TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, April 6, 2000

• 0906

[English]

The Chairman (Mr. Stan Keyes (Hamilton West, Lib.)): Colleagues, pursuant to an order of reference of the House dated March 31, 2000, we are considering Bill C-26.

So that we're not rude to our witnesses, we have a quorum to hear witnesses. We don't have a quorum to vote or anything like that. Of course what the witnesses tell us is a matter of record, and if committee members find themselves absent or late, they can always check back to see the record and read through it.

Joining us this morning, colleagues, are representatives of Canada 3000 and Air Transat.

From Canada 3000 we have Angus Kinnear, president. Thank you very much for coming back to our committee, Mr. Kinnear. We appreciate that.

And from Air Transat we have Denis Jacob, the executive vice-president, and George Petsikas, who is director of government and industry affairs.

Gentlemen, good morning. Welcome to the committee. I understand you'll be making separate presentations of between five and eight minutes for each group. If Canada 3000 could give us ten minutes and Air Transat ten minutes, that would be much appreciated.

When you're comfortable, gentlemen, please begin.

Who would like to start? Mr. Jacob, do you want to start then, please? Thank you.

Mr. Denis Jacob (Executive Vice-President, Air Transat): Thank you. Mr. Chairman and honourable members of the committee, my name is Denis Jacob and I'm executive vice-president of Air Transat. I'm accompanied today by George Petsikas, director of government and industry affairs. We will share the presentation.

[Translation]

I would like to apologize for our not having been able, because of the time available, to translate today's presentation. It will be given in English, and the texts will not be available for distribution today because they are in English.

[English]

I would like to start by thanking you for the opportunity to appear before you today. This is my second appearance in the last five months to discuss airline restructuring issues, and I can truly say I have been impressed by the committee's commitment to seek input and understand the issues from all perspectives in this critical time in the history of Canadian civil aviation.

We will make a brief statement, and then we will be pleased to answer any questions you may have.

When Air Transat appeared before the committee last November, we shared with you our views and thoughts as to what needed to be done from a legislative and policy standpoint in order to ensure our ability, as Canada's largest independent provider of holiday and leisure travel air services, to remain viable and competitive in the new reality of the Canadian airline industry.

To this end, we are pleased to see one of our key recommendations is about to be implemented, since it is our understanding that the Minister of Transport is preparing to introduce a new international charter air policy that will be pro-competitive and will finally eliminate 1960s-style protectionism of scheduled air services.

• 0910

As well, the minister's announcement of his intention to appoint an independent observer who will monitor the impact of airline restructuring over the next 18 to 24 months is also encouraging and consistent with our recommendations. It goes without saying, however, that the observer will have to be someone who properly understands the industry and who will dialogue openly with all interested parties and stakeholders.

Mr. George Petsikas (Director, Government and Industry Affairs, Air Transat): I'll continue.

With respect to Bill C-26, we'd like to share some brief comments and observations. First, Air Transat is of course mindful of the circumstances that led to the tabling of this bill. The intent, from what we understand, is to promote and maintain fair and vigorous airline competition, and I underline “fair”; to ensure that service to regional communities is maintained; and in general to prevent abusive practices by the recently emerged dominant carrier in Canada. Air Transat states for the record that we fully support all of these very legitimate objectives.

The problem, however, with this proposed legislation is that in a number of cases, we believe it will end up hurting and making life more difficult for the carriers, which the Minister of Transport has so often said he is counting on to provide the necessary competition to the dominant carrier in the future.

For example—and I know you heard talk about this yesterday from ATAC, but we're just going to weigh in with some of our thoughts—proposed subsection 64(2) extends the notice period for exiting a market from 60 to 120 days. Although the intent here is clearly to maintain service levels to smaller communities, the fact is the effect of this change will be to discourage new competitive entry into markets.

Indeed, I think we can speak here today for Air Transat when we tell you that if we were faced with a mandatory four-month waiting period before being allowed to discontinue service in a market that we chose, for whatever reason, to no longer serve, we would simply not even consider entering it in the first place. This is not because of a lack of entrepreneurial spirit or a fear of taking reasonable commercial risks. On the contrary, our track record over the last decade in developing numerous services to new markets, especially internationally, speaks for itself. The bottom line, however, is we cannot afford to be experiments in public policy-making. We answer to our shareholders.

So the issue here is, is there a problem? Was there a significant problem to begin with in service to smaller communities prior to the Air Canada-Canadian merger? The problem started, or the debate certainly was focused, on this issue when we started hearing all the talk about rationalizing services from the dominant carrier and its regional feeders.

ATAC's proposal, which you heard yesterday, of a grace period for all carriers prior to the applying of the provisions of proposed subsection 64(2) certainly has merit and should be considered. However, the committee should not rule out the possibility of simply focusing the legislation on where and with respect to whom the problem actually exists.

The same basic sentiment goes for proposed section 66 and the provisions concerning unreasonable fares and rates. The Canadian Transportation Agency's role in overseeing pricing practices has been substantially increased, to the point where we are in danger of returning to the sclerotic bureaucratic practices and red tape of old-style fare regulation. Pricing of a service in a particular market is an extremely fluid thing. We are constantly changing prices in markets to respond to market conditions, and flexibility in this respect is essential.

Furthermore, the agency would now have the ability to ensure an adequate range of fares is offered. What does this mean? Will low-cost carriers such as Air Transat, which have simple price structures, very simple...? You can have 35 different fare classes, as you know, between Toronto and Vancouver offered by the major carriers. We don't do that sort of thing. Does that now mean we would be required to maintain and manage a much more broad range of fares? This would be a very costly requirement and would not address the pressing need to prevent abusive practices by the dominant carrier.

• 0915

Air Transat is very pleased with the proposed amendments to the Competition Act dealing specifically with the air transport sector, particularly proposed section 104.1, which would provide the Commissioner of Competition with the power to issue temporary orders in cases of predatory or anti-competitive behaviour.

Indeed, as a relatively small carrier attempting to compete with an overwhelming dominant airline, we had recommended the adoption of such special powers in the Competition Act, since predatory behaviour in the airline industry can take many forms and can be very swift in achieving its dubious objective. It is therefore imperative that the committee maintain the amendments and avoid any attempt to delimit or restrict the ability of the commissioner to act.

To this end, we do not support ATAC's recommendation that a list of anti-competitive acts be agreed or established in advance, since this would clearly limit the commissioner's discretion to act. Already we are starting to see, unfortunately, examples of where maximum discretion to act is needed, and I will give you a concrete illustration this morning.

Air Transat is again planning to operate a popular transatlantic service between Europe and Whitehorse during the upcoming summer season. As is standard industry practice, we will contract ground handling services from local suppliers for this once-weekly operation, since it would be far too costly for us to self-handle, to do it ourselves.

The only ground handling supplier with the equipment and expertise needed to handle our wide-body aircraft at Whitehorse Airport is Canadian Airlines. In the past they have always agreed to handle us. This year, surprise, surprise, they have informally advised us they will not offer any such services, despite their continuing ability to do so and our willingness to pay fair market price for the service.

It is our understanding that a policy of not providing handling services to competitors is also being applied by Canadian and Air Canada at other airports throughout the country. While there is no obligation for Air Canada and Canadian to handle any third-party airline, an outright refusal to deal, especially at small airports such as Whitehorse, where you are the only supplier in town, raises some very troubling questions for us.

Given the fact that the direct consequence of the Air Canada-Canadian policy at smaller airports is the virtual exclusion from the market of smaller operators dependent upon such handling services, is this all just a coincidence or the tip of a very ominous iceberg? I'm asking the question. I can assure you if we don't resolve this matter, we will be following it up with the Competition Bureau.

I have a final comment about proposed section 104.1. It is limited to acts undertaken by a person operating a domestic service. Air Transat believes and strongly recommends this should be expanded to include all types of service, i.e., domestic and international. Indeed, while the focus has obviously been, and justifiably so, on maintaining domestic competition, we would remind the committee that many international routes between Canada and other countries on which Air Transat is attempting to compete are dominated by Air Canada and their Star Alliance partners.

It is therefore incorrect to assume Air Canada is faced with vigorous foreign-carrier competition on all its routes. For example, the Canada-Germany market, in which Air Transat operates, is almost 85% owned by Air Canada and its key Star Alliance partner, Deutsche Lufthansa. This is a classic dominant-carrier scenario where smaller Canadian carriers are vulnerable to anti-competitive practices. Given that almost 80% of our revenues are derived directly from international services, I hope you will understand why this is very important for us.

Mr. Denis Jacob: Finally, I'll say a few words about airports.

In our earlier submission to the committee, Air Transat had emphasized the importance of increasing federal oversight of airports, since these unregulated monopolies are key elements of Canada's aviation infrastructure, and since decisions made by local authorities have a direct impact on competition and service levels. The need, therefore, to adopt legislation that gives the government the power to review fee-charging practices and major decisions or undertakings by airports, e.g., expensive capital development projects, is now more important than ever. This is because Air Canada henceforth enjoys far more clout with these airports, given their massive size and the revenues they represent.

• 0920

[Translation]

I would like to mention now that, recently, we had discussions with an ADM representative, who stated in a press article that Air Canada had 65 per cent of the market at Dorval and that therefore when the company asked for something, it was answered: Yes, sir.

I can assure you that, even if Air Transat has a major share of the market at Mirabel, that is not always the answer we get from ADM.

[English]

Consequently, decisions can be made by these authorities, under pressure or duress from Air Canada, that directly affect competition and the viability of services offered by smaller carriers. For example, as a result of the AC-CP merger, air services will be reduced at Calgary International Airport.

The authority has therefore decided that the shortfall in revenue will be made up through a unilateral 15% increase in airport fees, payable by all carriers, effective May 1, as well as through another 15% increase next year.

Why should competing carriers pay for decisions made by Air Canada and Canadian? Would not a surcharge payable by Air Canada and Canadian only have been more fair and reasonable? All this is in addition to the obvious potential advantages for the dominant carrier with respect to the allocation and positioning of counters, gates, office space, etc.

In summary, new and effective oversight of airports is needed and should be included in the proposed legislation.

Thank you for your kind attention.

The Chairman: Thank you, Mr. Jacob.

Mr. Kinnear, please.

Mr. Angus Kinnear (President, Canada 3000): Ladies and gentlemen, thank you for inviting us to express our views.

What a difference a couple of weeks makes. We started looking at your proposed legislation two weeks ago. I thought the committee and the drafters of the legislation had done a pretty good job reflecting all of the concerns we had previously expressed to the committee and to the government. As in all things, of course, as these things unwind, you start to see where there may or may not be efficiencies or deficiencies.

Firstly, I would not repeat but totally support everything my colleagues from Air Transat have said, because I believe we all are facing a very similar set of circumstances.

Let me give the committee perhaps two or three insights as to what is actually now happening in the air market in Canada.

It is true that we also serve Whitehorse from Vancouver, and have been given notice by Canadian Airlines that they no longer wish to service our aircraft there. We are operating smaller A320s, so we don't have quite the same logistical problem as our friends Air Transat will have in Whitehorse. We're trying to find some spare baggage belts and shipping them north, and training Air North, a small local service, the local operator in Whitehorse, to be able to handle our aircraft.

We also have been told by Canadian Airlines management staff that we can expect to be given notice of the ground handling operations they do for us at Winnipeg and Edmonton. Now, at Winnipeg and Edmonton, Canada 3000 staffs its own check-in counters and its own check-in desks, but Canadian Airlines has traditionally handled our ground services operation at ramp level.

We were told to expect a notice from Canadian that they would no longer be providing a service at those airports, and we had set about to provide alternative handling organizations to look after those aircraft. But there seems to be dissension within the ranks of the new organization, where from on high the Canadian staff are being told to divest themselves of all outside contracts that do not operate under either Star Alliance or the new merged carrier.

• 0925

However, we pay Canadian at those two stations in excess of $2.4 million a year for our handling services there. There's a budgetary deficiency in Edmonton and Winnipeg, then, which is causing them some delay in issuing us a notice that they wish to terminate service, we understand.

We also have another peculiar situation in this circumstance. Because of Canadian's protection under their bankruptcy provision, we can't terminate service at Edmonton or Winnipeg. We hold a contract with them, and their bankruptcy protection protects us from withdrawing service at this period of time.

So while we expect that they may well give us notice to terminate, we can't take our life into our hands and move forward to find alternative providers, because they hold a contract with us that we can't finish. Are we now about to get a 30-day notice that contract services are withdrawn, and are we therefore then expected to find alternative suppliers we'll have to rush into position to maintain our services?

Now, you may think this is a little exaggerated, as did I until yesterday. Yesterday we received from Canadian another letter, which said:

External Training Equipment Rentals

Please be advised that effective immediately, all third party contracts for training equipment rentals with Canadian Airlines' Air Crew Training Department will be terminated. This policy is to align our department with the Company's position on external training rentals and services.

As per the terms of our contract, we are providing the stipulated thirty (30) day notification for cancellation. Dates already scheduled in this 30 day period will be honoured. No new dates will be accepted.

We appreciate your past business and trust you will be able to make alternate arrangements.

What does that mean? Well, for the last eleven years we have rented from Canadian Airlines in Vancouver and Toronto their cabin services trainer unit. It's the service that allows us to put our cabin crew in this mock airplane and train them to open and close doors with a high-pressure mechanism in force, as you would if you were exiting an airplane in an emergency, with the doors armed. It allows us to create smoke in the cabin so that cabin crew can deal with fire and other problems that may occur. It allows them to remove and replace over-wing exits, which would be used in an emergency.

Canadian has rented these facilities to us for eleven years at commercial rates. Other than Air Canada, there are no reciprocal or similar facilities available in Canada. So in order to keep our cabin crew fully trained to Transport Canada standards, we are now investigating whether or not we can rent similar facilities from Air Alaska in Seattle and US Airways in Pittsburgh.

If we are capable of doing that, our June, July, August, and fall training courses will require us to bus people to those U.S. airports in order to train 700 cabin crew to maintain them to Transport Canada's standards.

The alternative, of course, is to buy a cabin trainer unit. That we are prepared to do, but such units are produced now only by companies in Germany or the United States. CAE used to do it but no longer does. It will cost us approximately $1 million, and from the very minor inquiries I was able to make yesterday afternoon, after I received this letter from Canadian, dated April 4, I believe delivery could be seen to be in November or December this year.

My understanding from the minister's statement on December 21 was that the government, this committee, and everybody else in Canada accepted that we were about to go through a two-year transitional period under which the Canadian aviation industry would be reshaped. The minister generously gave Air Canada and Canadian two years in which to undertake this process, before he would accept applications from anybody else to make services to routes that those two airlines currently held, other than if they were operating in a market of more than 300,000 people.

• 0930

I suggest to the committee that this legislation needs to include a provision that if either Air Canada or Canadian have made services available to other carriers within the last two years, from December 21, 1999, if we're going to work from the same dates, they should be required to offer the same services to those same carriers for the next two-year period, from December 21, 1999.

That would allow us the capability to react to the restructuring of the Canadian aviation industry and put in place those facilities and services that had previously been quite willingly provided by Canadian Airlines and others, and which now it seems are being withdrawn without any real explanation, other than that the company's policy has changed. This applies to ground handling services at remote airports, certain handling services at major airports, and the use of A-320 and 767 flight simulators. It applies to the use of this particular piece of equipment in both Toronto and Vancouver, as it is essential for a training crew to be able to operate safely within the environment specified by Transport Canada. It also involves the trading of aircraft spares.

We have traditionally had Canadian Airlines spares pool available to us on a contract basis, and Canadian Airlines has had our spares pool available to them on a contract basis. Nobody has yet written to me about aircraft spares pools, but having been told about ground handling and having received a letter on equipment rentals in the air crew training department, I suspect I may well have another letter by the time I get back to the office, or in the next 48 hours, telling me that any spares pooling arrangements are subsequently withdrawn.

While I appreciate that one cannot legislate and should not legislate to a provider of services that they must provide service if they don't wish to in a competitive environment, I do believe we are in a restructuring process. The government has recognized the necessity of giving a period of time to allow all participants to react to the new realities of life. I believe the present arrangement being produced by the dominant carrier is perhaps a window of just how wide the legislation may have to be in order to ensure that the transition does not cause massive disruption.

What will it cost us? Assuming we can get these foreign cabin crew trainer units, get time on them, and Transport Canada will provide for them, we will end up shipping 700 cabin crew into the United States in order to verify them to fly on Canadian airplanes, and pay not only the per diem costs and the overnight hotel costs, but also the disruption costs of doing it.

I'm not pleading to have the facilities that have been offered freely to me, on a commercial basis for the last eleven years, for perpetuity. I'm just saying I think it's unreasonable that the dominant carrier, having provided that service to us as well as Sky Service and Royal, should take it upon themselves to give us 30 days' notice, purely because a policy change has been announced from somewhere—we're not sure from where—with regard to the support of provision of services to any competitor carrier.

The Chairman: Does that conclude your remarks, Mr. Kinnear?

Mr. Angus Kinnear: That concludes my remarks, Mr. Keyes.

The Chairman: Thank you very much, sir, for your insight and what would seem to be, at first blush, reasonable recommendations.

By the way, doesn't Air Canada have any of these trainers? Have you approached them?

• 0935

Mr. Angus Kinnear: Air Canada has never been an airline that has tried to make its services available to third parties, whereas Canadian tended to try to grow revenue from its supplementary service offerings. So while Air Canada has provided some services in the past, they've usually been very limited. We haven't come to rely on them, whereas Canadian has always been a much more open organization, with regard to providing services at full commercial rates.

The Chairman: Thank you, sir.

Colleagues, we usually start with the opposition. This morning I'm going to start with Lou Sekora, only because he has to get to an eye doctor appointment.

Lou, do you want five minutes?

Mr. Lou Sekora (Port Moody—Coquitlam—Port Coquitlam, Lib.): Thank you very much, Mr. Chair.

As I listened to this, what is happening is not new to me. I suspected a lot of these things would happen. It's just the tip of an iceberg.

On what's happening, it is my own vision that Canadian Airlines sooner or later will be sunk totally by Air Canada and taken out of the picture altogether. It cannot work and hasn't worked. There's a pattern in what's happening here, and it's a very bad pattern. I call what they're giving you, gentlemen, a dry shave. That's one thing I really resent.

They don't seem to want to cooperate one way or the other with many airlines. They have Canadian now, and they just want to control everything and anything in Canada.

What would happen if the committee recommended—and it was possible—opening it up to other airlines across Canada, bringing in other airlines, opening up the skies in Canada and saying, “Look, Air Canada, you've now got yourselves some great competition”? Would you be in that picture and be able to compete against them?

Mr. Angus Kinnear: I think we already do compete against them. That's why we're suffering from the dry shave syndrome, and they recognize that.

As I said, it is normal for airlines to offer supplementary services. For example, when our A-330 airplanes go to Germany, they are attended by Lufthansa engineers. They provide our ground service maintenance under contract in Germany. When our aircraft go to Sydney, Australia, or Hawaii, United Airlines engineers provide ground services support for those aircraft, just as different carriers in Toronto that come from overseas are also provided services.

Here we have a situation where the two major components of Star Alliance, Lufthansa in Germany and United Airlines in the United States, are providing us with services under contract in a normal commercial environment, but the main player in Canada, which also belongs to the same alliance, is not prepared to provide similar services on a commercial basis. So we have a situation here where the dominant carrier is, indeed, trying to be dominant. We accept that.

My point is that during the restructuring period we're all going through, it would be reasonable to expect that services that were previously provided over a period of eleven years should be continued for a period, to allow us to be able to make the replacements.

With regard to competing in Canada, Air Transat, Royal, WestJet, and ourselves will make sure the Canadian public have alternatives, but this is a two-year process. We have just signed for four 319 aircraft to be able to compete on some of the smaller destinations within Canada. They're the 142-seater airplanes you're probably all familiar with, as you've flown on the Air Canada type.

The earliest delivery I can get of two of those aircraft is November 2001, and the second two aircraft in April and May 2002. So I can't provide the sort of service everybody out here in the committee is asking me to provide because we're not going to be able to get those aircraft delivered, off the production line, and into service before those dates.

It's been discussed both with Transport Canada and in this committee. It will take us about two years to get the equipment in place and look at where the gaps are, we believe, in service in this transitional period. I think everybody has recognized that. And we need to have some let during that period in order that we can actually convert the services that are provided and can move forward to be able to fill in the gaps that the major carrier may not have fully seen.

• 0940

Mr. Lou Sekora: Aren't there some airplanes that Canadian Airlines has but Air Canada has no use for?

Mr. Angus Kinnear: Well, I don't have any use for them either.

Some hon. members: Oh, oh!

Mr. Lou Sekora: Are they that good?

Mr. Angus Kinnear: They're probably thirty years old, and they don't owe anybody anything.

Mr. Lou Sekora: Mr. Chair, as we go through all these witnesses, one thing we're going to be seeing in the next week or two, one thing we're going to find is a more frightening story of what's happening here with Air Canada. Yesterday or the day before, Mr. Chair, I took a real shot at Air Canada in the paper. I meant every damned word of it, because I can tell you something: they're brutal, ruthless people.

The Chairman: Thanks, Lou.

Mr. Lou Sekora: Okay, thank you.

The Chairman: Mr. Kinnear, just as one supplementary to Mr. Sekora's statement, I can see Mr. Milton coming back to us saying, “Kinnear and Jacob never asked me”. Have your airlines or your people asked Air Canada if you can use their training equipment?

Mr. Angus Kinnear: We have a standing arrangement with Canadian. Until they wrote to me yesterday, giving me 30 days' termination notice, these contracts were in place.

The Chairman: Since it's one airline now, it's—

Mr. Angus Kinnear: Clearly they are anxious to constrain their Canadian friends from contracting the services as they have done in the past. We're now talking about virtually the same organization. If you would prefer that I write to Mr. Milton—

The Chairman: No, I'm just—

Mr. Angus Kinnear: —I'd be very happy to do so.

The Chairman: I'm just saying that's what he would come back with.

When you talk about that document that you have, I'm not clear on whether or not it's part of the bankruptcy problem they're going through now and whether or not that's why they have to do what they do. Or is it that Air Canada is trying to do through the back door what they can't do through the front door? I'm not sure which one it is, but if I were Milton, I'd come back and say “Kinnear has never called me and asked me for time on my trainer. Maybe if he asked me I'd say there was no problem and we could make a deal.”

Mr. Angus Kinnear: Mr. Keyes, we understand from our Canadian friends, whom we've worked with for eleven years, that it wasn't their suggestion that they should send out these letters.

The Chairman: Oh, all right.

Mr. Angus Kinnear: As I say, with regard to Edmonton and Winnipeg, the people in Edmonton and Winnipeg are concerned about their job security because they're losing $2.4 million worth of revenue. On the one hand, they're being told they have to get rid of revenue. On the second hand, they're being told that if it's not economical, eventually they won't be employed.

Now, there's a two-year let about not removing staff, but here the staff, or at least some of the staff, understand that most of their jobs in these two stations rely totally on the services they provide to us. It's an example of how it's so difficult to pin down this type of activity. But clearly there has been a policy made within the combined organization that now controls Canadian Airlines that the services they have provided traditionally to the rest of the marketplace for a long period of time—in our case, we're talking about eleven years—are suddenly being withdrawn. Those services are still in situ, still operating, still being staffed by the same people, and they still have available time on them.

The Chairman: Mr. Kinnear has a reputation of giving this committee the straight goods, and we surely appreciate it.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): On a point of order on this very situation, if I have the consent of the committee, I think this is serious enough, Mr. Chairman, that perhaps Mr. Kinnear would be willing to give you—you, but not the rest of the committee—a copy of that letter.

The Chairman: It has been distributed already, Joe.

Mr. Joe Comuzzi: Oh, it has been distributed?

The Chairman: Yes.

Mr. Joe Comuzzi: Then perhaps you, Mr. Chairman, should write today to Mr. Milton and ask for some commercial reasonableness prior to his visit with this committee. I don't know how the committee feels, but I don't think this is a situation that can exist, given the time constraints of thirty days. It puts pressure on these airlines.

Ms. Val Meredith (South Surrey—White Rock—Langley, Canadian Alliance): What do you mean by commercial reasonableness?

The Chairman: Hang on, colleagues. I'm not going to get into a discussion on this at this time.

Mr. Joe Comuzzi: Is it a point of order or not, Mr. Chairman?

The Chairman: No, I'm not going to rule that as a point of order, Mr. Comuzzi. It is a good suggestion, and it can be dealt with by the committee at another point in time if you like. It may even be dealt with when Mr. Milton is present. We'll have our shot at Mr. Milton.

• 0945

Mr. Joe Comuzzi: Well, I don't think we have that time. I'm interested in the committee's wishes on this, Mr. Chairman, with all due respect.

The Chairman: Well, I'm saying this is not a point of order. It's a request for unanimous consent.

Mr. Joe Comuzzi: How do you know it's not a point of order, Mr. Chair?

The Chairman: Because I'm in the chair and you're not, and that's good enough for me for now. We're going to move along.

Mr. Joe Comuzzi: You can't be—

The Chairman: We can—

Mr. Joe Comuzzi: Now you're acting like Mr. Milton.

Some hon. members: Oh, oh!

The Chairman: You have avenues of appeal as well, Mr. Comuzzi, if you want to do your thing.

Ms. Meredith, please.

Ms. Val Meredith: Mr. Bailey is going to go first.

The Chairman: Okay, Mr. Bailey.

Mr. Roy Bailey (Souris—Moose Mountain, Canadian Alliance): Mr. Chairman, sitting here, I tend to agree with my colleague, Mr. Comuzzi.

This is very serious stuff that you gentlemen have given us. To have a bankrupt company like Canadian...they wouldn't dream of denying part of their income, right? It just doesn't make any sense. This, to me, is very urgent on behalf of two companies that are appearing before us today that are vital to the network of air travel in Canada. This is a very serious thing. I think it's so serious that I agree we ought to take immediate action.

I have a question. I don't know which one of these gentlemen mentioned it about the airports, but this really bothered me. Which one of you gentlemen mentioned that the percentage of the price at the Calgary airport was upped 15%, with a guarantee that there was going to be another 15%? Was that 15% that's coming on the 115%?

Mr. George Petsikas: No, it's 15% and 15%.

Mr. Roy Bailey: On the original?

Mr. Denis Jacob: Yes, it's 15% plus 15%.

Mr. Roy Bailey: So it's 30%?

Mr. Denis Jacob: Yes.

Mr. Roy Bailey: Okay, I got that straightened out.

Now, getting back to Mr. Kinnear, I'm really bothered here. How many years have you had this agreement with Canadian?

Mr. Angus Kinnear: Eleven.

Mr. Roy Bailey: How much notice were you given?

Mr. Angus Kinnear: Thirty days.

Mr. Roy Bailey: You were given thirty days as the notice period, and you can't comply in thirty days. The way I understand it, sir, you're in a position in which you could conceivably be in a position of curtailing your operations.

Mr. Angus Kinnear: That is correct. If I can't retrain the cabin crews to meet Transport Canada requirements, it's not legal to operate with them.

Mr. Roy Bailey: Holy crickets, Mr. Chairman! This is getting down to some serious stuff. We heard some of this the other day.

Let me throw one last question at you. What recommendations would you give to this committee? I know what you should do, and I can tell you that, but it's not my position to tell you. I think you are here to give us some suggestions. I don't want to see the monopoly gain a further monopoly with these kinds of tactics. That's not Canadian—pardon the pun. I hope that's not the Canadian way of doing things. What should we do?

Mr. George Petsikas: May I answer that?

The Chairman: Yes.

Mr. George Petsikas: First and foremost, Mr. Chairman, I would like to just go back to your question about Mr. Milton showing up here and saying we never wrote to him and never asked him. I think what you have to do as a committee is put the question to Air Canada about what the policy is going to be with respect to this. I spoke personally with senior executives this past week—

Mr. Roy Bailey: At Air Canada?

Mr. George Petsikas: Yes.

Mr. Roy Bailey: All right.

Mr. George Petsikas: I can't share everything, because I spoke to someone who asked me not to repeat a lot of what was discussed, but I can tell you that there is no babe-in-the-woods routine here as far as Air Canada is concerned. There will not be any “Oh, really? I didn't know this was happening at Canadian.”

There is an internal debate going on. I will let Air Canada provide you with whatever they want in terms of sharing whatever they want on that issue with you. But the question needs to be asked of them, and they have to come clean. Unfortunately, we weren't able to get a straight answer this week. We tried very hard before we came to you today, but we couldn't. We didn't think it should take that long, but it did.

So we recommend that you put the question to Mr. Milton and ask him what his policy is with respect to providing services to competitor airlines in Canada. Based on his answer, you will need to take measures as to whether or not you feel there is an issue here with respect to excluding smaller operators from operating at certain airports or having access to certain critical services, such as Canada 3000. I submit to you that whether or not they can give you a straight answer on whether or not they're prepared to change their policy where it needs to be changed is a very serious issue.

The Chairman: You have thirty seconds, Mr. Bailey.

• 0950

Mr. Roy Bailey: I appreciate what you're saying. I think we are in agreement. This committee has a very serious responsibility today, if not at this meeting then through a motion to look at this.

As for the fact that Mr. Kinnear has never written to Air Canada, with all due respect, Mr. Chairman, he had no reason to write to Air Canada previous to this letter. I don't think that is an issue.

The issue before us right now—and I say this to the committee and to the gentlemen—is that we have a certain area in Canada to protect. If there's any validity to this committee, we'd better act today. That's what I'm saying. Mr. Chairman, that will come up later, but I think this committee has to move very quickly with a motion on this critical issue. Thank you.

The Chairman: Thank you.

Mr. Angus Kinnear: Can I just respond very quickly?

I fully support what you said, sir. My request earlier in my submission was that if Air Canada or Canadian had previously provided services to carriers for a two-year period prior to December 21, 1999, they should be required to do so for the next two years.

Mr. Roy Bailey: That would be my motion.

Mr. Angus Kinnear: That would allow us all, George and I, to decide whether we wanted to put a handling unit into Whitehorse or wherever it was we needed to do. We would have the time and the ability to do it. At the present time, I don't know what other letters I'm going to get in the next 24 to 48 hours that will say some other leg of the table has been sawn off.

Having relied on these people faithfully to provide services to us, which they have done very willingly on full commercial terms over this period of time, the disruption is too great to be able to deal with in the short term. Give us time and we can replace those services, make the investment, put in whatever we need, and provide Canadians with a competitive service. But we are in a transition period.

The Chairman: Thank you, Mr. Kinnear.

If you do get any more of these letters in the next 24 to 48 hours or in the next month, this committee would certainly appreciate getting a copy of that kind of letter just so that we can build our portfolio on exactly what is happening in the industry as a result of the extraordinary changes that are taking place over the next year.

Mr. Kinnear touched on this and I just want to make it clear with you, my colleagues, that Mr. Roy suggested a motion. Mr. Comuzzi suggested that I write a letter to Milton as chair of the committee. Quite frankly, I can just see what Milton would do with a letter he would receive from me. I mean, it has all the power of.... Well, we won't get into it.

Where this committee really has power is to take a recommendation such as Mr. Kinnear has suggested, and when we are through with our witnesses and we start to go clause by clause, to actually bring forward a recommendation to the effect of what Mr. Kinnear is suggesting on a two-year transition period. If we're giving two-year periods of transition to many other items and Air Canada itself, if we're giving other conditions of two years even to Air Canada, then we can certainly as a committee bring forward the recommendation. That will have teeth, a lot more teeth than a letter from the chairman.

Mr. Joe Comuzzi: I agree with you, Mr. Chairman.

The Chairman: Mr. Comuzzi, you're up. Five minutes is yours.

Mr. Joe Comuzzi: It seems that this is a problem of such a serious nature that on a 30-day cancellation.... I'm still on my point of order.

The Chairman: No, you're not, because I ruled it out of order, Mr. Comuzzi. Now you have your five minutes.

Mr. Joe Comuzzi: Okay.

This is a problem of a serious nature and has serious consequences with those people we are relying on to offer competition in the airline industry in Canada. The committee maybe should go into a committee of a whole sometime in the next day or so to decide how to deal with this issue. I make that recommendation.

Gentlemen, I think I heard that what we have in front of us in this legislation is basically a bureaucrat's dream and an entrepreneur's nightmare. I don't think we want to go down that road. We were on that road twenty years ago or fifteen years ago, and we're headed back.

• 0955

I, on this committee, want to foster good, competitive competition in Canada. You folks tell me what you need. Will you spend the next four minutes of time and tell me what you need? I know there's the investment policy that maybe isn't conducive to your airlines. Maybe there are ownership rules that are preventing investment. Maybe we have some access problems to the gates and the times that those gates are available at the major airports. I agree with you that the use of the contractual arrangements you entered into should exist during the two-year period, and we'll talk about that some other time.

I'm going to shut up now. I want to hear from you folks.

Mr. Angus Kinnear: First of all, I think what we need is time. That's the issue. When I look at all the things we want to do here, clearly everybody has great expectations that there will be some competitive forces within Canada to maintain the air services, which are vital to this country's survival. That's not to say that Air Canada won't do a good job in providing for the majority needs. We've discussed it at the Transport Canada level with Ms. Dufour and elsewhere. What we're looking at is a period of time in which this adjustment is going to happen, and it's been suggested also by my colleagues on the Air Transat side.

What we do not need is price controls. What we do not need is limitations on the ability to provide economic services in an environment that would encourage people to go in and try to start new services.

Mr. Joe Comuzzi: You're talking about the twenty days?

Mr. Angus Kinnear: Yes. That legislation is unhelpful.

If you are going to encourage small commuter airlines to provide services to backroad communities, which is what is required in part of this thing, and if you are going to force them to commit themselves to services beyond their financial ability in trying to make a justification of what they're doing, it will never happen because the risks will be too great. Nobody knows what type of competition they will face from the dominant carrier as they go into these new markets and how that will be played out.

It's totally unreasonable to expect a small entrepreneurial operation to try to foster itself. The major carrier would know it only has to keep the pressure up for a period of this length before it actually managed to dominate the marketplace. So those issues are not helpful.

On the broader issue, we have to all appreciate that this is a two-year evolutionary process that is underway. We need time to be able to go out and order new cabin trainers and put them in place. When we started this contract with Canadian, we had one airplane and 48 cabin crew. Now we have 700. When we started, it would have been totally uneconomic for us to go out and buy a million-dollar cabin trainer to train girls on how to open the doors of an airplane, against the amount of revenue we were collecting.

Today, sure we can go get a cabin trainer. I'll rent it to Royal and Sky Service and we'll get on with life and we'll do our thing. Although I compete with these guys, it makes sense that I get economic use out of the facility. It made absolute sense for Canadian to get economic use out of their facilities in the past. As my friend from Saskatchewan pointed out, an airline that is in bankruptcy is hardly able to give up $2.4 million worth of revenue.

So what we're seeing doesn't make sense. What we're seeing applying is not commercial rules but anti-competitive rules, and that's the concern. I would have thought that with the major shift that's taking place, the dominant carrier could have at least been a little bit more discreet and perhaps a little bit more sensitive. Having sated itself on the entire Canadian aviation industry, it now finds that is not enough.

It just concerns me that it bodes ill for the future. It is the underlying hand that's there that makes me nervous about where we're going with this when all the major carriers of the world will rent us services at a commercial rate and expect it as part of their normal revenue-generating exercise.

The Chairman: Mr. Jacob.

• 1000

Mr. Denis Jacob: I must add that there is another problem, too. Today, if you have a contract with Canadian, let's say, then you can have access to service for another two years. But there are some destinations that Air Canada is actually alone in serving, and maybe another carrier would like to serve these destinations, but if the services are not available for that carrier there's no way that carrier will be in the market. So it has to be that everywhere Canadian or Air Canada has a monopoly situation, they have to give access to other carriers.

The Chairman: Thank you.

[Translation]

Michel Guimond, please.

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré— Île-d'Orléans, BQ): Thank you, Mr. Chairman.

[English]

The Chairman: By the way, colleagues, that's just the bell for the start of the House, not a vote.

[Translation]

Mr. Michel Guimond: Gentlemen, thank you for your presentation. I am convinced that the mandarins from the Department of Transport, who had the Minister told that everything was for the best in the best of all possible worlds, listened to your presentation. In old French, there is a folk song, which our interpreters who come from France will remember, called Tout va très bien, madame la marquise. The words go more or less: “Hello, hello, what's new? The house is on fire, my husband has committed suicide, my lover is threatening to do so, how are things? Everything's fine, Madam Marchioness.”

The day before yesterday, we heard the Minister's presentation. Every time we brought up a specific or problematic case, he told us to talk about it to Mr. Milton. “Talk about it to Mr. Milton.” I think he must have repeated 10 or 11 times in his presentation: “Talk about it to Mr. Milton.”

It makes you wonder what this bill C-26, which this committee will have to approve and we will have to pass in Parliament, will be worth?

You have told us about some fantastic cases. The example of Whitehorse that you gave us, Mr. Petsikas, is astounding. Mr. Kinnear, if I had been anglophone, I would have said: By Jove, but I cannot speak with your British accent. The cases where the training is given in Pittsburgh or in Seattle make us wonder whether Canadians are proud to be Canadians, because agreeing to employees taking their training in the U.S. like that« Well, the whole problem of identity arises.

You have read and studied bill C-26, through your lawyers. I would go a bit further; I would like to receive the letters, but I would also like you to suggest to us, since that is the purpose of hearing witnesses, how to improve this bill. Can you suggest any amendments to us that the committee should take into consideration and study, legislative amendments that you would like Parliament to pass?

For my part, I am convinced that all my colleagues around the table are going to vote in favour of the bill. I am convinced that all the Liberals are not going to allow themselves to be influenced by the party line, by the nasty whip, who is going to threaten them with reducing the number of trips.

[English]

The Chairman: Michel, have you a question here? Your time is almost up already.

Mr. Michel Guimond: I'm suggesting amendments to Bill C-26.

The Chairman: I don't know if you stepped out of the room for the last hour, but we have a pretty good idea of what those are already. But if they want to repeat them....

[Translation]

Mr. Michel Guimond: This is my second question. Could you make some comments on the new policy published on April 4 by the Minister of Transport, recommending that much more room be created for the type of carrier that you are? What are your comments vis-à-vis the new policy that was announced for international charter flights?

Mr. George Petsikas: In answer to your first question, Mr. Guimond, we suggested a few amendments in the presentation we just made. I think that attention must be paid above all to the provisions respecting competition with regard to the aspect we raised about domestic flights in relation to international flights.

• 1005

This is very important for us because our competitiveness on the domestic level depends enormously on our possibilities of success on the international level. The international sector accounts for 80 per cent of our business. Clearly, if we cannot manage on the international level, it will not work on the domestic level. From this point of view, it is therefore very important to extend the scope of the provisions respecting anti-competitive practices. That is one point I mention right away.

Second, we talked about airports. The policy respecting airports in Canada is a problem. I know that Transport Canada is reviewing this policy. We have seen some of the recommendations suggested. Still, it is extremely important to understand that these are monopolies. They are monopolies that offer very important infrastructure services for aviation. These are monopolies that could have a direct impact on our competitiveness on the domestic and international levels. These are monopolies that are currently, in many cases, clearly being subjected to perhaps abusive pressure from the dominant carrier. Mr. Jacob talked about this in connection with Aéroports de Montréal.

The federal government must have the power to intervene and make sure that these airports are soundly managed, in the interests of all parties.

This is not a question that can be referred to a local board of 10 persons who maybe know about only a few of the issues, or who do not know anything about them at all. They are not the ones who can decide on expenditures to be made and charges to be imposed on all carriers. If Air Canada decided to move its maintenance activities to Dorval, would that make it 50 per cent more expensive the next day, for us, its competitor? These are decisions that need to be reviewed, and there are a whole lot of them.

Mr. Kinnear, with regard to his suggestion about service contracts, presented a few cases to you. I am very happy to hear you say that you find them important. We were not sure that is how it would be. Some people might have said that we were getting upset over very little. But these are important cases and there have to be specific provisions dealing with this type of thing. I think that his suggestion of a two-year transitional phase is a good one.

I do not want to take too much time. I know that I am talking a bit too much. But, as far as the international policy is concerned about chartering—I think that is what you are talking about—, we said earlier that we were happy to see that it was finally acknowledged that charter flights constituted an auxiliary service to regular flights in the leisure or pleasure travel market. We think that people are beginning to realize that they are very important in the area of pleasure travel. We think they have been made too competitive by eliminating the restrictions on their capacity, on reservations and on the minimum duration of stays. We nevertheless think that it is a step in the right direction.

Before closing, I would like to talk about the international air policy, the overall policy in bilateral negotiations, which includes the designation of air carriers under bilateral agreements. This policy has to be revised within one year. I claim however, that these things could be settled right now, things that would enable us maybe to have access to markets we do not presently have.

I will take the example of the Netherlands. We want to submit an application to be able to offer regular flights between Canada and the Netherlands. A threshold of 300,000 passengers was established. At present, there are 289,000 passengers, who nearly all travel with KLM and Martinair, and we are told we cannot do it. We have to wait a year, for Air Canada to be on the market, as the company has just done for daily flights to Toronto, and we may then be able to join the market.

I submit to you that this warrants a somewhat closer look, before a year is up.

I will stop now so as not to monopolize all the time available to us.

[English]

The Chairman: Ms. Meredith, please.

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

I want to concentrate my questions on whether a solution is possible. It would appear from your comments that Air Canada, as the dominant carrier, is going to control all the ground handling and all the training facilities that are available for domestic carriers. Is that a fair statement?

• 1010

Mr. Angus Kinnear: No, it's more complex. I think the issue we have to get here is that there are competitive ground handling arrangements in most of the major airports. Indeed, in Edmonton and Winnipeg, where we've relied on Canadian, we can put in, if we get enough notice, alternative suppliers of those services. At the moment I'm being told I'm going to be served notice, but I don't know when I'm going to get it and I don't know how long a notice I'm going to get to remove those services. I can't say, “Canadian, thanks very much, but I'm going to give you 60 days notice in accordance with my contract and I'm now going to move on because I know that you're asking me to find alternative services”. In this peculiar situation that Canadian is in at the moment I can't give them notice.

So the issue here, and the issue where Whitehorse is perhaps the answer.... I can find people who can provide us with $2.4 million worth of handling in Winnipeg and in Edmonton. It will be very difficult to find an alternative handler in Whitehorse, where I operate three flights a week for 18 weeks during the summer season to move tourists in and out, and where, for example, Transat is doing a series of flights out of of, I believe, Frankfurt in Germany, into Whitehorse to serve the needs of the Yukon tourist industry. How do you put services in place to handle 10 or 15 flights over a 15-week period and then withdraw them all and go back next year and do it again for 15 weeks?

So it's critical when you get to the smaller outlying airfields. I can see a situation where a small carrier decides to serve one of the remote destinations, for example, in Quebec, but can't actually do it because they're going to have to put a million dollars worth of ground services on the ground in order to be able to mount the service in the first place. Then there's somebody who's going to tell them they have to run a service for at least 160 days when they've done it, etc. The entry cost is going to be too high to get the competitive environment.

Ms. Val Meredith: So it's not really an issue in the larger centres because the alternative is there, and you just need time to set it up. Where it does become an issue is where we would consider those routes to be a monopoly route.

Mr. Roy Bailey: Yes. That's it.

Mr. Angus Kinnear: That's exactly right.

Ms. Val Meredith: Technically it's probably not a monopoly route because you go into Whitehorse and the service is there.

Mr. Angus Kinnear: Correct.

Ms. Val Meredith: But for the majority of the time it's a monopoly route with only one carrier that has the potential ground handling service and checkout counters and all the rest of it. So it's going to take some consideration, because we don't want to prevent you from using a contract to a third party in the major centres but access in the monopoly or the smaller routes.

The other thing I want to deal with is airports. I had it brought to my attention that Dorval was talking about refusing WestJet access to Dorval and trying to force them to use Mirabel Airport. Recognizing what you gentlemen have said about airport authorities, how do you prevent the dominant carrier, which will be providing most of the income for the airports around this country, from flexing their muscles and keeping other airlines from access to that airport? I think it's something we've skimmed the surface of, but I don't think we've really dealt with the potential it has. Because when the guy who is paying 80% of the bill says “I'm not really interested in you allowing somebody else in our backyard”, what is an airport authority going to say? They're going to probably bend, because they depend on that income. So I appreciate your comments on that, and I think it's something we're going to have to address.

Are there any other areas in which you don't perhaps have the experience but that you anticipate we should also be considering?

Mr. Angus Kinnear: I think you've identified the issues very clearly and understand the points we were making. I come back to my time again. I don't think you can force an organization to provide services it doesn't want to provide. The issue here is that we need time to see what's going to happen in the next two years, because these things are coming out of the woodwork. Bill C-26 isn't in place yet, and we're already seeing this evolution happening. We need to have some way of monitoring it over that two-year period that I've suggested. That's issue number one.

• 1015

Issue number two, on the airports situation, is we operate a scheduled service between Montreal and Fort Lauderdale but we're not allowed to use Dorval. We are forced to use Mirabel. The Dorval Airport Authority will not allow us to compete with USAir and Air Canada; we are not permitted to be there. The Government of Canada gives us a licence, but the local authority refuses to let us use it. So I can well understand WestJet's problem. I went to court in Quebec and spent $357,000 trying to defend my right to use Dorval for domestic services.

The situation in Calgary is that at Calgary Airport they have seen their revenue decline because of the removal of the Air Canada and Canadian combination and their concentration of services. And as Mr. Jacob said to you earlier, the situation then is that they have, like most other airports in Canada, started on some very expensive expansion plans.

For some reason the airport authorities never foresaw that there was going to be a consolidation in the Canadian airline industry, which we've all been talking about for seven years. Now we have airport development plans going on in Calgary, which was supposed to expand service to deal with ever greater volumes. And Air Canada and Canadian have now published their joint schedules, which have reduced I think 58 movements a day out of Calgary. So the Calgary Airport Authority comes back to us and says “Will you increase service into Calgary?” on the one hand, but on the other hand, “We're going to put your rates up by 30%”. I go back to the Calgary Airport Authority and say, “Guys, if you put the rates up by 30%, you're not going to increase service to Calgary, you're going to decrease service to Calgary”.

I understand our friends in WestJet are now talking about going to Red Deer. So this thing's out of sync somehow, and we have a two-year period here where we have to try to get the whole of the band to play the same tune. At the moment we have the orchestra all trying to do different things at different times, and it's not actually helping us get this thing through where it needs to go.

Ms. Val Meredith: Another concern I have relates to your timing issue. This bill is in committee stage. It has to go into Parliament at report stage, then it has to go through Parliament at third reading, and then it hits the Senate—and God knows what the Senate is going to do with it. So before it's proclaimed, this isn't going to be addressed tomorrow.

The Chairman: It can be. The amendment could be retroactive to December 31, 1999.

Ms. Val Meredith: That's the point I'm trying to get at. This committee is going to have to appreciate that your problems are immediate, the solution with this legislation is not immediate, and there might have to be written into this legislation a retroactive provision.

The Chairman: Val, I don't think there's any question. I don't think that's even up for debate.

Ms. Val Meredith: I just want to put it on the table.

The Chairman: Yes. If we have to accomplish the goal of—and I think these are the critical words here are—“existing services”, we're not talking about reinventing the wheel here for people who want to take advantage of Air Canada's services; we're saying the existing services are what's critical. And the whole purpose of the discussion is to ensure that for the next two years, beginning now with the letters Mr. Kinnear's study received, they will provide.... There's just no sense in having an amendment unless it does say it's retroactive to December 31, 1999, and services shall be provided for a period of two years, etc.

Mr. Jacob.

Mr. Denis Jacob: If I could say something about it, for us the emergency is more than urgent, because we have flights that will start shortly and we don't have any services possible in Whitehorse. Our equipment is larger than other carriers, and we won't be able to serve this destination for this season if we don't have an agreement now with Canadian Airlines.

• 1020

The Chairman: Thank you, Val.

Stan Dromisky, please.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Thank you very much. I'm really impressed. I'm pleased that you guys are here, because you've given us a completely different viewpoint on the interpretation and implementation of some of the clauses in this bill. Thank you very much for coming.

I want to get one point clear before I continue with my questioning, and it's about the comments that Roy Bailey made to Mr. Kinnear regarding the training of 700 employees. If I'm right, he asked what would happen to the company after the 30 days, and you gave the impression that everything would be finished, kaput, and you agreed to that. I can't understand that. Aren't your 700 employees trained right now?

Mr. Angus Kinnear: Yes. We have two sets of training. We have ab initio training to bring on a new cabin crew. But we also have a requirement to retrain on a six-month basis all our present cabin crew to keep their emergency training updated. So they go back into the classroom every six months for two days in order to be requalified.

Mr. Stan Dromisky: All right. Thank you very much for that.

Mr. Angus Kinnear: The situation is that we had booked all of our classes through to the end of July, set up all the training courses, and now we're looking at busing people overnight to Pittsburgh if we can get the facilities there.

Mr. Stan Dromisky: Okay. But it's not a one-day deal, and after thirty days everybody is finished, kaput. It's an extension—

Mr. Angus Kinnear: No, no. It's as they come up to their six-monthly checks.

Mr. Stan Dromisky: Okay.

We have a unique situation here, with two companies and one board of directors. We know what Canadian is going through right now. I think all of these things you're telling us are indicators of something that's going to happen not in two years' time, but probably right around the corner—maybe not 30 days, maybe 40 days, maybe 35 days, maybe 45 days. In other words, I can see this as cleaning the slate, cleaning house, getting rid of all of the commitments and obligations as quickly as possible so that whatever is going to be happening can happen without dragging a whole pile of garbage behind it as one company disappears completely. In other words, the slate is being cleaned—no ramifications, no carry-ons, nothing. So in that period of time I see that all the companies that are affected have to do something, and that is, from my viewpoint, start negotiating with the major dominant carrier for them to provide the kind of service the defunct company was providing over a period of eleven years.

Am I way off base? Or is this something that can really happen without you spending millions of dollars in trying to develop the infrastructure and facilities and everything else to carry on with the training and everything and the unloading equipment and so forth? Can that happen?

Mr. Angus Kinnear: With respect, sir, it doesn't need to happen. It's already in place. As I say, nothing has changed about the facilities, and nothing changes about the staffing level. All that's changed is the right to access. This is the only thing that's changed.

I go back to the illustration I've drawn on the handling, which we can reprovide in Winnipeg and Edmonton. The Canadian staff were given a directive to withdraw from all of their third-party handling contracts. The local staff is saying that takes our budgets out, and we can't run the business, as we've said, because we don't have the revenue any more. That's what's holding up the process at this present moment in time while an argument goes back and forth trying to decide whether the commercial requirement or the policy requirement is the greater.

Please understand that we've worked with these people in Canadian Airlines for ten or eleven years. We know them personally. We can walk into a bar and have a beer with them. These guys will tell us what they perceive is going on, and I'm trying to relate it to you. It would be wrong of me to use words that may have been said to me in private or personally. That's not the issue. The issue here is that we are in a transition period. There will be a time when we have to get alternative services provided. Air Canada and Canadian as the dominant carrier in this new scenario have been given a let of two years by the government to structure themselves before they're faced with the massive competition that Transat and I can render against them.

• 1025

Yet there is no let on the other side to hold forward on their part of what they've been doing for the rest of the industry. I don't want to force people to do something they don't want to do. That's the last thing I want to do, because that's not a useful situation. But I do believe we have a time period here whereby we have to be able to evolve so that we can replace some of these services and see what's going on. I can't predict what's going to happen next week or the week after; I'm just living this life, real time, with you right now.

Mr. Stan Dromisky: I realize that you have 29 days left; you got the letter yesterday and you have 29 days. I don't know what your plans are. I'm sure that you're going to react to it and do something very positive. I can't see you operating by yourself. I have to see you operating with the other charter carriers and their representatives in approaching the company that's going to have control over all those services that you're going to have withdrawn from you—and all their employees that have been trained to provide those services for you for eleven years.

Oh, I don't know what your plans are for the next 29 days, but I'm sure you will be doing the rational thing in approaching what you perceive to be the dominant carrier and asking them to make some kind of concessions or agreements or contracts for the service to continue. Aren't you planning something of that nature?

Mr. Angus Kinnear: Well, as they sent me the notice yesterday, I must believe that they meant what they said, but I will go back and ask them if they really meant what they said. I suspect they're going to tell me that's what they did mean.

I'll have to make alternative arrangements. My overnight view—my conversation with my cabin crew training staff—was about the following. Where are the nearest facilities that we could rent to replace these in the interim? How long does it takes us to place an order for such a piece of equipment? What does it cost? When can it be delivered? Who can make it?

Mr. Stan Dromisky: I'm missing something here. I'm missing something completely. When Air Canada takes over all the employees, all the equipment will belong to Air Canada, right?

Mr. Angus Kinnear: Correct.

Mr. Stan Dromisky: Okay.

The Chairman: So far you're not missing anything.

Mr. Stan Dromisky: Yes.

Well, in light of what you're saying, I can't understand why you're not making an effort to have those services continue through Air Canada.

Mr. Angus Kinnear: Well, we're—

Mr. Stan Dromisky: Canadian will be gone.

Mr. George Petsikas: Mr. Chairman—

Mr. Stan Dromisky: It'll be gone!

The Chairman: Okay, okay—

Mr. George Petsikas: —if I may say—

The Chairman: Mr. Petsikas.

Mr. George Petsikas: Like I said before, we are dialoguing with them at the highest level to see what we can do about the situation.

Mr. Stan Dromisky: But you're talking about Canadian.

Mr. George Petsikas: Let's be frank: at Canadian, the marching orders come from Dorval. We know that.

Mr. Angus Kinnear: Canadian are taking their directives from—

Mr. George Petsikas: I'm assuming—

Mr. Angus Kinnear: —their owner.

Mr. George Petsikas: —that people understand that, and when I say “Air Canada”, that includes Canadian. We're dialoguing, we're talking, and we're saying, guys, come back to us and tell us whether or not you want to make good on this. Unfortunately, it is a process that may drag on, and we have to get on with our lives. We have to get on and pay our bills. We're doing what we can to arrange for alternative arrangements, but in the end, we're asking the big guy, and the big guy can basically say, “I don't want to hear from you.”

The Chairman: There's just one questioner left. Joe's friend, Charlie Hubbard, wants to ask a question.

A voice: Oh.

The Chairman: I figured if I said that he'd sit down again.

Some hon. members: Oh, oh!

Mr. Joe Comuzzi: I'll stay for Charlie's question—

A voice: He has more than one, Joe, surely.

The Chairman: You have three minutes, Charlie.

Mr. Charles Hubbard (Miramichi, Lib.): Mr. Chairman, first of all, following up on Joe's business here, I think it would be remiss if the committee didn't send a letter to Canadian indicating that it's a problem of air safety. As a committee, we've heard about this problem. In terms of air safety, I think the 30 days is certainly beyond the capabilities we'd have of replacing that training unit.

Secondly, we talk a lot about predatory pricing, but it seems that you're also referring to other types of predatory activities, which have to be addressed. You don't have to go and deal with prices, but you can deal with many other elements.

The only thing that rather disturbs me when you look at Air Canada and its responsibilities in terms of the act that we're going to bring forward and the relationship that has developed.... Air Canada will have to serve dozens of airports across this country, and it has a responsibility to do that, whether it be through its regionals or through Air Canada itself.

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With that responsibility, of course, as an Air Canada president or administrator or whatever it might be.... You are the people who are picking the best routes, the routes that have the major traffic. How can Air Canada work on an even playing field with your groups if you're cherry-picking the best activities within the air traffic system?

There are two sides to this issue. We are concerned, as a committee, about service. How many airports are being served? How much of the Canadian travelling public is getting the kind of service that's required in this country?

I know you provide a lot of good charter flights. You negotiate with different travel agencies and different groups to do charter. But if I were managing Air Canada, I would perceive that you are taking away a lot of my business. And you're doing that on a very selective basis. You don't have many responsibilities in terms of what the other areas of Canada need. You fly into Moncton, for example, two days a week. Air Canada has to fly in there probably 50 or 60 times during that week to provide the service people in Moncton, New Brunswick need.

So in all fairness, we have to look at this in perspective. I have the old thought in my mind about coming from a wood-cutting community. You can't have a group of people all out there cutting wood and give one group all the best forest. There has to be a division. You take a strip of land and cut it, and you work it from there.

The other point I'd like to ask about is this Montreal airport thing. I have been one of the people, with the minister, who's been critical of what's gone on in the Montreal airport. We have probably one of the best airports in Canada sitting down with probably 20% or less use. And we have that Dorval thing, which was never really designed for and is not capable of international travel on a major basis. Yet you are denied, and you spent all that money trying to get....

But the big problem in Montreal is traffic. They built a big airport, but there's no way to get to the city, unless you spend about an hour and a half aboard a bus.

So I'd like to ask for your comments on Montreal, because Montreal airports are coming to us. They're trying to fly all the international traffic into that part of Canada, to a small airport in the very centre of the city. Is it realistic?

Mr. Angus Kinnear: Mr. Chairman, could I answer two points?

First, with regard to cherry-picking, Canada 3000 serves Toronto-Moncton twice a week at the present moment in time. We also serve Orlando, Florida and St. Pete's, Florida from Moncton. We will be opening service direct to Calgary and Vancouver from Moncton this summer. And last summer we introduced a flight direct to Charles de Gaulle in Paris from Moncton, to bring in tourists from France who wanted to go and see the original French Canadian communities in New Brunswick. I had a visit from the Premier of New Brunswick, who asked me to go there and provide service.

I've also told you we have ordered four additional A-319 aircraft. The A-319 aircraft will be specifically to serve destinations such as Moncton on a more frequent basis. At the present moment in time, if I put my large airplanes into Moncton, I can sweep the streets clean and there will be nobody left there for a week, because I'll have moved them all to Toronto. So I need smaller airplanes to provide more frequent service to places such as Moncton. But my problem is, up until now, Moncton has been overserviced. Moncton had Air Canada, Canadian, and us servicing it. The point was there weren't enough people in Moncton to make economic service for Canadian, Air Canada, and us.

So what is happening is this evolution is taking place where the major carriers are being merged and there are other opportunities to serve Moncton, but we need time to get the equipment and we need time to respond to the schedule changes that are going on. We are only now learning what Air Canada and Canadian are proposing to do in their revised schedule for this summer. Until we can see the levels of service they're intending to give markets, we can't respond by saying we believe there's an opportunity in that market to fill what was previously an overserved market in now what may become an underserved market.

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So the whole of the process is going to go forward for the next two years. You're going to see a situation where Air Canada, if they don't want to serve a particular community, should be allowed to withdraw from it. Nobody's asking Air Canada to provide a social service. What we're asking Air Canada to do is decide what level of service it wishes to provide in a place where two people used to provide service. Then we'll review the situation, as will a lot of small carriers across Canada, such as Bearskin Airlines and the boys up in Quebec, and then we'll get in and provide a level of service the market can actually accommodate.

We don't fly to places with airplanes people don't want to travel on. We can't do that. So we have to look at the marketplace. We have to assess the market. We have to provide to that market a responsible level of service the market can afford to fill. That's what we're endeavouring to do. But to provide different sizes of aircraft, more frequency, and different opportunities is going to take us a period of time. We can't do it overnight.

The Chairman: Mr. Petsikas, please.

Mr. George Petsikas: I know time is short, Mr. Hubbard, but I just want to say something in ten seconds about the cherry-picker issue.

I'll give a simple illustration. I had to fly between Dorval and Washington a few weeks ago. There are no cherry-pickers between Dorval and Washington, sir. It cost me $1,500 return for a one-hour-and-fifteen-minute flight. For that price, I can take you to Athens and throw in a one-week package. Thank God for cherry-pickers, sir.

Voices: Oh, oh!

The Chairman: Mr. Kinnear, Mr. Jacob, and Mr. Petsikas, we want to thank you for your frankness and your recommendations.

What's becoming clear here, colleagues, is that maybe what we ought to do too is have a discussion on whether or not we legislate airports again and bring these under the control of government. Anyway, that's a discussion for a later day.

Gentlemen, thank you very much.

This committee is adjourned until next week.