimately to the travelling public and it will go on and on.

What we're asking for is a process to be put in place to determine it, because he's leaving it up to us. He's saying on the one hand that he will keep us separate for two years, for five years, for ten years. Then every now and then he says seniority is the issue that belongs to the unions, but when it comes to his core employees, that's a different story. He is facilitating this frustration among the groups. He's making it very easy for us to be... He's pitting one group against the other, and it will continue.

• 2005

A merge is very disruptive. It's a disruptive process. I've been through it and my colleagues have been through it. Nobody wants to have to go through that. When PWA and CP were merged, nobody gave us an opportunity to reject the idea of a merge. We were told they were going to merge and we were told we had to come to some resolve. Mr. Milton is saying we don't have to come to a resolve because he can keep us separate.

It's difficult for us, and that's why we come here. We ask you to please put a process in place so that ultimately that $130 million is not going to be transferred to the travelling public.

The Chair: Okay, Ms. Murdoch. What we're saying to you, though, is that we do have a process. We have a process called the Canada Industrial Relations Board, which has provisions under the Canada Labour Relations Board. You're aware of that.

I'm just talking off the top of my head here, but a suggestion that the Minister of Labour... We have a mechanism in place and all you want to do is have an amendment that creates a whole other mechanism, which I don't even think has any standing in law because we already have this other mechanism in place. So we have a mediation process in place under the CLC. What we do is we ask the Minister of Transport to ask the Minister of Labour to instruct the CLC to have a look at your situation and to deal with the situation in x amount of time.

Now the board is seized with your issue and your issue alone. It's given a time length of six or eight months, whatever it is, and then the amendment that would be in the legislation would say that after the resolution has taken place, after that six or eight months, that's when the two-year commitment has to be made by Air Canada.

You have a process that's in place, you have a mediator ready to go, and you have direction from the Minister of Labour to that board that says they shall deal with this situation and have it done in six to eight months. Then after it's resolved in six to eight months you still have two years of protection after the date of the agreement with Milton.

Anyway, it's just something for you to chew on. You don't have to give me your answer right away.

Mr. Guimond.

[Translation]

Mr. Michel Guimond: Thank you, Mr. Chairman. Let me advise you first of all that I shall start with a comment that is not particularly flattering and that has nothing to do with seniority lists. I also wish to state that I will not lose my temper. I lost my temper this morning, and my psychiatrist has told me that I should not lose my temper more than once a day. You are lucky that I already lost it this morning.

Some members: Ah, ah!

Mr. Michel Guimond: On page 3 of the French version of your brief, you say that Canadian is loosing young bilingual or multilingual flight attendants to Air Canada. May I say that this situation draws no tears from me? As far as I am concerned, Canadian is the very model of a company that did not give both official languages equal billing. That is not my fault; I am not the one who decided that Canada is officially a bilingual.

[English]

Canada, stay together, understand together.

[Translation]

Since it is a bilingual country, you must accept the fact that Canadian's bilingual flight attendants are moving to Air Canada. I do not wish to argue with Mr. Montpetit, but I am sure he could quote figures that would allow us to compare the situation of bilingual personnel at Canadian compare to what it is at Air Canada. Even at Air Canada, the number of bilingual personnel is still proportionally lower than the number of Francophones living in our beautiful country. This is why you will get no sympathy from me in that regard.

• 2010

My second comment has to do with seniority. I must say that, having spent 16 years in industrial relations, I understand your concerns and am sympathetic to them. If the idea is to merge two companies, we should find a way to make everyone happy and not make one group feel like second class citizens. If there is to be a single company, Air Canada, we should ensure that its employees are happy and motivated.

Finally, Mr. Chairman, I have here the presentation that your colleague Ms. Denise Hill, representing Air Canada, intended to make before the committee. She will not be able to testify. I have noted in her brief a certain number of feelers put out by your Air Canada brothers and sisters.

Mr. Denis Montpetit: Excuse me, Mr. Guimond, but Ms. Hill is president of the Airline Division of CUPE. She represents all the unions under the umbrella of the Airline Division. She is not with Air Canada.

Mr. Michel Guimond: She is then at the top.

Mr. Denis Montpetit: That is correct, sir.

Mr. Michel Guimond: When you say that the Airline Division of CUPE is asking that the seniority lists be integrated based on the hiring date, am I to understand that this is the position of the union leadership, of the Airline Division, which includes both Air Canada people and Canadian people. We are told, on the other hand, that the integration of the seniority lists according to the date of hiring would be unfavorable to members of the Air Canada component. There is a problem here and that is why your union leadership is asking the Standing Committee on Transportation, in order to relieve the great tension presently experienced in the workplace and to avoid years of costly legal action, to create a fair and equitable settlement process that does not prejudge the issue. If our committee were to approve your amendment, we could not be sure that Air Canada employees would take it sitting down or, in other words, that things would actually happen according to that scenario. How do Air Canada employees feel about all this?

Mr. Denis Montpetit: Mr. Guimond, I am in a position to answer you. Your committee would provide the implementation process. In other words, as our president Ms. Hill has suggested, it will only be a way of approaching the issue. Air Canada seems to want to put our names at the bottom of the seniority list. If you provided us with such a process, we could bring our grievances before a board. Let me add that the Airline Division represents a number of regional carriers, including the late InterCanadian, and Canadian Regional airlines as well as Air Nova/Air Alliance.

Canadian in-flight personnel have been fighting with the company for years to defend the French language, Mr. Guimond. Our Vancouver members want to learn French. They would like the various governments as well as Air Canada to offer them French courses so that we might speak French from sea to sea. Our Canadian members would like the company to make these courses available to them but they are not given that opportunity.

[English]

The Chair: Mr. Twentyman, Mr. Montpetit, Mr. Slade and Ms. Murdoch, thank you very much for your presentation to our committee and for answering all our questions. There would probably be another hour's worth, but your brothers and sisters in the CAW have been waiting patiently for a while and they're ready to come up next. So thank you very much, again.

Mr. Terry Twentyman: Thank you, Mr. Chairman. We appreciate the time.

The Chair: Thank you. Let me know what you think of my idea.

• 2015

Our final witnesses today are representatives from the Canadian Auto Workers Union: Jim Stanford, economist, research department; Gary Fane, the director of transportation; Berni Viczko, chairperson of the Canadian Regional unit; and Tom Freeman, president of the CAW.

We welcome you to our committee. I'd first like to apologize. We've been running a little bit behind on each witness, and then we had a vote at 5:30 p.m. The combination of all of this has put you close to an hour behind your scheduled time. I do apologize for that.

Thank you for appearing. We look forward to your presentation of five to eight minutes and then we can get to questions.

Mr. Fane.

Mr. Gary Fane (Director of Transportation, Canadian Auto Workers Union): Thank you, Mr. Keyes, ladies and gentlemen, members of the committee.

I'd like to also take the opportunity to introduce Paul Flegal and Rick Lemesurier. Paul and Rick are employees at Canadian Regional. They are not members of the CAW, but they are employees, and they brought a little bit of information they would like to share with you.

I told them they could, Mr. Keyes, provided we could get it in the five- to eight-minute time period, if you were to be so kind. They didn't particularly have standing because they're not in a union, so we invited them to share their experience with you so you'll have a full view of what some other employees are living with.

The Chair: It's your time, Gary.

Mr. Gary Fane: Okay. Thank you.

I'm going to start off. With me is Jim Stanford, our economist and Buzz Hargrove's chief economist adviser. As well, Tom Freeman is the president-elect of Local 2213, which is the Air Canada group. Berni comes from the Canadian Regional group.

The Chair: There was some extra stress on that, I would just point out.

Voices: Oh, oh!

Mr. Gary Fane: Well, “re-elect”, I might add.

The Chair: Oh, okay. Good. Congratulations.

Mr. Gary Fane: I wanted you to know that we had all three sectors, the national office and the Canadian and the Air Canada side.

Before we start that, I'm going to help you figure out how to resolve the seniority dispute right now so that you don't have to spend any more time on it. When I'm talking to Air Canada members I say to them, look, it's simple: You give the Canadian people date of hire and then you give the Air Canada people date of birth.

Voices: Oh, oh!

Mr. Gary Fane: But just so you know, when I speak to Canadian people I just reverse it.

• 2020

As you may know, our union represents about 250,000 members in 15 different industries. We have 8,000 workers working at Air Canada and Canadian and about another 2,000 to 3,000 members working in the regional airlines: Air Nova, Air BC, Air Ontario, Canadian Regional, and the other ones.

It's been a tough time for people. It's been an emotional time. It's extremely stressful. People are worried about losing their jobs, and they're trying to understand how come all this change is happening, how come the government has taken this initiative.

We do have problems, like everybody else. We have problems of workers fighting with workers, people worried about seniority, people worried about whether they're going to have a job tomorrow and whether they can make their mortgage payment. We have those types of union problems. We have those types of problems not only for the union people; they're for all the people in the airline industry: the management people, people who are not in unions, people who get hired on and think this is going to be a wonderful place, and they worry about whether they will have a future and what the future will look like.

We're very pleased with the line the government has taken and that the government has taken an initiative on restructuring the industry. We went through years and years of deregulation. It started with the Conservative government; it moved on a little bit with the Liberal government. It was ideology-based. It was this idea that more competition was going to be better for the consumer.

Well, I too have lived in the airline world. I've been through all the mergers, five or six of them: Transair, Pacific Western, EPA, Nordair, CP Air, and now the Air Canada arrangement. So we've been through this before, and we're hoping this will be the last one. We're hoping there will be some stability in the industry. We want Air Canada to do well; we want them to make lots of money. All of you will know it's easier for them to share with us when they're making lots of money, and that's our strategy. We want companies to be profitable.

But the government still has to continue to keep their eye on the situation. It's somewhat amazing that we couldn't get anyone to listen to us about the deregulation cry, and now numerous times the governments have said they're going to regulate Air Canada to make sure they treat the customer right and to ensure the safety standards. Of course we always ask, well, how are the workers doing? So we're pleased with the direction, and there's some opportunity here for success that will be good for the country, when it's all finished, to have some stability.

I listened carefully to the CUPE presentation on the question of seniority. There is nothing more explosive in the industry than seniority. It is a dog's breakfast everywhere we go. To answer Mr. Keyes' question, yes, we have a new labour code, and yes, under the new labour code, the new labour board has the control over seniority issues. But you have to understand there is not a confidence from the unions or the company—and you'll have the choice to ask the companies on Thursday—on how speedily a court case could be handled. Would it take two, three, four, or five years?

So in our union we're trying to stay away from the Canada Industrial Relations Board. We're trying to stay away, because as my colleague said before, if one union goes there, every union piggybacks on the same question. So you don't have one hearing to solve your problem; you have one hearing and six unions, two sides each, and you have twelve people. It would take you goddamn years just to get the lawyers' names straight before you could ever solve the issue. So we in our union have been trying to stay far away from it. But I want you to know the seniority debate is a very hotly contested question.

My friend here, Mr. Tom Freeman, is the elected president, and not a day goes by that he doesn't have people demanding the same thing the Air Canada folks have told you is going on with CUPE—the same thing. So I'm going to let him talk about the world of labour relations in the new airline.

Mr. Tom Freeman (President, Local (E) 2213, Canadian Auto Workers Union): Thank you, Gary.

Just to let you know, I'm a 33-year Air Canada employee. I've worked at Winnipeg Airport for many years in the reservations office, so I've lived my life in the airline industry. These past nine months I've experienced have been absolutely nine months of hell, seeing people fighting and eating at it. It's driving people crazy. There has to at some point be a resolution in this industry for all of us, and most important, for the customer.

Labour relations in the airline industry are really highly charged to say the least. Everyone involved in the process is grappling with the difficult task of integrating two airlines, two work cultures, two traditions, and, as Gary said, most controversially, two seniority systems.

• 2025

As in any other service industry, the success of our airline sector depends fundamentally on the quality, professional work that our members and the members of other unions perform every day. Loyalty to the airline industry, pride in our work, determination to succeed—these features of the airline workforce are huge assets as the sector moves into the future. Sadly, however, these assets have been viewed as tools to be manipulated by self-interested airline executives in their efforts to construct an airline industry in which they, and they alone, are in the flight deck.

Air Canada senior management played a shameful role during last fall's takeover wars in trying to exploit the loyalties of their employees in the battle to defeat the Onex bid. Air Canada workers emerged the victors over the competition, but are Air Canada workers going to reap the spoils of victory? It seems not. Air Canada management moved quickly ahead with the unannounced de facto merger of the two airlines within days of its legal and financial victory late last year, even though they had led their employees to believe that a merger was exactly what they were fighting against.

As the merger process unfolded, CAW locals at Air Canada and Canadian Airlines came together with management to try to resolve some of the huge difficulties involved in integrating the two airlines through the collective bargaining process. We must stress how unique this experience has been. Ours is the only union in the industry where the locals of the two airlines have managed to come together in a joint effort to deal with the problems we will all face through the restructuring process. This is a testimony to the leadership and the goodwill that exists in both the national and the local levels of our union despite the well-publicized difficulties of last year.

Unfortunately, Air Canada management is still playing war games with its employees. They mobilized the Air Canada workforce into battle last year by playing the company loyalty card. Now they have a group of decommissioned soldiers whose expectations were raised unduly by management's promise that they would be the victors.

Last month we managed to negotiate a tentative agreement between the new Air Canada and CAW members at both airlines, one that included an initial attempt to address the difficult seniority issue. Senior executives made numerous, less than helpful public statements during the period leading up to the ratification vote on that agreement. Largely because of concerns regarding the seniority issues, our members at Air Canada rejected that agreement, and the first penalty Air Canada gave our members was to tell them there was no severance packages for any members at Air Canada. That was their thanks for their loyalty.

The Vice-Chair (Ms. Val Meredith): As per agreement, you have used ten minutes, so I'll give you one minute to do a wrap-up, please.

Mr. Tom Freeman: One minute is sufficient. I'm just about done. Thank you.

We are now polling our Air Canada members to get a sense of their preferences for our future strategy. Workers out of Canadian Airlines will now probably sign on to a 90% vote, to a new agreement. The bargaining process will now be extremely volatile again for months to come. Management's continuing efforts to play one group of workers against another has clearly prolonged this difficult situation.

We're not asking you to solve the problems with our union. We'll do that ourselves. But the federal government could play a helpful role in this process by impressing upon Air Canada's management, in the course of designing and implementing the restructuring legislation, the importance of effecting smooth transition and labour relations.

In particular, we request that the federal government demand a commitment from Air Canada for a four-year period with no layoffs and no involuntary relocations of its workers at Air Canada, Canadian Airlines, and their respective regional carriers.

Thank you.

The Vice-Chair (Ms. Val Meredith): Thank you.

Gary, you wanted to make one comment. You've used up actually eleven minutes of your time.

Mr. Gary Fane: I appreciate that. I know you'll understand if we just finish, seeing we were waiting for so long. We got anxious.

The most important thing from where I'm sitting, from the national office perspective... I have to talk to you about this idea of selling Canadian Regional Airlines.

The Vice-Chair (Ms. Val Meredith): Can that be handled in the questions? Perhaps when we start getting into the questions, that can be answered.

Mr. Gary Fane: Okay. Sure.

The Vice-Chair (Ms. Val Meredith): Roy Bailey, for five minutes.

• 2030

Mr. Roy Bailey: Thank you.

You know the old song, Ain't It Funny How Time Slips Away. Not too long ago, we had one Gerry Schwartz promising that none of this would take place if he was able to take over, and then we had Air Canada coming on the scene telling us the same stories, that all these problems would be solved. Obviously you were sitting here when CUPE was here, and they're in deep trouble.

Could I ask you this question? You say that CAW has been able to resolve this between your members from Canadian and Air Canada, that you've come to an agreement. What magic do you have that CUPE doesn't have to reach this agreement?

Mr. Gary Fane: We don't have any magic, sir. What we had, quite candidly, was a tentative collective agreement that included an arbitration process. The collective agreement was ratified on the Canadian side and it was turned down on the Air Canada side. We are now presently having a questionnaire sent to our members on the Air Canada side, because many of our members in Air Canada have said to us that even if the package was a good package, because seniority has not been resolved, they were going to vote no.

So we don't have any magic, sir. What we have is a bunch of union people getting kicked around every day, trying to find a solution, just like all the other unions are doing, including CUPE. The difference we had, quite candidly, is that we were able to come here together; and if I understand the world of CUPE properly, the Air Canada component of CUPE hasn't been able to find it in their hearts yet to come to the table with the Canadian folks.

Mr. Roy Bailey: All right. What will it take, from your point of view—and we're listening in now—to have them come together? Obviously you've done the trick. What does CUPE have to do here? This is a terrible mess that the Canadian public is facing, and the longer it goes on, the more it's going to fester. You're going to have hatred out there beyond belief. It's already there. Do we let it go on? Does the government let it go on? You don't want government interfering with the labour unions, yet somebody is going to have to step in and bring about an arbitration and bring both Canadian and Air Canada together, possibly making everybody mad but bringing it to a resolution. Who's going to do it?

Mr. Tom Freeman: I think it's our view that after the failure on the Air Canada side, which is the group I represent, clearly now is the time for us to tackle the problem. In our view, the only way to get on with life in this business is, number one, tackle seniority; number two, get proper severance programs so that the people who want to leave will leave, and the rest will easily take care of itself. The people say that whatever the resolve is, whether it's on the Air Canada side or the Canadian side, we want an answer. We want to know first, before we get on with working side by side, what the rules are, and that's what we intend to do, Mr. Bailey.

Mr. Roy Bailey: These are Canadian people, and as far as I'm concerned, whether you work for Air Canada or for Canadian, any job lost unnecessarily, anybody's experience not recognized, is bad for Canada. You have representatives here who don't even belong to the union, with Canadian Regional being sold off. There's more unemployment. This whole issue should have been dealt with long before now. It has been left too long.

Mr. Tom Freeman: Mr. Bailey, when I met with Robert Milton and Gerald Schwartz back in September, I said the very statement to both of them: “Until you deal with the seniority issue in this airline industry, it's going to be a mess.” The one thing Gerald Schwartz said was that he would put the company together right away.

The problem we had at Air Canada was that Mr. Milton kept saying “It's going to be a two-airline policy; it's going to be two airlines.” The minute he got it, he phoned me, and I said “What the hell are you talking about? It's not two airlines.” He said “Well, I never said I wasn't going to merge them.” I was shocked, Mr. Bailey. I was shocked because that's what the Air Canada employees had based their loyalty on. If it was going to be a merger, it didn't matter who owned the company. As long as you paid their paycheques, that's all they were worried about.

So now is the time to do this and get this behind us. But we have to do it, and we're saying that if we had an arbitration process, we would resolve it in three to six months.

The Vice-Chair (Mr. Val Meredith): Thank you.

Lou.

Mr. Lou Sekora: Thank you.

I'd like to ask a question. There seems to be an awful lot of different unions and locals with the airlines. How many are there?

Mr. Gary Fane: There are at least five unions.

• 2035

Mr. Lou Sekora: The way CUPE spoke today it looked like they have a president and some board of the union on the Air Canada side and the same thing on Canadian.

Mr. Gary Fane: Yes.

Mr. Lou Sekora: I think it's very simple. What would happen—I'll ask you this question, because I was going to ask this question last time but the chairman said you're over your time, and that's fine—if one of the boards stepped aside and said you take over both those sides? Would that be much easier to do business?

Mr. Gary Fane: Sir, that would be like the Conservative Party stepping aside and saying to the Reform, why don't you get an alliance? That doesn't happen. That's not a reality. These people are elected to represent their members, sir. That can't happen.

Mr. Lou Sekora: I realize that.

Mr. Gary Fane: Yes.

Mr. Lou Sekora: What would happen if all you unions merged?

Mr. Gary Fane: That would make the CAW the biggest and most powerful union in the country, sir. It would make me real happy. I'd like that. I could work with this.

Mr. Lou Sekora: What I'm really saying is the fact is that there seems to be a real problem between CUPE—

Mr. Gary Fane: No, sir. This problem belongs to every union. I think our union has been able to deal with it differently because of the leadership of Tom Freeman and his executive, but it's still very difficult for him.

The problem you have at CUPE... Did you see the Air Canada CUPE component here? They're not here because they refuse to talk to the other component. They refuse to deal with the issue. Do you know what they tell their members? One will be on the top and one will be on the bottom.

We don't have that happening here. What we have is our leadership saying we will resolve it through a process of arbitration or at the board, which might take a long time.

Mr. Lou Sekora: So you feel in your heart and in your mind that the federal government should try to orchestrate something. Is that what you're saying?

Mr. Gary Fane: The federal government has a key role to play here, but as noted in my brief, to be very honest with you, the federal government has a land mine coming with the Canadian Regional question.

This idea that the commissioner would sell off Canadian Regional, 2,100 jobs... There's a process in the airline where you have major carriers here and then you have the second carrier over there. They've made life at Canadian Regional like Mission Impossible. There's no solution there.

I want you to know that we're really angry about this one. We agree on the restructuring question. What we don't agree with is what's happened on the Canadian Regional question, because the problem we have, quite candidly, is you want to take Canadian Regional and sell it out somewhere and hope someone else is going to buy it.

You're going to start exactly the same problems. The commissioner should take a ride on Air Atlantic or InterCanadian, because that little piece of what he, the commissioner of competition, wants to do there is to create a bankrupt Canadian Regional Airlines. Twenty-one hundred of the employees want to join the Air Canada family. My friend Paul here, who is not even a union man, has brought a petition to share with you, Mr. Chairman, if you haven't seen it before, of all the employees. They're very worried about being unemployed.

The Canadian Regional serves 30 different cities in western Canada, from Toronto west. It has 2,100 employees and seniority that goes back about 20 years.

From our union's perspective, it's real simple. The commissioner of competition has made a serious mistake. He will create unemployment if he does not let that airline join the Air Canada family. And we're basically saying to the public and any purchasers that they should be really careful about buying this airline because they will have a fight with our union.

We will make sure that there are no profits to be gained if you take Canadian Regional and sell it to some American airline that wants to make a deal with Canada 3000 or some other independent investor who's on the threshold of making unemployment for Canadian Regional. Our union will have a fight with whoever that purchaser is.

That was the part I didn't get to talk about, sir.

The Chair: Thank you, Lou.

Mr. Guimond, please.

[Translation]

Mr. Michel Guimond: Following your comments on the Canadian Regional divestment, I would appreciate some more detailed explanations. In your mind, Canadian Regional should continue to be part of the Air Canada family, just like Air Nova and Air BC. We heard this morning the testimony of small regional carriers, formerly affiliated with Canadian, who are complaining about Air Nova's predatory behavior. We must not forget that Air Nova intends to incorporate a company headquartered in Toronto which will take over the market in various regions.

• 2040

When the minister put forward his plan, and when Mr. von Finckenstein spoke of divesting Canadian Regional from Air Canada, we were told that the aim was to have Canada 3000, Air Transat or WestJet buy Canadian Regional and compete with Air Nova in the regional air market. I am very much aware of the fact that InterCanadian went bankrupt in Quebec and in the Maritimes as well as in western Canada. It seems that within the last two months, and this is especially true in British Columbia, three or four small companies, Canadian subsidiaries, have gone bankrupt.

If nothing is done, many small carriers will go bankrupt. Mr. von Finckenstein has told us that Canadian Regional should be sold in order to foster greater competition. In that case, I do not understand why the company should stay within the Air Canada family. Would that serve to enhance competition?

[English]

Mr. Gary Fane: Canadian Regional has a fairly good size of the market in these 30 cities, and we think the best thing to do is to take them, this group, and merge it with Air Nova, Air BC, and Air Ontario. The president of those three companies has said he's going to merge them, and he also wants to merge Canadian Regional. The 2,100 employees at Canadian Regional want exactly that to happen. They want that to happen because they see themselves as being part of the Air Canada family, building a strong network of serving the customer well and having stable jobs. These are the same people who always get treated as second class.

When Canadian Airlines decided to have wage cuts, they talked to all the unions. Then they went to the regional airlines and told them, by the way, Canadian is taking wage cuts for five or six years, we expect you to do the same. These people get paid usually less money than the major carrier. They're happy in their homes. They're quite satisfied with the jobs they have. All they want to do is keep them.

The idea to create more competition is a theory. The commissioner of competition, as I said, should ride InterCanadian, which is out of business, or Air Atlantic, which is out of business. This is a serious mistake. I understand competition. This gentleman doesn't understand the airlines. You can't have the customer thinking we'll just get on this flight and go somewhere. A regional carrier needs to have a strong basis. It needs to be tied to a national carrier.

It's like the customer. If I can fly with you or if I can fly on this airline and get points for my free travel, I'm going with that airline. It needs to have a reservation system.

In terms of the idea to cut it away, to this day I try to understand the logic of the commissioner of competition, because it will not create more competition; it will create unemployment.

Mr. Michel Guimond: Who will offer the competition on the Toronto-London, Ontario flight?

Mr. Gary Fane: Right now you only have Air Ontario, because Canadian Regional is not in that market any more. They're not there because they could not survive there.

Mr. Michel Guimond: If they are merged?

Mr. Gary Fane: If they are merged it will still be Air Ontario and VIA Rail.

Mr. Michel Guimond: And the bus industry too.

Mr. Tom Freeman: Sir, if I can add a point to that, a lot of the problems with the current two airlines and their connectors was they were flying Toronto-London or Toronto-Windsor at the same time, both empty. They were losing tons of money. On the routes in those cases you still have the frequency, but the head-to-head is gone, which is the stuff that didn't make sense.

The Chair: Thanks, Michel.

No one's disputing that, but I think the dispute is that there would be a lack of competition.

• 2045

Mr. Gary Fane: Mr. Chairman, the idea of competition means somebody would stay in business. Our experience has been that any time you cut away one of those regional carriers like InterCanadian... that should be the best example; they're out of business now. Air Atlantic, as soon as their relationship was gone with Canadian—

The Chair: Yes, but Mr. Fane, if you understand the airline industry, as you say you do, there's no question in anyone's mind that Air Canada, as a monopoly, is going to need feeder airlines. They're going to need people to feed them the passengers to get on their flights. The only people who can do that are regional carriers because they're the ones who are going to fly into smaller communities.

So all of a sudden you say to Air Canada: “I tell you what, Air Canada, you can have them all. In fact, why don't you fold Canadian Regional into the whole system as well? Take the whole kit and caboodle.” Now you have Air Canada operating with 90% of the airline market in this country. There is no competition, Mr. Fane. Everything comes under Air Canada's wing. Air Canada sets the agendas. Air Canada pays the bill. Air Canada has them all under their computer reservation system, under all their command, as it were, and there is no competition.

I think the committee is probably leaning more toward the idea of do you know what? I think perhaps we should tell Air Canada to divest itself of all its regional carriers so that Air Ontario, Air BC, Air Atlantic, Air Whatever are all going to be competitive with each other to supply the dominant air carrier, Air Canada, with passengers.

Mr. Gary Fane: Mr. Keyes, I don't think that's going to happen. You're right that Air Canada will be the dominant carrier. I suggest to you that either they have 80% of the domination, or 82% or 85% when you throw in the regional... Why would you want to make 2,100 people unemployed? That's what you'll be doing here, because that airline will not last by itself. Your committee here will be doing that; you'll be making 2,100 unemployed. The 2,100 people don't want to be all by themselves tied into American Airlines and Canada 3000. Doesn't that matter to you?

The Chair: Following that logic, then, if WestJet had not existed before—

Mr. Gary Fane: WestJet is doing absolutely fine, sir.

The Chair: And why?

Mr. Gary Fane: Because they're bringing in competition. Let WestJet turn around tomorrow and decide what routes they want to compete on. I know your government's going to let them do that, and we're fine with that. Don't do it at the cost of these 2,100 people. That's the problem.

An hon. member: Let's move on, Mr. Chair.

The Chair: That's true.

Stan Dromisky.

Mr. Stan Dromisky: Thank you very much.

On page 3 of your document here you request, in particular, that the federal government demand a commitment from Air Canada for a four-year period with no layoffs, no involuntary relocation of its workers at Air Canada, Canadian Airlines, and respective regional carriers.

You state further on that the result would be a much smoother transition to an integrated workforce. You're asking for a four-year moratorium here. Wouldn't that four years just be an extension of the turmoil that's going on right now? You're just delaying the whole process and extending it for a longer term, for a four-year term of confusion, animosity, anxiety, and everything else.

Mr. Gary Fane: Sir, I think not, and let me politely try to explain why. In the tentative agreement that our 8,000 employees had negotiated with Air Canada and Canadian, we had a new clause in there extending the two-year job security the government had wrestled out of the system to four years. That's what we put in the deal. We did that hoping it would give people a feeling of stability, a feeling that, listen, let's not kill each other over seniority. You now have a lengthy time period for us to find a solution on seniority.

The two-year question, if I understand right, started ticking in March. We moved right away to see if we could find a resolution on that and we negotiated in the package a four-year job security... The problem we have is we don't have the economic strength to do that at Air BC, at Air Ontario, at Canadian Regional or Air Nova. We don't have the economic strength to do that in those places or we would. Now that's just our organization.

When we put the four-year question in there, we'd like you to look at it not only for our members but also for the members of CUPE, the members of IAM, and other non-unionized employees. Every day I talk to non-unionized employees who call me up and say, “Can we join the CAW, because we're worried about our future?”

Dr. Jim Stanford (Economist, Research Department, Canadian Auto Workers Union): Perhaps I can just add something here. Part of the difficulty in the seniority issue that you've heard so much about relates to a fear of job loss. That's not the only issue associated with the seniority dispute. There are other issues about job bidding and so on. But the fear of job loss is definitely the kind of cold shower that gets people really frightened about their future.

What we're saying is that we expect Canada's airline industry is going to grow. On the whole, we think this is a very solid economic foundation for the industry. We don't expect masses of job losses through the merger and we certainly don't see it in the longer run. We actually see incredible opportunities in this industry.

• 2050

By imposing or encouraging Air Canada to commit to a four-year moratorium without any layoffs or forced relocations, you're kind of taking that fear that's gripping people right now and saying, you're not going to get laid off in four years, and in fact with all the projections, the airline's going to be hiring like mad before that four years is up. That's going to make it much easier. That's going to cool the emotions on all sides.

We're not saying freeze the status quo for four years. You're absolutely right. That would just mean four more years of turmoil.

What we're saying is where you have the leverage, put your pressure on Air Canada to create a context in which we can solve this problem ourselves. We're not asking you to solve the seniority problem. We know that's something we have to solve with the company. But in a situation where no one is afraid they're going to lose their job or be transferred to Regina, Saint John, or wherever, it's going to be much easier for us to solve that problem.

Mr. Stan Dromisky: You would like to see that model be transferable to all the other parties, especially the five unions you're talking about, to deal with that problem.

Dr. Jim Stanford: We're asking you to extract a commitment from Air Canada for no involuntary layoffs or forced relocation of any of its employees, not just in our bargaining unit but in all of the units. I think that would reduce the tensions throughout the system as we try to grapple with this seniority problem, and the regionals as well.

The Chair: Thanks, Stan.

Bev Desjarlais.

Ms. Bev Desjarlais: The previous presentation was a good lesson in Unions 101. There are no union bosses. The members say what happens. The union leaders don't tell them. That's why you can have a situation where one CUPE local is not in agreement. When you can't get 301 members of Parliament or 156 or 157 Liberals to agree, you can well imagine what it's like trying to get two different bargaining units to agree when their jobs and their livelihoods are at risk. So nobody's going to do it willingly. It doesn't matter how loving and wonderful and caring you are. You're fighting for your job.

You have someone like Robert Milton saying, I'm not going to go by date of hire. He set the ground rules. He has told those Air Canada employees, this is the ground rule: I'm not going to go by date of hire. So he has created this problem.

I just had to get that in. I knew I wouldn't get another chance, Stan.

So here we go. Mr. Keyes made a good point about getting this whole issue resolved in a timely manner. Quite frankly, I feel much the same way. I think we need to get it resolved. I'm wondering whether as a committee we could recommend that there has to be a quick resolution to this. I don't know if we can put it in the legislation. Maybe what we need as the timeline factor is that Air Canada has to cover all the costs of any of the arbitrations. That would give them the encouragement to speed up the process. They have both bodies. What better way to get them to speed up the process than to make them cover the cost of the whole thing?

You're not making a presentation, but you represent a number of non-unionized employees. Which employees fall under your non-unionized category?

Mr. Paul Flegal (Internal Communications Coordinator, Canadian Regional Airlines): It's not a formal group of non-unionized employees. It's a number of people who voiced their concerns strongly in a petition I have with me. It's approximately 970 of about 2,100 Canadian Regional Airlines employees.

Ms. Bev Desjarlais: I got the impression some of those were non-unionized members.

Mr. Paul Flegal: They're everybody.

Ms. Bev Desjarlais: During our discussions I think we were under the impression that there weren't a whole lot of non-unionized workers, so there has been a tendency to just—

A witness: We have about 850.

Ms. Bev Desjarlais: There has been a tendency to just say no job losses for union members. I know it was a concern that came up at one point, but I was under the impression that there weren't a whole lot of those non-unionized members.

The Chair: Bev, it was no job losses for employees. We didn't specify union or non-union.

Ms. Bev Desjarlais: I thought somewhere it said non-union. That's fine, as long as it says employees in general. Thank you. That's it.

The Chair: Thank you, Bev.

Gentlemen, thank you very much for your presentation to the committee.

I will just dispute Bev Desjarlais' comment to one extent when she compared the unions to Parliament. At least in Parliament at the end of the day we have to decide on how we're going to do things, and then there is a vote. Then the decision is made.

With that, I'm just going to say thank you to all of you for your presentation to our committee and for your input. We'll see how things go from here.

Mr. Gary Fane: Thank you, Mr. Keyes. With your indulgence, we'd like to give you this petition from the folks who are worried about their jobs.

The Chair: Please do. The clerk will take that petition and we'll have it circulated to all the members. Thank you.

Colleagues, we're adjourned until 3:30 tomorrow afternoon in room 701 of La Promenade.