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STANDING COMMITTEE ON TRANSPORT
LE COMITÉ PERMANENT DES TRANSPORTS
[Recorded by Electronic Apparatus]
Tuesday, November 16, 1999
The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues.
Pursuant to Standing Order 108(2), a study on the future of the airline industry in Canada, we welcome this afternoon our witnesses from the Canadian Auto Workers Union, Mr. Buzz Hargrove, president; Mr. Gary Fane, director of transportation; Ms. Peggy Nash, assistant to the president; and Mr. Jim Stanford, the economist.
Ladies and gentlemen, welcome to the Standing Committee on Transport. We look forward to your presentation of between 10 and 12 minutes. Then we'll go to questions from the members.
Mr. Basil (Buzz) Hargrove (President, Canadian Auto Workers Union): Thank you very much, Mr. Chairman and committee members, for the opportunity to be here today. You've already introduced my delegation, so I won't go through that again, other than to say Jim Stanford is one of the few economists in the country who really understands the airline industry, so I think he can add a lot to the discussion today.
I just want to take a few minutes and give the committee a bit of history. I think it's fair to say that from the time of the privatization of Air Canada in 1989, the industry has been in a bit of a tailspin and workers have faced incredible uncertainty.
Workers at all of the airlines, but particularly what is known as Canadian Airlines today, have faced incredible uncertainty, including three major sets of concessions the employer demanded from them. Each time, the unions knew concessions were not the solution to the problem and that they were delaying the inevitable, which was a restructuring of the industry to get rid of the excess and what we referred to as destructive competition that was in the industry during that period.
The latest fiasco, before 1999, was in 1996, when all the unions were again asked, under a new CEO, to give concessions of 10%. All of the unions argued that that wasn't going to solve the problem. We faced an excess capacity problem. We faced an industry that was deregulated and treated like an American industry in a Canadian environment, with a small population spread over a massive geography. Canada could not support two major airlines competing with each other on all of the different runs—what we call wingtip-to-wingtip competition—during that period.
In 1996, we decided we'd had enough as a union and said no to the concessions. I think some of the honourable members will recall we carried that debate for about a month and took a lot of hell from a lot of unions in Canadian Airlines. The interesting thing for me now is that in 1996 the other unions—including members of my own union—were accusing me of trying to bankrupt Canadian Airlines to give all the business to Air Canada. That has shifted a little now, and I'm accused of trying to support Canadian Airlines at the expense of Air Canada.
Of course, in 1999—as it was in 1996—my total goal is always to assist the workers we represent at both airlines. If by doing that we can assist other workers at both airlines, that will be helpful.
In 1996, we ended up taking concessions that were much less than Mr. Benson and company had demanded, but only after the Parliament of Canada threatened to force our members to have a vote. I just want to put that on the record because it frustrated the hell out of me that somehow were we seen, in the country, as being undemocratic.
We had negotiated a collective agreement with our employer under the laws of the country. Our members had ratified it, voted on it, and it was in place, but we were again forced to open it, not just by the employer but by the then transportation minister Mr. Anderson, the labour minister, and the government. They joined in saying that somehow we were being anti-democratic, when our members were being faced with the ultimatum of losing their jobs or taking another cut. I would make the argument that the only people who were undemocratic in those days were the employer and the government in their actions against us.
We worked our way through that, but the crisis didn't end, as we had predicted. The government did absolutely nothing about the overcapacity in the industry. The Prime Minister's Office agreed to have a day of analysis by all the industry players. We did that in December 1996, I believe it was, or maybe 1997. All the players were brought together, but at the end of the day everybody said everything was wonderful—status quo—including the chief executive officer of Canadian Airlines, Mr. Benson, who argued that the market would be fine. We knew it wouldn't be.
The other unions made the same case, that they couldn't solve the problem. As we headed into spring 1999, we had a meeting with our leadership from Canadian Airlines from across the country—elected people. We took a decision then, because of the impending crisis, that we would write the Minister of Transport and the government and ask them to act. We had a press conference and sent a letter to the Prime Minister and the Minister of Transport, asking them to involve themselves. We saw Canadian Airlines, within a twelve-month period, hitting a wall.
We called upon them to do several things. We said if they were going to continue to try to have two airlines in the country, the government must take a minority equity position in Canadian Airlines and allow Canadian Airlines and Air Canada to restructure and get rid of the destructive competition that had almost destroyed both airlines over a ten-year period.
We called for the government to take an equity position and lift the restrictions on ownership that applied to the industry at that point, although we were talking specifically about Canadian Airlines. We felt that if the government came in as a minority equity owner, they would leverage some money from the private sector for two reasons.
First, they would be showing confidence in the airline. Secondly, by putting money in, they would be a player at the table and would therefore be able to see what the problems were. They would insist that this idea of one airline trying to destroy the other would have to end. We felt they would have insight into the industry, as a minority equity partner, and would have the power to make the kinds of changes that been long delayed.
We called for a couple of other issues, such as the end of the destructive competition. But my point is that we flagged this problem in April of this year and we got no attention at all, other than from the Minister of Transport, Mr. Collenette. To his credit, he met with us and heard our case. He didn't commit anything, but in August he and Mr. Manley brought in section 47 of the Transportation Act.
It recognized that we faced a crisis in the airline industry, and that was extremely important. For the first time in over a decade of losses by both companies, the government recognized that we still faced a crisis in the market and the private sector couldn't solve it. Secondly, it put in place the mechanism to do the restructuring of the airline industry. That brings us to where we are today.
Once section 47 was put in place, the Onex Corporation, under Mr. Gerry Schwartz, brought in a proposal to buy the industry. We immediately responded by asking Mr. Schwartz for a meeting, where we reviewed with him our concerns. Our concerns weren't those of shareholders; we never worried much about them. They're pretty well represented wherever you go in the country, including the Parliament of the country. But the workers were underrepresented.
We presented to him our proposals for workers. We looked with interest at his proposal, but we told him we needed a guarantee, if they were going to have our support, of no forced layoffs of any workers in the restructured industry. All the downsizing and restructuring—and we recognized there would be fewer people at the end of the day—would have to be done by offering enhanced retirement benefits and enhanced voluntary separation payments, with a continuation of people's health care benefits until they were 65 and moved on to the government programs.
We had three other issues. Having no movement of our work offshore was really important to us. If American Airlines took an even greater interest and share in this new company, we saw that the penalty of saving the industry could very well be a lot more jobs moved offshore. So we asked for a commitment that none of our work would be moved to the United States or anywhere offshore.
We outlined those issues as being of major importance. Recognizing the problems of the industry, we said they would have to move to one company owning and controlling the industry, but they could run two airlines—a blue one and a red one. They would have separate seniority lists, so the workforce wouldn't go through the agony of having to worry about being disadvantaged by those changes. We went through so many of those, we know this could have been a workable solution.
In our first meeting with Mr. Schwartz, he made no promises whatsoever. He would not commit that there would be no layoffs. His exact words were: “Look, one job loss is too many, one layoff is too many, but we can't commit because we don't have the appropriate information. What we will commit is to do what we can by attrition or enhanced retirement benefits.”
We then had a meeting with Mr. Milton at Air Canada and we made the same case to them. In our opinion, workers had to be protected—one company, two seniority lists. The other thing I should point out is that we said there should be wage parity as well. You couldn't have three or four classes of workers working for one airline. The workers at Canadian and Canadian Regional should get the same wages as the Air Canada main carrier or Air Canada Regional, in the case of their regionals.
We said there should be no forced job losses, no relocation of our people across the country, and no work moved to the U.S. Again, we had a sympathetic ear on the job losses, but no commitments.
As the events unfolded, we set up a leadership meeting in our union and invited both companies in to make presentations. I won't go through all that, but our leadership endorsed the proposal we put to both companies. At the end of the day, we had a good discussion with both Air Canada, under Mr. Milton, and the Onex Corporation, under Mr. Schwartz. The following day, Mr. Schwartz sent us a letter that didn't meet all of our concerns but started negotiations to try to deal with our issues.
Over the next several days, Mr. Schwartz bargained with our union conditional on our making a public statement that we would support the Onex bid, based on our negotiations and the protection for our members. We offered Mr. Milton the same offer and it was declined politely by Pat Heinke of Air Canada.
Then, of course—I don't have to go through them—the courts made a decision that took Onex out of it, and nobody can question that Mr. Milton has now won. He now is in complete control of the industry and how it's going to be restructured. When I say Mr. Milton has won, I mean that Mr. Milton and the shareholders are major victors, and for the executives of Air Canada, it's a major victory.
I can't, for the life of me, see where the Air Canada workers can define it as a victory, or especially the Canadian Airlines workers. There's nothing in it for them. I watched with interest as we bid up the price of shares at Air Canada, and if you were a shareholder, you probably felt really good about it.
In our agreement with Onex we had, in a very conservative estimate, $500 million over the next several years in an enhanced retirement program that would have allowed a lot of senior people who had spent a lot of years in the workplace to retire with dignity and avoid any layoffs at either Air Canada or Canadian Airlines. We had a commitment to parity of wages between the two airlines by January 2002. We had a commitment of an enhanced severance pay for someone who had worked and didn't qualify because of their age or service for a pension, so if they wanted to leave and start a business, they could do that.
We had a commitment that none of our work would be moved to the United States or any offshore country. Again, to put that in perspective for the committee members, you can take a phone call out of Ottawa and it can be handled in India, the Caribbean, England, or anywhere to make a reservation—anywhere throughout North America. And a lot of our work initially moved to the United States. So this was a real threat.
Where are we today? We couldn't get that commitment out of Air Canada. There's no commitment on the table for the workers other than Mr. Milton's and the company's broad statement about their commitment to workers. This latest offer this morning that's in the paper—we had a brief look at it on our way here in a cab today—talks about no terminations. Well, I don't have to tell the honourable members here that no termination means nobody's going to be fired permanently, but that can mean that several thousand people could face indefinite layoffs for an extended period of time, up to the length of their seniority.
We have still on the table Mr. Milton proposing a four-tier industry, with Air Canada up here, and Canadian over here, owned by a numbered company that Air Canada has no responsibility for. It does not have to worry about what happens to them, but stands to benefit greatly if everyone takes what they call a “haircut”, which means writing off a lot of debt. And presumably they'll go after workers' wages as well, for the fourth or fifth time. But there's no commitment to the workforce whatsoever. All of the workers at Canadian Airlines could lose their jobs. Then, in addition to that, you have the regionals and you have this no-frill airline that's proposing to fly out of Hamilton.
So you have a monopoly. It's not just a monopoly in the sense that they start out owning the total industry, but you start out with a monopoly with no commitments to a large number of the workforce, no money for Air Canada workers to ensure them early retirement, and you ensure that no new entrants can enter the game because you have this no-frill airline flying out of Hamilton that's supported by the larger monopoly, and they can undercut or ensure that no one else can come in and play the game.
So where we see it today... I just want to make this point, Mr. Chairman, because I think it's important. I went through one of these restructurings with Massey Ferguson about a decade ago, and they spun off almost identically to what happened here. They had a huge debt and they spun it off and set up Massey Combines over here. They put the total debt on Massey Combines, including the commitment to retirees and active workers, people off sick. The Verity Corporation took all of the operations that were making money.
Well, you didn't have to be a genius to know what was going to happen. Two years later, Massey Combines went bankrupt. All of the workers lost everything, including people who'd been off sick for many, many years. They lost their health care and disability benefits. Everything was gone, while Victor Rice and Verity Corporation moved on to bigger and better things. And I see this the same way today.
I'll end with this comment. The shareholders are well looked after. The executives are well looked after. The only thing we have to worry about is what happens to the workers at both airlines, and their families? What happens to communities across this country in terms of the service they're able to get? And what happens long term when you establish, through government action, a monopoly? Do you open up the door for new entrants to come in and to grow? You can't do that if you let Air Canada off with this proposal that they have in front of the shareholders of Canadian Airlines today.
Thank you very much, Mr. Chairman.
The Chair: Thank you, Mr. Hargrove, for your presentation.
You said Mr. Milton is in complete control of the future of the airline industry. I want to assure you that Mr. Milton is not in complete control of the future of the airline industry. Yes, he's the front-line player and he has something to say, but that's why this standing committee is meeting. That's why the economic development committee of our own Liberal caucus is meeting. That's why the competition board is there to look at the results. That's why all these different reports are going to come. And the Minister of Transport is anxiously awaiting the results so he can formulate legislation to ensure we meet the five principles that you spoke of in your remarks and that we are concerned with as a committee.
With that, I'll begin with questioning.
Ms. Val Meredith (South Surrey—White Rock—Langley, Ref.): Thank you, Mr. Chair, and thank you, Mr. Hargrove.
I want to go back to something you said you recommended to the government, and I assume it was in April of this year, when you met with the minister. You suggested two things. It may have been more than two things, but I only got two things down.
One was that the government should take an equity position in Canadian. The second was the lifting of the restriction of ownership in the industry. I take it from that comment that you felt the 10% in the Air Canada Act should be removed, or something done with it. And I take it you also mean foreign ownership. Am I right in assuming that?
Mr. Buzz Hargrove: The focus of our union at that time was on foreign ownership. Our problem wasn't all these Canadians who wanted to buy more than 10%; our problem was raising capital. We felt at that time that the foreign ownership thing was a restriction. So in fairness to the minister, at that time I think our letter did specify the foreign ownership thing. But the thrust of our discussion was about how to raise capital, and if someone had asked the question, we wouldn't have been concerned about the 10%.
Ms. Val Meredith: So do you feel that the 10% would restrict raising capital for the industry?
Mr. Buzz Hargrove: At that time it didn't, but it certainly has proven to be a factor in this latest round of restructuring.
Ms. Val Meredith: What I get from you is that you think that when a government's policy interferes with a company's ability to raise the money to provide growth, more jobs, and stability, that should not happen.
Mr. Buzz Hargrove: I don't think I would frame it quite that way, Mr. Chairman. What I would say is that when you have an industry that's in crisis, and there's a policy that was put in place in an earlier period of time that was public policy, maybe even good public policy at that time, but it inhibits restructuring, which is absolutely necessary here—all the financial analysts, everyone said there had to be a restructuring—then at that point the government has to decide whether or not it makes sense to continue those restrictions, both of them.
Ms. Val Meredith: Okay, let me ask you this. Do you feel that the fact that three out of the five largest companies in this country, which provide employment for, I believe, over 72,000 Canadians, are foreign owned is a problem?
Mr. Buzz Hargrove: Look, I'm a Canadian nationalist, but don't put my nationalism in front of me and my members losing their jobs. The question I faced with the Canadian Airlines is that we were facing a crisis and they were going to hit the wall. At that point I said if we could raise capital outside this border to save this industry, coupled with the government ensuring that we didn't just raise capital while the destructive competition that destroyed the capital that was there continued, then I would have no problem.
But on most days you'll find me really, really worried about what's happening to our country, the amount of foreign ownership that's taking over many, many sectors of our economy. I think in the first nine months of this year, $24 billion of U.S. money took over 181 Canadian corporations. I think all of us should be worried about that in the long term.
Ms. Val Meredith: So you think it's a problem that the Canadian automobile industry is owned by the United States?
Mr. Buzz Hargrove: I said, ma'am, don't get between me and my members' jobs. If we could find a way to buy the automobile industry... We recommended 35 years ago to another group of people, as a union, that we should have a Canadian-owned industry, but given the circumstances today, that doesn't make sense. It's like Canadian Airlines. It's great to have a restriction on foreign ownership, but if it means a lot of people are going to lose their jobs, then it doesn't make sense.
Ms. Val Meredith: So would you suggest that foreign ownership requirement could be raised, say to 49%, which still leaves the control in Canadian hands?
Mr. Buzz Hargrove: The government decides what's good public policy. What I am concerned about today is the structure we're looking at, the only proposal that's in front of us.
Mr. Milton today, contrary to where he was at a couple of weeks ago, is suggesting a raising of the 10% domestic ownership rule, but he's not talking, I don't believe, about the foreign ownership. The government has to decide, madame, what's in the best interest of the public and the workers.
I just plead to the committee, remember, there are 40,000 workers here who we had bargained good guarantees for with one of the investment groups, and the other investment group has made no guarantees to any of the workforce.
Ms. Val Meredith: Is the door open for you to get them to make concessions, to get Air Canada to meet the Onex concessions that you—
Mr. Buzz Hargrove: Not without the support of this committee and the Government of Canada. They will not. Why would they now? They are the only player. They control the bat, the ball, the field—they control it all. The only thing between Milton and doing exactly what he wants is the people here and the cabinet.
The Chair: Thank you, Val.
Ms. Val Meredith: Thank you.
The Chair: On that 10% rule, for clarity, you said 10% doesn't make sense. What percentage would make sense? Do you have a ceiling?
Mr. Buzz Hargrove: The question facing the committee is whether 10% is still good public policy. Does it make sense after a decade? We've tried that for 10 years, and it hasn't worked. I'm not in a position, Mr. Chairperson, to make the decision on that. All I know is that as this restructuring went about, it appeared to inhibit the restructuring process, to the point where we only have one player who has enormous power today.
The Chair: What we're looking for though, as a committee, is your help, Mr. Hargrove. You're saying foreign ownership if necessary, but not necessarily foreign ownership.
Mr. Buzz Hargrove: Right.
The Chair: Then you're saying a 10% rule doesn't make sense today, but you're not sure what that number is.
We're trying to draw out of you what the CAW's position is on foreign ownership and what their position is on the 10% rule. We understand why, and it makes a lot of sense to us too, but at the end of the day we have to come up with a report that makes a recommendation, and we can't be as loose as you have been here. Is there a position?
Mr. Buzz Hargrove: If you ask me personally, I see no value in the restriction. What other corporation do we have this ownership restriction on domestically? It may have made sense and it may have been good public policy when it was introduced in the initial privatization and deregulation period, but that hasn't worked.
So in looking at it, the committee has to ask, does that serve public policy today? Is it good public policy or is it bad? My experience with it—and I haven't had a lot—is bad.
The Chair: Mr. Fontana, please.
Mr. Joe Fontana (London North Centre, Lib.): Thank you, Mr. Chairman.
Welcome, Mr. Hargrove. You laid out a pretty good challenge for us, but the chairman quickly pointed out... I'll be damned, personally, if Mr. Milton is going to dictate the public policy of the airline industry in this country, so watch us. You said you're going to need the help of this committee and this government. Well, watch us, because I'll be damned if one person is going to dictate the airline industry in this country, and it won't be Mr. Milton. I guarantee it will be this committee or this government that will do that.
I must tell you, Mr. Hargrove, it was a rather interesting thing on that Monday going into Toronto Pearson, with all of your workers putting on these nice little buttons striking Buzz off the face of the earth. I know you supported Air Canada at some point in time and I know you supported Canadian at some point in time, and I know what your answer will be, but whose side are you on now?
Voices: Oh, oh!
Mr. Joe Fontana: You know what? As good a politician as Buzz is, he'll probably say the employees of the airline industry.
Mr. Buzz Hargrove: I will take advantage of that, Joe—and I'll call you Joe, because I've known you for a few years—to again stress that the proposal we bargained with Onex covered 10,000 workers under 10 different collective agreements. It covered Air Canada and all of their regionals—Air Ontario, Air Nova, Air Alliance, Air BC—and it covered Canadian Airlines and all of their regionals, which have 10 different collective agreements with our union alone.
The dispute was that our Air Canada members were used by Mr. Milton. They were convinced that somehow, if there were a new investment group behind Mr. Milton, they would lose something. He used loyalty and he used the threat that people were worried they were going to lose their jobs or lose their seniority status or lose something out of this.
The only thing I'd say today to the committee is if you take a look at what we bargained, it covered 10,000 people, and it guaranteed that not one person would lose their job—not termination, which is this fancy language of Mr. Milton, but not one person would be laid off through forced layoff—not one person would be relocated from Toronto to Nova Scotia, none of our work would ever leave the country to anywhere else in the world, and we had in place enhanced retirement benefits and enhanced severance payments. All of that is gone.
There was a conservative estimate that that was valued at over $500 million. There's $1 billion out there for the shareholders today, and there's not one penny on the table for workers and their families.
Mr. Joe Fontana: Buzz, I appreciate that, but I ask the questions, and if you use too much time, I won't get another chance to ask you another good question.
Mr. Buzz Hargrove: Sorry.
Mr. Joe Fontana: I want to get to the issue at hand today. You pointed out that a dominant player is going to control not only the domestic but also the intercontinental, transborder, international, and maybe even the low-discount area under the present proposal, which we've yet to see and which has been approved. You talked about the fear of this monopoly that's going to control an awful lot of things, including prices and capacity and so on.
I want to applaud you on some of the stuff, because one of the things we're trying to do is get our heads around what's going to happen to the consumer in all of this. You properly pointed out that the prices in fact had gone up greater than CPI, even with a so-called deregulated two-airline policy in this country. You also indicated that both companies, believe it or not, have not made a heck of a lot of money. So you've pointed out that structurally, there are some fundamental problems in the two main carriers in this country.
We need to try to deal with these public policy issues the transport minister has asked us to consider. Are you against the Air Canada proposal as it stands now, from the standpoint of a monopoly, and also from the standpoint of the employees? Do you like that proposal? Do you think that's good public policy?
Mr. Buzz Hargrove: No, from both points of view, especially the defence of workers. Also, the way it's structured, it ensures that no new entrants can come in and try to make their way up the ladder to become a player in an industry that has potential for growth.
Mr. Joe Fontana: Now there's only one player, but perhaps others will come forward. As you know, this morning someone did come forward to propose a regional set-up, because the Competition Bureau did say if there were a dominant carrier, like an Air Canada, they may have to divest themselves of the regional network in order to make sure there's competition.
The people who were here this morning indicated that they're taking a look at it and gave some guarantees for job security. In fact they talked about growing an industry and growing competition, thereby providing much more employment opportunities. Do you think it's important for us, under a single dominant air carrier, if that's what happens to this country in the next little while, that we look at divesting the regionals and breaking up that four-tier system Mr. Milton is proposing?
Mr. Buzz Hargrove: No, I think that would be a major error, because in the Deluce proposal of this morning, as I understand it, they're looking at a monopoly in the regions where they feed the main carriers. Then they use the fact that they have a monopoly and they can build strength there to put some competition in the main carriers. All you're doing is ensuring we have a continuing crisis in the airline industry. That will not solve the problem.
We need one national carrier, with the regionals as part of that structure. That would be the top-of-the-class carrier, but then we'd need to allow new entrants to come in in the regions. If Mr. Deluce wants to start an airline in the regions to compete with them, good luck to him. But he doesn't want that. He wants a monopoly by saying he'll buy at fire hall sale the regionals. That will further undermine the strength of the industry. You'll do what we've been saying for the last 10 years: we keep creating a further problem instead of fixing it.
Mr. Joe Fontana: What's your solution, then? There are no real problems in entrants getting into the domestic air industry in this country. Apparently some of the regulations or non-regulations allow for easy access to a domestic market. Therefore, if you think there's that kind of buoyant market where there are the Air Transats, the Royals, the Canada 3000s—
Mr. Buzz Hargrove: And WestJet.
Mr. Joe Fontana: —and WestJet out there providing some competition... How do you think, though? What regulatory framework or instruments are going to be necessary in order to make sure that competition does thrive and that the consumer does have good and fair pricing? That's what really ticks them off.
The Chair: Thank you, Joe.
Mr. Buzz Hargrove: I start from the premise that we've had 10 years of destructive competition. All we've done is see airfares rise higher than the other goods in the basket of CPI measures.
I start from there to say that I think the best thing the government can do and this committee can recommend the government to do is to ensure that Air Canada is the flag carrier and that their regionals feed into them so that they can pick up the business offshore, and they can go ahead and make some money.
But you can't allow them to cover every level of service. If somebody wants to fly a no frill, surely a Deluce or somebody else should be able to come in and compete regionally, as WestJet does on the key routes, by providing a low-cost, no-frill flight. But if you take that major piece away from the carrier, you're just creating a further problem for the future. Give the WestJets, the Air Transats, the Royals, and the Canada 3000s an opportunity over the next five or six years to grow and become competition.
One thing that has been shown is that we cannot afford and we cannot support two carriers as we have over the last decade.
The Chair: Thank you, Mr. Hargrove.
Mr. Guimond, please.
Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): Mr. Hargrove, I don't remember seeing the name of your union. You're a worker from what union?
Mr. Buzz Hargrove: The Canadian Auto Workers Union represents 10,000—
Mr. Michel Guimond: I mean you personally. What section are you from?
Mr. Buzz Hargrove: I worked in a Chrysler plant in Windsor.
Mr. Michel Guimond: Okay.
At the outset, I'd like to repeat what I said to the pilots yesterday, and especially to the Canadian Airlines pilots. I think that everyone recognizes that Canadian's workers, for the last ten years, have suffered enormously because of the company's quality of management. They made the efforts that had to be made and even accepted decreases in their working conditions and their salaries that were out of the ordinary. That must be recognized.
Tagging along on Mr. Fontana's question, I'd like to know what your proposition is. Since the Onex offer was judged illegal by the court, we've seen, as expected, that Air Canada's president is more and more active. On the weekend, the media reported that Air Canada was offering $125 million for employee buyouts. Even this morning, they said he was making a commitment that there would be no layoffs and that any decrease in staff would be done through attrition. Can we believe the president of Air Canada? Have you had official or unofficial meetings with Air Canada to get guarantees for the members you represent?
Mr. Buzz Hargrove: No, there are no guarantees from Air Canada. There's a blanket statement. The terminology they use is that there'll be no terminations. “Termination” means an end of employment. The term “layoffs”, which is the language we used in bargaining with the Onex Corporation, means that no one can be laid off. There's a big difference. Terminating someone means you have broken their seniority, and they're gone.
For Mr. Milton, with his language, layoff means he could lay off 5,000 people without offering any... He's not offering any enhanced pensions. He's not offering any ideas as to how we downsize the industry without laying people off. So we are very skeptical, firstly, of his commitment to not lay people off or terminate them. We don't believe that means people will not be laid off. We think quite the contrary, that it will.
When you put a structure in place that ensures you're the dominant player at every level of service in the industry, we believe you are designing that to ensure you have a monopoly and can call the shots once you get control.
This structure of Canadian Airlines he put out yesterday is, we believe, a very cleverly designed thing that says Air Canada has no responsibility at all for Canadian Airlines. If they don't find a way to make themselves survive, they go bankrupt. That's where we're at today. They know that. If they don't find a way to survive, they're bankrupt. Under his proposal they go bankrupt anyway. It doesn't add anything at all. It is an arrogance of recognizing I'm the only player and people have to play the game I put forward.
Mr. Michel Guimond: In the discussions you're going to have with the Deluce group or other groups interested in purchasing the regional carriers or even restructuring the regional transportation assured by both companies if they're not merged, will you intervene for the InterCanadien workers who, contrary to what most may think, are not in the Canadian Airlines structure? It's a totally independent company. It's about 1,100 employees strong and is headquartered in Montreal. It has an important base in Montreal, in the outlying regions of Quebec as well as in the Maritimes. Are the employees of that company at the heart of your concerns?
Mr. Buzz Hargrove: Absolutely, and I believe that under our proposal these people would be protected.
The only way InterCanadian can be harmed, like WestJet, Royal, or Canada 3000, is if Mr. Milton is allowed to take complete control of the industry. Then he will decide whether or not InterCanadian survives, WestJet survives, or any of them survive. If you own the whole industry, you just dump some extra capacity into the triangle between Edmonton, Calgary, and Vancouver for three months, and WestJet is gone. It's the same thing for InterCanadian in the east, and then they're gone. There should be some way to control that and to ensure that Mr. Milton can be the flagship carrier and have the regionals feeding into him and he can have the access to the international routes, but it should be a structure that encourages the InterCanadians of the world to survive and grow.
The Chair: Thanks, Mr. Guimond.
Mr. Calder, please.
Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.
Buzz, this is almost déjà vu for me. I remember meeting with you when I was on the CN task force back in 1995, when we solved that problem.
You said that you see one national carrier, a component in there for the regional carriers, and also space for further expansion. That's what you see.
In that situation, obviously we've merged the two airlines. How do we address the differences, for instance, in the union contracts between the two, the seniority ladder issue? With regard to the 10%, I think you agree that it should be increased, but you're not exactly sure what the figure should be, whether it should be 10%, 20%, or—
Mr. Buzz Hargrove: Get rid of it.
Mr. Murray Calder: Okay. The other thing I would like you to comment on is the issue of the slots at the airports. Toronto airport is basically the biggest problem in this whole issue, and I think that's something we're going to have to address. Obviously, if you wanted to stop expansion, that would be the beautiful way of doing it.
Mr. Buzz Hargrove: Let me deal first with the seniority question. We've dealt with this on many occasions. This is not the first merger we've gone through. The only difference with this one is that there's going to be a monopoly in an important industry like transportation, and it has a public profile because public policy dictates it.
What we suggested and bargained freely with the Onex Corporation without them having a gun at their head—they didn't own anything, and we bargained it—was conditional on their taking ownership. That was the only way it would be triggered and become a collective agreement, and then only after it was ratified by our members. But we had a separate seniority list. People could continue to work under their seniority with the blue and the red carriers, much like General Motors has the Buick division and the Chevrolet division, or Chrysler has the Dodge and the Jeep. There are all kinds of examples of how this can work and work intelligently.
After meetings we didn't get with Mr. Milton, because he wouldn't meet with us, we were able to convince Mr. Schwartz's people that this could work, that you could do an airline...and we bargained the protection for seniority. No one would have been disadvantaged by their seniority.
It's interesting to see Mr. Milton today talking about whatever guarantees he's willing to give only being out to March 2002, and that was what we said, because our bargaining takes place in March 2002 and we had every intention of extending the seniority protection from that point forward.
On the slots, again, you're absolutely right. In order to have competition, firstly, I don't believe the airline industry, given our history... It should be open to any new entrant who wants to come in. We should just say anybody who can lease a plane and fly between Toronto and Windsor can do it, and that's what we have today. We put together a presentation with other unions that I believe was an intelligent and smart way, that said there are some requirements for new entrants to come in, and the government does it in an intelligent way and encourages the building of successful, competitive new entrants for the future, and part of that is the slots.
I read in yesterday's paper where Mr. Milton has bought all the slots at Hamilton—all of them. He has 100% control of the slots there in anticipation that we're going to rubber-stamp his proposal to have this no-frill airline flying out of Hamilton.
That carries the monopoly one step farther. You can't say somebody has complete control of the slots in an important thing like this, or you're not going to have competition. It can't happen.
Mr. Murray Calder: I'm a little curious here. When you use the Dodge-Plymouth analogy, for instance, isn't that very similar to what Mr. Milton is proposing about having Canadian as a subsidiary of Air Canada? We hear in front of this committee right now that there's great concern amongst the Canadian employees that it puts Air Canada in the position to basically pick away at Canadian until all that's left is a corpse on the road and you walk away from it. Isn't the analogy you just gave similar to that?
Mr. Buzz Hargrove: No, mine is much different from Mr. Milton's.
What we're talking about here is an equal partnership, that Canadian Airlines continue to be allowed to operate domestically and internationally, and we pull back capacity based on the market each airline has by community. You don't leave it open at that point, and you move the wages up so that it is part of one first-class airline, a world-class airline with a great product, which both of them have, and people have a choice of flying on one airline or the other, based on the product and the service they provide, much like any one of us here who, like General Motors, has a choice of going in and buying a Pontiac or a Buick.
But it's not Mr. Milton's. Under my scenario he would take complete responsibility, including everything—the debt, for example. You have an industry with $9 billion in revenue under a monopoly situation. That's what we're talking about here. Everyone agrees that there's going to be one major player at the end of that. The question is—
Mr. Murray Calder: Then I have one last question along that line, because I want to know how you're going to address this issue.
In what you're proposing right now, what I see is that we still have the situation where you have two sets of aircraft taking off minutes apart from each other, they're flying to the same destination, and both of them are half empty. How does your proposal address that? That's the issue.
Mr. Buzz Hargrove: No, mine is different from yours.
Again, if you have one airline and you're flying 100 customers between Toronto and Ottawa, and today you have 20 planes half empty, under my scenario you would have 10 planes full. The only issue would be if 70% of them were flying on the red today, then 70% is what the red would get. You'd reduce it by 30%. You'd reduce the other line by 70%.
Mr. Murray Calder: Okay.
The Chair: Thanks, Mr. Calder.
Ms. Bev Desjarlais (Churchill, NDP): In your presentation here on the 1997 minister's air policy committee, you mention a number of things. Is that the type of suggestion you were making back then? Are these changes that should have happened then so that we wouldn't be in this situation?
Mr. Buzz Hargrove: Yes.
Ms. Bev Desjarlais: And you don't see it as an impossibility. We can still go that route.
I guess I should ask Mr. Stanford if financially or economically it is possible for these two airlines to still survive by making those changes.
Mr. Jim Stanford (Economist, Canadian Auto Workers Union): We've identified the crucial financial problem in the airline industry as being in the nature of the domestic competition, where you have a small number of firms who are competing with each other in a strategic way. It's not like a bunch of corner grocery stores that compete with each other. You have two giants that are competing with an eye on each other. They're actually competing to try to do harm to each other rather than to provide better service to the consumer, and the main way they've done that is by pumping more and more capacity into the domestic market.
That type of competition, that sort of oligopolistic competition, if you like, has been unsustainable. It has led to chronic overcapacity, very high operating costs, higher ticket fares, and ironically, poorer financial performance of both airlines.
To solve that problem, you have to step back from that head-to-head, wingtip-to-wingtip competition domestically. There are various ways you could do it, and we've been presenting options in all the submissions we've given.
One would be to reregulate the domestic industry. That doesn't seem to be especially popular. Another would be to allow for some kind of cooperative arrangement between the two firms. That is to say, we'll focus our marketing and expansion in one area of the market and you focus over there. That's the sort of process that would be allowed under the section 47 arrangement and one thing that we thought might happen under section 47.
Another would be to merge the airlines outright, or another would be to have kind of a quasi-merger or a partial merger where you get some kind of combination at the financial level but maintain the separate airlines at the operational level.
In any case, you have the firms stepping back from that wasteful duplication and financial bloodletting in the domestic competition. If it were sort of a quasi-merger where they were combined at the corporate level, the two subsidiaries obviously would not try to duplicate each other hour for hour, just as you'd never see a Pontiac dealership located across the street from a Buick dealership. The company maintains the separate brands, not to drive each other into the ground, obviously, but rather to meet different segments or different niches of the market.
So we think there's a lot of possibility for attaining that type of arrangement. The crucial ingredient for us would be to have some kind of management at the aggregate level of the expansion of domestic capacity in the industry.
We proposed in 1997 a system of auctionable quotas whereby the federal transportation ministry would set ceilings on the expansion of domestic capacity in line with the underlying economic fundamentals, such as population growth or economic growth. The carriers could compete with each other for shares of that aggregate capacity, so you're obviously still having some competition, but it won't be channelled into the chronic excess capacity that we've seen over the past decade.
Ms. Bev Desjarlais: Okay. I want to make sure I understand the auctionable quota part. If you had one hundred seats that were flying out of there one day, would you give 50 seats to one and 50 to the other?
Mr. Jim Stanford: With all the carriers, you would establish the maximum number of seats that would be serviced on a particular route, a particular pairing of a destination and an origin, and the companies in essence would bid for the right to service a certain share of that.
In the first place, it would be a source of revenue for the government that could offset some of the costs of running the transportation infrastructure. Then the companies can make cost-effective decisions about where they can have the best opportunity to turn a profit, what markets they can serve the best, and that will all influence the price they're willing to bid for the quotas they're bidding for.
Again, there's a lot of thinking and working out to be done there, but that's just one idea where you can combine some of the benefits of competition but channel that competition in a constructive direction rather than the destructive direction we've experienced.
Mr. Buzz Hargrove: Bev, I would make just one point on that. We had the time to do this, to work out this program. Now we're back in crisis and we're facing a much different situation. It's hard to imagine us putting together something today that takes care of the death of Canadian Airlines, ensures their future, and then looks at how we deal with new entrants in this industry for the future.
Ms. Bev Desjarlais: I had one more question, but I can't remember it. That's okay.
The Chair: Thanks, Bev.
Mr. Jackson, please.
Mr. Ovid L. Jackson (Bruce—Grey, Lib.): Thank you, Mr. Chairman.
Buzz, you've had a long time to think about this problem. You've been on the ground for quite a while. We had a professor here from the University of Toronto, and we were told that mergers never work, particularly when they're hostile, and when you get people trying to work and cooperate, it always fails. You give a good example of what happened in the Massey Ferguson case.
Do you know of any mergers you've worked with that have actually worked, and how would you see the merging of Air Canada and Canadian?
Mr. Buzz Hargrove: For a professor to say that, he must have been sleeping the last four or five years. Boy, have there been a lot of mergers take place!
The latest high-profile one that we were involved in in the last couple of years was the takeover by Daimler of Chrysler. It merged the two companies, and it's working very well. They're a very successful company. It wasn't just two different cultures within a country that we were talking about there—we're talking about two airlines and their cultures—but there were three major countries and several others. They've been very successful in merging.
The issue is how you start out. If you start out with Mr. Milton convincing everybody in the workforce that they're losing, that there's a new environment and a new investment group behind, and you get everybody mad, then it's going to be more difficult to pull them together in the long term.
But I do not believe it's impossible. By the way, neither does Mr. Milton. He's now saying to people, we should settle down and start to make this thing work, and that Canadian Airlines is going to be part of the future.
So I don't buy the argument that mergers can't work. There have been many of them we've dealt with, and I can't recall one that wasn't successful. Massey wasn't a merger; Massey Corporation just redefined itself. It said today we're Massey Ferguson; tomorrow we're Verity Corporation, with all the profitable units in it. And we're Massey Combines over here, not only with all of the operations that are losing money but with every responsibility for all the active workforce, retirees, and surviving spouses. It was destined for bankruptcy when they set it up.
I see this proposal of Mr. Milton's with Canadian Airlines in the same light as the Massey restructuring.
Mr. Ovid Jackson: Okay. You've implied to us that we need a dominant carrier and that we need to have the competition among the smaller players. What would some of those details of the merger be with regard to the debt owed to American Airlines, and would that include equity from the Government of Canada?
Mr. Buzz Hargrove: Our suggestion was, and still is, that we believe we need equity. The government is going to be a player in the airline industry. It doesn't matter what happens at the end of the day; the government's either going to be a player in terms of regulating a monopoly or it can be a player through a minority equity position, where we're sitting at the table, we're part of pricing policy, pricing decisions, route decisions, and how people are treated. The government is there in all of those things.
It seems to me it makes more sense for the government to do that as an equity player as opposed to trying to bring together a bureaucracy to regulate the industry for the future. So my recommendation would be for a minority equity position by the government.
Mr. Ovid Jackson: Okay, since we're blue-skying, would that include... Some American airlines, for example, allow their pilots to have equity. Do you see any of that happening, that workers may have equity in the company as well, as part of bringing the costs down?
Mr. Buzz Hargrove: Workers have equity in Canadian Airlines. Ask them whether they want any more. If you look at page 3 or 4 of this document, and if you are a worker and you see the losses... It says the bleeding continues. That page shows you that back in 1988 and 1989, before it was privatized and deregulated, Air Canada actually made money for the people of Canada. Then it's been all downhill. It's now just getting back to where it's even. Canadian Airlines has lost money every year during that period of time.
So if you're a worker looking at this, you're saying, do I want equity in that? The people who have equity through shares, who don't work for them, don't want it. Why would workers who rely totally on that for their livelihood—they've got everything locked up in it, from their mortgage to the education of their children—want to put more into it? I don't think so. What we need here is government framework, government policy, and we need an assurance that the workers aren't going to be left behind in what is going to be a monopoly situation here.
The Chair: Thanks, Mr. Jackson.
Mr. Casey, please.
Mr. Bill Casey (Cumberland—Colchester, PC): I would like to go back to your position about the single dominant airline—Air Canada or whatever. In regard to the Air Canada proposal now, which has the four tiers that you mentioned—Air Canada, Canadian Airlines, low air...and the regionals—you said you don't agree with that, but that the regionals should not be divested.
Mr. Buzz Hargrove: Yes.
Mr. Bill Casey: Why do you say they should not be allowed to have all of those areas, but the regionals should not be divested? Isn't that a contradiction?
Mr. Buzz Hargrove: No, Bill. The regional structure is important. You can't have a national carrier with no feed, or the feed that you control. Let's assume for a moment that they divest it. The main carrier is still going to control the regionals. Or, if the regionals get powerful enough, they're going to control what happens with the main carrier.
What I'm suggesting is, let's make the main carrier a first-class carrier that has everyone treated the same. We don't have four tiers of wages, which is what they're competing on in this industry. The wages and benefits and their commitment to the workforce allow the regionals to provide lower fares. Today, it's Air Canada up here, Canadian Airlines here, the regionals here, and then the no-frill that Mr. Milton wants to start.
What I'm saying is if you just have one carrier, with Canadian and Air Canada as one, and then you have the regionals feeding into that, making sure they're all the same—you have one company and they're all treated the same—then you have room for new entrants, like the Deluce brothers or someone else, to start up an airline and make money in the business, and provide a no-frill if they want to. But if you let Mr. Milton control every level of service, then no one can survive.
If you take the regionals out of it, then all you're doing is guaranteeing that we have a major and continuing problem. You have not solved the problem at all, because the regionals, under Deluce's scenario, would have the monopoly in the regions, and they'd use that monopoly to try to undermine the carriers on the key routes where they make money, which are the triangles—the eastern triangle, Montreal-Ottawa-Toronto; or the western triangle, Edmonton-Calgary-Vancouver. And from his base, he'd continue to weaken the main carrier.
It's not very smart of us, not good public policy, to ensure that we're going to be back here in another three or four years dealing with the same problem again.
If Mr. Deluce wants to come in, let him come in as a new entrant and put his money in, as opposed to letting the government force the other guy to give him the regionals.
Mr. Bill Casey: Now, you talk about public policy. At the beginning of this great debate this summer, the minister said, I think, that it was his preferred policy that the regionals be divested, and I don't know whether at that time he meant as separate companies or as one like Mr. Deluce is proposing. But it seems to me that in the majority of presentations we hear from, the number one concern is competition—no competition under the dominant carrier. It seems to me that this would provide some competition for the dominant carrier, because they would still be competing on some lines for sure. They would still have to depend on each other, but the regionals would have to depend on them on the main line, because, again, much of their traffic would be feeder traffic. So they both need each other.
Mr. Buzz Hargrove: To answer the question, Bill, you have a monopoly in the regions. That's where the people are worried about the competition. That's where people are looking for fares that are lower. It's not the business travel between Ottawa, Montreal and Toronto, or Vancouver, Calgary, and Edmonton. It's the regions. But now what you're saying is that instead of Air Canada having the monopoly, the Deluces would have that monopoly.
Mr. Bill Casey: What if they divested the regionals but didn't have the monopoly? What if, say, there was Air BC, Air Ontario, Air Atlantic, or InterCanadian, and they divested and remained independent?
Mr. Buzz Hargrove: You're still going to have only one regional carrier under that scenario. The only way you can provide competition is to make the structure such that it invites someone to come in at another level. If there's traffic that will bear it, then someone will come in. The Deluces will come in; they've done it before—or WestJet.
Again, this is an interesting industry. Success breeds failure. If you get the infrastructure for a national carrier, as Canadian and Air Canada have done, you have all of these services—the buildings, the accounting—and all of the pieces that go into that take an enormous amount of capital investment. But a new entrant coming in can lease planes today, can outsource their mechanical work, and can hire people at a much lower wage, and they can start eating away at the areas where you can make money, which is the triangle. If you don't allow the major carrier to have some ability to make money on those major routes, then you're going to end up with the same problem we have today. You and I will be sitting back here—or somebody else—three or four years down the road, looking at this again.
One thing that's clear, if you look at these numbers...here are 10 years of the industry, and both companies are losing money. Now, can anybody name another industry where two companies have run 10 years losing money?
The Chair: Thanks, Mr. Casey.
Colleagues, we have three people left on the list, because I have to move on to our next witness. We are already 10 minutes behind.
Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): You know, Mr. Buzzgrove, I guess I met somebody else that doesn't trust Mr. Milton.
A voice: It's Hargrove.
Mr. Lou Sekora: Hargrove, yes. I said Buzzgrove.
Mr. Buzz Hargrove: I've been called worse than that in the last few weeks.
Mr. Lou Sekora: I know you've been called many things in your life. I know in the position you have, you'd have to be. I have some experience with that.
The Chair: The man has been called a lot of things in his time, but never that.
Mr. Lou Sekora: The fact is that we also had a presentation here by Mr. Milton. From some of the things that were said and some of the things I listened to, I just didn't trust the comments that were being made.
I come from British Columbia and I'm interested in the best service across Canada, pricing and employees. Those things are very important. I was in municipal politics for 26 years before I came here, and I'll tell you one thing, I had a good relationship with my employees throughout the city. They always said, “Lou, you're one tough so-and-so, but you're very fair.” That's what has to happen.
I think it's very important that the employees are recognized for their years of service and the work they do. At the same time, I don't want to see the pricing of airline tickets get out of hand to the point where people can't afford to travel, or where they have to take charters because the other airlines cannot give them the service.
You made the comment that the federal government should probably have a little piece of the action as far as the airlines are concerned. I totally oppose that. I don't think for one minute we, as government, are good managers of any business. We should totally stay out of any kind of business.
You also said that the 10% was not good. If I remember correctly, you said to throw it out. What percentage should it be?
Mr. Buzz Hargrove: I just said throw it all out.
Mr. Lou Sekora: Are you saying it should be thrown out altogether and left wide open?
Mr. Buzz Hargrove: Yes. On your first point on the equity, what's least offensive? Is it for the government to regulate a monopoly? You're going to have a monopoly because there's no other way the industry can survive. All you have to do is look at the numbers. Do you have an equity position where you're sitting at the table? If investors are willing to put money into an airline, I think it's a good investment for the Canadian people to ensure that consumers don't get ripped off, as you said, and we provide a service to people across the country. I think that's a good role for government. You don't have to run the business. A minority equity position gives you a seat at the table, so you can know what's going on.
On the ownership question, the only reason to have any kind of restriction is if it's good public policy. This rule came out in 1989. Look at the losses for both companies since then and ask yourself whether it is good public policy. If I were a policy-maker, my conclusion would be that it isn't.
Everyone in the financial community and honourable members from all parties across the country recognize that something has to happen; the industry has to be restructured. The only question is, what is the best way to do that? If you have a policy that inhibits the restructuring, then government has an obligation to look at it.
Mr. Lou Sekora: You know, when Mr. Milton made his presentation to us, I got the feeling, from the things he was saying, that he would like to take over Canadian and eventually sink it. Is that your feeling?
Mr. Buzz Hargrove: It's not that I trust Mr. Milton less than I trust Mr. Schwartz; I go by what I have in writing. I had a signed agreement with Mr. Schwartz. I called him Mr. Onex one time, if that makes you feel any better.
Mr. Lou Sekora: It makes me feel better.
Mr. Buzz Hargrove: I had a signed agreement with him guaranteeing that couldn't happen, that the workers and the consumers were protected. We had a good signed agreement.
With Mr. Milton, it isn't a question of trust; I don't trust anybody I bargain with. The days of a handshake on a deal are long gone, surely. We need to have a guarantee in writing, and Mr. Milton is not prepared to put any of the issues we talked about in negotiations in writing. He's prepared to put a letter out publicly, but everyone here knows if you go to a lawyer and I send you a letter saying I'll guarantee you something, unless you and I have signed the document, a legal document doesn't mean anything. I can say anything I want.
We need a signed document, and this committee and the government are the only powers left to ensure that Mr. Milton meets his responsibility to the workers and their families and the communities in terms of service.
Mr. Lou Sekora: If Mr. Milton and Air Canada were to walk away today, we'd be back to square one.
Mr. Buzz Hargrove: Mr. Milton is not going to walk away today. He didn't put $1 billion into shareholders' pockets and zero into workers to walk away. He has the best deal one could imagine today.
The Chair: Thanks, Mr. Sekora.
Mr. Bailey, please.
Mr. Roy Bailey (Souris—Moose Mountain, Ref.): You should change your name. It should be Mr. CAWgrove.
When you made the deal with Mr. Schwartz at Onex, he guaranteed that your union would be protected, but there's more than one union in this deal. How many other unions are there? CUPE is one.
Mr. Buzz Hargrove: There are six unions, I believe, in the airline industry.
Mr. Roy Bailey: Did that include the other unions as well?
Mr. Buzz Hargrove: No, I only bargained for the 10,000 CAW members. But my understanding was that most of the unions had talked to Mr. Schwartz and he was prepared to put similar guarantees in writing for them.
Mr. Roy Bailey: Mr. Schwartz has said that under no circumstances, because of the judge's ruling in Quebec about the 10%, would he be back. Do you believe he would make another bid if legislation lifted that 10% to 80% or an unlimited amount?
Mr. Buzz Hargrove: I have no idea. I don't know Mr. Schwartz personally. I met him on three different occasions in my lifetime. I had never heard of him before he put in an offer to buy the industry. I always want to meet the players in any industry I deal with, especially ones who have money. It's the first time in a lot of years we've had anybody with money who was interested.
Mr. Roy Bailey: Okay. Last week we met with two different groups of pilots. If you're going to go to a dominant carrier—or a monopoly, if you want to use the word—from your experience, wouldn't it be very difficult to pull those different pilot union groups together?
Mr. Buzz Hargrove: I can't speak for the pilots; all I can speak for is the history. Canadian Airlines was born out of mergers of Pacific Western Airlines, Eastern Provincial Airways, Wardair, and Canadian Pacific Airlines. Everybody used the same argument that the pilots or agents wouldn't come together or the agents. They all came together; they're all professional people.
The real question here is how are they treated? What are the guarantees? If you start out by saying to the pilots, “Look, you're number 10 on the seniority list, which allows you to fly a 747. We're now going to merge your seniority list, so you'll be dropped down to a regional jet”, you won't get any cooperation, and you shouldn't. Our proposal would have made sure that wouldn't happen.
Mr. Roy Bailey: So you're saying that at the present time this committee is facing a difficult situation. Mr. Milton is in the driver's seat, and it's going to be a monopoly because there's no other interest in it at the present time.
I really don't see this committee making a recommendation to the government to that extent. Something will have to take place to make sure he isn't in the driver's seat, and we will have to act, not necessarily on the part of the unions but on the part of Canadians everywhere. So maybe the part we have to play won't look too democratic either.
Mr. Buzz Hargrove: If it's a decision by an elected government, it has to be democratic. That's the difference between Mr. Milton and you and me. You're elected and so am I. Mr. Milton is not elected; he's appointed. He'll do fine no matter what we do here. It's a matter of the workers and their families and what happens to the Canadian people in this new environment we find ourselves in.
The Chair: Thanks, Mr. Bailey.
Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): I share your concerns about the sale of all Canadian's assets in the last 18 or 20 months, especially in the forestry industry. It's a tragic consequence. I'm concerned that the war we find ourselves in and are trying to solve involves the global participants, who are vying for that international route, more than Air Canada or Canadian.
What are your thoughts, Mr. Hargrove, on how many of those jobs will leave Canada on this very important segment of air traffic?
Mr. Buzz Hargrove: That'll be up to Mr. Milton. That's the problem with it. He has the total say. We had written guarantees from the other investment group; we have none from Mr. Milton.
What I find most interesting about this debate, Mr. Chairman and honourable members, is that there was a big hue and cry about ownership and control from the United States when the Onex bid was there. Under the last remaining bid, though, United Airlines and Lufthansa have an enormous amount of power. If you're the small guy feeding into the large guy, and if you're a businessman—which a lot of people around this table are—you know what kind of control that has here.
Mr. Joe Comuzzi: All Nippon came on board yesterday to further that alliance.
Mr. Buzz Hargrove: Yes, that's right, so the real question now is whether or not we have a monopoly. We have an incredible American influence and we have influence by Lufthansa. The question is, who's going to act in the interests of the people and workers and families? I can assure you that I don't care whether it's Mr. Milton, or whether it's Mr. Schwartz of Onex. We have to have some guarantees if we want to have people protected here.
Mr. Joe Comuzzi: This is my last question, Mr. Chairman.
I'm not one who has been sold yet on the idea that we're going to end up with a dominant carrier. I would hope that we'd be able to rationalize, and that Canadian Airlines, its employees and its independent contractors all will play an important role in the future of the air navigation business in Canada. I'm still convinced that we haven't explored that option.
At one time, I sold a lot of your cars. You made the cars in Windsor and I sold them in Thunder Bay. It was a very competitive business. I have a difficult time looking at these two businesses. We were competitive, so how come such a predatory competitiveness has been allowed to exist? I think we were in as competitive a business as was known, being in the automobile business. I can't understand how these companies have allowed themselves to deteriorate to a position such as the one they find themselves in today.
Mr. Hargrove, I want to find out if you would take us through what you would visualize as a soft landing for Canadian. How can we retain two competitive airlines in this country? We know one will be more powerful than the other, but without forgoing all the effort that has been put in over the years on Canadian Airlines...
Mr. Buzz Hargrove: I would argue that one would be more palatable than the other as well.
It would be possible if we started out and said—as we did with Air Canada back in 1989—that we're going to write off the billion-dollar debt that Canadian Airlines holds today, and that we're going to put an end to destructive competition through regulation. We made a proposal on that in 1996, I think. Had people listened, we had an opportunity to do that. We've now really moved to a real crisis. We had an opportunity that's passed us by today. It would take an enormous amount of public money to guarantee that it happens. I don't think there's a will around the government or the opposition parties to see that happen. It could, but it would take a lot of money.
You not only have to write off the debt, you have to to remember that with this continual destructive competition, Canadian hasn't been able to upgrade its planes, its facilities. On all of this, it has fallen behind. It takes an enormous investment to move ahead into the future. I've come to the conclusion that your vision was one that may have been able to survive three years ago, but not today.
Mr. Joe Comuzzi: So Canadian is a wipeout.
Mr. Buzz Hargrove: Canadian's not a wipeout.
Mr. Joe Comuzzi: Tell me what we can do with it.
Mr. Buzz Hargrove: Canadian can be part of a restructured Air Canada. There's no question about that. Canadian can still play a very important role, because there's a product there that a lot of people like. But it needs to be able to not be part of some company that's setting out here and that Air Canada has no responsibility for. This structure says Air Canada has a new company, a numbered company. I've watched those numbered companies. They're set up for a reason. That's the first step to the last step.
But if the honourable members look at this thing and use the restructuring process that Parliament put in place to ensure, firstly, that the workers are looked after—which Mr. Collenette committed to—and that the consumers and the Canadian public are looked after, we can still have a good industry and an opportunity to grow. Most countries don't have two major carriers.
Mr. Joe Comuzzi: Thank you.
The Chair: Thank you very much, colleagues.
Thank you, Mr. Hargrove, Mr. Stanford, Ms. Nash and Mr. Fane, for coming to our committee to give us your presentation and answer our questions.
Mr. Buzz Hargrove: Thank you, Mr. Chairman.
The Chair: Colleagues, we'll have a two-minute recess to change witnesses.
The Chair: We're resuming our hearings.
Colleagues, our next witnesses are representatives of the airline division of CUPE. We have the division president, Denise Hill; Richard Balnis, the researcher for CUPE National; and Judy Darcy, the national president.
Ladies, Mr. Balnis, welcome to the Standing Committee on Transport. We look forward to your presentation of about 10 to 12 minutes. Then we can ask questions when you're ready.
Ms. Judy Darcy (National President, Canadian Union of Public Employees): Thank you very much. We're here today to deliver three key messages.
First, we believe that clear and decisive leadership by the federal government is required in order to ensure the viability of the airline industry.
Our second message concerns the bid Air Canada made late yesterday to shareholders of Canadian Airlines. We believe there are very serious problems, as well as some gaping holes, in that bid. We will need very real answers to tough questions before we can judge Air Canada's bid properly.
Third, we want to underline, at the outset of our presentation and throughout it, that while we intend to put forward a very strong position about reregulation, we believe we are not the ones who are ostriches with our heads in the sand. Those who say we can continue the way we have over the last 10 years with deregulation are ignoring the reality of the airline industry in this country today.
We are Canada's largest union. We represent 475,000 working men and women across Canada in the public and private sectors. Most importantly today, the airline division of CUPE represents 9,500 flight attendants who work at Air Canada, Canadian Airlines, Air Nova, Air Ontario, Air Transat, Canadian Regional, Calm Air, First Air, InterCanadian and Cathay Pacific. The list of who we represent continues to grow as we continue to organize the unorganized flight attendants in this country.
Our members are intimately familiar with the airline industry and how it operates. CUPE flight attendants play a key role, as you know, in ensuring the safety, comfort and well-being of 100,000 passengers daily across Canada and around the world. We bring that experience and expertise to our analysis.
We also represent the concerns of our entire membership, nearly 500,000 of them, who are also members of the travelling public and residents in communities, who depend on air service and who are also citizens who are concerned about the future of our airline industry.
We've provided to the clerk copies of our brief in English and French. It sets out our analysis of the Canadian airline industry in some detail, but it is not that brief I am speaking from today, for those of you who are thumbing through it. We want to leave a lot of time for questions, so I'm just summarizing some of the most essential points. We also just received Air Canada's proposal late yesterday, as you did, and do not have a written analysis of it at this time.
We firmly believe the government must develop an airline policy with teeth, which establishes clear rules for the approval of any future restructuring of the airline industry. Why do we say this? It's because we believe air transportation is far too important an industry to be left to the marketplace. Frankly, for about 12 weeks now, in our opinion, the Government of Canada has been flying without an airline policy.
In our view, the primary goal of air transportation policy is to ensure that Canadians have ready access to safe, efficient and affordable air service. Air transportation is also fundamental to our economic and social development as a country, and plays a key role in supporting regional development. It also provides good jobs for Canadians, which are the foundation for a strong and vibrant economy. That's an issue we believe not just employees in the airline industry, but all Canadians and certainly the government should be concerned about.
The experience of the last 10 years of deregulation has clearly shown that we cannot rely on airline management to protect the interests of the Canadian people. Nor can we continue to rely on so-called private sector solutions that drive the downward pressure on service, staffing and safety, and create the destructive competition that has marked the industry—destructive competition that in the end means no competition at all.
The most cost-effective way to protect the interests of airlines, their employees and the travelling public is through a responsible regulatory framework. In essence, we're saying it's time for smart regulation in order to restore the balance between legitimate public policy objectives and market imperatives. It's a balance we think has disappeared in the last 10 years.
I'd like to take this opportunity to remind you we are not the first to call for such a regulatory framework. I want to take you back six years. This committee, in June 1993, called on the federal government of the day, and I quote “to regulate better and smarter, to harness the market mechanisms in order to provide what the public interest requires”. That's a quote not from CUPE or another union but from this committee.
Since that time, some of you have moved from one side of the House to the other, and the aversion to the R word, the regulation word, has certainly grown even greater in that time period. But the reality is that the need for decisive action on the form of government to protect a viable Canadian airline industry has never been greater than it is today.
Even in these days of market mania, we regulate a range of vital services in this country, from local telephone rates to cable rates. Surely something as fundamental to the economic and social well-being of Canadians as air transportation warrants effective government regulation as well.
On a less philosophical note, surely the uncertainty—and I would say it's been more than uncertainty; it's been bordering on chaos—that has been created by the virtual vacuum of public policy in this area needs to be put to an end.
Let me touch briefly now on the latest proposal by Air Canada management to assume control of its competitor, Canadian Airlines, and to operate the carrier as a separate business, “at least initially”, if I can quote Mr. Milton. Like you, we have had less than 24 hours to review the proposal. Frankly, we have many questions that remain unanswered. We have a 47-page document that we saw for the first time after it was released last night. In those 47 pages, there are three pages that address the form and structure of the new airline, and there aren't many details at that.
From reading this, we see that Air Canada was clearly more interested in answering the questions of Canadian's shareholders than it was in answering the questions of employees, of the Canadian public, and, I would also say, of this committee.
The Chair: Ms. Darcy, just a reminder: this committee wasn't seized with looking at any one proposal, including the recent Air Canada proposal.
Ms. Judy Darcy: I understand that, but the committee of the Senate, the committee of the House, and the government itself certainly are very concerned with whatever proposals are coming forward. From listening to the debate, we know that there has certainly been considerable discussion about the various proposals.
The Chair: As they apply towards the term of reference of this committee.
Ms. Judy Darcy: Indeed.
From our initial analysis, however, it is evident that the Air Canada bid falls short. It does not meet the minimum criteria which we believe should be in place in order to protect the interests of our members, of other airline employees, and of the travelling public. Equally important, it does not demonstrate how the promises it makes will be enforced.
To begin with, the Air Canada bid does not provide adequate guarantees of job security for its own employees, the employees of Canadian, and the employees of other regional airlines. If I may recycle a quote that was directed earlier at the Onex bid: “a guarantee of no job loss for two years means a guarantee of job losses in two years”. That was certainly a sentiment that many of our members expressed earlier, and it is a sentiment that I am sure they would continue to express today. For our members at Canadian Airlines in particular, the Air Canada bid raises major fears about their future job prospects.
In addition, for all employees and for Canadians in general, there are a number of other issues we'd like to touch on. The issue of wage equity and protection has not been assured, nor have we been provided assurances that pension surpluses will be protected or that surpluses would be used to benefit airline employees.
We believe the role and structure of regional carriers needs to be clarified in this bid—including carriers operating in and to the north. Will the regional carriers continue to be feeder airlines as they are now? The regional airlines have repeatedly said that this role is essential to their survival, yet others have suggested that they should be cut loose and become the competition in the face of a new monopoly. The questions about that have not been answered.
There are no guarantees offered in the bid that Canadian jobs will not be exported to foreign nationals, which is certainly a concern of many employees.
The promises that have been made about “preserving service”—and again I'm quoting Mr. Milton's bid—to smaller communities are, we would say, ambiguous at best. Certainly, eliminating duplication and eliminating overcapacity is one thing, but substantially reducing the level of service to communities is quite another. Frankly, we don't know from reading this document what Air Canada has in mind as far as service to smaller communities and to all regions of this country is concerned.
We also question the viability of the proposal. In effect, Air Canada is promising to compete with itself. It will offer full-service domestic and international flights through two major carriers. It will offer regional flights through two or more others, and it will offer, it says, low-cost discount flights through a fifth carrier. We have to wonder whether this pretext of competition isn't in fact intended to pre-empt competition. We also worry that the low-cost carrier will serve, over time, to ratchet down wages and standards without offering the travelling public any real substantial break in fares.
Air Canada might well argue that it isn't up to them to answer some of these questions, and they may well be right, but here again we are caught in the bind between the public interest on the one hand and the interest of maximizing profits on the other, the role of the market on the one hand and the role of the regulator on the other.
Quite frankly, we find ourselves back where we were three months ago, only worse. In the absence of a clear policy direction from government, no action was taken to amend the regulatory framework, with the result that one takeover scheme, as we know, was ruled illegal. Now we have Air Canada floating a proposal that may well fail because it doesn't satisfy the standard that an airline that is essentially running five airlines can't pretend to be anything other than a monopoly.
The Minister of Transport continues to offer vague and contradictory statements, but no clear direction has been given. We met with the minister a few weeks ago, bringing together all of our components within the airline industry. We expect to meet with him again soon. But clearly, if the minister continues to abdicate his responsibilities, there will be no solution to this crisis.
We know there are those who say that the market is the best way to answer these questions. We also know there are those who suggest that we are essentially ostriches with our heads in the sand, oblivious to the fact that the world has moved on, that regulation is a thing of the past.
But I would suggest to you that it is those who say leave to the market who have their heads in the sand. The reality is that the people of this country, and airline employees in particular, have suffered through 10 years of turbulence since deregulation. Not only that, services to some regions of this country have deteriorated and service to many others is far less convenient than it used to be. The great promise of deregulation—that prices would go down—has not been realized. On the contrary, airfares have skyrocketed, and they've increased at a rate many times faster than the rate of inflation.
During the past 10 years, airline employees and the travelling public have been forced to endure one crisis after another in this industry, but over these past three months I think we'd have to say that what was perhaps a bumpy ride over the past 10 years has turned into a full-scale emergency. Flight attendants and their families, together with other airline employees, have lived through 12 years of hell, quite frankly, since late August. Countless other airline employees and Canadians have felt used and abused as corporate executives focused on maximizing profits to meet the needs of shareholders while the needs of communities and employees came second.
The inaction of this government sets us on a collision course with disaster for the Canadian airline industry. The minister has the power. The minister has the responsibility. We're calling on the minister and on the Government of Canada to protect our collective interests as Canadians, to act to protect the public interest now.
We believe it's time for the government to stop ducking its responsibilities and to develop an airline policy with teeth. By that we mean managed competition, not destructive competition. We mean protection for airline employees. We mean maintaining service to communities. We mean regulating the industry in the interests of Canadians. There is no time for any more excuses. The time to act is now.
The Chair: With your presentation complete, we'll go to questions.
Mr. Fontana, please.
Mr. Joe Fontana: Thank you, Mr. Chairman.
Thank you for the presentation. I would agree with most of the premises of your concerns as they relate to what's happened in this country over the past 10 years in the airline industry. In fact, what's happening in the airline industry around the world is similar.
I'm having a little bit of difficulty, though, with your solutions, even though I think you've addressed some of the questions that the government, obviously, and this committee are charged with in looking after that public interest. No matter what proposal comes forward, one of those questions obviously is to test those proposals against that public interest. We hope to do so—so some of your guiding principles have been useful.
I want to talk a little about your reregulation proposal. Reregulation—and having not been here before that—would necessitate some perhaps very draconian actions or would necessitate imposing certain regulations on certain carriers, such as the overcapacity...I think you've addressed it. You had two corporations who had a corporate mentality that they were going to knock each other out of the skies, so to speak. In fact, they've managed to do so. One is going down faster than the other. Perhaps the solution that they have or that one has may very well not solve our problem.
What do you really mean by reregulation? Do you want us to control prices? Do you want us to control capacity? Do you want us to control schedules? Do you want us to control all of those things? Then you're leaving it to the government to dictate what level of service Canadians will get, what pricing we'll get. What makes you think the private sector is even going to want to be involved in this kind of thing? Somebody has to pay, and what you're suggesting is that maybe the governments, either by paying airlines to service certain communities...
Ms. Judy Darcy: I'll start things off, and then I'll let my colleagues pick up on it.
We're not suggesting that we go back 10 years, 20 years, or even five years. We're suggesting that we look at what kind of smart, market-sensitive regulation is useful in the present context. That does include looking at a number of areas of the airline industry. It does mean looking at the issue of capacity. It does mean ensuring that there are some rules about rates. We do that in other industries, and I touched on a couple of them earlier. It does mean ensuring that we don't let safety standards continue to deteriorate in the airline industry. It does mean we need to ensure that in the industry as a whole, service is maintained to smaller communities and northern communities.
The promises that deregulation offered have not in fact been realized. We've had major, major crises. I don't know if Denise Hill would like to pick up on it, or Richard Balnis. We presented an extensive position on this, and we've been trying to get the ear of the government on this ever since the last major crisis. We went through the Canadian Airlines crisis, met with the Minister of Transport in the middle of the night—
Mr. Joe Fontana: But Ms. D'Arcy, that's why I wanted to get precise, because even within this committee, there seems to be a debate as to what the definition of “reregulation” might be.
Obviously a new regulatory framework is going to have to be put in place, especially when you have one dominant air carrier that is going to control 90% of everything that happens in this country. When you have that kind of dominance in a market, who's going to protect the public interest if it isn't government?
So you're absolutely right that some sort of regulatory framework is needed, but that's why I wanted to have you distinguish it from the old regulatory framework, which was destructive in encouraging private sector solutions, competition, and so on.
In fact this country did get that in 1988. Don't forget, we did get the independents. We did get the advent of regional carriers, which have been bought up by Air Canada. But deregulation did allow for Air BC, Air Ontario, Canada 3000, Air Transat, Royal, and all of those things. Without a deregulatory framework, none of that private sector would have come in to fill that breach.
Yes, we have problems now, and you're right about slots, about prices, and about scheduling. I wouldn't call it massive government intervention, but we need some fine-tuning in the marketplace so that a dominant air carrier, if that's what we're left with, is controlled to a certain extent. Is that what you're talking about?
Mr. Richard Balnis (Senior Research Officer, Canadian Union of Public Employees): In the submission we gave out, right in the middle of the document, before it flips from English to French, is a document that was prepared by the Canadian Labour Congress, Heads in the Sand. Pages 6 and 7 speak directly to your question, under the recommendations.
This document was written in November 1997, and it speaks about a brief window of opportunity for the government to stabilize the sector. Two years later we're in the same position. They talk about controls on new entrants, price guidelines and financial guarantees, what the Canadian Transportation Agency should be developing as a new policy, and the six elements for the Canadian Transportation Agency to do.
The previous witness, Jim Stanford from the CAW, also spoke of a number of other options that were raised during the minister's task force. We raised these options. The minister's staff were there, air carriers were there, and airports were there, and everyone said, through those year-long hearings, “There is no problem. Go away.”
We proposed this document, called Heads in the Sand, after a year of that process to say the committee had ignored the crisis, and unfortunately we're telling you we're back again, and the recommendations we have are on those pages. So you can review them at any time.
Mr. Joe Fontana: Employees usually are the success of any business, it's fair to say, and more enlightened employers would think so than others. As a union and obviously a significant player, in your negotiations with both Air Canada and Canadian—you were negotiating with them and you did represent them both—did you ever bring to their attention their destructive corporate culture that was set on a collision course that would bring one of them down?
Ms. Judy Darcy: Repeatedly.
Mr. Joe Fontana: I know you don't have a seat on their board, but obviously you do talk to management and the boards of directors of those two corporations. Did you let them know their corporate management decisions were causing some of these problems?
Ms. Judy Darcy: I haven't personally had any conversations with Robert Milton, but I can tell you I was personally involved, as were the other heads of unions and our airline members, in the big crisis in Canadian Airlines three years ago. I met with Kevin Benson many times and appealed to him to come forward with us in pressing the federal government to look at the issue of deregulation.
One of the issues that was finally agreed to at the end of that Canadian Airlines crisis was that a committee would be struck to review what was happening in the industry. It ended up being, quite frankly, stacked with so many different players that the unions' voices were overwhelmed and ended up being a minority voice.
But I remember appealing to Kevin Benson personally and saying that with further concessions from employees at that time, unfortunately, and with some money from government, we might be able to get out of that particular crisis, but there would be others. We appealed to them to come on board, but unfortunately they saw fit, when they appeared before those committees, to argue different positions from ours, and here we are.
The Chair: Thanks, Mr. Fontana.
Mr. Johnston, please.
Mr. Dale Johnston: Thank you, Mr. Chairman.
Thank you for your presentation. I would like to pick up on Mr. Fontana's questioning about regulation. Some of your recommendations here and some of the things you referred to in your presentation lead me to believe you'd like to see the airlines run a little bit more like a utility. Tell me if that's right or if I've been mistaken there.
Ms. Judy Darcy: I've heard some people refer to it in that way. I would certainly suggest it is an industry that is absolutely vital to the economic and social well-being of Canadians, it's vital to regional development in this country, and as such, it needs to be regulated in the public interest. There is certainly a public good here; there's absolutely no question about that. If we do it in various aspects of telecommunications, why wouldn't we do it in the airline industry?
Mr. Dale Johnston: Then you would be advocating controlling or regulating the area of ticket prices, for instance, so that they don't get too high or predatorily low?
Ms. Judy Darcy: Yes, we do.
Mr. Dale Johnston: You would also advocate regulating capacity, competition? In other words, you would not want to have these wingtip-to-wingtip, gate-to-gate, hour-for-hour, minute-for-minute flights?
Ms. Judy Darcy: I think there's general agreement these days that it has been incredibly destructive to have planes flying half empty, leaving from exactly the same locations, arriving at the same time, and charging exactly the same price.
Mr. Dale Johnston: What I'm doing here is giving you an opportunity to lay out exactly what you think regulation should be, as far as prices, capacity, competition, routes, and so forth are concerned.
Ms. Denise Hill (President, Airline Division, Canadian Union of Public Employees: We've heard from this committee and from the public, as there's been this debate as to what the industry is going to look like and whether there's going to be a monopoly, a real concern that the prices are going to skyrocket, because if Air Canada controls the industry, they can do whatever they want with the tickets. The companies are not going to regulate themselves, so it has to be the government's responsibility.
So we've always said there has to be a regulation on the ceiling and there also has to be a regulation on the floor. We can't continue to operate an industry that sells tickets for less than it costs to put the product in the air and expect that we're going to maintain a safe industry and an industry that's financially sound and viable for the long term. I'd rather be negotiating against a company that's making money than one that's continually losing it.
On the capacity issue, we've always said we have to monitor new entrants. We can't just say, okay, we're going to open the doors and allow anybody to come in, because once again, what happens is you have too many seats in the market. Not only does it affect the new carrier that's come in, but it affects the carriers surrounding it. It starts to have an effect on the prices, to lower those, because now everybody starts trying to match their prices.
So you have to be really careful on how you allow new entrants into the market. We believe the government has to have the test to ensure the population can financially allow a new entrant in the market so that they survive and so that the public doesn't get thrown out on the streets when everybody books seats and then they go out of business, like Greyhound, VistaJet and Intair.
Mr. Dale Johnston: Okay. I think what we've been talking about here is, in the eventuality that we find one dominant air carrier in Canada, this is your solution or what you'd like to see. How would this regulation affect charter operators, like Canada 3000, for instance, which doesn't normally fly routes?
Ms. Denise Hill: A lot of the charters are now starting to fly the routes to pick up some of the slack in the market. Once again, you still have to be careful that we're not allowing even the charter carriers to fly into cities where the population doesn't maintain more seats being added. I think you really have to look at the whole industry and not just a piece of it.
Mr. Dale Johnston: So your answer then would be that it would affect the charter companies, and the charter companies would have to make application to some sort of central authority in order to pick up any new routes, or any routes? Is that what I'm hearing you say?
Ms. Denise Hill: Obviously that would be the government's decision, but as I said, you couldn't just say now the charter carriers can go anywhere but the main carrier can't. I think you have to look at how you want the industry to look and to ensure that we're not going to continue to add capacity.
Mr. Dale Johnston: What I'm trying to nail down is your recommendation as to how it would affect the charter carriers.
Ms. Denise Hill: I think it would affect the charter carriers.
Mr. Dale Johnston: So they would have to apply if they wanted to set up a route.
Ms. Denise Hill: Yes, otherwise you're going to have two sets of rules for the industry.
Mr. Dale Johnston: So how would all of that affect competition? If company B wanted to compete with company A on certain routes, they would have to go through this central agency and say, no, we don't need competition on that route, or yes, we do. How would that be set up?
Ms. Denise Hill: I think you'd have a government body, whether it's the Competition Bureau or not, that would look at that and decide for themselves how they want to monitor the industry and whether they want to monitor it to that extent or not.
Mr. Dale Johnston: But that's what you would recommend.
Ms. Denise Hill: That's what we would consider looking at.
Mr. Dale Johnston: Thank you.
The Chair: Thank you, Mr. Johnston.
Mr. Calder, please.
Mr. Murray Calder: Thank you, Mr. Chairman.
Ms. Darcy, how do you see this? Do you see two airlines? Do you see one airline? What do you see?
Ms. Judy Darcy: Frankly, as a union, we have not taken a position on that. We haven't taken a position on any corporate proposal that has been on the table, and it's not our intention to do so. We represent employees at both major airlines, as well as the regional carriers, and our concern is to ensure that there is a viable airline industry in this country and that the government puts those kinds of rules in place to ensure that it's a viable industry. Our role is also to protect our members and to ensure that there is a maximum number of decent family-supporting jobs in this country in this industry.
So we have not attempted to say we support this merger, or we don't support that one, or this is the ultimate solution. Historically, as a union, we have supported a two-airline policy, which has been the government's policy as well, but in the climate of deregulation of the past 10 years, to pretend that we even really had a two-airline policy... In fact we had a policy that could not possibly have sustained them, because there weren't the kinds of rules to make it work.
Mr. Murray Calder: Quite frankly—and I don't want to sound condescending here—those are all nice fuzzy motherhood statements and everything, but we know that our airline industry is going through an evolution right now. It started with deregulation and it has got to this point right now. The issue is going to be, can Canada support two national and international carriers, or should it be one carrier?
Our previous witnesses have already stated that they look at the probability of one national carrier with regional feeders going into it and with space incorporated into that structure for further expansion. If we go that route, we're going to have to address the issue of the seniority ladder, for instance. You have two different carriers right now that have two different union contracts that we're going to have to address. There's a whole myriad of different problems here.
The litmus test I've been taking with this all the way through is, yes, it is the employees, but to say you have no position, you have no idea, when you in fact are as close to the industry as anybody—
Ms. Judy Darcy: If you're asking me whether I think we're going to end up with one carrier and with a merger, it sure looks as if that's where we're going. What I'm saying to you is that we represent employees at both airlines. It's no secret that every union has been struggling with this amongst its own membership over the last 12 weeks, and I'm not going to come here and present a position to you that is not a common position of our members. I'm being quite honest with you; we have not taken a position on whether or not there should be a merger and which corporate proposal we would support in order to bring about that merger.
Mr. Murray Calder: Okay, that's a fair answer.
The possibility of problems has been brought to our attention by a couple of presenters. You've had two very competitive airlines that have worked opposite each other, and now all of a sudden we're looking at a situation where you might be putting them together. With your experience and everything, how well do you think that exercise will go?
Ms. Denise Hill: I don't. We've gone through probably five mergers at Canadian Airlines. It's made up of EPA, PWA, and Wardair, and each merger was more difficult than the one before it. It's never easy to pull people together, especially where seniority is involved.
It's going to take a lot of time. First of all, there has to be a lot of healing done. It has been hell the last 12 weeks. There has been name-calling; there have been fist fights. It has been incredible.
So is it going to be an easy task? Absolutely not, but I believe, certainly for flight attendants, our main role on board the airplane is safety. Our members are safety professionals, and if at any point they're forced to work together, they will rise to the occasion and perform their duties as they always do.
Ms. Judy Darcy: If I could pick up on that one, we met with Minister Collenette a number of weeks ago. We appealed to him for the government to bring clarity to the situation as quickly as it possibly could, because the longer this crisis goes on, the more difficult it will be to pull things back together. Morale has continued to plummet, and the hostility has continued to get worse. We've been through many crises before and many mergers, as Denise mentioned, but this is certainly the worst.
It is also no secret that you've had employees at different airlines supporting different corporate solutions, and therefore also being pitted against one another. So the sooner we have some clarity about where we're headed in this country and what the government's conditions and criteria are for approving a restructuring proposal, the sooner we're going to be able to work to bring employees together.
The Chair: Thanks, Mr. Calder.
Mr. Michel Guimond: I find your presentation refreshing in many respects but especially in respect of one thing that no one has mentioned since the beginning of these hearings that we started when Parliament came back in mid-October. It's the whole aspect of health and safety. During his appearance before us, the Minister mentioned his policy framework. Personally, I found it interesting but I'd need more information and perhaps you could send us this through our clerk. Amongst other things, on page 2 of the Minister's policy framework, it says there will be no compromise in the matter of safety.
Saying there will be no compromise in the matter of safety, is as much of a commitment as saying that winter will happen this year and snow will probably fall. It's that kind of commitment. When you say there will be no compromise, it's always only empty words. Everyone is in favour of motherhood and apple pie and everyone wants to go to heaven when they die.
You mentioned specific commitments that a policy framework should include in the areas of health and safety. I'd like your research services to send us details on how that could be implemented. For example, what legislation should be amended? I don't want to say today that my party will be tabling a minority report, but I will try to convince my friends across the room to include that aspect in our committee's report.
More specifically, in the ten most important concerns, you're emphasizing a totally new occurrence, which is “air rage”, someone suddenly becoming crazy because of voluntary or involuntary intoxication with drugs or alcohol and then literally, physically assaulting your members.
I'm sure the government will answer that the provisions for health and safety contained in the Canada Labour Code adequately protect workers. I'm sure that's the kind of answer we're going to get. Would you be in a position to submit some ideas to us?
Ms. Denise Hill: We would love to. Richard Balnis and I have participated in the Canadian Aviation Regulatory Advisory Council process for about the last four years, and we've watched the safety and the health of our members. We believe the travelling public has been impacted.
We went through a fright three or four years ago, I believe—and Mr. Keyes will probably remember this, since we lobbied him on the issue—where they reduced the number of flight attendants on our aircraft. We used to have two on a Dash-8 300 and an ATR-42, and an RJ was supposed to have been built, we believe, for two flight attendants.
In order for the carriers to make more money, they lobbied to have only one flight attendant. They were successful. Fortunately, they were not successful in changing the rule on the larger aircraft.
We've also seen proposals coming to us to lessen the amount of oxygen on board the aircraft.
All of that is about saving money.
So we'd be really happy to supply that information to you. We're also really happy that you're raising the health and safety of what's happening on the airplanes.
Mr. Michel Guimond: Did you meet with Mr. Schwartz before he tabled his proposal? If so, did he ask you to take a position, as he did the Canadian Auto Workers? You say that you don't want to take a position which personally I find very wise and very realistic. I don't want to speak ill of the witness who preceded you, but he might have done better to... Anyway, I promised to stay calm about that.
Therefore, did you meet with Mr. Schwartz and did he ask you to take a position?
Ms. Denise Hill: Our leadership met with Mr. Schwartz on the Monday prior to his pulling his offer on Friday. He did ask our Canadian and Canadian Regional people for their support. They were, I believe, in discussions with Mr. Schwartz to sign a letter similar to the letter the Canadian Auto Workers had signed. Unfortunately—or fortunately, whatever the case may be at this point—nothing was reached because he withdrew his offer.
But, yes, we did ask him, and he asked for the support only of our Canadian representatives. He recognized that it would have been very difficult for the national division, and he knew the Air Canada people were not going to support his offer.
The Chair: Thank you, Mr. Guimond.
Mr. Dromisky, please.
Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Mr. Chairman, I would like to continue in the area that was introduced by my colleague across.
Ms. Darcy, I think it's time for us to get a little personal here.
The Chair: Easy now, Stan.
Mr. Stan Dromisky: Could you please give me some information about your background? Were you a flight attendant once upon a time?
Ms. Judy Darcy: No, I was not.
Denise Hill certainly is a flight attendant. She's the president of our airline division.
Mr. Stan Dromisky: I'm asking that because you have many statements in this publication here pertaining to safety, to fear, including the ten points from the report that you gave to the special committee and the Senate committee on transportation and safety and transportation systems.
A voice: A flight attendant.
Mr. Stan Dromisky: —yes, a flight attendant—would follow when she finds something wrong or something that should be looked after?
I'm asking this question because in any hierarchical model of administration, if the people at the bottom want somebody at the top to get the message, by the time it gets to the top of the pyramid there's no resemblance to the original message.
I would like to know something, then, about that process. To whom does the flight attendant report regarding safety issues?
You have some here that are really frightening, really startling, and I'm very concerned about safety. I fly every damned week, in four different planes.
So I would like to know more, and so would millions of other passengers. Explain.
Ms. Judy Darcy: I'll ask Denise to speak to how a flight attendant deals with it on the job, but the issues we're raising here are issues that our airline division and our national union have raised repeatedly and lobbied government around. These concerns are not just on one aircraft or another. These are concerns throughout all of the aircraft on which our members fly, and should be of concern to the travelling public.
So we have pursued both the individual question of process and the political process through various committees and with members of government.
The Chair: Ms. Hill, please.
Ms. Denise Hill: First of all, it really does depend on what the issue is, but if a flight attendant notices on board an aircraft that a piece of safety equipment is broken, then the aircraft does not leave. We report it to the captain, who then calls the stock centre, and they send out a maintenance person who would come and either replace the piece of equipment or fix the piece of equipment.
If it is not a piece of safety equipment but there is something on board the aircraft that needs fixing, we have a process where we write a report that then goes to the inflight people. Depending on what the issue is, it then gets farmed out to whoever is going to solve the problem. Whether it is a maintenance problem, whether it is a training problem on board, whether the flight attendants are not trained on the issue, or whether the pilots aren't trained on the issue, a whole host of different things happen, depending on what the problem is.
Mr. Stan Dromisky: So what we're dealing with here is a human being's perception of a report coming from another human being. It could be a male receiving a report from a female.
Ms. Judy Darcy: Generally speaking.
Mr. Stan Dromisky: Generally speaking. And it's, “Hey, lady, you're hysterical”, or something. Do you know what I mean? That attitude could prevail.
I'm not saying that the captains of our airplanes are irresponsible. What I'm saying is that there are lot of factors that come into this picture here.
Is there no way you could give that information not through the pyramid to the superior officers, all the way up, but to an outside body so that action could take place?
Ms. Denise Hill: Oh, yes, absolutely. We can do that.
Mr. Stan Dromisky: Not the government, but some other agency.
Ms. Denise Hill: We do that. We can go to the employers directly. They all have health and safety people, they all have inflight people, they all have maintenance people. That's why I say it really does depend on what the issue is as to where we would go with it.
So there is a process, but whether the problem is solved is another issue. It often takes many years before a problem is ever solved in the airline industry. But, yes, there is a process, and generally it is one human being going to another human being, and generally not hysterically.
Mr. Richard Balnis: I'd like to give you a very specific example.
Mr. Stan Dromisky: Yes, please.
The Chair: As long as it doesn't take too long, Mr. Balnis.
Mr. Richard Balnis: It won't.
A flight attendant on board an aircraft saw too many passengers boarded for the number of flight attendants on board that aircraft. They reported it to the pilot. The pilot said, no, according to his manual it was okay. The flight attendant filed a report with the company: “I think there's a problem. Please investigate.”
We're ready to take it to the regulator. She's afraid of losing her job. The company did not respond. She needs whistle-blower protection.
Mr. Stan Dromisky: That's right.
Mr. Richard Balnis: We have other cases. She is afraid to go forward and say she did this on that flight because she's afraid the company will fire her and the union can't protect her.
That's a problem we have every day. There are other cases like that. They report through the chain, the company does nothing, she's afraid for her job; Transport Canada can't investigate without details and without naming her, and she's afraid for her job.
The Chair: Thanks, Mr. Dromisky.
Ms. Desjarlais, please.
Ms. Bev Desjarlais: Thank you for your presentation and for bringing in, as both Mr. Guimond and Mr. Dromisky have mentioned, the issue of safety, which almost always comes into play when we talk about cutting costs and using only the marketplace solution or profits as the ultimate goal. There is a need in those cases, of course, to ensure that regulations are in place to ensure the safety of the travelling public.
Ms. Judy Darcy: We read their release.
Ms. Bev Desjarlais: They are now the saviours of the regional airline industry in Canada. I asked for some specifics on one of the comments they made. I have to admit I had some concerns, but I didn't get any specifics, so I want your impression of how you would see this.
One of the comments was about maximizing the utilization of our resources, which will be achieved through the rapid turnaround of aircraft, an optimal route configuration, including the expansion of transborder operations, and by enabling employees to handle multiple roles. I wondered about how you would have certain employees handling certain roles. The pilots pretty much are going to do the piloting, and I couldn't see what else they could be doing. If you were to see that type of statement in the airline industry, how would you perceive this?
Ms. Judy Darcy: First of all, the previous issue we just spent a fair bit of time on was safety. As Denise Hill stated very clearly, the role of a flight attendant is first and foremost that of a safety professional. It is not first and foremost playing a role as far as hospitality is concerned. We would be very worried about anything that jeopardized or reduced the kind of intensive training needed for flight attendants to fulfil their role as safety professionals. And we think the travelling public should be extremely worried about this.
Ms. Bev Desjarlais: I have to admit that before I was a transportation critic I didn't realize exactly everything that flight attendants had to do, even though I had flown quite a bit. I didn't realize that when it comes to an emergency, when the plane crashes—and I think it's important that Canadians know this, because I'm sure most of them don't—your emergency response team is the crew on the same plane that's crashing.
Tell me what's wrong with this picture. The crew member on the same plane that's going down with you is seen as your initial responder. As a result, the trained crew members make all the difference in the world as to whether or not you're going to get off that plane. It's important that people realize that flight attendants aren't just hostesses, but they carry on a lot of other responsibilities.
When a flight attendant is taken off a flight, the safety of the passenger is greatly at risk, and I don't think we realize that.
The Chair: Bev, do you have a question?
Ms. Bev Desjarlais: Yes, I do have a question. I just asked a question actually, Stan. I asked the question about how they saw that one situation.
The Chair: Your time is running out.
Ms. Bev Desjarlais: That's okay, as long as I get these points out to the Canadian public. I think they are very valid points. We need to look at the airline industry in an all-encompassing way and to see safety as every bit as much a necessity as the profits of airline companies.
If I get that point across, Stan, that's just fine. I won't have to ask a question if my time is up.
The Chair: You have time for one more question as long as it's a question.
Ms. Bev Desjarlais: Do you have any comments on the 10% rule that's in place presently with the Air Canada Act?
Ms. Judy Darcy: I'm going to give a similar response to the one I gave earlier, and that is that our members in different components have different opinions on that and we have not taken a position on it. Frankly, most people weren't very familiar with the 10% rule until this latest scenario came along, so it hasn't historically been a subject of much debate within our union.
Ms. Bev Desjarlais: Okay. Thank you.
The Chair: Mr. Comuzzi, please.
Mr. Joe Comuzzi: I very much appreciated your presentation today.
I know this fight you've gone through in the last 12 or 14 weeks has been very stressful. But it's the precursor of a more serious, more insidious fight that you may have to get involved with down the line, whether we end up as one dominant carrier or not.
The area that concerns me a lot is the business we're going to lose regardless of how the structure ends up. That's with the importance of the global participants in this airline debate that's going on. We all know that American Airlines is very instrumental in the future of Canadian Airlines, or the lack of future. I can see an erosion of the Canadian workforce through this insidiousness that a lot of us don't realize is present. All of a sudden a plane is landing in Chicago and we're dropping off 30 or 40 people, and planes are landing from all over and they're filling up a 200- or 300-seat plane. That means there are job losses in Canada.
Ms. Judy Darcy: Are you talking about the issue of cabotage in particular?
Mr. Joe Comuzzi: That's my next question. We can see what's happening now with the erosion of the international flights, the transporter flights—the two most profitable segments of the airline industry.
We can see we're a feeder airline. We're 30 million people versus 300 million people going into the United Airlines and the American Airlines markets. They want that predominance in the global marketplace and we become a feeder line.
Every time you become a feeder line you lose jobs in Canada. That's just an assumption. Do you agree?
Ms. Judy Darcy: Yes, you do.
Mr. Joe Comuzzi: Tell me what we can do to prevent this.
Ms. Denise Hill: We have to look at having a financially sound Canadian airline industry that means growth for the Canadian airline industry, so we're not continuing to give our passengers to United or American Airlines to fly them overseas. If we have an industry that is strong and financially sound, you'll see growth in the industry. Why couldn't a Canadian air carrier pick up all that international flying as opposed to giving it away?
It depends on what we want. If we want to have a Canadian airline industry, not an industry that is giving away our passengers, we have the ability to do that. We have a good product, we have good employees working in the industry. I know Air Canada won the best airline award last year. We can compete in the international market, but we have to have a financially sound industry in order to do that.
Mr. Joe Comuzzi: Do you see that with one airline or two?
Ms. Denise Hill: That almost certainly looks like where we are today. That's all on the table today, but for us it's a discussion that we'll be having internally in the next week.
Mr. Richard Balnis: I would like to add that you raised a very important question. We are also members of the International Transport Workers Federation. They have had a lot of experience in the maritime industry. The concept of a flag of convenience has been raised, where ownership of one ship is concentrated in a particular country, the ship's officers are from another country, and the deckhands and the ones without ratings are usually from the poorest countries. And you occasionally see ships appearing on various coasts, their owners bankrupt or not having paid the wages of the sailors. We are very concerned that the airline industry may very well move ultimately in that direction and that the global alliance is a first step there.
On the question of loss of jobs, who crews those aircraft? For the pilots and the flight attendants as well as those performing the ground services, this is a very real concern, and I think you are looking down the right road, sir.
Mr. Joe Comuzzi: Now we get to the cabotage question. Do you see any future in reciprocal cabotage?
Ms. Judy Darcy: Let me just say something about cabotage and then perhaps Richard or Denise will want to talk about reciprocal cabotage.
Our concern with cabotage is manyfold. For starters, we can expect that those foreign carriers flying within the country will try to skim off the cream of the routes and they will leave the less profitable ones alone and perhaps discontinue that service completely. We think that should be a major concern as far as service to the communities is concerned, which has already deteriorated over a number of years, with fewer direct flights, fewer flights to certain parts of the country and so on. But we will also see with cabotage a major loss of jobs in this country. There's absolutely no question about that. And both of those areas we think should be of major concern.
Mr. Joe Comuzzi: Even with the reciprocal covenants?
Mr. Richard Balnis: The question about this theoretical model, as I think a number of your witnesses and the experts we've talked to have noted, is who is going to reciprocate with you? I don't think the United States market is going to turn around and say, Air Canada, you can now fly Chicago to Denver for domestic passengers. It would be a great theoretical concept. It's not going to happen.
Mr. Joe Comuzzi: I have one final question.
Mr. Richard Balnis: And then on page 16 of our brief, we do make brief comments on a number of recommendations from the Competition Bureau, from their October 22 letter, and in particular we criticize as misguided their proposal for exterior cabotage, where you allow transcon traffic to flow out over outside points; we criticize it as further destabilizing our industry.
Mr. Joe Comuzzi: On this very point, there are different rules you folks operate by in terms of so many attendants in the cabin as compared to the United States airlines. If I'm correct, they have different rules, and their rules are not as good as ours.
Ms. Denise Hill: It depends on the rule.
Mr. Joe Comuzzi: The amount of attendants—
Ms. Denise Hill: In terms of the number of flight attendants there are, we believe our rule is the safer rule when there are more passengers on board. With a full aircraft, we have more flight attendants.
Mr. Joe Comuzzi: How would you reconcile those differences with a huge carrier like United?
Ms. Denise Hill: The government in the U.S. has a one in fifty seat rule. So if they have fewer passengers, sometimes it makes more sense that there are more flight attendants on board. But under our rule, because flight attendants are there for safety, the more people there are on board, the more flight attendants you have on board to protect them. So we believe that absolutely our rule is safer and it should be maintained.
The Chair: Ms. Hill, Ms. Darcy, Mr. Balnis, thank you very much for your presentation to the committee and for answering our questions. We do appreciate the time you have taken.
Colleagues, we're going to an in camera meeting at room 139-N, downstairs, and we'll return in about 15 minutes.
The Chair: Colleagues, we'll resume our hearings pursuant to Standing Order 108(2), a study on the future of the airline industry in Canada, with representatives of the International Association of Machinists and Aerospace Workers in Canada.
We welcome Mr. Dave Ritchie, the Canadian vice-president; and Mr. Ron Fontaine, president, district 140. Oh, Mr. Fontaine isn't with us, I guess. All right.
Why don't I leave it to you, Mr. Ritchie, to introduce who you have joining you in your presentation to the standing committee this afternoon.
Mr. Dave Ritchie (Canadian Vice-President, International Association of Machinists and Aerospace Workers in Canada): I have Mr. Erlichman here, who is our national research director, and Vincent Blais, who is my administrative assistant, who will be making the presentation to the committee today. We're going to do it half in English and half in French.
The Chair: Wonderful. Thank you very much for coming to the Standing Committee on Transport with your presentation. We look forward to your presentation, about 10 to 12 minutes, and then we'll get to questions from the members.
Begin when you're comfortable, gentlemen.
Mr. Dave Ritchie: On behalf of the 52,000 Canadian members of the International Association of Machinists and Aerospace Workers, I would like to thank the committee for giving us the opportunity to present our views on the future of the air transport industry in Canada.
The IAM is the largest union representing workers in the air transport industry in Canada and in North America. We have represented Canadian air transport workers for almost 60 years and have approximately 18,500 members in this sector. We represent workers at the two largest carriers, Air Canada and Canadian Airlines; at regional, charter, and smaller airlines; as well as workers at a range of companies providing services like fuelling, security, screening, baggage handling, and catering to the industry across Canada.
To begin, we want to urge you to take a broad perspective in looking at the industry. Most of the discussion to date has revolved around deals concerning the two major carriers. The industry is much more than the large carriers, and the public interest goes well beyond the narrow interest of investors in one or more of those carriers.
Our union has argued for the last two decades that active public direction is essential in the air transport industry if the interests of the communities, the flying public, and the workers are to be served. At the Canadian Transport Commission's hearings in 1983-84, we predicted that an unregulated airline sector would create not healthy competition but chaos, then concentration at great cost and ultimately to the benefit of no one. We argued over 15 years ago that the industry needed modernized regulations, not deregulation.
Unfortunately our views went unheeded and the federal government deregulated domestic air transport in 1984. As we predicted, since that time we have seen disruptions and concentration in our air transport industry. The existing regional carriers were rapidly swallowed up, and two large unregulated carriers dominated the market by the end of the 1980s.
In the first post-deregulation downturn in the early 1990s, both dominant carriers suffered severe financial reverses. While Air Canada was better financially prepared to weather the storm, Canadian Airlines has continued to have financial problems. By late 1996 Canadian Airlines was on the verge of bankruptcy.
The IAM played a leading role in keeping Canadian Airlines alive, and we participated in the industry committee set up by the transport minister in 1997 to consider the sector and its problems. Unfortunately the minister insisted there were no real industry problems, so the opportunity provided by the 1997 committee on air transport policy issues was wasted. Now the continuing financial problems of Canadian Airlines have once more laid bare the fundamental problems of the industry. The federal government has once more opted for a passive approach.
When the government invoked section 47 of the Canada Transportation Act in August, we were somewhat optimistic that it would finally accept an active role in setting the industry right. In response to the minister's initial stance that the private sector would cut a deal and that government would approve it, our union urged a more active stance. When the minister endorsed our five principles for the sector, we were encouraged; however, there is a clear need to move beyond those five principles and define a clear, detailed public policy framework for restructuring. This has not happened, but must happen soon.
In the absence of this framework, communities, the flying public, and workers in the industry have faced uncertainty and insecurity. Both major carriers are now financially weaker than they were three months ago. Our members and all workers in the industry have been held hostage by competing bidders in these air wars, while the government has sat on the sidelines.
As unions we have been placed in an untenable position, trying to negotiate for our members the best protection we could from the rival bidders, when we clearly could never negotiate for all the industry.
Because of the lack of defined public policy, workers in this industry have faced months of fear and insecurity and have been set at each other's throats. No matter what form future industry restructuring takes, it has been made more difficult as a result of the absence of a clear framework at the beginning of this process.
We cannot rewrite history. What we must do now is move as quickly as possible to set right the Canadian air transport industry, and we ask that this committee give a clear set of guidelines for the positive action necessary to set the industry on a course to a healthy future.
Mr. Vincent Blais (Administrative Assistant to the Canadian Vice-President, International Association of Machinists and Aerospace Workers in Canada): The evidence is now clear: the air transport sector tends toward concentrated control. In the U.S., the largest market in the world, after 20 years of deregulation, three carriers control over half the market. In Canada, we have two dominant carriers, and may soon have one.
The only way for the public interest to be protected in a concentrated industry is for the government to take active, continuing regulatory control. Some people have suggested that the answer to domestic concentration is to deregulate further and let foreign carriers into our domestic market. This would be no solution. It would give us more monopoly, not more competition.
Set loose, the big U.S. carriers would be able to rapidly destroy the much smaller Canadian carriers, as they have in the U.S., through their enormous financial and marketing resources. We would have a massive loss of employment, and Canadian consumers and communities would be worse off, at the mercy of the bigger U.S. carriers, for whom the Canadian market would be only a marginal concern. In short order, we would be importing higher fares, and worse service, particularly outside of a couple of our major centres.
The government must act immediately to set up the framework for a healthy future for this industry. There is no simple magic solution. There must, however, be a clear set of legislative principles to guide this industry, and a structure to provide the ongoing guidance and direction to ensure the satisfaction of the public interest.
The Minister of Transport has endorsed the principles which we initially laid out as a basis for industry restructuring—a policy to deal with the entire sector, protection for communities, workers and the flying public, continuing Canadian control and no export of jobs. We want now to lay down in some greater detail our views on the next steps. First and foremost, the government must recognize it has an ongoing responsibility to oversee the air transport industry, to ensure that the public interest is met. Whether this is done through a revitalized Canadian Transportation Agency or a new body, it is essential that the government do more than react to crises, but give active and continuing direction to the entire sector, not only the large, visible actors.
We do not have a simple blueprint for a regulatory framework. Overseeing this industry will require a sophisticated and flexible policy framework to ensure that the broad public interest is met. At a minimum, the regulatory framework will require strict rules on capacity and financial soundness for existing carriers and new entrants, to ensure ongoing financial viability; the allocation between carriers of route and capacity rights to ensure adequate service to communities across the country, to avoid the abuse of monopoly power and the predatory dumping of excess capacity; ensuring that the management of airport, air navigation and other infrastructure is publicly accountable and supports a healthy industry; controls on air fares to ensure that, while the long run viability of the industry is assured, there is no price-gouging, with the flexibility to allow yield management and controlled discounting; the maintenance of Canadian ownership and control of airlines in Canada; protections for workers in the industry, particularly in the coming restructuring.
In our Charter of air transport industry workers' rights, we have presented the main problems for employees. We would ask the committee to support these rights for all workers in the air industry and urge the government to ensure that approval of any restructuring proposal be subject to compliance with the following rights:
- no involuntary layoffs and no relocation of workers against their will is to be undertaken during the restructuring;
- any employee deemed surplus during the restructuring of the industry will have his or her future economic security protection through attrition, an early retirement incentive program, a voluntary departure agreement, authorized absence programs and other compensation programs;
- the government will establish a worker assistance program to provide income support, retraining, job search assistance and relocation assistance, and priority access to new vacant positions for displaced workers;
- existing collective agreements must be adhered to and pension rights protected during the restructuring process;
- no job must be exported outside Canada;
- a consultation process must be set up to accommodate workers affected during the restructuring;
- any disagreement regarding interpretation of this charter of rights must be resolved as quickly as possible.
Mr. Dave Ritchie: We ask this committee to put before the government a recommendation to legislate, as soon as possible, these guarantees for communities, workers, and the flying public in the restructuring of the air transport industry. We look forward to working with you and the government to rebuild a healthy Canadian airline industry.
In addition, we have prepared a video. I've sent it to all of you, but we brought another copy here with us. It lays out our five principles, and it talks about the industry. It's in both French and English, and we'd appreciate your taking the time to look at it. It's six minutes long for either the French or the English.
Thank you very much.
The Chair: Thanks very much for your presentation to the committee, Mr. Ritchie. And Mr. Blais, thank you very much. We'll go right to questions, gentlemen.
Val Meredith, please.
Ms. Val Meredith: Thank you, Mr. Chair, and thank you, Mr. Ritchie and Mr. Blais.
Looking at your presentation and your recommendations on the framework that you feel is necessary, I have to ask you if you have had the opportunity to approach Air Canada with some of these issues, some of these guarantees. Have you had an opportunity to talk to the people who are able to put this kind of thing in place through bargaining?
Mr. Dave Ritchie: Let me say to you that I have those guarantees that I'm asking you for from Air Canada today, as I sit here. They have guaranteed no layoffs, they have guaranteed no base relocation. We are negotiating with them further on the wages and whatever of employees. But they only talk about the Canadian Airlines folks. I am here representing the industry. I ask you all, please do not focus on Air Canada or Canadian. These are industry problems and they need industry solutions.
Ms. Val Meredith: So you're suggesting that this isn't just the majors, that this is the regionals, that this is the charters, that this is—
Mr. Dave Ritchie: Absolutely. This is an industry-wide problem, and it goes right across the industry. The whole depth of what we're talking about is that this is for all workers, not anybody in particular or any particular employer. It's putting some sense into an industry that needs sense to be put into it.
Ms. Val Meredith: So what you're asking, then, is for this committee to literally tie the hands of any airline company or employer for the long term in terms of no involuntary layoffs of any sort in any airline company in the country, no matter what the circumstances.
Mr. Dave Ritchie: No. It's like anything else; you have to put in a program in order to do it. I'm saying that until the program is there, until we have a program of restructuring, the employees should not be paying for a restructured industry. We need to get in there, we need to put in some sense, and we need to put some stuff in. In addition to that, if we find out that we have an overcapacity of people, then we need to put some training in, we need to put some relocation in. There are a number of other avenues that go along with it, but that's when we have a restructured industry that we can put these people into and know what can be out. We're not just going to drop them like we did with the fisheries or other industries, when we said, gee, what do we do with these people? We have an opportunity here to restructure an industry in a way in which everybody can benefit.
Ms. Val Meredith: You're telling me that there is an overcapacity in all aspects of the airline industry, yet that's not really what we've heard from other witnesses. Yes, we've heard there is overcapacity in the two mainline carriers. They're flying wingtip to wingtip, ten minutes apart, from all the same pairing locations. We didn't hear that there's an overcapacity from the charters and we didn't hear it from the low-cost flyers, so why would we change the structure of the whole industry when not all the players have indicated to us that there is a problem of overcapacity?
Mr. Dave Ritchie: We sat with all the players and the ministers in 1997, including Air Canada and Canadian, including the travel agents, and they all told us at that time that there were no problems. Everybody said there was nothing wrong, so tell me why we are sitting here today. It's time for these people to get their heads out of the sand and smell the coffee. We're in a major crisis in this country, and it doesn't affect just one, it affects them all. Let's do the job for the entire industry. The band-aid has to stop. There's an industry in crisis here. Let's look at an industry.
Ms. Val Meredith: But I am looking at the industry as it—
Mr. Dave Ritchie: No, you're looking at two major airlines.
Ms. Val Meredith: No, sir. We heard from WestJet, we heard from Canada 3000, and we heard from some of the regionals and some of the independents. I didn't hear them saying there's a problem of overcapacity. This almost looks like you want to take—
Mr. Dave Ritchie: Are you telling me that you heard from—
The Chair: Hold it, Mr. Ritchie. Let the question be asked, and then you can respond.
Ms. Val Meredith: I'm saying that in the bill of rights that you've listed here, I would say things are justified in some circumstances. But when you say this should happen to the whole industry and all parts of the industry, it would appear to be that some measures are a bit strong in some cases and maybe not strong enough in others. I don't know that you can use the same pill, if you will, for all of the industry.
Mr. Dave Ritchie: We represent over a thousand people at InterCanadian, which is not part of either of the two major airlines. If this restructuring goes through, a thousand people could be unemployed. They are regional folks. They are in trouble, major trouble, and I'm here to tell you that regionals have a problem.
We have a thousand people out there. I've spoken to the chief executive officer. He doesn't know what's going to happen to his people in a restructured industry. So for you to say that there is no problem here is wrong.
Ms. Val Meredith: I'm not saying that. I'm saying that some of the witnesses from whom we have heard have said there's no problem. I'm not in the airline industry. I'm not telling you there's no problem. I'm saying there are witnesses who have appeared before this committee but have not indicated to us that they have a problem with overcapacity. Some of them—and InterCanadian is one of them—have said they're looking forward to the opportunities that are there before them, and to just have a transitional period there for them to—
Mr. Dave Ritchie: Well, make them part of the industry. Today, they're not. They're not included in either plan for a restructured industry that's out there today.
Ms. Val Meredith: But they're still flying airplanes for whomever. It may not be for either/or, but they're part of the industry. If you were to tell InterCanadian that they're not part of the industry, I don't think they would appreciate it.
Mr. Dave Ritchie: I'm not saying it is, you are.
Ms. Val Meredith: No.
Mr. Dave Ritchie: You just said there was no problem amongst the regional carriers, but I'm giving you one.
Ms. Val Meredith: I think I'm going to end there, because I'm not getting anywhere on this, Mr. Chairman. Thanks.
The Chair: We have a point of order from Ms. Desjarlais.
Ms. Bev Desjarlais: I just think it might be a good time to clarify that we are looking at the whole industry, at the restructuring and the effects it will have on the entire industry. That is what we are doing. I think this might be the point to clarify that.
The Chair: I think you've just done that, Ms. Desjarlais.
Ms. Bev Desjarlais: Thank you.
The Chair: I think Ms. Meredith's point is that she's not saying anything from the first person, she is just reiterating what she has heard the witnesses say.
Mr. Dave Ritchie: I understand that. As I said, we sat with them in 1997, and they told us there wasn't a problem then. That was from the same people. That being the case, why are we here today? We put a minority report in then that said this was a major problem. The majority of those folks, including those same people, said there was not a problem. That's why no action was taken.
The Chair: Mr. Dromisky, please.
Mr. Stan Dromisky: Thank you very much, Mr. Chairman.
I know you feel very strongly about this, because this is a very serious problem that we find ourselves in. That's why we're here, and naturally we're going to try to do our very best by listening to you and to all of the other witnesses, by reading all the reports, and by coming up with some kind of package, you might call it. In other words, we want guidelines that will guide, in a sense, the new aviation industry in this country. But there are other things besides the two major airlines, and you have some very good points in this brief.
I would like to zero in on something here that I find interesting. In your regulatory framework, you said there are minimum requirements. One of them is ensuring that the management of airports and air navigation and other infrastructure is publicly accountable and supports a healthy industry.
Here we're talking about airport authorities. Many of the airports now have them in place, and more will be created in the near future. On those authorities, we have representatives from different levels of government, as well as from labour, from industry and management, and so forth. Yet in many communities these people could be operating in an isolated sort of manner, with no way... Not that there are opportunities, but as far as the public is concerned, it could appear that they are not accountable to the public, although they have representatives from all levels of the public.
Mr. Dave Ritchie: They are not, and let me give you an example.
The airport authority can lift the credentials of one of my members. There is no appeal process. That person could lose his job because he no longer has the security to go in. We have no mechanism available to appeal that decision, whether it's right, wrong or indifferent. There is not a mechanism there. That is the set-up that the government has bestowed upon them. There are also a number of other areas, and they are not accountable to the public.
Mr. Stan Dromisky: I'm quite aware of that problem. I know you had a problem very similar to that two or three years ago. In fact, I know of two or three different occasions. However, you've already mentioned a way of dealing with this problem, and that is by having an appeal process, if there is a complaint regarding the airport authorities, air navigation, NAV CANADA—a separate entity operating at arm's length from the government.
They have their rules and regulations. They have their mandate, and they operate in such a way that very few people know what they're doing until it's done. In other words, they can make drastic changes in the air navigation services in a region of the country without any consultation with the people—without any public input or input from pilots, and so forth.
Mr. Dave Ritchie: In fact, that is what they have done. They have decided they do not need navigational people at certain airports at certain times. New Brunswick comes to mind. There was a crash just over a year ago of a small Air Canada aircraft. These are the areas.
It's not one segment; it's a complete industry. We shouldn't be looking at one area; we need to look at the air transport industry in this country and ask, how does this one relate to here, and how does it go over here?
There's the matter of safety. We can go on and on and say this is a large industry and it all needs to be looked after.
Mr. Stan Dromisky: Thank you. I'll stop there.
The Chair: Mr. Guimond, please.
Mr. Michel Guimond: Mr. Ritchie, thank you for your presentation. We know that since the beginning of this study, we have been talking about billions of dollars, voting shares and non- voting shares, runway slots, time slots and international alliances. I received a copy of your video this morning in the mail and I watched it at noon. In my opinion, it is very well done, especially because you emphasize an aspect that this committee will not be able to take into account when it prepares its report. You called your video Restructuring Air Transport: The Human Dimension. I think that people very often forget about that aspect. That is the first comment I wanted to make.
You say that the government should develop a worker assistance program to provide income support, retraining, etc. That has been done in other industries, such as the fisheries. It will not be the first time that this is done in Canada. I think that workers have benefitted from such programs. As taxpayers, workers in the air transport industry in Canada have a right to receive certain commitments from their government.
In your Charter of workers' rights, you say that no job should be exported outside Canada. Do you feel that American Airlines' stake in Canadian... If you have included this point, it is because you are afraid and you do not trust some of the players involved, not to point the finger at American Airlines. You may be just as worried about United Airlines, but I would like your comments on that point in your charter, that is that no jobs should be exported. It would be better, though, to say: "No further jobs," since the experts are saying that since American Airlines has come onto the scene, jobs have in fact disappeared from Canada.
Mr. Dave Ritchie: Our union itself suffered 700 job losses when American bailed out Canadian Airlines. There were 700 administrative jobs that were part of the bailout deal. Those people lost their jobs and went south of the border.
Air Canada has been talking to American Airlines about using their SABRE system. Those folks in the system here today are employed in this country by Air Canada. The SABRE system is run out of the U.S. Now, to use the system is one thing, but to have the jobs done outside of this country is another.
The system can be operated, and was operated at one time, in this country. It can still be done so the jobs, not necessarily the technology, will stay within this country and maintain the folks who are here using it. So it can be done.
There are a number of other fields we have to be concerned about. They mainly deal with maintenance. We have large maintenance bases in Winnipeg, Toronto and Vancouver. They employ a lot of folks who are keeping our airworthiness right there. Canada has a very good airworthiness record in this country. Those are my members—the expertise. We need to keep them within this country to preserve an industry.
We have to be concerned when we see some of the mega maintenance bases that have gone up all over the world. I was in Hong Kong last year, and they have one that would eat up our entire industry. So we have to be concerned. These alliances today are getting together and providing services for each other. They say, “We will provide you with this service; you provide us with that service.” They're going to the bottom line where they can make money.
In the meantime, once we no longer have that expertise, we will be at their mercy because we'll have moved out of that work. We can't allow that to happen.
The Chair: Thanks, Mr. Guimond.
Mr. Murray Calder: Thank you very much, Mr. Chairman.
Mr. Ritchie, I haven't had a chance to view this tape yet, but I'll watch it tomorrow morning when I get to the office. On the title, Restructuring Air Transport: The Human Dimension, you must obviously have in your mind's eye a view of how the airline industry should be. Would you please give me that view.
Mr. Dave Ritchie: No. I say right in here that we don't have a blueprint for the airline industry because this is a complex issue that reflects a number of other areas. The human dimension is only one. There are a number of other areas in the interconnection.
I believed that this committee, in the length of time they were meeting, was going to look at all the areas that came in. They weren't here to talk about reregulating traffic; they were to look at the industry and try to put back in financial ability and accountability to the Canadian public. So I don't have any magic answers to give you.
One of the issues has to be the human factor. We represent that human factor and are thereby asking you to please not leave these folks out of your area. Moreover, it is the entire air transport industry, not just the two carriers. We represent people at Canada 3000 and security guards—our union represents everybody in the industry today. They are the human factor within, and any kind of restructuring will have a ripple effect. Let's not exclude certain people. Let's make sure we're going to include the industry. Let's work with some of the outside agencies.
Mr. Murray Calder: One of the litmus tests that I've been applying all the way through this is the employees. I know it's their jobs, their futures, their livelihood—the whole nine yards.
You talk here—and Mr. Dromisky went at it a wee bit—about the minimum the regulatory framework will require. One is to ensure that the management of airport, air navigation, and other infrastructure is publicly accountable and supports a healthy industry. I would read into it that you're addressing the issue of slots at the airports, for instance.
Mr. Dave Ritchie: We're talking about slots at the airport and accountability on their pricing. As an example, today they set the fees and the airline has to pay them. They say what the cost will be. The accountability of pricing, even for them, is not there. We've gone into a system that costs a lot of money and needs to be upgraded.
Mr. Murray Calder: So what would be the answer to that problem?
Mr. Dave Ritchie: The public must have more input into that process. We don't have any input. If you ever attend one of those open general meetings, you'll find out how much public input there is to the airport authority. They may indicate they want you to be there, but you need to go before them to find out just how much they appreciate your being there.
Mr. Murray Calder: Good point.
You also talked about the maintenance of Canadian ownership and the control of airlines in Canada. Are you making reference to the 10% clause that's in there right now, for instance? If not, what are you referring to?
Mr. Dave Ritchie: I'm saying this is a Canadian industry, and as far as I'm concerned, it's the one area domestically we need to control. In this country we control telecommunications because it directly affects our folks here. This is an industry that directly affects our folks, and we need to ensure it is Canadian owned.
Mr. Murray Calder: If you're setting control on that, what should the figure be? Should it be 10%, 15%, 20% or what?
Mr. Dave Ritchie: If you're asking me where it should be, I believe it should be 100% Canadian owned.
Mr. Murray Calder: Do you think that's achievable?
Mr. Dave Ritchie: I think there's a lot of money to be made in this country, and my answer to you is that it's absolutely achievable.
Mr. Murray Calder: Okay. Thanks, Mr. Chair.
The Chair: Thanks, Mr. Calder.
Just on a point of clarification, you said telecommunications is owned in this country?
Mr. Dave Ritchie: No, I said it's controlled in this country.
The Chair: What do you see as a level of control in the airline industry? What are you trying to tell us about control?
Mr. Dave Ritchie: I think it needs to be reregulated insofar as what we're able to do. People may say they don't want to reregulate, but we have regulations coming out of our gazooms here.
The Chair: Mr. Ritchie, there's a regulation now, under the Air Canada Public Participation Act, that limits individual ownership to 10%.
Mr. Dave Ritchie: But that's only for Air Canada, sir.
The Chair: That's right.
Mr. Dave Ritchie: Does the same thing apply to Canadian?
The Chair: No, it doesn't. That's why I'm asking you now that if the Air Canada Public Participation Act sets out a regulation of 10%, what is your union's opinion on whether that 10% rule should be expanded to all airlines? Should it remain at 10%? Should it go to 20%? Should there be none? What is your position?
Mr. Dave Ritchie: We haven't taken a position on the basis of the airline—
The Chair: We all know we need some kind of control. We're trying to get information from our witnesses to guide us on what they think control means. Everybody has great ideas, but nobody has any bloody suggestions.
Mr. Dave Ritchie: You're asking whether one person can own more than 10% of Air Canada, and I'm saying I don't care if one person owns 100% of Air Canada; I want it to be 100% Canadian ownership. I'm only concerned that this is controlled in this country and owned by Canadians.
The Chair: Mr. Ritchie, there are two different issues here. You're talking about the 25% foreign ownership rule, and there's the 10% individual ownership of the share of an airline in this case.
Now, let's set aside for a moment the foreign ownership question, because it's presently at 25%, etc. That's another debate we can get into. But right now, I'm just talking about the fact that you're hoping for Canadian control of that particular Canadian airline.
Mr. Dave Ritchie: Right.
The Chair: Now, there has been some discussion as to what constitutes Canadian control. Is it 10%? Could it go to 20%? Mr. Hargrove, for example, who appeared before us earlier, said he doesn't care if it's right off the table, as long as his workers don't lose their jobs. That's his opinion, which is valuable to this committee, because we can apply it to our thinking when we start to put together a report next week. What is your union's position on Canadian control? What does that mean? Does it mean retaining 10%? Does it mean, I don't care as long as the jobs are saved? What does it mean to your union?
Mr. Dave Ritchie: Again, if I express one area, I'm expressing it to only one company, because that control only rests with Air Canada. But I'm not here to discuss Air Canada; I'm here to discuss an industry. That's what the 10% does. We've taken a position on the industry, not on one individual company. That's what the 10% rule applies to. That's why I asked, does it apply to the rest? The answer is no. That's where the 25% rule comes in.
So my rule is that I want to see it 100% owned by the country. What does that mean? Whether it's one person who owns 100% or five people who own 20% apiece, I don't care. I want 100% control. That's our position.
The Chair: Thank you, Mr. Ritchie.
Ms. Desjarlais, please.
Ms. Bev Desjarlais: Thank you.
Mr. Ritchie, I get the feeling you're a bit frustrated with the whole process. If you've gone through the same type of scenario a number of years ago and put forth suggestions that weren't followed and then saw the result of those recommendations not being followed being this crisis in the industry, it must be very frustrating.
I'm getting the impression you think we're not looking at the industry as a whole. I want to assure you, from my perspective and, I believe, the perspective of this whole committee, that we are looking at the industry as a whole. We're not looking at just Air Canada and Canadian, just those two offers. That is not what we're doing. We have been very adamant, very clear, and very open to hearing from whoever had an interest in the industry. We actually went out there to ensure that we got a broad spectrum of opinions from people involved in the industry, not just from those two companies. So I hope you aren't thinking we've been so narrow-minded that we were only looking at what happens with Air Canada and Canadian. We recognize that it affects the whole industry.
I'm not sure if you're aware that we had representation this morning from Regional Airlines Holdings Inc. It's a newly founded regional incorporation that is looking at the possibility of being what I would see as a sort of dominant or monopoly carrier within the regional airlines. You also have members within the regional airlines.
One of the comments they made was this, and I'll just read you the paragraph:
Maximizing the utilization of our resources will be
achieved through the rapid turnaround of aircraft, optimal
route configuration - including the expansion of
transborder operations - and by enabling employees
to handle multiple roles.
Has a suggestion ever been made to your members that they handle multiple roles as such, rather than the duties they would normally perform?
Mr. Dave Ritchie: Employers are always coming at you to do more, so clearly the answer's there. I don't know exactly what they mean.
I think they came here and said to you, if this committee recommends that if there's going to be one dominant carrier they diverse themselves from the regional, we want to let you know there's a buyer in the market. I think that's what they wanted to do. The truth is that they have all this business savvy, and they're saying that. To me, the truth is that if we have one dominant carrier, it won't make any difference, because we're going to have a dominant carrier in either of their plays. It will be one international and the other regional. So what's the difference? I don't understand what they're doing.
We have assurances from Air Canada today that they're prepared to sit down and bargain with us and to bring the Canadian people up to the Air Canada rates. They're also prepared to bring the regionals in line. I would say to you that workers will pay under that restructuring proposal, based on the fact that they've said they're going to optimize with what they're doing, and optimize means they're going to reduce the jobs and make us pay for them.
Ms. Bev Desjarlais: Mr. Hargrove, when he was before us, indicated that his view of Air Canada's latest proposal is not that there wouldn't be layoffs. He said Mr. Milton's proposal said there would be no terminations. Is that how you see it as well, that Mr. Milton is saying there are not going to be any layoffs whatsoever, or just no terminations? We all recognize that there can be layoffs without terminations.
Mr. Dave Ritchie: I would say that in Mr. Milton's offer that's on the table he's talking about cutting 2,500 jobs, and he is prepared to do that through attrition, voluntary severances, and whatever. Yes, I think the cuts are still there, but what he is saying is that nobody will lose their job through a layoff procedure. He has guaranteed that.
Ms. Bev Desjarlais: Just out of curiosity, do you have that in writing?
Mr. Dave Ritchie: Yes, I do.
Ms. Bev Desjarlais: Okay. Thank you.
The Chair: No, he didn't say that, Mr. Ritchie. In fact, we have copies of this deal, and he says specifically “there will be no involuntary termination of employment”. He doesn't say anything about no layoffs. That's what Mr. Buzz Hargrove's point is, because he doesn't say no layoffs; he says “there will be no involuntary termination of employment”. That's great, but—
Mr. Dave Ritchie: That's not what I got. Do you want me to read you what I got from him? It says:
No current unionized employee at Air Canada, Canadian
Airlines, Air Canada Regionals or Canadian Regional
will be involuntarily laid off as a direct result of
this industry restructuring.
The Chair: What's the date on that letter?
Mr. Dave Ritchie: It's dated November 1.
The Chair: This is the latest deal on the table. That's today's deal, not November 1.
Mr. Dave Ritchie: No, this deal is still on the table, sir.
The Chair: Perhaps we could have a copy of that for the clerk.
Mr. Dave Ritchie: I'll be glad to give you a copy.
The Chair: There's no mention of, as he calls it, involuntary termination of employment in this document that was released today.
Mr. Dave Ritchie: Right. Well, I have another one here, and this is—
Mr. Michel Guimond: Maybe that's a press release.
Mr. Dave Ritchie: That's a press release.
The Chair: No, this is written by Air Canada.
Mr. Dave Ritchie: Yes, but it's a press release.
The Chair: This is the offer to the shareholders. He has a letter. We have an offer to shareholders.
I'm on your side on this, don't get me wrong.
Mr. Dave Ritchie: In fact, I have two letters from Air Canada that give us a guarantee to deal with our members who work for Canadian, Canadian Regional, Air Canada connectors, and Air Canada, as well as a number of other areas.
The Chair: I'll tell you what we'll do. The clerk will pick up a copy, and we'll have copies made.
At least there'll be good questions when Mr. Milton appears before us next week. We'll have these letters. Who's right? Who's saying what to whom? Who's zooming whom?
Where the heck were we? I think we're going to Mr. Hubbard next. Mr. Hubbard, please.
Mr. Charles Hubbard (Miramichi, Lib.): We hear about Canadians and all the so-called bill of rights you've written up here. With shipping, Mr. Chairman, if someone had said 50 years ago that Canada would lose control of its shipping industry, people would have been amazed.
We've had witnesses come to us and talk about, for example, cabotage, which is the landing of an aircraft from America or other countries at two or three of our airports. What would be your reaction in terms of that if it were suggested that whereas right now we have the one landing, the come-and-go business, they were allowed to stop at two or three airports before returning to their home country?
Mr. Dave Ritchie: Let me ask you, where's the control of the safety aspect within that area? They come and go, we can't regulate them, so they can fly in here and have unsafe aircraft.
Mr. Charles Hubbard: So you would be against cabotage.
Mr. Dave Ritchie: Absolutely.
Mr. Charles Hubbard: In terms of your bill here, you mentioned the allocation between carriers of route and capacity rights, and controls and airfares to ensure that. Now you're recommending to this committee that there be some regulatory body that would control access of routes and would control the regulation of fares along those routes. In terms of your unions, you're saying there should be some governmental body set up to regulate the industry from that point of view.
Mr. Dave Ritchie: Yes.
Mr. Charles Hubbard: In terms of that same body, it would appear that you would demand they maintain certain routes. How would you achieve this in terms of routes that weren't profitable?
Mr. Dave Ritchie: I suspect that's why you ensure you're giving them some profitability.
Let me give you an example. Within my own union, sir, not everybody is paying the same kind of union dues, but they're all getting the same service. That's because it's done on an average. We have ups and downs, and we know what's going to go there. The industry has to be the same. You know you're going to make money here and you're going to lose money there, but that's the cost of doing business.
Mr. Charles Hubbard: So you would suggest that this body would regulate in such a way that if a certain airline had four profitable routes, the body would also say there are two other routes here that don't make money, but because of the good of Canada and a basic right that they should have air transportation, that particular carrier would have to service those routes even though they weren't making money. So they would subsidize two routes by having four profitable ones.
Mr. Dave Ritchie: Yes, I would.
Mr. Charles Hubbard: Mr. Chair, this is something new, and it certainly would speak very well in terms of what this body might do, especially in terms of the regional areas of this country.
I have another question. You referred to Hong Kong, and you referred to the repair and maintenance of aircraft. From your perspective, among all your union groups, is there any major slippage in terms of repairs that are being done by various carriers outside of Canada?
Mr. Dave Ritchie: Presently, no.
Mr. Charles Hubbard: Should there be regulations to ensure that carriers do maintain their fleet on Canadian soil?
Mr. Dave Ritchie: Yes.
Mr. Charles Hubbard: Thank you, Mr. Chair.
The Chair: Thanks, Mr. Hubbard. Actually, there's nothing much new to this proposal only because if the government was going to impose that an airline fly to a particular region, the airline might want to turn around and say, if you're going to make us fly there, then here's what it costs. Then there's the debate on whether or not you can tell the airline where to fly. This is part of the discussion we'll have when we come to drafting our draft report.
Mr. Casey, please.
Mr. Bill Casey: Thanks very much.
That little line troubled me. I don't know if we saw it the same way or not, Charles. It troubles me. I can't imagine the government setting up a licensing organization that says airline A can fly from such to such at certain times, but airline B can't. Do you know what I mean? To regulate every single flight in Canada I don't think is realistic. I don't think it can ever happen.
I also don't think they can control airfares and control the prices of airfares. I don't think that's possible. The biggest concern I get, or my impression from presenters is, of the lack of competition that should control some of these things. If competition is there, it should control them. That's the concern I hear most. I wonder what your thoughts on that are.
Again, going back to one of the previous questions about the regional airlines, which the minister proposed at the very beginning to be divested, that's come up again today. Do you have a thought on it?
Mr. Dave Ritchie: No, I don't believe the regionals need to be divested, so that's my thought there.
He brought it up even in his asking for information from the Competition Bureau. They didn't talk about a divesting in their proposal either. So again, the minister may have said it at one point in time, but he hasn't followed through on it at all within that area.
As I said, we have some people who see an opportunity and say, we're prepared to do it. We want to let you know that if this committee decides on the airlines to be re-divested, there are people here to buy it, and I think that's what they wanted to make known.
The Chair: Just a point of correction on that, Mr. Ritchie. In fact, in the Competition Bureau letter to this committee when they appeared, they did in fact recommend full divestiture of the regional airlines.
Mr. Dave Ritchie: Not to the minister, they didn't.
The Chair: No, to this committee.
Mr. Dave Ritchie: No, I said to the minister, sir. I said when the minister asked them to look into it, it was not part of their recommendation to the minister at the time. That's what I said.
The Chair: You mean the letter that was given to the minister?
Mr. Dave Ritchie: Yes.
The Chair: Yes, because that letter came to this committee before it went to the minister, at the same time as it went to the minister, and in that letter the Competition Bureau actually did say in their recommendation—and my colleagues can correct me if I'm wrong, but I'm pretty sure of it—they recommended the regional airlines be divested.
Mr. Dave Ritchie: I guess just as you got a different letter from Mr. Hargrove, I must have got a different letter from them, because we didn't see that.
The Chair: I'll find it for you and read it to you.
Mr. Dave Ritchie: I'd appreciate it.
Mr. Bill Casey: My point was not so much about the divestiture or not, but that there are only two ways to do this. If we're going to have a dominant carrier, then we have to have a lot of regulation. The other option is to have competition. You're leaning towards the regulation side strongly, and I'm not trying to argue with you, but I cannot imagine the government agreeing to regulate and police every single route, and assign it and control it and then reassign it later on, and police it and police the price of air tickets.
I think what you say is right. If we do have a dominant carrier with no competition, we're going to have to have a pile of regulations, and I don't think most people want that. I think most people would rather not have the regulation and have competition to control those things.
Mr. Louis Erlichman (Canadian Research Director, International Association of Machinists and Aerospace Workers in Canada): The problem is that in fact you don't have competition. The evidence is in for the last 20 years. When you look at the United States, the biggest market in the world, three carriers control more than half that market, six carriers control about three-quarters, and they're going to consolidate further before or during the next downturn.
So in this industry you don't get that competition, this big jump into deregulation... Some of the so-called experts at that time said it's very easy to get into the airline business; you lease a couple of planes, you hire a couple of pilots, you photocopy your schedule, and you can undercut these big dinosaurs and everything else. And it doesn't work.
So while people would like to imagine it happening, it ain't going to happen, so your option is regulation.
In terms of the nature of regulation, and you don't necessarily have to have a regulatory body that approves flight times or anything of that sort, there is a whole range of ways you can do it, and you're going to have to be flexible in the way of doing it, because it's a complicated business.
But there really isn't an option, because you don't get competition in this industry, and you won't get competition even if you allow the Americans in, because they don't have competition there. If you've flown in the U.S., it's not cheaper and the service is worse. They have bigger guys and stronger guys, and in terms of the size of the market, you can argue that they're more concentrated than we are. So it's not an option.
The Chair: Thanks, Mr. Casey.
Mr. Sekora, please.
Mr. Lou Sekora: Thank you very much. Sorry I was late, but anyway you mentioned that when Canadian and American came together you lost 700 jobs to the United States. Tell me, what kind of jobs were they and for what reason? Were they lower-paid jobs in the United States, was there a salary difference, or what was it?
Mr. Dave Ritchie: They were administrative jobs. They were from our finance branch. The finance branch went to American. That was part of the deal. That's part of the $15 million they receive a month on administrative salaries. That's the deal they cut. It wasn't a deal to do with wages or to do anything. They just made a deal to provide that service, and when they started to provide it, we were no longer needed to do it.
Mr. Lou Sekora: Just a little while ago you said to Mr. Hubbard that if an airline had four profitable flights, you'd give them two that are losers. I'm a businessman. If you gave me four profitable ones and two losers and the two losers lost more than the four making a profit, where would I stand then? You'd still work on that basis?
Mr. Dave Ritchie: Again, that's a hypothetical. My point is, can it be done? Yes, it can be done. It can be done in a sensible way. Maybe the fact is that the service is only going to be done once a day instead of twice a day or three or four times a day, but they're still going to get service. There are a number of avenues you can look at in order to do that.
Mr. Lou Sekora: I'm looking at it purely as a businessman. The fact is you'd give me four profitable ones and two losers. Let's say the two losers are losing more than the four profitable ones. Have I the right to say, no, I don't want the profitable ones, and neither do I want the losers?
Mr. Dave Ritchie: If you want to be in the airline business, you're going to take what the regulations say or you're going to get out.
Mr. Lou Sekora: But I don't know that we can regulate the fact—
Mr. Dave Ritchie: I'll tell you what. You regulate every other thing in this country. I mean, come on! You regulate where I can smoke, you regulate how much I pay in taxes, you regulate how much I have to pay in telephone bills.
Mr. Lou Sekora: Hold it!
Mr. Dave Ritchie: I can go on and on and on.
The Chair: Order. One at a time; that's all I'm asking. You can answer as heated as you like.
Mr. Lou Sekora: You're telling me I regulate where you're smoking? No, I don't regulate where you're smoking. You go to your mayor and council members; they're the ones who regulate where you smoke.
Mr. Dave Ritchie: Do you regulate, sir, where the telecommunications are in this country? Are you part of that? Are you part and parcel of the banking industry? I can go on and on about the regulations you put on. So don't tell me regulations are not part of this government's way of making everyday life—
The Chair: Order.
Mr. Lou Sekora: Mr. Chair, I think we're wasting our time with this witness, if he wants to use an arrogant manner or mood when I ask about two losers and four winners. I don't want a big argument about that. I'm just trying to get some answers.
Ms. Bev Desjarlais: —
The Chair: Order, Bev. Order.
Mr. Lou Sekora: I have to make some decisions at the end of the day.
The Chair: Mr. Sekora, do you have a question for Mr. Ritchie?
Mr. Lou Sekora: No, not any more, thank you.
Mr. Dave Ritchie: Because I don't agree with him, he doesn't like it.
A voice: —
The Chair: Order, please.
Ms. Val Meredith: Thank you, Mr. Chair.
Mr. Ritchie, I'd like to pick up on something you said that I see as an opportunity. You made mention of these mega maintenance centres around the world. Isn't it true that Canada does have one of the better reputations for flying safe, well-maintained aircraft?
Mr. Dave Ritchie: Absolutely.
Ms. Val Meredith: Why aren't we selling that internationally? Why aren't we trying to compete with mega maintenance centres? Why aren't we trying to pick up the American maintenance, the Tokyo maintenance, the British maintenance? Why aren't we out there trying to develop that industry? We have the record to stand on; we have the reputation. Why don't we take advantage of the global changes with these mega maintenance centres, and why aren't we one of the mega maintenance centres?
Mr. Dave Ritchie: We in fact do some U.S. maintenance. We have about 250 people employed at Air Canada in Winnipeg today who do what we call third-party work, which is from the U.S. Yes, we are doing it.
The facilities we're talking about, these mega facilities, are those three facilities in combination. That's how massive they are. They're building a brand-new one down in Mexico. It's just up and running. It's another mega facility.
I'm not saying we couldn't compete. I'm saying at present we are not there within that same frame.
Ms. Val Meredith: But what I'm saying is we could be. I don't want to point fingers, whether it's government, whether it's private-public cooperation or partnerships, call it what you want. The union has access to big chunks of dough. Why aren't we moving into that market and capitalizing on it? Instead of being concerned that our people might be going elsewhere, why aren't we bringing all this work and making more jobs for our Canadian workers?
Mr. Dave Ritchie: Well, one thing is that we lack, very, very terribly, the skilled workforce in this country. We also lack the ability to have apprentices take on these jobs.
Ms. Val Meredith: Are you telling me Mexico has more skilled aviation maintenance people than Canada does?
Mr. Dave Ritchie: Not at this present time, but I'll tell you what; they are training those folks.
Ms. Val Meredith: Okay. I guess that's my challenge. That's what I'm asking you. As an industry, why aren't we training Canadians to do that job? Why don't we have a strong apprenticeship program supported by the industry? Why aren't we competing with the Mexicans? They don't have the talent now. Why would we wait until they do have the talent?
Mr. Dave Ritchie: But in the skilled industry throughout this country—not just in this sector but throughout this country—we are not there. We do not put out the kind of money that is needed for apprenticeship and skilled workers throughout this country in all kinds of industries.
Ms. Val Meredith: I appreciate that. My challenge to you is, why not? Why doesn't the industry, why don't the unions, and perhaps government retraining programs identify this as a role that we can play? Why aren't you and the education people—
Mr. Dave Ritchie: Well, in fact—
Ms. Val Meredith: —focusing on retraining and apprenticeship programs through the union, making sure that we don't wait until Mexico has the trained people, that we have the trained people, we provide the good service, and we fulfil that requirement in the international market?
Mr. Dave Ritchie: Well, in fact we sat with the government, the industry, and the union on CAMC, and we are in the midst of developing what we believe to be the guidelines and the restrictions to go into these training processes. I can tell you that we've had to develop them and go. There haven't been any there in a number of these areas.
Ms. Val Meredith: I guess I'm looking for more of a commitment than guidelines. I'm looking for a commitment of funding and of the union taking an active role. I come from the province of British Columbia. Most of the apprenticeship programs are done through the unions. I think that's the leadership you could show, making sure it's Canada and not Mexico where the maintenance facilities are located.
That's just a comment that I would leave with you.
The Chair: Thanks, Ms. Meredith.
Just to go back a step, Mr. Ritchie, I'll first thank you for copies of the letter that you received from Air Canada's senior director of labour relations, which confirms the letter of November 1 that was sent to Mr. Ron Fontaine.
Mr. Dave Ritchie: Actually, it was sent to me as well. I just didn't have my copy here.
The Chair: All right. So it's the same letter?
Mr. Dave Ritchie: It's exactly the same letter.
The Chair: It's exactly the same letter, in which Air Canada, in one letter on November 1 to the union says, “No current unionized employee at Air Canada...will be involuntarily laid off as a...result of this industry restructuring”.
Then, two weeks later, to the shareholders, in the offer to purchase Canadian, the line is very different. Air Canada said “There will be no involuntary termination of employment”. To Mr. Hargrove's mind, when he came to us and told us, they are two very different statements. I think you would agree.
Mr. Dave Ritchie: Well, let me say to you—
The Chair: We'll confirm that with Mr. Milton when he appears before us, but they are two very different statements, according to Mr. Hargrove. One talks about involuntary layoffs, but the other one says “involuntary termination” of employees.
Mr. Dave Ritchie: Well, you see, if you're going by Ontario law, as an example, they're both the same thing. They're identical.
The Chair: Well, we're not just in Ontario on this issue.
Mr. Dave Ritchie: No, but you are under the federal system—
The Chair: And the head office of Air Canada is in Quebec.
Mr. Dave Ritchie: But I'm talking about the federal position on EI. It's the same thing. If you are being laid off for longer than 16 weeks, you are being terminated.
The Chair: That even goes more to my point, then.
Mr. Dave Ritchie: Okay. If you don't have a recall within 16 weeks, you're being terminated.
So if you take a look at the wording there, that's what it talks about. There will be no terminations in either manner—
The Chair: But wouldn't you want a clarification of this in any case, Mr. Ritchie? It would be interesting, wouldn't it, to get a clarification from Mr. Milton on exactly what he means here? I'm not going to defend him, and you don't have to, so why don't we find out what he said, and then we can clear up whether he means layoffs in one letter and termination in another.
Mr. Dave Ritchie: Right.
The Chair: The other matter we have to clear up is that in the letter to Mr. Collenette from the Commissioner of Competition—and there was only one—on page 18, the Competition Bureau recommends a 1.6 on a regional carrier divestiture. They say “Divestiture of some or all of the dominant carrier's regional affiliates may go some way toward introducing competition into the domestic markets.” Then on page 19 it says “On the assumption that the divestiture of regional carriers is feasible and would result in viable competitors, the government would need to address...”, and it goes on to address the points.
Mr. Louis Erlichman: That's not a recommendation.
Mr. Dave Ritchie: No, it says, “In the event—
The Chair: Mr. Erlichman, you've been around a while and you know these kinds of reports. The competition commissioner and the bureau support competition. They say divestiture promotes and achieves competition. So naturally there's the impression left, with me anyway, that the Competition Bureau then supports divestiture, upon fuller examination.
Mr. Louis Erlichman: Well, in the sentence you didn't read, he says:
We have not had the opportunity to examine this option
in detail, and would need to carry out a full merger
review before recommending it as a remedy.
So they haven't actually recommended it. They're saying it's a potential, and if it were to happen there are certain conditions they'd put onto it.
The Chair: There's where we agree. There's the potential. The Competition Bureau certainly sees that as an accelerator for competition, and that's what their whole business is—competition.
Mr. Joe Comuzzi: I have a point of order, Mr. Chairman.
I think two things. First, it would be worthwhile to get Mr. Milton's evidence from when he was before us, when we talked about that issue of involuntary layoffs and terminations. He did speak of that and how he would treat the Canadian employees. So we could get the clerk to give us a transcript of that—not the whole transcript, just that part.
The Chair: The blues.
Mr. Joe Comuzzi: I was questioning Mr. Milton at the time.
The Chair: Sure.
Mr. Joe Comuzzi: Secondly, Mr. Ritchie—and I questioned Mr. Milton at the time on this issue—when you're talking about... Let me just make sure I've got this correct. Canadian Airlines and Canadian Regional carriers, the servicing of their aircraft is done by independent contractors. That is not the case with Air Canada.
Mr. Dave Ritchie: Right.
Mr. Joe Comuzzi: I asked Mr. Milton if, when he spoke of employees of Canadian Airlines, he included those independent contractors who were responsible for serving the Canadian aircraft, so that when he spoke of employees it included those who may not have been covered by a union agreement. I just wanted to clarify that. I'm sure that would be your...or it may not be your understanding. I don't want to put words in your mouth. Is it your understanding when you're talking about these letters that you're also dealing on behalf of those people who may not have a union or be properly represented by a union who are termed independent contractors?
Mr. Dave Ritchie: Well, that letter does not go to those people, and in fact we do represent those people—Hudson General and all those others.
Mr. Joe Comuzzi: And there are the smaller centres throughout the country. There are many others that are just small, individual, two- and three-men operations.
Mr. Dave Ritchie: Yes. And we do represent the greatest majority of service providers in this country. That letter represents only the people it mentions in the letter. Those folks are not those people.
Mr. Joe Comuzzi: Well, I would want, Mr. Chairman, to have those people included, as Mr. Milton... And it's very important that you get a copy of that transcript, because he confirmed to me that when we discussed employees—and the term in the labour law would apply—he would also extend that to the independent contractors who are involved with Canadian Airlines. I think that may be an important point.
Mr. Dave Ritchie: That's why I brought up the InterCanadian people. As I say, we've got 1,000 of them. They are really an independent contractor that contracts through Canadian Airlines. They are not part and parcel of this regional restructuring at all. When we got this stuff from Mr. Milton—and we got the same things from the Onex people as well—one of the reasons we rejected it as a union was based upon the fact that it did not help the entire industry, and that's what we had to represent. It wasn't just one particular company or the other.
Mr. Joe Comuzzi: Those are my questions, Mr. Chairman.
The Chair: Thanks, Mr. Comuzzi.
Mr. Joe Comuzzi: I think it's important that we follow up.
The Chair: Thank you colleagues, and thank you, Mr. Ritchie, Mr. Blais, and Mr. Erlichman, for making your presentation to the committee, the video, and answering our questions.
We'll take a two-minute recess so that we can get our next witnesses to the table.
Thank you colleagues, we're suspended.
The Chair: Colleagues, our last witness this evening is from the CLC, the Canadian Labour Congress. Their spokesperson, Mr. Hassan Yussuff, will be making a presentation to us. He's the executive vice-president. Also joining us is Mr. Kevin Hayes, senior economist, and Mr. Cliff Andstein.
What is your position, Mr. Andstein, legal counsel?
Mr. Cliff Andstein (Executive Assistant to the President, Canadian Labour Congress): I'm the executive assistant to the president. I'm not a lawyer.
The Chair: Well, that's a plus on your side—I'm only kidding.
Colleagues, we welcome the CLC to the Standing Committee on Transport. We look forward to your presentation of between 10 and 12 minutes, and then we'll open it up to questions.
Mr. Hassan Yussuff (Executive Vice-President, Canadian Labour Congress): Thanks. On behalf of the congress, we do appreciate the opportunity to present before the committee. We think this is an important issue that's facing our members and our affiliates, and I think it's timely that we get an opportunity to speak to the seriousness of the problem as we see it from the congress.
I'll read much of our brief, but I may skip some parts so that we can get into questions at the end of the session.
On behalf of our 2.3 million members, we want to thank the House of Commons transport committee for this opportunity to outline our views on a national air transport policy.
We want to talk to this committee about the principles of air transport policy, such as the need for government regulation of domestic transport—as we do internationally and for transborder traffic—the need to provide quality airline service to every community in Canada; the need to maintain high standards and enforcement of airline safety; the importance of keeping jobs in Canada; and full protection for current airline employees in any restructuring.
We acknowledge that our domestic airline system will have to be rationalized and restructured.
We also want to talk about ownership issues such as the maximum level of ownership by a single shareholder, limits on foreign ownership, and control of national airlines.
Every Canadian and every community throughout this country is affected by this crisis. We are profoundly concerned about the fate of the two national carriers and their employees. But we are also concerned about airline ticket prices, quality service to smaller centres, service to the vast regions of this country, and the viability of businesses and their workers who provide important goods and services to the industry.
The protection of the public interest—consumers, communities and workers—is the job of government, and that means regulating and managing competition in our domestic market. We want Parliament to approve any future corporate restructuring of the airline industry. Any restructuring must provide managed competition and protection for airline workers.
Let me acknowledge that this crisis, and the way it has been handled by the government, has been the source of major distress for our unions and their members. Because of the regional base of the two national airlines, the airline wars needlessly fuelled regional differences among the provinces and among workers. The hostilities between management and shareholders of the two airlines, aided and abetted by the lack of government action, has divided the workplace of the two warring airlines.
When there is destructive competition, like in all wars, there is enormous waste, unnecessary human suffering, and needless destruction. As in all wars, it will take a lot of work to repair the damage, and some things will never be repaired. Hundreds of millions of dollars that could have been productively used in the restructuring of our air transport system has been squandered on lawyers, newspaper ads, and poison pills.
What is particularly tragic for airline workers—indeed, for all Canadians, who have so much at stake—is that this three-month battle did not even get close to addressing the root causes of the crisis in the first place: deregulation and destructive competition.
Let's list some of the outcomes of deregulation and competition: Air Canada and Canadian have yet to break even over the total years under deregulation. There is chronic overcapacity in domestic markets. Even when seat sales are factored in, average ticket prices have increased faster than prices generally. There has been a growth in user fees, and specifically airport user fees. The quality of service throughout the country, but particularly to remote communities, is worse.
Let me just highlight some points with regard to this section of our brief.
Competition in which the only outcomes are higher prices, lower service, and wholesale destruction of a national airline and its workers can only be described as destructive. It has created divisiveness across the country and in the workplace. The legacy of an unregulated domestic airline industry engaged in destructive competition has been very costly for all Canadians. It has saddled the airlines with huge debts, sour labour relations, and heightened regional tensions.
Surely there is ample evidence that deregulation and competition in our airline industry has failed. The current structure of the industry cannot continue. It must be changed.
In terms of managing a restructuring process, clearly air transport policy goes well beyond the narrow interests of shareholders and investors. Workers and their union representatives must participate in any decision-making process that will restructure our airline industry. The government must ensure that the broader public interest is served.
The restructuring process should lay the groundwork for a stronger, more efficient, and more financially stable industry that will be of benefit to consumers and workers and that will serve the broad public interest. Any restructuring can and must minimize the economic hardship of airline workers. For this to happen, the federal government must oversee and directly ensure the performance of the restructured industry.
The airline workers and the thousands who work for employers providing goods and services to the airline have a lot at stake. For workers, much of this could have been avoided had the government provided leadership in shaping a national air transportation policy.
Clearly, a major interest of the labour movement is to ensure that the thousands of airline workers who have a direct stake in any restructuring of the industry are adequately protected in any restructuring and rationalization of the industry that is inevitable. If the restructuring and rationalization are carried over a long timeframe, it is in fact possible to have no layoffs.
What the government must do: We regulate the international air transport and manage transborder competition. The result is that both airlines are not in bad shape with respect to both international and transborder traffic. Reregulation of domestic service is essential to avoid skyrocketing airfares and to ensure full service to every community. A complete range of regulatory, fiscal and other policy instruments must be used to create a stable and viable air transport industry to serve all Canadians.
We therefore welcome the minister's commitment to bring in legislation to increase the government responsibility for controlling prices, to allow regional carriers to increase domestic service, and to ensure fair access to new entrants to the reservation system.
In our view, Canadian control means limiting ownership by a single shareholder to 10% of shares and limiting foreign ownership to 25%. As it turns out, putting limits on share ownership may be meaningless without control on key service alliances with foreign airlines. As we are learning, who controls and runs the reservation system may be far more important than voting and non-voting shares. We want the reservation system kept in Canada.
We are concerned about foreign ownership of airlines and allowing foreign carriers to operate in Canada. No country allows foreign carriers to compete with its domestic carrier service for domestic travel within its own borders. We do not want our domestic market opened up to foreign airlines whose only interest will be picking up the most lucrative routes, with no obligation to serve smaller centres and remote communities. In one sentence, we want foreign control limits expanded.
Canadian content requirements should be implemented to protect a proportionate share of Canadian jobs in all airlines operating in Canada.
To cover the cost of excess capacity and flying empty seats, the airlines have to maintain high prices. As long as there is excess capacity, ticket prices cannot fall.
We want a no-layoff pledge in any restructuring. We want to preserve the maximum number of jobs, and we want to ensure that any job losses are through attrition and incentive packages.
All surplus employees identified in the industry restructuring must have their economic future secured through attrition, early retirement incentives, voluntary severance options, leave of absence programs, voluntary transfers, and other mitigating programs.
We also want a no-layoff pledge in any restructuring, and the pledge should be backed up by a government worker assistance package. This package should include income support, retraining, job search, relocation assistance, and priority access to job openings in the industry. If it's phased in over three or more years, and if it's supported by investor and government payments for buyout packages, several thousand positions can be eliminated without a single layoff.
We are asking that no current employees will be involuntarily relocated, that all current collective agreements will be honoured, and that no jobs will be exported from Canada. The job security of airline workers should be tied to the success and failure of takeover artists, poison pills, and hostile takeover schemes.
To make any of this work, and in the interests of all Canadians, we need policy leadership from the government. As we speak, our national airline policy is being shaped by shareholders and foreign airlines, not by government and Parliament. The contractual arrangements that both airlines have with foreign partners and international alliances have reduced the ability to respond to the needs of our domestic market. Decisions are being made to the benefit of foreign corporations, not the people of Canada.
This is respectfully submitted on behalf of the Canadian Labour Congress.
The Chair: Thank you very much for your report, Mr. Yussuff.
Ms. Meredith, please.
Ms. Val Meredith: Thank you, Mr. Chair, and thank you, Mr. Yussuff.
How many of your 2.3 million members work in the Canadian automobile industry?
Mr. Hassan Yussuff: I would say it's probably about 50,000 within the big three, and in the parts sector it's probably about 40,000 to 50,000.
Ms. Val Meredith: Can you explain to me why it's okay for foreign ownership in the Canadian automobile industry, yet you seem to have great difficulty with that kind of ownership in the Canadian airline industry?
Mr. Hassan Yussuff: In terms of the country, Canada is quite huge. Access for Canadians to be able to connect from coast to coast is an important part of public policy. In terms of our air transport policy and our national rail policy, I think Canadians must be assured that they will have access from coast to coast, and an ability to commute. In a national airline policy, we have to take that into consideration. We have no assurances that foreign competition will allow Canadians to have access from coast to coast, as we do now under our national policy.
Ms. Val Meredith: Okay, but I'm not talking about foreign competition, as in cabotage. What I'm talking about is foreign ownership.
What happens when you limit foreign ownership to 25% is that you undercapitalize an industry that needs major capital investments in order for it to compete. I'm just curious why you would feel it's okay to have foreign investment at 100% in three out of the five largest companies in Canada. They employ a lot of Canadians. They work under Canadian law. They don't move the jobs. They complement an industry, if you will.
I would like to know why you feel it's okay for the automobile industry, but you wouldn't like to see the same capital investment... You could still have Canadian control if you raised it to 49%. You would allow capital investment to enable our airline industries to be well managed and competitive in an international market. Yet you could still have Canadian jobs and Canadian control. So why is it good for one industry and not the other?
Mr. Hassan Yussuff: Well, I think the 25% rule is a mechanism that allows the government to have some levers in regulating the industry, and we think it has served our interests quite well. Once you take off the limit in terms of foreign control, you can never bring it back. You know that our ability to restore that under NAFTA is not going to be possible, because once you take it off, it's gone for good. And so far, nobody is arguing that the 25% limit doesn't work and doesn't help the industry. This crisis was not created because of the 25% limit.
Ms. Val Meredith: Why wouldn't you consider raising it to 49%, which is still not majority control, it's still controlled by Canada, by Canadians, yet it allows for more foreign capital investment?
Mr. Hassan Yussuff: Again, that's the recommendation. But we think that is not the source of the problem as we see it today in Canada, and we don't think there is a need to change that policy.
Ms. Val Meredith: What about the 10% rule, which is completely different from foreign ownership? The 10% rule just says that you can have a shareholder who holds more than 10%. If you had a Canadian who was well heeled and who wanted to own 30% of the airline industry, or of Air Canada, why should you not want that kind of capital implanted into the industry to make it healthier? Why would you limit it to 10% ownership in a domestic relationship, a domestic situation?
Mr. Hassan Yussuff: Our perspective on this is that the 10% rule, in terms of when Air Canada was privatized, was put there to ensure that you had a reasonable amount of participation from the public in terms of the shares, but that at the same time you didn't have one individual dominating. What would happen in terms of the airline if someone were shaping the policy of an airline?
Our observation is that the policy has worked, and nobody has raised this as a crisis. This has only become an issue since Onex bid its sale in regard to the 10%. They're asking that it be changed. Otherwise, there is no example that the policy hasn't worked.
Ms. Val Meredith: But it hasn't worked. It hasn't allowed the capitalization to go into the company. Air Canada has not been a really profitable airline over the last 10 years. Mr. Hargrove showed us a chart showing that it hasn't broken even over a period of time. Petro-Canada's the same, and I would suggest that Canadian National probably will find itself in the same position at some point.
When you limit how much capital can go in to make a business competitive, you're limiting its opportunities to create jobs and growth in that industry. Is that something we should be looking at as public policy? Or should we be encouraging people to plant capital in our industries to create growth and competitiveness internationally?
Mr. Hassan Yussuff: Again, Ms. Meredith, if you look at the airlines overall in terms of capacity, passenger traffic has increased enormously. If you go back five years, passenger growth for the airline industry has grown tremendously. And somebody could make an argument that if you were to lift the rule, you might have more players. I assume you could, if somebody is interested in putting money into the business.
But again, the source of the problem here is not the question of the 10% rule; it's a question of how you make this industry profitable. It's not a question of how many shares one investor should be allowed to buy. I think the question is how you make this industry profitable. And I think it comes back to what's happening in the domestic market. That's the source of the crisis.
Ms. Val Meredith: But one of the arguments has been that it's a highly capital-intensive industry. And if you limit the capital that goes in to support it, you're limiting its ability and its capacity to make sure its equipment is modern, that it's able to meet its requirements, or not even its obligation, but its potential in providing international routes. We've heard how neither Canadian nor Air Canada are meeting all of their potential in international routes because of a lack of capital, a lack of ability to do it. That means it's costing Canadians jobs. It means that there are people who aren't working who could be working if they were expanding.
So it is a question of having the ability to bring the capital into a highly capitalized system.
Mr. Charles Hubbard: I have a point of order, Mr. Chairman. The witness has given his position, and we as members shouldn't try to convince witnesses to adopt our positions. I think a couple of times tonight we've tried to do that, and it's unfair to a witness who comes and gives us his reasons on why he supports a particular position.
The Chair: It's not really a point of order, but your intervention has been made, Mr. Hubbard. You're on the record.
Did you want to respond to any of that, Mr. Yussuff, before we go on?
Mr. Hassan Yussuff: There's no question there's a need for capital in the airline industry. The last crisis, this current crisis, is not a result of a lack of capital. I would argue the opposite. The airline has the potential and the ability to make money. The question is when you have the airline duplicating the same service over and over again, flying planes with half-empty seats at the same time in the same direction... The ability to maximize the return on the investment is really the source of the problem.
You can have all kinds of people putting money in the industry, but if the potential is not there to make money, at the end of the day I don't know where we're going with that kind of policy. The question is, how do we allow the airlines to maximize their ability to make profits while recognizing where the source of the problem is? The source of the problem is not a lack of investors; the source of the problem is how you maximize the return on the investment when you're flying half-empty planes.
The Chair: It's all most interesting too that both the questioner and the witness, Mr. Hubbard, are saying almost exactly the same thing. If one has nothing to do with the other, then why bother with the 10%? And what's fascinating is that we can hear one union saying they want 10%, another union saying they don't care if it's even there. Even the airline pilots at Air Canada say take it off, and another union representative this afternoon, Mr. Hargrove, says if it's going to interfere with jobs, take it off. So we're trying to understand from the different witnesses this variance of opinion between unions, between air pilots, etc.
Mr. Calder, please.
Mr. Murray Calder: Thank you very much, Mr. Chairman. This is exactly what I wanted to talk about.
You're bang on, because we have been charged with the responsibility of coming up with the policy to set the airline industry right, and I believe that before we can come up with the policy to set an industry right, we have to have some sort of vision of what the industry is supposed to look like. Would you agree with that?
Mr. Hassan Yussuff: I would agree.
Mr. Murray Calder: I have asked each presenter here for their vision of what the industry should be, and I will ask you that same question. How do you visualize the most efficient and perfect example of an airline industry here in Canada? Once I have that vision in my head, then we as a committee will diligently work to put the policy in place.
Mr. Hassan Yussuff: I assume if I had all the answers to the questions you're asking, I wouldn't be before you here today. In fairness, I will attempt to provide some suggestions and recommendations from the congress.
We envision the industry as one that has the capacity to grow, but at the same time, as a healthy industry in regard to making money in terms of the routes that they're flying. Given the current conditions in terms of lack of regulation in the domestic market, we don't see that happening in the short run or in the long run. So in terms of this committee's role, we obviously have recommended that there be regulation in regard to the domestic industry.
We also believe that while both Canadian Airlines and Air Canada provide a major service to the major points in this country, the regions of this country also need to have an equal ability to access wherever people want to fly to. Those regions currently are serviced by their own regional carriers. There has to be some understanding that if you were to reorganize the industry, it's going to have very broad implications, because for me to go to faraway places in this country, I need to get on an airline. I would go with Air Canada or Canadian to a major point and, from there, get on a regional carrier.
I think the point was made earlier that in order to support some of the regional carriers they need to have a feeder to feed those two national airlines. If you simply take away the ability of the national airlines to feed the regional carriers, it creates some problems. The regions of this country are not going to have access to air travel or very infrequent access to air travel.
So for your committee, in terms of the whole question, there needs to be regulations, a body, set up. The CRTC structure is a structure we would propose in terms of regulation, where the public would be able to make recommendations to the government on a frequent basis regarding access to services, what's happening in prices across this country and people's ability to commute. After all, we're the second largest land mass in the world. We need to bear that in mind in terms of regulation and also in how we restructure the industry.
Mr. Murray Calder: That's a good start.
We have an issue right now where we have two carriers. They're in the same airports across the country, they're taking off minutes apart from each other, they're basically flying wingtip to wingtip, and they are all flying their planes half empty. It's already been stated to us today that instead of having 20 planes flying half empty, it would make much more sense to have 10 planes flying full. How would you address that in your perfect vision of the airlines industry?
Mr. Hassan Yussuff: It makes sense. For what the industry can't do for themselves, I think it is up to the government to come in and say there needs to be some regulation in this particular sector. We've seen the destructive policies over the last number of years since the last crisis. Nothing has changed. We're exactly where we were almost three or four years ago.
In terms of the view of the committee, your suggestion makes perfect sense. To have two airlines flying in the same direction at the same time with half-empty planes doesn't do anything for giving Canadians access to the regions. We're not utilizing the service that is possibly there.
In terms of regulation, you can say specifically you're not going to have two airlines taking off at the same time, going in the same direction. You can stagger that. You can make all kinds of recommendations on how you would then increase the service if the capacity should increase. It is a perfectly logical conclusion, as a result of these hearings, for us to look at the industry concretely and say, what can we do to ensure we're not in the same crisis another three years from now?
As a congress, we will not have any problems with that. I'm going across this country on the airline as frequently as members of this committee. I understand the need for a schedule, but if I have to adjust my schedule accordingly, I will.
The Chair: Thanks, Mr. Calder.
Mr. Guimond, please.
Mr. Michel Guimond: Mr. Yussuff, I want to begin by saying that I fully agree with your proposal that Canadian control means that no shareholder can be allowed to own more than 10% of the shares and that foreign ownership must be limited to 25%. That is fully in line with my own thinking and with that of my party.
Our committee chair has pointed out certain contradictions between some parts of your brief and parts of the briefs of some previous witnesses. I do not mean to be disrespectful toward my colleagues, but I worked for 16 years in labour relations before becoming a member of Parliament. Am I wrong in saying that the Canadian Labour Congress is a large central labour body acting as an umbrella group for units, unions, affiliated federations, but that the United Auto Workers, the Canadian Union of Public Employees and the International Association of Machinists have some amount of independence in their views and their positions, even though they are part of the Canadian Labour Congress? Is that true?
Mr. Hassan Yussuff: Yes, it is true. The Canadian Labour Congress is an affiliated organization. All the unions that have come before you—CAW, IAM, CUPE—are affiliated with the Canadian Labour Congress. Our brief here today encompasses, to a large degree, the views that have been presented by those unions.
We also have a responsibility to share public policy as a congress. You must clearly understand that it doesn't mean we're not going to have differences in a particular argument about a particular position. That is quite normal. At the end of the day, our position here is to try to shape the public policy in the broader interests of both public and private unions across this country.
Mr. Michel Guimond: As a central labour body, you would like workers in the Canadian airline industry to show solidarity and to work together in the face of the coming restructuring. However, there is a corollary to that. The president of one of your affiliates has taken a clear position in favour of one offer and against another. Does that strike you as a way to bring people together? Do you think it helps workers to take a united stand if East is pitted against West, Conservatives against Liberals, Montreal against Calgary? Is that any way to unite people? When Mr. Hargrove came out in favour of the Onex proposal, what was your reaction?
The Chair: I don't know if it's germane to what we're trying to study here, Mr. Guimond.
Mr. Michel Guimond: I want to know his reaction.
The Chair: Is this a psychological consultation? I'm not quite sure. But, Mr. Yussuff, if you're—
Mr. Hassan Yussuff: Let's be frank here, folks. Buzz Hargrove is representing his members. He has every right to speak on behalf of his members, and so do the other affiliates that have come before this committee. I think what Buzz was trying to achieve is how he can best represent his members in the event that the Onex proposal should be successful. I think all the affiliates that have come before you are also trying to do the same thing. They're trying to protect their members as best they can in a restructured industry. So at the end of the day, I think each affiliate can speak for themselves in regard to how they approach this question.
We personally do not have a problem with it. It's for them to decide how they see it best. As a congress, of course, we always try to bring people together with some common vision. I think what I've heard here from the two unions whose presentations I was able to sit in on is that there's a lot of common vision as to how we get down to the point where we would like to be. There's a question about common vision about regulation and of course what should happen in the industry.
The Chair: Thanks, Mr. Yussuff.
Mr. Sekora has left us. Bev Desjarlais.
Ms. Bev Desjarlais: Stan told me I can't make a statement, I have to ask a question. He was giving me that—
The Chair: No, it's your five minutes, you can do whatever you like with your five minutes.
Ms. Bev Desjarlais: I'm going to ask a question after my preamble.
One of the things that seems to keep coming out is that everyone seems to feel—not everyone, but a number of people who have appeared before us and a number of committee members—in regard to the 25% foreign ownership rule, or the 10% rule that's in effect under the Air Canada Act, that somehow we'll save the industry if we change those rules or that these rules may be the reason the industry is in such bad shape.
I'm having a hard time understanding why people can't see that when Air Canada was profitable before it was privatized, then it become privatized and started this—and I like your term—war that had enormous waste, unnecessary human suffering and needless destruction, because it was the needless destruction of an airline industry and an airline that was profitable... Literally, we have seen one airline lose money and the other airline gradually be bled out of the system, and I get the impression it's like a cock fight, where they're in it and one of them has to die off for the other one to survive. I'm having a hard time understanding why people can't see that the reason we are in this situation is because of the deregulation of the domestic airline industry in Canada.
With that in mind, can you tell me how we go about impressing upon Canadians, this committee, people in general, that the word “regulation” is not a horrible, wretched, nasty thing? We have regulations called laws within our criminal system, and nobody argues. Why is it that when we talk business and we talk regulation, it's an absolute nasty word? Do you have any ideas on how we'd go about getting that change of frame of mind out there to the public?
Mr. Hassan Yussuff: I think if you were to ask the public that question, you would get a different response. I think the public's interest in terms of this whole crisis is that they want to ensure that at the end of the day they will have access to service.
The members of the congress and the members of the affiliates we represent want to ensure they will have stability. These workers in the last number of years have gone through incredible stress, and this particular crisis has not made it any easier. And I think there's a need to reflect that.
I think the Canadian public, including our 2.3 million members, are less concerned about regulation than this committee might be. I want to be very candid about that. We recognize that regulation has served industries in different capacities very well. We have regulations for health and safety. We have regulations for pesticides in our environment. We have regulations about what kind of air we breathe. So I don't understand this obsession about why we can't have regulations.
The question is, as a country, do we want to have an airline policy that allows the domestic carriers, Canadian and Air Canada, to be successful in providing service to the communities that we expect them to? I think if you're going to do that, you have to bring in regulation. To simply leave it to the market to decide... It will be based on one single denominator. If it's profitable, they will fly the routes. If it's not profitable, they won't fly them. I think there has to be a balance, because this country is unique in terms of its size and its geography. Canadians need to have services, and with the cutbacks that have taken place in terms of rail travel, there is only one mechanism people have to move today, and that is through air travel. So for communities who don't have the access to rail travel any more, they now have to rely upon air travel.
The Canadian people are less concerned about regulation. They want to see their ability to have access to the service maintained. They want to ensure that they can do it at a reasonable price so they can at least afford it and that it's not just those who have money who are able to do it. Most importantly, I think the workers want to ensure that they're going to have some stability in their lives and in the communities in which they live. I think it's far too much to leave in the hands of the industry.
I want to make two quick points in regard to the whole question around reservations, which has been spoken to at length here.
While the reservations that have moved from Canadian to the United States have moved a lot of jobs, there were huge amounts of resources diverted to the United States that should be reinvested back in this country. We have the technology, we have the skills, and we have the workers who can provide that, and unless there are some regulations that will ensure that those jobs are maintained, what's going to bring those jobs back to Canada?
The other issue is that the alliances these two national airlines have now entered into are having an incredible amount of impact on how we shape national airline policy, and I think as a country we need to have some controls. Can carriers simply engage in signing on to an international agreement that binds them as to how they will serve the Canadian public or the Canadian interest? I think that is something this committee has to deal with.
So in terms of the question of regulation, I think the Canadian public is less concerned about that. I think there's a recognition that if we're going to have regulation we'll have a more stable industry and less crisis.
Ms. Bev Desjarlais: Thank you.
The Chair: Despite the statement of Ms. Desjarlais, it's not that anybody's thinking, on this committee anyway, that regulation is all the words she described it to be, but rather it's a matter of degree. We need regulation for safety reasons. Do we need to regulate airfares across the country? I don't know. So where is the compromise? Where is the matter of degree of regulation that you're going to impose? The danger, of course, is that if we overregulate, then who wants to start up an airline industry? Then they'll say “Sorry, there are too many regulations for me. I can't make money. And if I can't make money, why should I even start in the business?” So there's that delicate balance that I think has to be found.
Mr. Casey, you're the wrap-up.
Mr. Bill Casey: Thanks very much.
I wanted to say I really appreciate your presentation, and it isn't a matter of regulation or not regulation; it's going to be a matter of how much. One thing the minister said in his five principles was that we must ensure that the regions still get their service, and that's going to be a regulation because some of those will not be profitable. So there are going to be regulations; it's just a matter of how much.
I wanted to ask a question to wind up. I know you represent labour and jobs and everything, but you said on the one hand that you agreed there shouldn't be 20 planes travelling half empty, that it would make much more sense to have 10 planes travelling full. But then, on the other hand, you want a no-layoff pledge. That's the conflict. Can you reconcile that for me?
Mr. Hassan Yussuff: I think if there's going to be restructuring of the industry and if there are going to be workers declared surplus from that, the question is how do you deal with those workers?
It's not a simple question of saying, in regard to the workers we don't need, that we'll simply lay them off and discard them. I think there's a question of how we achieve attrition of those workers who we decide are not needed because maybe the jobs won't be there because of restructuring. There are many ways to get to the surplus workers. You can ensure that there are incentive packages in order for those who would like to retire to leave earlier. There may be others who decide they want to work somewhere else, because the stress of working in this industry is just too much.
So I think you provide different programs to allow those workers who would like to leave the industry, those who would like to retire, and others who may just want to change careers completely to be able to do that. For those who might be displaced despite doing all of that, there may be ways of looking at retraining programs and other programs to assist them to get on with their lives.
Mr. Bill Casey: I see what you mean. You're not saying no job cuts and no layoffs.
Mr. Hassan Yussuff: No.
Mr. Bill Casey: But if there are some, there must be a safety net for them.
Mr. Hassan Yussuff: That's fine with me. Thanks very much.
The Chair: Mr. Casey, thank you very much.
Mr. Yussuff, Mr. Hayes, and Mr. Andstein, thank you very much for coming before the committee. Do you have any final words before we wrap up?
Mr. Hassan Yussuff: I think we ought not to underestimate the crisis we're in in this country. It's not just a question of the airlines; it's a question about how we maintain access from coast to coast as Canadians. That's a much bigger question. It has to be put into context.
I think to a large degree our airline policies have served Canadians, other than of course the major carriers, which are obviously in crisis. For this committee, I think there's a need to reflect very seriously to ensure that the smaller communities that don't have the mass population of Toronto, Montreal or Vancouver continue to have access to the service, while at the same time recognizing how we continue to foster a made-in-Canada airline policy that's going to serve us in the long term.
Whatever you do as a committee, I want to say it should be borne in mind, should you be changing the rules, that it has far-reaching implications for us to take back those regulations if we change them.
I specifically want to make the point that under NAFTA, once you make a change and other companies come into the marketplace, your ability to reregulate and change that industry is forever lost. I think we've had a country in which Canadians have had access from coast to coast to a large degree. There is a need to reflect on that in terms of this committee.
Of course, the most important point is that we want to ensure the committee reflects on how a number of members within our affiliates are going be affected by this, because I think there need not be any more pain than these workers are already going through.
The Chair: Gentlemen, thank you very much.
Colleagues, we'll resume tomorrow at 3.30 p.m. Keep in mind we're in room 701, Les Promenades, tomorrow because we're in teleconferencing. We'll see you tomorrow at 3.30 p.m.