TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 4, 1999

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[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues. Pursuant to Standing Order 108(2), this is a study on the future of the airline industry in Canada.

We welcome our witnesses this afternoon. Representing WestJet Airlines, we have Mr. Stephen Smith, president and CEO. From Bearskin Airlines, we have Harvey Friesen, president. And from First Air, we have three representatives: Mr. Robert Davis, president; Mr. Pita Aatami, chairman; and Mr. Sam Silverstone, the legal counsel.

Gentlemen, good afternoon and welcome to the Standing Committee on Transport. We look forward to hearing your presentations. I'd like to begin if I might with WestJet Airlines and Mr. Stephen Smith.

Sorry; there's an interruption. Mr. Guimond, please.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): On a question of privilege, Mr. Chairman, I am raising section 117 of the points of order, which stipulates that the chair of a committee must maintain order in the committee and ensure that the proper procedure and practices are observed.

I am also raising, Mr. Chairman, Beauchesne's parliamentary Rules and Forms, 6th edition, in which point 75 deals with members' freedom of speech. I will read you that point:

75. The privilege of freedom of speech is both the least questioned and the most fundamental right of the Member of Parliament on the floor of the House and in committee. It is primarily guaranteed in the British Bill of Rights which declared “that the freedom of speech and debates or proceedings in Parliament ought not be impeached or questioned in any court or place outside of Parliament”.

I am also raising, Mr. Chairman, point 69 of Beauchesne's parliamentary Rules and Forms, 6th edition, which deals with decisions by the Speaker of the House of Commons:

69. The Speaker has reminded the House, “It is very important... to indicate that something can be inflammatory, can be disagreeable, can even be offensive, but it may not be a question of privilege unless the comment actually impinges upon the ability of Members of Parliament to do their job properly.”

Mr. Chairman, this morning, after the debates, at 12:05 p.m., immediately following the testimony by the President of American Airlines, Mr. Carty, I was approached by an individual in the corridor. I won't repeat his exact words because they were in English, but what he meant was very clear from his expression and his tone of voice. In any case, I was accosted by an aggressive, angry person, livid with rage, who pointed his finger at me and said: “The questions you asked the President of American Airlines were disgusting and unacceptable. You didn't even ask the President of United the same questions." This person also told me: "I'm an employee of Canadian Airlines. What are your voters going to think of your attitude?”

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I answered that I had a job to do, that I was doing this job to the best of my abilities, with my talents and my failings, but also with my heart, that I felt threatened by him, that I had a right to speak here, in Parliament, because we live in a democracy and I had been sent here by citizens who trusted in me to represent them as well as any one of us.

I told him that, in a democracy, voters can change their representatives every four years if they're not satisfied with their work, unlike senators who are appointed as a political reward.

I went to see the security guards with this individual. I asked him to identify himself. He was wearing a blue card issued by the House security service with the name Scott Bradley on it.

While all this was going on, Ms. Parrish arrived. I asked her if she had witnessed the threats he made against me and she said no, she hadn't.

The security guard I met went to get his immediate superior and all the notes were recorded. At the moment, an inquiry is being carried out.

Today at noon, I went to see the Sergeant-at-Arms Cloutier and indicated to him that I would be raising this question of privilege and that it was up to you to decide, as Committee Chairman.

Mr. Chairman, considering the facts I've presented, considering the parliamentary law applicable in these cases, I would ask that you ensure my safety as a Member of Parliament and that you continue to recognize my right to speak, as you have always done, Mr. Chairman. I would like to repeat that I am not criticizing your chairmanship. Whether you agree with the comments I make or not, you have always conducted the work of this parliamentary committee with a master's hand, but I am telling you that my rights have been violated and I am afraid that other people will threaten and intimidate us.

Mr. Chairman, I am raising this question at the first opportune occasion. I think that the rules are clear in this regard: a member or an individual must raise questions at the first opportune occasion. When I looked a little while ago, the person was not in the room. You know that we are adjourning today for the parliamentary recess and I want to confirm with you that this person will be denied access to the committee room when we come back to work on Monday, November 15, and that the ban will continue until the end of the air transport study we are presently carrying out.

[English]

The Chair: Mr. Guimond raises a very important point, a point that we must, individually or as a collective, respect, and that is the ability to sit in a committee. We also have the privilege of being protected by the House of Commons, because this committee and any committee of the House of Commons is an extension of the House of Commons.

We must be able to do our job to the best of our ability, and if that means asking questions that we feel are important and might not be to the liking of a particular individual who might be watching these proceedings, that's too bad, because quite frankly, we have a job to do.

I don't care if it's a member of any opposition party or my colleagues on the government side. I have to remain as neutral as I can as chair and protect the integrity and the abilities of every member of this committee to express their views, ask the questions, and get to the point of whatever it is they want to do with the witness.

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Mr. Guimond, when I left the committee this afternoon, I was told of the altercation out front—the altercation of words; let's make that clear. The first thing I did on your behalf, as I would on anyone's behalf as a member of this committee, is I had a discussion with Mr. Cloutier as well. I have asked for, and Mr. Cloutier has supplied us with, a security guard outside this door so that, for your security and the security of all members, when the committee meeting is concluded and you want to leave, you can leave without fear of being harassed.

We all know there's a bit of a game that happens here in Ottawa. It's an art form. We walk out of Question Period, and even the door coming out of Question Period is jammed with cameras and reporters, and everyone is trying to get their clip from the latest hot member of Parliament or cabinet minister, and in the case of a committee, the latest witness who happens to be on the hot seat at that moment. So there's a scrum, and scrums can be very difficult to get through.

At times witnesses and the friends of witnesses who sit behind our witnesses will get as tempered as we do sometimes, except we have the right to be tempered, sitting here to ask the questions. Quite frankly, after the fact, if they want to have a discussion, they can come up to us and have a discussion. We hope that discussion is always done in a non-hostile manner.

Unfortunately, in this circumstance, I have heard it didn't happen that way.

Mr. Guimond, I hope you'll take some solace in the fact that I have spoken with the Sergeant-at-Arms, Mr. Gus Cloutier. A security guard will, from this day forward until the end of these hearings, be posted outside this door so as to make sure you can come and go without any harassment.

On the matter of asking this individual to no longer be admitted into the committee room, I too would like to have a discussion with this individual, from the perspective of being a chair, to point out to him that he went over the line in the opinion of one of my members of this committee. I would like to see what this individual does first. From what you have told me—and I don't have both sides of the story quite yet—I would expect that if there were no witnesses... I am familiar with this individual, and I am probably 90% sure this individual will get in contact with you in one way or another to express an apology.

I hope that goes some distance in satisfying your point of order with us this afternoon. Mr. Guimond, do you have anything to add?

Mr. Michel Guimond: That's all right. Merci.

The Chair: I consider this matter closed.

Are there any other points of order?

We apologize to the witnesses for the interruption. It was obviously a necessary one.

Mr. Smith, when you're comfortable, we would like to hear your presentation on behalf of WestJet.

Mr. Stephen Smith (President and Chief Executive Officer, WestJet Airlines): Good afternoon, ladies and gentlemen of the Standing Committee on Transport. My name is Stephen Smith. I am the president and chief executive officer of WestJet Airlines, a regional low-fare carrier operating completely in western Canada, based in Calgary, Alberta.

For those of you who are not familiar with WestJet Airlines, let me give you a bit of background. WestJet was founded in February of 1996 and started by flying three Boeing 737-200 aircraft, serving five destinations in western Canada, with 220 employees. Today WestJet operates 13 aircraft to 12 western Canadian cities and employs over 1,100 people. We only operate one aircraft type, that being the Boeing 737-200, which seats 120 passengers. This year we will carry over two million passengers. We have seen our stock price increase some 40% since our debut on the Toronto Stock Exchange in July of this year. We are on record as saying we plan to increase our fleet by three to four aircraft per year and are focusing solely on western Canada.

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Why has WestJet been successful when other airlines have not been? There are a number of factors, but primarily it comes down to our people. WestJet invests heavily in its people, and as a result they provide us with a low-cost structure where we average approximately 65 employees per aircraft versus the two major carriers, who currently employ between 140 and 170 employees per aircraft. In addition, our people give us a customer service for which we are renowned and which really is the reason people continue to come back to WestJet.

WestJet fares are, on average, approximately one-half of those charged by the major carriers, and none of our fares have any Saturday night stay requirements in them. We are the true low-cost carrier.

WestJet's marketing philosophy is not to garner market share, but rather we grow the marketplace in which we serve. In 1997, when WestJet had only seven aircraft compared with 1995, which was before we had started, we had seen our marketplace grow an average of 150%. Now that we are up to 13 aircraft we believe the stimulation is much greater than that. Prior to our arrival, markets would grow an average of approximately 3% per year, for comparison's sake.

We believe we compete more with the car, the train, the bus and, more importantly, the couch or a night out, as WestJet tends to stimulate travel as opposed to diverting it from other carriers. We are able to do this because of our ability to charge fares that I indicated earlier are much lower than the prevailing fares in the marketplace, and we deliver excellent value for those fares. We are trying to take people off the road and get them to travel by air, and we have been very successful in doing that. As a result we feel we are unique in the Canadian airline industry. Thus far WestJet has been strictly an observer with respect to the potential consolidation in the Canadian airline industry. Our position with respect to that industry is that we do not believe there's a problem in the industry; rather we believe there is a problem with one carrier, self-admitted by Canadian Airlines.

From the financial results posted by Air Canada, the three publicly traded charter airlines, some regional carriers and ourselves, which all appear to be relatively healthy, we can only draw the conclusion that the airline industry in Canada is not broken.

First, we request that there not be any reregulation of the industry in Canada. We believe this is wrong and definitely not called for.

Second, assuming that one of the current offers is successful, we will end up with one major carrier in Canada. WestJet is very pro competition. We were born in an era of competition. We will thrive in an era of competition. While we do not believe we compete with the major carriers, any restructuring or consolidation in the airline industry would be extremely favourable to WestJet. We become a viable alternative to the major airlines as their frequency on routes decreases and ours increases.

We do have a problem, however, if one carrier controlling approximately 90% of the airline industry in Canada is free to do whatever they want in terms of current or potential competition. You can imagine what would happen if a carrier were to control the high-fare market and also decided to get into the low-fare marketplace. There would be very few if any openings for future competition.

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In addition, it would allow this new large entity to cross-subsidize its low-fare operation from an obviously profitable high-fare operation that would have no competition.

As a result, we are asking Transport Canada, along with the Competition Bureau, to ensure that a framework of competition is built into any single carrier proposal.

We have seen a letter from Mr. Konrad von Finckenstein, Commissioner of Competition, to the Hon. David Collenette, Minister of Transport, with respect to some ideas into which we had some input, and we are supportive of many of the ideas contained in that letter.

WestJet believes we live in an efficient economy and as a result we must allow competition and the forces in that efficient economy to occur.

Obviously this does not guarantee that every company that exists will always exist, and in fact I will suggest to you that would only see a regeneration of the airline industry if there were some dramatic change to the current existing scenario.

In addition, there has been some comment about allowing foreign airlines to operate on domestic routes. While once again WestJet is pro competition, without reciprocal agreements in other countries we do not believe this makes sense for Canada, and in particular not for WestJet.

Without the ability to respond to foreign carriers who may decide to set up service on Canadian routes, it can create an unequal playing field in which we could find it very difficult to compete.

From my speech, I would like you to take the following. First, WestJet has been doing, and continues to do, extremely well. This morning we released our third-quarter results and on a margin basis we are one of the top profitable airlines in North America, if not the top profitable airline, on a margin basis, in North America.

Secondly, we believe there's a problem with one player in the industry.

Third, while WestJet will do well with any restructuring or consolidation, if we end up with one dominant carrier, we would ask the Competition Bureau and Transport Canada to ensure that we have a competitive, fair, and equitable airline industry.

We would ask that the concept of reregulation not be considered, and we do not support the ability for foreign-owned carriers to operate in Canada without reciprocal agreements.

I thank you for your time.

The Chair: Thank you, Mr. Smith. We appreciate that, and all within the 10 minutes too, which is terrific.

Mr. Stephen Smith: You're welcome.

The Chair: Now, from Bearskin Airlines, Mr. Harvey Friesen.

Mr. Harvey Friesen (President, Bearskin Airlines): Mr. Chairman, honourable members of Parliament, and ladies and gentlemen, I'd like to thank you for the opportunity to make a presentation to the transportation committee at this time.

Bearskin Airlines, or our corporate name, Bearskin Lake Air Service, will celebrate its 37th anniversary in July 2000. Bearskin Airlines' roots are deep in the soil of northern Ontario, and the company has come a long way since its founding on July 17, 1963.

At present, Bearskin Airlines operates a fleet of 26 aircraft under a variety of schedule, charter, and contract services. Bearskin Airlines is northern Ontario's hometown airline and its largest commuter airline.

In 1999 the company will carry more than 200,000 passengers to 38 destinations on almost 200 scheduled departures daily. Bearskin is also a charter carrier in the region, providing services to government, corporate, and private interest groups.

Bearskin's scheduled network extends from Flin Flon, The Pas, and Winnipeg in the west, to Sudbury, North Bay, and Ottawa in the east, and as far north as Peawanuck and Fort Severn on the Hudson Bay coast.

Our current marketing agreement with Air Canada's connector carrier, Air Ontario, provides for our participation in the Aeroplan frequent flyer program as well as joint fares with Air Canada.

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Within Canada, the airline industry is clearly divided into three camps: the red, the blue, and the unaffiliated. The red camp includes scheduled air carriers aligned with Air Canada and includes wholly owned subsidiaries like Air Ontario, Air Nova, Air BC, and Air Alliance, as well as smaller privately owned domestic carriers like Alberta Citylink, Central Mountain Air, First Air, Air Creebec, and Bearskin Airlines.

Affiliation with Air Canada provides for a number of marketing tools that enable the red camp to be more competitive than they could be individually. Wholly owned subsidiaries and some of the privately owned carriers participate in code sharing with Air Canada.

All airlines in the red camp are offered participation in the Aeroplan frequent flyer program, as well as through fares or joint fares. These airlines also endeavour to facilitate connections between each other at the hub airports, providing a seamless service for passengers and baggage that make multiple connections.

Globally, Air Canada is aligned with other carriers in the Star Alliance, including Lufthansa, United Airlines, SAS, and other carriers. The benefits to these member carriers are similar to those outlined above.

The blue camp includes scheduled air carriers aligned with Canadian Airlines International and includes wholly owned subsidiaries like Canadian Regional, as well as privately owned carriers like Ontario Regional, Inter-Canadien, and Calm Air, in which Canadian has a part interest.

Globally, Canadian Airlines is aligned with other carriers in the Oneworld alliance, including American Airlines, British Airways, and other carriers. The benefits to members of this alliance are similar to those outlined in the red camp and Star Alliance partners.

Unaffiliated carriers include scheduled and charter carriers who have remained independent, like WestJet, Canada 3000, Royal Aviation, and others. Most of these carriers serve only larger markets on a point-to-point basis. Although these carriers can be and are competitive in the markets they serve, they are unable to compete effectively in a true global sense.

Within the current environment, wholly owned subsidiaries of either the red or blue camp can receive specific direction in terms of markets served or fares charged. Privately owned affiliated carriers are free to do as they like, although policies that are not endorsed by the major carriers could have negative effects on their relationship.

Bearskin Airlines prides itself on being a Canadian airline, and, as an operator and business owner in this country, we would not like to see any changes that would effectively place control of our industry out of the hands of Canadians.

Presently we are aligned with Air Canada, one of Canada's major airlines. This alignment provides joint fares to multiple city pairs in North America, preferred scheduling, and participation in the frequent flyer program. With the emergence of a single carrier, this dominant carrier may not see the need to allow us to continue to participate in these programs. They may instead operate their own version of the service by using their excess equipment and competing against us, the independent, who has just been stripped of all necessary tools to compete in similar markets. This single airline can easily change prices in one sector of the industry to predatory price over any competition it receives. The significant size of this new airline could easily allow it, if unchecked, to bring each competitor to its knees systematically, one at a time, and fill the resulting void with its excess equipment.

There has been much said about the impact of job losses and layoffs, and again, comments have been made on minimizing this impact by expansion and attrition. For independents our size, the concern is, will this expansion to reduce layoffs result in dumping aircraft and financial resources on routes currently operated by independents, commuters, and regionals, who will be stripped of their marketing tools and end up going it alone against their former partner? If this occurs, the layoffs will happen not with the large carrier, but with the small independents who cannot fight such a huge competitor.

When restructuring takes place as currently contemplated by the two sides, Air Canada or Onex, we will have one major airline in Canada, or two controlled by the same corporation. What happens to the wholly owned regional carriers? Are they also to be merged, sold, or swallowed up by the remaining major airline? These are questions in the plans of each side that will need to be answered as the outcome changes, depending on the answer.

The wholly owned regional carriers are large players in the airline industry in Canada, as they provide the feed to the major carriers, and their fate should be known. In order to run the same schedule points, the new major airline will not need to be as large as the two separate airlines. They will have excess aircraft, equipment, airport terminal areas, offices, and hangars, and excess staff such as pilots, cabin crew, maintenance engineers, baggage handlers, counter staff, and administrative staff. One airline will obviously result in reduced frequency of service and reduced competition. Is this bad, or just business and market forces at work?

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There are some concerns for consumers and some questions. Will this one big airline be very weak due to its debt burden, or will it be competitive on a cost basis? With one airline, everyone is on the same alliance and the same frequent flyer plan. Will this plan still allow for the same point redemption scale, or will it be changed to the consumer's detriment? Who starts competitive fares and seat sales? Why would the industry need them if capacity is reduced and there is only one major airline? Would service levels falter? What would we have to compare against?

We believe regionals that are owned by one airline will be directed to fly similar to how they operate now. The new major airline calls the shots, identifying times, frequencies, and costs. The only difference under a restructured industry is that there may be only one regional.

Once again, our concern for northern and remote areas is that in order to minimize job losses and use excess equipment, the new major airline could place this excess on top of existing carriers in these areas. The existing airlines in these areas may not be able to adjust to this excess quickly enough and may be adversely affected, resulting in a loss of effective competition and the emergence of markets dominated by a new major airline.

Can we be so certain that the promises made in this merger will be adhered to? Let us not forget the promises made by TWA Corp. when they acquired Wardair. It was promised to the public that Wardair would be operated as its own entity, yet within months of the acquisition the name was removed and the airline ceased to exist.

Thank you.

The Chair: Thank you, Mr. Friesen.

Our final presenter, before we get to questions, is from First Air. Will it be Mr. Davis or Mr. Aatami?

Mr. Pita Aatami (Chairman of the Board, Makivik Corporation): I'll start off with my presentation, and then Bob and Sam will make their presentations.

The Chair: As long as it's all within 10 minutes, we're all ears.

Mr. Pita Aatami: Yes.

Good afternoon, ladies and gentlemen. My name is Pita Aatami. I am the president of Makivik Corporation and also the chairman of First Air.

The Makivik Corporation was created pursuant to the James Bay and Northern Quebec Agreement signed in 1975. Makivik's membership is made up of all Inuit beneficiaries to the James Bay agreement, presently numbering approximately 9,000. Inuit beneficiaries live in 14 Nunavik municipalities and are fully subject to all forms of income and sales tax. We are taxpayers and fully contribute our share to the national and provincial treasuries. Makivik is responsible for administering and investing the compensation funds received for the Inuit pursuant to the James Bay agreement.

Since its inception, Makivik has had a special interest in the aviation industry. In 1975 Makivik established Air Inuit and successfully won the right, through decision 5223 of the Canadian Transport Commission, to provide air service to the communities of the Ugava coast of Nunavik. It was clear from the decision that the air transport committee relied in large part on the governmental policy direction contained in the James Bay agreement to give Nunavik Inuit the means necessary for their economic development and recognized the importance of air transportation in the north as the only year-round mode of transport, there being no roads or rail.

I had the unfortunate privilege of detouring on the way here. Since there are roads leading to all cities in the south, I can detour to come here. I don't have that privilege in the north. The only mode of transportation I have is the road.

Air Inuit generates approximately $35 million in annual sales and, more importantly, employs approximately 300 people, one-third of whom are Inuit beneficiaries of the James Bay agreement.

In 1990 Makivik acquired First Air. In acquiring First Air, Makivik believed it was spearheading an attempt on behalf of the Inuit of Canada to gain control over the growth of northern transportation.

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In 1998, strengthening an already established relationship with Air Canada, First Air entered into a commercial agreement with them in order to provide our northern customers with a fully integrated and seamless service with the south. We have presently invested over $50 million in First Air, which employs almost 1,100 people in the company, 450 of whom are employed in the north. The company pumps approximately $38 million in direct expenditures into the northern economy. The investments we have made in First Air, as with our investment in Air Inuit, demonstrate that we put our money where we live and where we work.

As you shall hear in the report from Mr. Davis, our First Air president, we are very concerned about the impact the present restructuring of the southern airline industry could have on First Air. We do not see how there can be a true competition in the northern market if there is no true competition in the south. The creation of a dominant airline in the south will prohibit there being any true competition elsewhere in Canada.

Nakurmik. Thank you.

Mr. Robert Davis (President, First Air): Thank you, Pita. As indicated in our brief to Ministers Collenette and Nault, which has been distributed to you, First Air and Makivik are concerned with the federal government's quest to restructure the airline industry in Canada, one that is not broken, and more specifically its impact on the north. At the present time the airline industry in Canada is effectively based on a two-airline model, Air Canada and Canadian Airlines. First Air and Canadian North are the north's two major airlines. We both have commercial alliances with the two respective national carriers. Although our competitor in the north carries on business under the name Canadian North, in reality Canadian Airlines continues to be our competitor through a modified ownership and operating structure completed last year.

After deregulation in 1986, the airline industry in Canada evolved into two competing camps, Canadian and Air Canada. They extended their services into every region of the country. This evolution was a direct result of federal government policy in the airline industry. First Air had to deal with this fact of life. The north was not insulated or protected from the national scene. Canadian Airlines integrated itself into the north as a major new player.

As a northern regional airline, First Air was forced to align itself with one of the two national groups. The decision to align was non-discretionary, First Air either aligned or perished. As Canadian was our competitor it was only natural that we aligned ourselves with Air Canada. As Pita has indicated, our initial marketing alliance with Air Canada has developed into a full commercial partnership.

One example is that with the Onex proposal, First Air faces the prospect of its partner airline, Air Canada, and its primary competitor, Canadian Airlines, becoming one carrier. It is impossible to see how a new dominant airline would want to compete with itself through its partners in the northern environment. Left with no alliance under the Onex deal, it is hard to imagine how First Air can remain viable, and this puts at risk the jobs, economic contribution, and, more importantly, the essential northern services we provide.

As you can see from our route maps, First Air provides year-round scheduled air transportation to 26 communities in the north. With no alternate form of transport, all of these communities are dependent on air service. As Pita mentioned, there are no road or rail services. Air service in the north is a necessity, not a mere convenience. To many of these communities, First Air is the only airline willing to provide year-round scheduled services. It should be noted that to deal with the unidirectional nature of travel in the north, primarily on cargo, it is crucial that our company have a proper mix of passenger, cargo, and charter work in order to survive. We are very susceptible to segmented competition, that is, competitors supplying part but not all of the service, as we do. A dominant airline would have no trouble disposing of us with those tools.

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Various comments have been made regarding the airline industry in a dominant airline scenario. Many comments have been made, but we have yet to hear any reference or concern that specifically addresses the north where air transport, as indicated, is an essential service. The industry restructuring proposals put forward to date deal solely with the two national carriers and the affiliates they own.

Can the federal government do something? First, they can stop this quest to help Canadian Airlines. We also believe there are other things it can do. Canada could order the newly formed dominant carrier to respect the commercial agreement in place between Air Canada and First Air for its full term, including respecting the restrictions not to compete directly or indirectly over our northern routes. Moreover, this new entity should be directed to review and modify the First Air commercial agreement with Air Canada in light of the fact that it would now be a dominant airline.

If the federal government has come to the conclusion that the southern market cannot support two major airlines, how can it believe the north, covering two-thirds of our country and having only 75,000 people, can support two major airlines? Has anyone asked why the Onex offer only includes Air Canada and its affiliates and does not include its northern commercial partner, First Air? We are not for sale.

My colleague, Sam Silverstone, will follow on.

Mr. Sam Silverstone (Legal Counsel, Makivik Corporation): Thank you, Bob. I'm legal counsel at the Makivik Corporation and I'm a member of the board of directors of First Air.

Mr. Chairman, committee members, ladies and gentlemen, one additional important element to this whole equation is the fact that First Air was bought with federal treaty moneys as a result of the federal comprehensive aboriginal claims policy. We've expanded the company in response to and in reliance upon specific federal transportation policies, which have already been pointed out by my colleagues.

As you may know, federal comprehensive claims policy has as one of its main purposes to provide aboriginal peoples with the tools for promoting their economic development. The James Bay and Northern Quebec Agreement from 1975 was a direct product of this federal claims policy. It has as one of its fundamental objectives the promotion of economic development. In fact, at least three entire chapters of this treaty are devoted exclusively to this issue.

In the James Bay treaty, Makivik was compelled by the Government of Canada to use the compensation moneys and the lands that they received under the treaty in ways carefully specified by Canada, the fiduciary. Makivik has followed all these rules to the letter. In particular, it is important to note that Makivik was empowered in the treaty to invest in any corporations carrying on business intended to directly relate to the economic or other interests of Inuit.

Consistent with the goals and objectives of this treaty, Makivik purchased First Air as a long-term economic tool for its people. As indicated previously by my colleagues, air transportation is a crucial northern economic activity. Makivik's decision to invest in First Air and Makivik's decision to expand its investment in First Air were based directly upon federal policies with respect to competition, with respect to foreign investment controls, with respect to deregulation of the airline industry in 1987-1992, as well as the crown's fiduciary obligations to Nunavik Inuit.

Canada is now changing the rules, apparently to suit its own political agenda, without any consideration of Canada's fiduciary obligations to Nunavik Inuit. The 25% limit on foreign ownership is being questioned now. There's talk that the 10% share restriction under the Air Canada Public Participation Act may be changed. The federal government has already agreed to suspend the Competition Act for 90 days in a situation where an emergency did not exist. The rules are changing. The rules are in flux. Canada cannot change transport and competition policies arbitrarily if, in so doing, it violates Canada's fiduciary and treaty obligations to Nunavik Inuit.

These crown duties pre-date any airline restructuring. In the case of the fiduciary duty, it pre-dates the invention of the airplane itself. The crown has a fiduciary relationship with Nunavik Inuit by virtue of the historic relationship between the crown and aboriginal peoples, as reflected in section 91.24 of the BNA Act and section 35 of the Constitution Act, 1982.

This fiduciary relationship has been confirmed and has evolved through jurisprudence of the Supreme Court of Canada and has now come to mean that the crown has a duty to act in an equitable manner towards aboriginal peoples, to generally look out for their interests and to protect them in their rights from unlawful and unfair interference, and to place the rights and interests of aboriginal people first, rather then second or third, in any federal decision-making.

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The Supreme Court has also said most recently that the fiduciary duty means that governments must take into account aboriginal concerns when developing or implementing policies, and to not do so in itself may constitute a breach of their fiduciary duties.

In addition to the fiduciary responsibility, I'd like to remind you that Canada has a very special responsibility to Nunavik Inuit under the James Bay treaty and its federal implementing legislation. For example, section 8 of the implementing legislation says that where there's any inconsistency or conflict between the treaty and provisions of any other federal law, the treaty prevails to the extent of the inconsistency. Let's remember this when we think of amending the Air Canada Public Participation Act or any other federal legislation to facilitate the dominant airline approach that seems to be taking form.

Let there be no mistake. Makivik Corporation, in investing in businesses like First Air, fully accepts the risks inherent in such investments. We're fully prepared to live with the vagaries of the marketplace. But what Makivik Corporation cannot and will not accept are financial losses brought about by an unlevel playing field due to federal changing of the rules in mid-stream for political reasons or by the federal government arbitrarily favouring one sector of the airline industry, directly or indirectly, over another, all without any consideration of your overall fiduciary and treaty obligations to Nunavik Inuit.

Because of the crown's fiduciary and treaty obligation to Nunavik Inuit, Canada, in restructuring the airline industry, has a duty to act in a manner consistent with these obligations and not in breach thereof.

We're not ordinary investors. We are people to whom you owe special obligations because of our historic relationship, because of the Constitution of Canada, and because of the James Bay treaty, which you signed with us. Your obligations to us are not only part of federal law now, but they're entrenched in Canada's constitution and take precedence over any other federal policy or law, including the airline restructuring.

These obligations pre-exist and they mean that Canada is not as free as it may think it is to restructure the airline without taking us into account. As my associate, Mr. Aatami, mentioned earlier, we got started in this business in the Arctic when the Canadian Transport Commission, the air transport committee in particular, in 1975 granted us a licence—

The Chair: You're going to have to wrap up, Mr. Silverstone.

Mr. Sam Silverstone: —over two other applicants to operate in northern Quebec. It would be a total contradiction now for the government in restructuring the industry to wipe out our investment by ignoring the very fiduciary obligations they respected in this 1975 decision.

Thank you.

The Chair: Gentlemen, thank you for your presentations to the committee. I don't normally interject right off the top, but, Mr. Silverstone, you struck a nerve with me, and I want to make it clear to everyone here in this room and everyone viewing outside of this room that we certainly acknowledge air transportation as a crucial northern economic activity. God knows, I've been to the eastern Arctic, right to the top and back down, at least three times in my terms of office.

But at the same time, I think we have to be careful as to what you allege the government is doing. To say that Canada is now changing the rules without any consideration of fiduciary obligations is not true. We're not changing any rules yet. No one has decided on any rule changes. There are considerations being made by the Minister of Transport, by the Competition Bureau, by this committee, the Standing Committee on Transport, by all parties, and by a host of organizations and agencies.

You say the 25% limit on foreign ownership under the Canada Transportation Act for domestic carriers may be changed. The Minister of Transport himself said in this committee that the 25% foreign ownership rule will not be changed—that firmly—and that the 10% share ownership restriction on investment in Air Canada under the Air Canada Public Participation Act may now be changed. That is up to this committee and other agencies to put down on paper and present to the Minister of Transport, who said he wants input on the 10%.

• 1625

All I'm trying to say, sir, is that we could be a little less confrontational and try to work together to try to come up with the solutions to ensure that we're meeting your obligations and the obligations of every air carrier operating—whether domestic, charter, or international—and find the best solution in policy for the country.

You can respond to that if you like before I move to a question.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): I have a point of order—

The Chair: Mr. Silverstone, may I have your reaction, please?

Mr. Sam Silverstone: Mr. Chairman, I wasn't attempting to be confrontational. I was suggesting that a lot of what we're responding to here are ads in the paper by Onex, ads in the paper by Air Canada, and statements in and out of the House by Mr. Collenette. We're not accusing the government of doing these things; we're responding to things as they evolve from hour to hour.

The difficulty for us, in trying to run a business, is the uncertainty that's being created by the entire restructuring. I agree with you that in the end these things may all fall into place. There may not be any amendments to the law, but even the minister himself was talking at one time of the possibility of looking at these percentages.

I agree that no decisions have been made, but what are we to respond to at this point? It's the uncertainty that may have a significant impact on our business.

The Chair: There is no uncertainty about consideration of fiduciary responsibilities to Inuit or on the 25% rule, as you mentioned.

Do you have a point of order, Mr. Comuzzi?

Mr. Joe Comuzzi: Yes, Mr. Chairman. These witnesses were very good to come here and present their views. That's what witnesses are supposed to do. We have the opportunity to question them at the right time. We don't have to make statements from the chair—

The Chair: I don't consider that a point of order, Mr. Comuzzi. I am going to the list.

Ms. Val Meredith, first question, please.

Ms. Val Meredith (South Surrey—White Rock—Langley, Ref.): Thank you, Mr. Chair. I hope I can be conciliatory in my questions.

We have had other regional carriers that are feeders to the larger carriers appear before us. They indicated a concern I have heard here from you, that with one dominant carrier your competitive ability may be challenged by what I've heard called a predatory attitude—whatever you want to call it. Some issues were raised by them that we could consider in public policy decision-making that would help to prevent that from happening.

I would like to ask the gentlemen from the three airlines represented here whether they can provide us with some areas we can address. What things could we look out for in trying to minimize attempts by the dominant carrier to prevent you from being competitive?

Mr. Stephen Smith: Maybe I'll start, Bob and Harvey, if you don't mind me taking a shot at that.

We had a lot of discussions with the Competition Bureau, and in the letter from Konrad von Finckenstein to Mr. Collenette, a lot of our positions were summarized. It's a very lengthy letter—I think it's 11 or 12 pages. At this point I would hesitate to get into some of those recommendations. It probably took us two or three hours to discuss them at that time. If you want to address that and then follow up on that with us, I would have no problem with that.

But there are so many areas where predatory pricing comes into play: on slot control, access to airports, counters, displays at the airports, computer reservations systems. It goes on and on. So with all due respect, if we start to get into that it could take another three or four hours.

That letter is probably a starting point for us. What you're talking about is fostering competition, whether it's with us, another start-up carrier, or whatever. That letter addresses a number of those issues.

Ms. Val Meredith: You've addressed a lot of issues that have already been raised, such as slot times; the ability to have facilities at an airport, be they gates or landing reservations; and being included in the reward system. So you would agree with the other witnesses we've heard that those are some of the areas that can help prevent a dominant carrier from preventing you from being competitive. The others indicated that slot control was probably the prime issue. You need access to the airports, and if you don't have access you can't possibly compete. Would you agree with that statement?

Mr. Stephen Smith: Slot control is probably the issue at only one airport in Canada, and that is Toronto. From our perspective—I won't speak for the other two—that is an issue in Toronto. But I believe predatory practices in both pricing and capacity are probably the biggest issues. Even if you had access to Toronto, if the major carrier were able to practice predatory pricing and capacity, it wouldn't matter how many slots you had if you couldn't really compete. So I wouldn't necessarily disagree, particularly if you want to serve Toronto.

• 1630

Ms. Val Meredith: Thank you.

The Chair: Thanks, Val.

Mr. Fontana, please.

Mr. Joe Fontana (London North Centre, Lib.): I'm sorry. I don't know if one of the other witnesses—

The Chair: Does another witness want to answer?

Mr. Robert Davis: Could I just add to that?

The Chair: Sure, Mr. Davis.

Mr. Robert Davis: I appreciate Steve's comments; they are very valid. WestJet operates one business model, which is a low-cost carrier. We operate a full-service airline in an alliance with Air Canada. WestJet doesn't use the frequent flyer program. It's a much different business model from ours and will probably do quite well, as WestJet has mentioned, in a dominant airline scenario. But where are we going now as an affiliated partner with Air Canada? We have a dominant airline and two competitors in the northern environment.

In both scenarios that are on the table now, they're saying there's no problem and they'll negotiate commercial alliances with us. This to me is handing back an empty box. Are we both supposed to sign a commercial agreement that provides the same frequent flyer program? We'll be trying to feed from the same airline. There is no competitive added value for me. The dominant airline will be charging us for these services, so any commercial agreement will strictly be to the cash benefit of a dominant airline.

For us to now turn around and try to model ourselves after WestJet and be competitive against this dominant airline doesn't just happen overnight when you have a culture or a company that's over 50 years old.

We were here more to address our concerns. The solutions are very complex and many.

Ms. Val Meredith: How would we address that? In all fairness, you are not the only ones who feel threatened; your competitor does as well. So you have the two air carriers, Air North and Canadian North, servicing that area. Now you're concerned that overnight there may be room for only one of those carriers feeding into the dominant carrier. Which one? How do you fit in? Do you need a transition period to restructure and work into it? Are you looking for somebody else to make the decision as to which carrier will be the one that remains? What are you looking for?

Mr. Robert Davis: I believe I've said it quite clearly: stop helping Canadian Airlines. Many years ago we elected to align with Air Canada. This was a business decision. As my colleagues said—I agree with Stephen and Harvey—we are quite willing to live in a competitive environment. We've lived and competed.

I'll go against a bit of what you said. The government has lifted the competition rules. It's facilitating a situation where a dominant airline is much more easily created. It's playing with the rules to basically help our competitor out. If that is the case, then somebody has to help us out too.

Ms. Val Meredith: You'd rather see Canadian go bankrupt and Air Canada become the dominant carrier and deal with that situation.

Mr. Robert Davis: I certainly cannot tell what the market will do. Canadian Airlines certainly has some financial difficulties ahead of it. Is bankruptcy their only solution? Will American help them out? I certainly can't project that. But the market should determine that.

Ms. Val Meredith: Thank you.

The Chair: Thank you Val.

Mr. Friesen, do you have another question?

Mr. Harvey Friesen: I believe the question was addressed to all three of us.

The Chair: Unfortunately, if all three of you answer each question that is asked, we will be here until midnight tonight.

Mr. Harvey Friesen: I don't have a lot to add.

The Chair: I welcome your comments. It's only now that I'm letting you know. I guess I should have let everyone know this before I started, but there were some complications at the beginning of the meeting. We usually hope each member will ask a question, and then ask either a very short question and ask all three to answer or ask the usual lengthy question to one of the witnesses, so we can keep it tight.

Go ahead, Mr. Friesen.

• 1635

Mr. Harvey Friesen: We also are aligned with Air Canada. However, we're in a little bit of a different situation than First Air. We have very little competition from Canadian on our routes. With the excess equipment they have, our fear is that they may now decide to jump on our routes.

What can the government do? Other than reregulation, it's going to be very difficult. Reregulation is something that I don't think we want to see. We have businesses competing with each other, and one business has not been able to survive. The question is whether it should be kept alive by grants and government forces. So you do have a very difficult thing to do, but I don't believe reregulation is the thing.

The Chair: Thanks, Mr. Friesen.

Mr. Fontana.

Mr. Joe Fontana: Thank you, Mr. Chairman.

First of all, let me applaud all of you, witnesses, for being so entrepreneurial in taking advantage of the opportunities that you've obviously seen and developed across the country, be it in western Canada, in northern Canada, or in northern Ontario, my home base.

In fact, as you have indicated, and from what I hear—I got a couple of main messages. The Canadian industry is not broken, so don't fix it. There's a problem with one airline, but don't fiddle around too much with the regulations because they've served us fairly well. But then I heard about existing commercial agreements. Because we are talking about one dominant air carrier perhaps being removed from the equation, that competitive nature in our country, that dynamic, is going to change. I also heard a couple of other things: Don't regulate, but protect my commercial agreements.

Depending on who wins this war between those who want to take over Canadian, you expect the government to do a number of things to protect your commercial agreements that you have with one company or another. Canadian North wants to protect its interest with Canadian Airlines International. Bearskin wants Air Canada protected. Stephen, you don't have any affiliation. You don't care one way or the other, right? You're beating them both, so it doesn't matter.

I also heard that if one goes down the tubes, if one airline is not there and we end up with one dominant air carrier, you want the Competition Bureau and the government to protect you from practices that a dominant player may in fact exert. I would agree with you. I agree with the Competition Bureau's assessment of slots, equipment, discount carriers, and all of those things, because we want to protect the public interest at the end of the day. They're your consumer and our consumer.

The marketplace should determine who succeeds and who fails. I would agree with that, except that who fails in this particular case also impacts you because of the commercial agreements you have in place. That's what you're asking us to do.

I think Val said it very well. If we were to stay out of this completely and let Canadian go down the tubes, as the marketplace might dictate, then the marketplace will dictate whether or not you have any existing agreements anyway. There might be a subtle difference, but I want to know how you expect us to protect you and your commercial agreements if one of those scenarios does in fact work out.

Mr. Robert Davis: That's a very complex question.

Mr. Joe Fontana: That's why it's not easy to just say let the marketplace determine things.

Mr. Robert Davis: With a dominant airline, it certainly would have been difficult. If we take a look at the history here, the marketplace was determining where the industry was going to go. The government stepped in to lift the competition laws. That has facilitated this whole situation.

We can't say what would have happened; nobody can. Would American have put more money in to keep Canadian alive? That could very well have happened, but the rules have been played with. That is how these destabilizers are now creating an unlevel field for the rest of us. But we've said all along that we're not afraid of competition. That's no problem at all.

• 1640

Mr. Joe Fontana: You're admitting to the fact that what's happening between the two dominant air carriers is going to impact you in some way, shape or form, and you want us to either protect your interests and your customers—perhaps not to reregulate in the old traditional sense, but to put in place some protective mechanisms to ensure that competition is in fact alive and well in this country. That's essentially what you're saying.

Mr. Robert Davis: We just want a fair and level playing field on which we can compete, so that somebody doesn't have—

Mr. Joe Fontana: I think all of you indicated that there are going to be dislocations. We'll have to take a look at those dislocations of reduced capacity by one airline being created, of markets being served or not. I would like to hear from all of you whether or not you feel confident that you'll be able to pick up the slack. There are opportunities out there in the regions, in the communities that do in fact rely very much on air traffic or airline service that may not be there any longer with two airlines going down to one.

Respectively, does Bearskin have the capacity? Does WestJet have the capacity to increase its business and provide service where those opportunities may present themselves? What about First Air and Canadian North?

Mr. Harvey Friesen: On our routes, we have very little competition from Canadian's regional—maybe on two or three points. We feel we are serving the market adequately, and we wouldn't have any problems if they were to change. What may happen stems from the excess equipment that Canadian has. Are they going to expand into our routes now because they're looking for a home?

The Chair: Mr. Smith.

Mr. Stephen Smith: Joe, if I could touch that question, we talked about the efficient economy that we believe in. Even with the two carriers, there has been a huge influx of carriers into the network every time the economy is strong. It's just incredible. In the eighties and even the nineties, there have been a lot of carriers created. Some of them have not done well and some of them have done well. This industry attracts capital like no other industry. It also attracts a lot of fools with capital, but that's another story.

The reality is that you may not have everything you want for a period. Over time, though, I believe you will get everything you want. In many ways, we've talked about it being like a forest fire. When you have a forest fire, it's awful when you first take a look at it. When you come back a couple of years later, though, all this new growth is there and everything is growing up beautifully. That's why I'm saying you almost have to have a change in the status quo in order to get what is a better system out of our economy.

The Vice-Chair (Mr. Joe Comuzzi): Mr. Davis.

Mr. Robert Davis: Just to respond to your question, we are certainly looking for the opportunities and we're excited that some may fall out of this. We're concerned that it may be difficult for us to exploit those opportunities. Steve mentioned the idea of attracting enough money to be able to go out and get new, modern airplanes to fly on southern routes. Again, however, I come back to the fact that we are a full-service airline.

Steve's model is working great and he's knocking them dead, but his whole company is cultured and structured to operate that way. Ours is not. To all of a sudden become a low-cost carrier and then go out there and start flying Sudbury-Timmins-Toronto would be sheer madness for us, given our current structure and with our current aircraft and whatnot. We believe the dominant carrier will stay extremely strong in most of the markets they are already in.

Mr. Joe Fontana: What about the north, though?

The Vice-Chair (Mr. Joe Comuzzi): You have time for one very short question, if you can handle that.

Mr. Joe Fontana: I just wanted to address the north, because obviously we want to make sure every region of the country is protected or has the opportunities. You talked a little bit about Timmins, Sudbury, and North Bay. That's the area where I grew up, but how about the far north?

Mr. Robert Davis: I didn't know where you were from.

Mr. Joe Fontana: Are there opportunities?

Mr. Robert Davis: In the north, it's a fairly fixed market to a certain degree. It's very unidirectional. There's lots of cargo going north, but there's nothing coming south. A dominant carrier only has to hurt us on the cargo side. All this regulation and slot control has nothing to do with the cargo business. All of our aircraft are half and half: half passengers and half Combi.

• 1645

The northern market is mature at this time. There is competition in air transportation all over the place, so there's not a lot of new opportunity, so to speak, in the north.

The Vice-Chair (Mr. Joe Comuzzi): Thank you, Mr. Davis.

Just by way of background, Mr. Fontana was the drummer for Shania Twain when he was up north.

Voices: Oh, oh!

Mr. Joe Fontana: No, I was much too old.

The Vice-Chair (Mr. Joe Comuzzi): The most famous drummer to come out of the north.

Mr. Joe Fontana: Unfortunately, I wasn't.

The Vice-Chair (Mr. Joe Comuzzi): Let's get back to business.

Ms. Desjarlais, please.

Ms. Bev Desjarlais (Churchill, NDP): I just want to confirm something. It has probably come up; I apologize for having had to run out.

I know it was indicated by this group over here, but did WestJet also indicate that the airline industry is not broken, that there is no problem, that we're just dealing with one airline that's having problems?

Mr. Stephen Smith: I was the first one who indicated that, I think. We do not believe there's a problem with the industry. Rather, there is a problem with one carrier, and it's self-admitted: Canadian Airlines.

Ms. Bev Desjarlais: If we should end up with the one dominant carrier, is there anything you can think of that would make it possible for all of the present regionals in place to be able to continue with the one dominant carrier? Do you see that working at all?

Mr. Stephen Smith: Are you talking about the regionals that are owned by Air Canada and Canadian?

Ms. Bev Desjarlais: Yes.

Mr. Stephen Smith: Okay. In Konrad von Finckenstein's memo or letter to David Collenette, I believe he indicated that in order to continue they will need that commercial agreement with the major carrier on the same basis they have now.

As a former president of Air Ontario, I would recognize that approximately 30% of the traffic Air Ontario carries—and that's probably pretty consistent from regional to regional—is connecting with the mainline carrier. Therefore, if they're going to succeed, they would need to have some affiliation with that mainline carrier.

I think Mr. von Finckenstein's document addresses that.

Ms. Bev Desjarlais: So as long as both groups of regionals—and I'm sorry that we're grouping you, but I don't think there's any question that the ones aligned with Air Canada are one group and the ones aligned with Canadian are another group—have access to that carrier and the agreements, it is possible to make things work. Is that what you're saying?

Mr. Stephen Smith: I wouldn't want to speak on their behalf. You just asked a general question. I'm just saying that I think they'd need to have that affiliation. Whether they can survive, I don't know.

Mr. Robert Davis: I think it's an unknown. Are you talking about the equity-owned affiliates or...

Ms. Bev Desjarlais: The regionals in general that right now are in alliances; the regionals, anyone who is affiliated now to fly with Canadian, those affiliated with Air Canada. If we end up with one, if all are allowed to access—

Mr. Robert Davis: We have a significant problem in the north. Canadian North, as I mention in my brief, is what I call a virtual company. Canadian Airlines was operating in the north. They've sold the company, but only the brand name. It's called Canadian North, but Canadian North is really just a marketing company. They have marketing and some ground services. Canadian Airlines continues to operate the airplanes and to supply the pilots; it has operational control of the aircraft, the flight crews, the maintenance, the insurance, and all of that.

So now I'm facing the prospect of our small aboriginal-owned company having this dominant airline operate their jets on my routes. We are going to get killed. It's as simple as that.

There are commercial agreements whereby we own all of our aircraft, we employ 1,000 people, and we have all our own buildings and whatnot. We're trying to compete in a business, and then we have a competitor that is a virtual airline or marketing company. Really, the new Air Canada will be flying on our routes. I haven't quite figured out how we're going to survive that. We certainly can't buy fuel or insurance at the price Air Canada does. Their insurance rates are 10% of ours.

The Chair: Thank you, Bev.

Stan Dromisky, please.

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

• 1650

After listening to these gentlemen today, and listening to the other small regional carriers yesterday, I feel comfortable; I feel very confident that the airline industry, which is dynamic in this country, will continue to survive and continue to thrive because of people like you. You guys are the movers. You're the shakers. You are not afraid to take the risks.

However, we're talking a lot here about competition. We're talking about agreements, firepoints, and so forth. But there are other forms of what you might call enhancements or even obstacles to competition—for instance, your relationship with airport authorities. Is there anything that is happening in that area that could be identified as a hindrance or an obstacle? What about NAV CANADA? What about government policies?

In those three specific areas, and I can go on into more areas, are there any areas or specifics you could identify that could be classified as obstacles to competition and to your survival?

Mr. Stephen Smith: None from my side.

Mr. Harvey Friesen: I guess if there are obstacles, they are basically the same obstacles for every carrier, so then it doesn't give any one carrier any advantage.

Mr. Stan Dromisky: Are there any changes you would like to see brought about in any of those areas?

Mr. Robert Davis: I think all of us would be happy to see the elimination of airport fees and NAV CANADA fees.

Mr. Stan Dromisky: Yes.

Mr. Robert Davis: I'm sure my colleagues would agree with me on that. I guess I'd have to agree with Harvey that most of the obstacles right now are equal for everyone, until you hit the level where you want to have—again it wouldn't apply so much to the WestJet model but more to the full-service airline—interline agreements, seamless service, frequent flyer programs shared between two carriers. That's where the obstacles will come in, for someone wanting to offer those products and services to passengers.

Mr. Stan Dromisky: What is your relationship with NAV CANADA? What kind of service are you receiving from them?

Mr. Stephen Smith: It's quite good. It does not change from carrier to carrier. They are the air traffic control system. They don't serve one carrier better or worse than another, I don't believe. We all have our concerns about it, but they tend to be industry concerns and not carrier concerns, to be quite honest.

Mr. Stan Dromisky: Regarding the charter service, I know some of you will take a planeload of people up, maybe to fish way up north or to go visit Baffin Island and so forth. You might call those charter flights. There is a charter industry in the aviation industry. Most of the traffic goes south. Is there any room for a regular charter service to some of the interesting areas we have? The north is beautiful. There is much to see up there, much to do. Have any of you ever considered something of that nature?

Mr. Robert Davis: In the north there is a fairly good tourist market, which has been increasing year over year. Overall, if you look at the tourist market going to, say, Niagara Falls, Ontario, it's probably the same size as all those going to the north. So it's not a huge market. While there is growth, it doesn't represent very large numbers. We have the capacity to carry those tourists on our scheduled system. There is not enough requirement to put that kind of capacity on a specific charter flight at this time, not for the north anyway.

Mr. Stan Dromisky: Very good. Thank you very much.

The Chair: Thanks, Mr. Dromisky.

Mr. Casey, please.

Mr. Bill Casey (Cumberland—Colchester, PC): I am going to yield to Mr. Comuzzi. He has to catch a plane, and I'll take his place when his time comes.

The Chair: Mr. Comuzzi, you can come to me with these requests. You don't have to go through the opposition. But if you need the slot, Mr. Comuzzi, we won't need to regulate and I'll give you the slot.

Mr. Joe Comuzzi: Sometimes, Mr. Chairman, I feel more secure.

The Chair: With the opposition?

Mr. Joe Comuzzi: Sometimes, yes.

The Chair: I understand. Go ahead.

Mr. Joe Comuzzi: There are times.

Thank you very much for appearing before us today. I want to pick up on what Mr. Fontana was getting to. As I understand it, gentlemen, it seems there is nothing much wrong with the airline industry in Canada, if I hear what you've said and what the regionals said yesterday. Other smaller airlines in this country, WestJet in particular—Mr. Smith is doing a superb job. You have a marvellous eastern terminal in Thunder Bay, and you are providing a very good service to the residents here, by the way. They are very happy.

• 1655

So there's nothing wrong, with the exception that one airline is going to run out of money. I don't want to oversimplify this, but I think that's the common denominator from all of you at the table. Is there any difference in that? Does anyone have a contrary opinion?

A witness: No.

Mr. Joe Comuzzi: To pick on Mr. Fontana, if there's nothing wrong with the industry, what are we doing here? I think I heard that throughout the process too. Why are we here discussing a change in airline policy for this country if there's basically nothing wrong with the industry? Therefore we have to ask the question, why are we here and what have we done at the government level to bring us to this point today? Does that make some sense to you folks?

Mr. Stephen Smith: It's a very good question, but very obviously there appears to be a fundamental change coming in the airline industry. I think as government representatives you're saying, is this good, is this bad, what role should we play, what role shouldn't we play, and you're talking to everybody and you're getting a perspective here.

I think if you talked to other people you might get a slightly different perspective, but what you're hearing from this group is the airline industry isn't broken, but if there is going to be one carrier, here are the kinds of things you've got to do to ensure you have fair, equitable, ongoing competition that is right for the consumers in the long run.

Mr. Joe Comuzzi: You've stolen my third question.

Mr. Stephen Smith: Sorry about that.

The Chair: Mr. Friesen.

Mr. Harvey Friesen: I think the fact that we are going to have one airline is going to create a lot of upheaval, and aside from going back into regulation, what can we do? What can you do without going into reregulation? I don't think there is much. Is this just normal business practice where the market is divvied up by the business that can handle it?

Mr. Joe Comuzzi: I'm just going to get back to these gentlemen over here in a minute because I want to ask the third question and the chairman may cut me off. Do you folks feel that, without going into reregulation, if we don't suspend the operation of section 47 ever again, which is draconian, that in the airline business today you have adequate protection if we end up with one airline? Do you have adequate protection provided by the Canada Transportation Act, but more particularly those protections that would be built in through the Competition Act in the letter from Mr. von Finckenstein. Do you feel secure that you would have enough protection with those recommendations?

Mr. Robert Davis: I think that's a question we couldn't answer today. I think it requires a full review by the Competition Bureau. That's their place, their job, and their expertise, and I think the proper forum should be put together for everybody to have input into that. What's going to happen here we don't know. I agree there is going to be a fundamental change. It's started; something is going to happen. Where it's going to go I think we should narrow down a bit more, and then I think the Competition Bureau or whatever forum should be constructed to figure out from that whatever ends up being in place. Then we know what we're dealing with, but right now it's a pretty broad question to ask.

Mr. Joe Comuzzi: But my question is, do you feel confident that the Competition Bureau could serve that function? With the proper input, are you confident that the institution we have in place could serve that function for the protection of the airline industry?

Mr. Robert Davis: No, I wouldn't agree with that. There are going to have to be some public policy issues looked at here.

Mr. Joe Comuzzi: Okay, thank you.

Mr. Friesen, what is your position?

Mr. Harvey Friesen: You're asking me the question?

Mr. Joe Comuzzi: Yes.

Mr. Harvey Friesen: I really couldn't answer that. I don't really have the knowledge of the regulation itself. Within our industry we are the northern carrier, as First Air would be, and I don't think it would affect us as much in that area.

Mr. Stephen Smith: If the Competition Bureau were given the teeth to enforce the rules they put down in that document, then yes, we believe that would allow for fair, equitable ongoing competition in the airline industry.

Mr. Joe Comuzzi: Without our getting into the regulatory control?

Mr. Stephen Smith: Absolutely.

Mr. Joe Comuzzi: You would be happy with that?

Mr. Stephen Smith: Yes, I would. I believe that's the basis on which our society is founded. That's how we protect, to make sure one carrier, one company, doesn't dominate an industry, and I believe that's right.

• 1700

Mr. Joe Comuzzi: That's providing the competition board is not suspended or its operation is never suspended ever again.

Mr. Stephen Smith: Right, and that it has the teeth to enforce what it says it needs to do.

Mr. Joe Comuzzi: Thank you, Mr. Chairman. Those are my questions.

The Chair: Mr. Davis.

Mr. Robert Davis: Just adding to that, if that's the way this government sees it, then I guess there'll be no change to the Public Participation Act, if the Competition Bureau is going to... So if you're saying the Onex proposal basically proposes that one individual control the dominant airline through a legislative change, does that make the presumption that the 10% rule would stay in place?

Mr. Joe Comuzzi: I'm sorry, would you mind asking that question again?

Mr. Robert Davis: I'm saying that not only will it be the Competition Bureau, but there probably will need to be some public policy review. If you're going to change the 10% rule, what does that mean? What does that mean to the industry?

Mr. Joe Fontana: You tell us.

The Chair: Thanks, Mr. Comuzzi and Mr. Davis.

Mr. Silverstone.

Mr. Sam Silverstone: What we've tried to set up here today is a series of reminders to the government as to what your obligations are in making recommendations from this committee or making decisions. I think one of the things Mr. Davis is saying is that for the Onex bid to be legal, it's clear that you'd have to raise the 10% rule, because in the present situation it would not be legal. Now, if the government chooses to move to amend the act to raise the 10% level, then you're making a move toward helping a particular segment of the industry.

What we're saying is if you're going to help one segment, then help other segments. Help us. We've been up there for years building our own hangars, improving our own strips, paying for our own aircraft. No one helped us. Now it's a delicate situation. If you start to tamper with one part of it to facilitate the creation of a dominant airline—however we get to that dominant airline—then you have to start looking at other parts of the industry that are, as you say, competing. We're in there competing, but we're also struggling. We have to watch our bottom line every minute of every day. So if there is help out there, if the government's showing a sign that they want to help—I don't mind using the word “favour”, but I'm saying “help out” or “facilitate”—then let's have a little help and facilitation in the north.

The Chair: Thanks, Mr. Silverstone.

Just as a point of clarification, Mr. Smith, you said if the Competition Bureau had the teeth. Do you believe it has the teeth today, or does it require additional teeth?

Mr. Stephen Smith: Actually, Mr. Chairman, I am unsure of the teeth they have. I'm just saying ensure that they do. I do not know the teeth they have. My feeling is that a lot of times they end up saying some things, but they don't have the ability to enforce them as well as they would like. It seems to be a long process. We need something that is immediate, and they have to have enough power to make it immediate. If it goes over time, you take away the competition, because in the airline industry you can lose money very quickly, as Mr. Fontana will attest to with VistaJet.

The Chair: Thanks, Mr. Smith.

Mr. St-Julien, please.

[Translation]

Mr. Guy St-Julien (Abitibi—James Bay—Nunavik, Lib.): What is important? I am going to ask my question to Mr. Pita Aatami, the President of the Makivik Corporation. At the moment, it doesn't seem as though the government of Canada is taking the James Bay Agreement seriously.

The James Bay and Northern Quebec Agreement was signed in 1975 and has to do with James Bay and Northern Quebec, that is, Nunavik. Today, in all the agreements, whether the Nisga agreement or others, they always say that we should go by the James Bay Agreement. The Auditor General of Canada said the same thing.

Today, what is important is to know what are the impacts of the James Bay and Northern Quebec Agreement and of the guarantees under section 35 of the Canadian Constitution on the aviation industry in Canada.

Mr. Aatami, do you want an advance ruling by the government of Canada, before the government makes a definite decision that there will be only one carrier in Canada? Do you or don't you want a ruling on the James Bay and Northern Quebec Agreement?

[English]

Mr. Pita Aatami: Thank you, Mr. Guy St-Julien. This thing the government is looking at now is being changed midstream.

• 1705

I'll give you an example: Eaton's. They were never taken into account. They have competition.

We just want to make sure we're taken into account. We're not asking for more than that. We want equality in this one. We're the forgotten people right now. With regard to this deal with Air Canada and Canadian that's being looked at, we're not in the picture at all. It's an unknown. That's why we're here today making sure we won't be forgotten.

Mr. Sam Silverstone: Could I add something to that?

The Chair: Yes.

Mr. Sam Silverstone: I think part of what we have to understand when we're talking about the James Bay treaty is that it's going to send a message to every other aboriginal group you've given money to in these land claim settlements.

You gave us the money because a federal policy said to give us the money. We invested the money because the federal policy said we had to invest it in a certain way. You put federal representatives on our board of directors to watch us and to make sure we spent the money that way. We followed all the rules, just as the other groups are doing. We invested. You facilitated us investing in the industry. Because you gave us the green light 20 years ago, we poured more money into it. If you start to change other federal policies that contradict the policy and the law that gave us the money and told us to go forth and multiply, then, with all due respect, you're going to have a big problem, because our policy is entrenched in law, and that law's entrenched in the Constitution of Canada, and it takes precedence over everything else you're doing. We're just giving you a warning here that we have to be taken into account, not simply because we're a player in the market but because we're a special player.

If other aboriginal groups realize that the money they're given and told how to use could just be wiped out 20 years from now because we decide to rearrange the trucking industry, the boating industry, or the airline industry, I think they're going to start to think long and hard about all these restrictions you put on the money and on what is the purpose of the money.

We didn't have many things to invest in in the north. There's not much up there to invest in, unless you're sitting on a gold mine or a diamond mine. In our area the only thing we could invest in that provided jobs for the Nunavut Inuit and gave us some opportunity to make some money was the airline industry. Plus it's the only way to get around up there, as you pointed out. If the planes don't fly, you don't go anywhere. It dictates the price of our food and the price of your airline ticket, and it dictates the way you live and who you see. It's critical to the north.

Now, if you start to rearrange and tamper with things in order to facilitate changes, that's fine. It may be for the better, but it may not be better for us. We have to be taken into account for all these reasons, but in particular because you have a pre-existing constitutional obligation to us.

I don't know if that answers your question.

[Translation]

Mr. Guy St-Julien: That was very well explained, Mr. Aatami, in the James Bay and Northern Quebec Agreement, is there a provision that stipulates that if you are left hanging by the government of Canada in this aviation issue, you can go to a dispute board and you can go to court?

[English]

Mr. Pita Aatami: We'd have to study it, Guy.

[Translation]

Mr. Guy St-Julien: You stated recently that the Makivik Corporation did not want the heritage funds invested in aviation in Northern Quebec to be threatened because it was decided that the market in the South cannot support two air carriers. I know that in the North, there are air programs and services provided by the Indian Affairs Department of Canada. Canada, through the Native Affairs Committee, watched NAV CANADA. They're still going to watch them. In the North, you worked for 53 years and, since 1975, you have an industry with First Air and the Makivik Corporation.

One important thing people in the South don't know is that you pay taxes, Mr. Aatami. You pay school taxes, municipal taxes, federal taxes and provincial taxes in Nunavik. You are like taxpayers in Ottawa, Montreal, Val-d'Or, etc. Have you met recently with the people from Air Canada and Onex to try to find a solution?

• 1710

[English]

Mr. Robert Davis: We meet with our partners at Air Canada on a reasonably regular basis, so we've been kept up to date as to where they're going. But that doesn't help us in knowing where we're going to end up. As far as Onex is concerned, we have not had any meetings whatsoever with that company.

[Translation]

Mr. Guy St-Julien: Mr. Aatami, are you expecting an advance ruling by the Canadian Transport Minister or the Canadian Native Affairs Minister concerning the impact of the James Bay Agreement, like in cases where Revenue Canada gives an advance ruling when somebody wants to save taxes? I know you want to save your industry and it is important to save this industry for the people of the North.

[English]

Mr. Pita Aatami: We hope there will be a decision soon, because, as I said, we're up in the air right now in not knowing what's going to happen. We need to know what's going to happen. As we're saying, we have to protect the interests of what we have now.

[Translation]

Mr. Guy St-Julien: Thank you, Mr. Aatami.

[English]

The Chair: Thank you, Mr. St-Julien.

We did a little research since you first made this query in your presentation, and it was a question in fact from Mr. St-Julien to the assistant deputy minister of policy, Mr. Louis Ranger, when we had the Transport officials here at our very first meeting. He said that if this country ends up with one airline, a dominant carrier, the government, that is, Transport Canada, will obtain a guarantee in order to respect the James Bay convention. So we have that on the record from the ADM at Transport Canada, and that response was generated because Mr. St-Julien asked the question.

Ms. Meredith, please.

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

I just want to follow up in order to be clear on what I heard. Mr. Silverstone, you basically have said that the Government of Canada cannot change any laws regarding transportation, whether it's trucking, boating, or the airlines, because it would in essence change the understanding the first nations communities have with regard to the land settlements. Would it be fair to say that's what you were saying?

Mr. Sam Silverstone: What I said was that the legislation that gave the James Bay treaty, which is protected by section 35 of the Constitution, has a provision that says that for anything that is inconsistent with the treaty, the treaty and the legislation that implements it take precedence. Now, what does that mean? Maybe a judge will have to tell us what it means. It means that if you do something with some other federal law that contradicts the benefits and rights we have in that treaty, then that law would be struck down. It has already been done in the case of fishing and logging disputes.

Someone may have to look at it and see if it has to be done in the case of our economic development. As I indicated, there are three comprehensive chapters of the treaty devoted to Nunavut Inuit economic development, and it's clear both in letter and spirit that those moneys were given to us to promote our economic development. If a federal law or policy is now negating that or denigrating those provisions, what I'm saying is that they may be subject to review on that basis.

Ms. Val Meredith: Your competitors, Canadian North, told us last night that they are aboriginal owned and that they acquired and started the business in 1998. I notice that yours was acquired in 1990. They said they didn't use land settlement funds to purchase the airline. Being an aboriginal community, would they also be protected by what you consider to be the government's fiduciary responsibility?

Mr. Sam Silverstone: Unfortunately, I don't represent them, so I can't speak for them. I don't know where they got their moneys from. But from what I know, as Mr. Davis pointed out earlier, they're what you'd call a virtual airline. It's not the same type of operation we have. They don't have the same degree of investment in the north that we do. We have many millions at stake. I think their total investment is in the range of $4 million; ours is substantially more than that. But to be fair, I can't really answer for them.

• 1715

Ms. Val Meredith: But they told us they have a jet network, they have nine northern points and two southern points, and they provide a service from Edmonton and Ottawa to the north. They have five northern servers that they work with. So I don't know if they would appreciate you calling them a virtual service, a virtual airline.

My concern is that you feel that your considerations are quite different from the other players, the other partners who share the table with you.

Mr. Sam Silverstone: No. It's a fair question. We have many of the same concerns as the other two representatives of the industry here, but I'm saying that in addition to that, we have special rights. These rights are constitutionally protected, and we're not going to be ashamed of them, nor are we going to hide them at a time like this when we're fighting for our economic life. We're going to bring them forward and see what they're supposed to mean.

We think we know what they mean. Recently you've seen in the Supreme Court that other groups have come to find what their rights mean. We're hoping not to have to go that route, but if it means whether we survive in this business or not, we're going to take whatever measures we have to take to assert our rights.

Ms. Val Meredith: Do you feel that your competitor, Canadian North, which is also an aboriginal airline, should have the same access to those rights that you have?

Mr. Sam Silverstone: I think they have to establish their own case. I cannot and will not speak for them.

Ms. Val Meredith: Okay, thank you.

The Chair: Thanks, Ms. Meredith.

Filling in for Mr. Comuzzi, Mr. Casey.

Mr. Bill Casey: Back to the “broke” business, last night we had four regional airlines here who said the industry was broken and you couldn't get capital. Those are two of the fundamental points they made. Today, your opinion is that the industry isn't broken and there's too much money out there. It's hard to believe we're in the same room.

I want to go back to that “broke” business. If American Airlines agreed to put more money into Canadian Airlines and they did an array of changes, would that solve this whole problem?

Mr. Robert Davis: We can't forecast. I don't know the internal workings of Canadian Airlines. I don't know their contracts or plans or customs. I can't speak on their behalf.

Are you chomping at the bit there, Steve?

Mr. Stephen Smith: I'm not chomping at the bit.

All I would say is, historically, Canadian Airlines have had injections of cash, whether it be from the federal government or from American Airlines, and it does not seem to have solved the particular situation they're in. They've had injections of capital. So it doesn't appear to, but again I agree with Bob that I can't comment on their behalf. I don't believe that's the solution. It's a panacea; it's not a solution.

Mr. Bill Casey: Section 47 was brought in because there was an extraordinary disruption to the national transportation service. Did you see an extraordinary disruption, or do you agree with that application of section 47, suspension of the Competition Act?

Mr. Stephen Smith: I believe it was a potential disruption of the airline industry in Canada and the government was in all good faith trying to say: “How do we resolve this? Maybe by suspending section 47 we can get some discussion going between these two carriers.” As it turns out, there are other agendas out there, but I believe it was done in good faith. I'm not about to say it was an attempt to solve a potential situation in the airline industry.

Mr. Bill Casey: Somebody mentioned that the government is bringing out policy on the fly or establishing it as they go. First of all, it was going to be a private sector solution when they brought out the 90-day deal. Then halfway through they brought out the five principles, and then 74 days into it they brought up the 10% restriction.

If the rules were established and they said these are the rules, and if we had some time, do you think other proposals would come out? Do you think other suggestions or opportunities would arise with time and a clear, firm set of rules?

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Mr. Robert Davis: I can only answer for our company. We're certainly not in a position to offer any industry-wide solutions. It's not our game and it's certainly far beyond our financial ability. All we can respond to is it looks like there's going to be a fundamental change and we don't want to get hurt in this. If the government wants to play with the rules, to continue to facilitate this, then make sure we don't get hurt.

Mr. Bill Casey: There's either one or the other. Either we have competition or we're going to have a whole bunch of regulations. You're saying, we don't want regulations, but we need protection here, here, here, and here. And that's regulation. So if we don't have competition there's going to have to be a pile of regulations. Do you agree with that?

Mr. Harvey Friesen: I think you have two businesses operating in very stiff competition, and one business wants to win, so one business has to fail, if there's not enough business for the two companies. That's basically what we're talking about. They don't want to share the pie. One wants all the pie. That's what we're looking at, and that's business; that's competition. I guess the question is, should there be government interference?

Mr. Bill Casey: We've been running on a two-airline model for a long time and now it looks like we're heading towards a dominant airline coming in. In your opinion and knowledge of the industry, do you think we could have a two-airline model that's differently managed?

Mr. Stephen Smith: Maybe I'll take a stab at that. Historically, if you take a look at Canadian Airlines and Air Canada, the two dominant carriers, they have not made money over the last 10 years. We are in a brinkmanship situation with Canadian Airlines, and while we are facing this brinkmanship situation we don't have a lot of time, it appears, from their own admissions.

So historically you would have to say this current model does not work. Going forward, if there are regional carriers that are involved, and maybe there is one main dominant trunk-line carrier, that may work. That format may work, but again we have to allow the marketplace, the efficient economy, to dictate that.

Mr. Bill Casey: On the Air Canada plan, they plan to include a low-fare airline. Do you think they can do that and be successful at a low-fare deal like yours?

Mr. Stephen Smith: I'm not Air Canada so I couldn't comment on that, to be quite honest. They're saying they can do it. All we're saying, again, is make sure the Competition Bureau ensures that everything is fair and they're not cross-subsidizing.

Mr. Bill Casey: I have one last comment. Because of WestJet I learned a nice little lesson, and that's on your tickets you put a NAV CAN charge of $7.50. I think you're the only ones who do it. I didn't know that NAV CAN charged $7.50 for every flight from station to station to station, and I learned that because of WestJet. Thanks very much.

Mr. Stephen Smith: I can explain that a little bit. That was the industry's reaction to the NAV CANADA charges to pay for the air traffic control system. It was agreed amongst the airlines—not agreed amongst the airlines; we don't agree on pricing. Canadian came out with $7.50 for the second NAV CANADA surcharges. So we identified that. NAV CAN actually charged per flight based upon the weight of the aircraft, a very convoluted formula based upon the square root of the weight of the aircraft, etc., and depending on how far you fly and what stations you fly between. So in the end the proposal by Canadian, which was accepted by all, was $7.50 added to the fare of the ticket to pay for the NAV CANADA surcharge.

Mr. Bill Casey: Does that $7.50 cover your charges from NAV CANADA?

Mr. Stephen Smith: Just.

The Chair: Thanks, Mr. Casey. I almost started a scandal talking about prices, Steve.

Bev Desjarlais, please.

Ms. Bev Desjarlais: Thank you, and once again I apologize for having to go out.

How does your arrangement work with your alliance partner right now? You mention that you pay for that service, but could you be a little more specific as to exactly how it works? You don't have to tell me how much, but give me an idea of how your arrangement with your alliance partner works.

Mr. Harvey Friesen: Ours is a commercial agreement, a marketing agreement. We don't pay for their service, although on some, for example, the frequent flyer plan, we have to pay a fee to that plan to be able to use it. Basically it's just an agreement. There's no equity. We arrange to meet their flights. We have joint fares with them. It's basically just a written agreement.

• 1725

Mr. Robert Davis: Ours is similar to a certain degree, but we also pay a fee for the use of the Air Canada code, the AC code, on our flights.

Mr. Harvey Friesen: We do not have the AC code.

Ms. Bev Desjarlais: Okay. That's fine.

The Chair: Thanks, Bev.

Mr. St-Julien, please.

[Translation]

Mr. Guy St-Julien: My question is for Mr. Davis.

The governments of Canada and Quebec have built 14 airports in the North, and assumed their costs on a 60% - 40% basis. We know that in the North, there are no roads or railroads. The seaways are only navigable for two or three months a year. When planes go North, they are filled with goods; when they come back down South, they are empty.

You have seen great changes in the industry. After deregulation, you had to join forces or die. Do you have the impression that Ottawa is going to impose regulation in the near future?

[English]

Mr. Robert Davis: Going back to what I said in my brief, in 1986 the industry was deregulated. It concerned us. It was a new challenge. We responded to it. We actually grew substantially out of it.

The Inuit started in 1979. We started with a sheet of paper. Today, between the two companies, we own approximately 45 aircraft, have revenues of just over $200 million, and employ close to 1,350 people. So we've done pretty well so far.

It comes back to this. We followed all the rules. We did what we were supposed to do. We lived within the environment. Now we have a critical situation with an airline in Canada. We don't want that to affect us. We don't want it to hurt the northern environment. We've worked hard to create local employment in an area where people can't get jobs. We turn a lot back to the communities. We've done a lot there. We don't want that all falling down after 23 years of work.

[Translation]

Mr. Guy St-Julien: Thank you, Mr. Chairman.

[English]

The Chair: Thank you, Mr. St-Julien.

I wonder, members, if you could just bear with me for a moment after our witnesses leave.

I'll say thank you to the witnesses for their presentation to us this afternoon.

I know you've come a long way, sometimes two days, just to get down to Ottawa to make your presentation.

We certainly appreciate the effort you've made to come to our committee and make your presentation, and we thank you for answering our questions. Gentlemen, thank you very much.

Mr. Robert Davis: We respond by saying we will behave when we leave the room. Well, our group will anyway.

Voices: Oh, oh!

• 1730

The Chair: Colleagues, I want to try to put some closure on the issue that kicked off this meeting at 3:30 this afternoon. It's important we keep it on the same tape.

I received a letter at 5:15 this evening, and it's a letter I believe I must share with you. It's addressed to me as chair, and it reads:

Dear Mr. Chair,

Earlier today, following the morning meetings of the Standing Committee on Transportation, I engaged in a vigorous discussion with the Honourable member from Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans.

Unfortunately, I may have gone beyond the decorum expected of a guest of this committee. The ongoing debate over the future of Canada's airlines can become emotional from time to time, given that the careers of both myself and 16,000 colleagues at Canadian Airlines are at stake. Following the session this morning, I was frustrated, and expressed these feelings in a public and visible manner. For this, I am both embarrassed and deeply sorry.

With respect, I ask that you accept my apologies for this conduct. I can assure you that an incident such as this will not happen again.

I look forward to watching with interest and contained emotion, the continuing work and deliberations that this committee is undertaking.

It's signed: “Sincerely, Scott Bradley, Director, Government Affairs”.

I thought I'd share that letter with you here. I'll give it to the clerk for interpretation and distribution. I've also been informed that Mr. Bradley has sent a letter of apology to our colleague, Monsieur Guimond. I felt I had to share that with you just so that we could put some closure on that before we break for a week recess, in fact.

Colleagues, have a good week in the ridings, and we'll see you back here, fresh, a week Monday night. Thank you, colleagues.

The meeting is adjourned.