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STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 3, 2000

• 1533

[English]

The Chair (Mr. Stan Keyes (Hamilton West, Lib.)): Good afternoon, colleagues. I call this meeting to order pursuant to an order of reference of the House of Commons dated March 31, 2000, consideration of Bill C-26.

Our first witnesses this afternoon come to us from the Association of Canadian Travel Agents, represented by the president, Randall Williams, and board member, Trish McTavish.

They're joined by Martin Taller, who is with Ports of Call Travel. He is the owner-operator.

Another presentation we'll have in this grouping will be from the Canadian Association of Airline Passengers, represented by the executive director of their public interest advocacy centre, Michael Janigan, who is no stranger to our committee.

Gentlemen and ladies, welcome to the standing committee on transport. We look forward to your presentation to our committee of between five and eight minutes from the Association of Canadian Travel Agents and five to eight minutes from the Canadian Association of Airline Passengers.

We also welcome Harry Gow, the president of Transport 2000 Canada, who has just arrived at the table. Welcome, Harry.

I think we'll start with Mr. Williams.

• 1535

Mr. Randall M. Williams (President, Association of Canadian Travel Agents): Mr. Chairman and members of the committee, on behalf of the Association of Canadian Travel Agents, I want to thank you for giving us the opportunity again to comment on the government's proposed airline legislation.

There are two points I would like to bring to your attention for discussion today, but before proceeding, I want to put on the record how much our association appreciates the committee's role in getting the government to incorporate in its legislation three measures we advocated when we last came before you in November.

The first is the new powers that are being given to the Governor in Council and to the Commissioner of Competition to enable them to address anti-competitive acts or predatory behaviour in the airline industry.

The second is the review of the computer reservation system regulations in order to remove anti-competitive practices and to ensure that competitive marketing information is not disclosed. On this point, I would like to remind the committee that our association definitely wants to be involved in the review that will take place hopefully as the year moves forward and as the Government of Canada has promised the retail travel community.

The third is the right of travel agents to negotiate collectively with an airline on the commissions to be paid on ticket sales. This last point brings us to our major concern today, which we would like to share with you.

We believe, as now worded, the relevant clause of the bill is not complete. It needs to be rounded out.

What we already find in Bill C-26 is the recognition by government of the growing inequity in the airline industry. Travel agents have seen their commissions on ticket sales cut by 35% to 45% in the last little while. What chances do 5,000 small to medium-sized independent travel agencies have of getting fair market value for their services against one dominant national carrier?

As a result, in order to introduce some fairness into the process, the government has decided to exempt travel agents from the Competition Act. Section 4 of this act will be amended to exempt us from sections 45 and 61. We will therefore be allowed to come together for the purposes of collectively negotiating commissions with an airline that has at least 60% of the domestic market.

We appreciate the committee's recommendation in that regard, but to ensure the principle of collective bargaining is made effective, it is critical that this committee consider adding further words to the amendment. Essentially, we're requesting that an arbitration process be laid out in the event that we and the carrier are unable to arrive at a fair resolution.

I've attached to our brief a proposed amendment that we'd like you to take a look at. It outlines the words we'd like to see in a proposed amendment to the Competition Act. It really provides the teeth required for us to negotiate fairly.

The amendment would carry out the government's intent, which is that in willing an end, the government should be prepared to will the means.

I know members need not be reminded that one of the four purposes of the Competition Act is to ensure that small and medium-sized businesses have an equitable opportunity to participate in the Canadian economy.

The second point I'd like to raise today has to do with service fees. In the wake of airline commission caps and cuts, agencies have begun to charge their customers a service fee for booking tickets. This is for the added value the travel agency provides the travel consumer in making their buying decision. Travel agents are comfortable with this and certainly confident that this service fee represents excellent value to their clients. In Canada, the fee ranges anywhere from $5 to $40.

In order to facilitate acceptance of the service fees in the marketplace, our association would like to see a box designed for that purpose on all airline tickets. Such a small measure would make seamless the process of all charges to the consumer. Actually charging the fee would still remain voluntary.

Attached to our brief is a sample illustrating how this box could be fitted into the present ticket, and we've included a sample of a ticket that was issued recently and shows the type of geography we're talking about on the ticket. It's such a small matter. Whether this fits into legislation, or regulation, or policy, we're asking this committee to make a recommendation that for the ease of consumers, this box should appear on all tickets. We don't know where it best fits. Only the regulators and legislators know where it should best fit, but this is something we require in order to have consumers treated fairly and have a proper reconciliation process for the purchase of their tickets.

• 1540

Airlines will tell you that it is too difficult to add this box or that there are liability issues with this, but our research shows that not to be the case. When airport improvement fees were introduced in Canada—you will remember that—the airlines were quick to accommodate that on the tickets, and that relates to a third-party charge. Airlines will say the airport improvement fee is related to the ticket purchase, but we would argue and feel that the distribution costs to consumers, which travel agents are, are just as relevant as the capital cost in maintaining airports.

Before concluding, I would like to alert you to another point regarding commissions. Our association is very concerned that Air Canada may link compensation to travel agents for domestic air travel to their performance in booking international travel with Air Canada. Although this helps to strengthen Air Canada's competitive position in the international arena, it also may serve to drive competition in international routes out of Canada in the near future, leaving Air Canada even more dominant than it currently is.

In his letter to the Minister of Transport on October 22, 1999, the Commissioner of Competition estimated that Canadian carriers account for 52% of the scheduled capacity on routes to Europe and 55% of capacity to Asia. We see that as a dominant position already. Foreseeing that one carrier might occupy a dominant position in the Canadian international market and knowing that it had joined an alliance whose partners fly the same international routes, the commissioner went on to recommend that:

    ...airlines should consider domestic and transborder/international sales separately so that no incentive is created to favour domestic bookings on the dominant carriers because of volume incentives in transborder/international markets. The dominant carrier should implement new agreements with travel agents that reflect the above conditions within six months of any restructuring.

We agree and are prepared to do our part to ensure the success of the air travel industry while giving the best possible deal to the travelling consumer.

In conclusion, my colleagues and I would be pleased to answer any questions the members may have about our outstanding issues and concerns, or, more generally, about the future of airline travel in the industry today.

Thank you.

The Chair: Thank you, Mr. Williams, for a very clear and concise submission.

Mr. Janigan, for five to eight minutes, please.

Mr. Michael Janigan (Executive Director, Public Interest Advocacy Centre, Canadian Association of Airline Passengers): Thank you, Mr. Chair. I've also given to the clerk of the committee copies of my speaking notes, which unfortunately are only in English because of the lateness of the preparation.

We would also like to extend our thanks to the committee for allowing us to attend here to present the views of the Canadian Association of Airline Passengers, or CAAP.

CAAP is an ad hoc coalition of public interest and consumer groups—

The Chair: Michael, can I interrupt for one second?

Mr. Michael Janigan: Sure.

The Chair: Colleagues, we have Mr. Janigan's presentation, but it's only in English. We need permission.

Mr. Asselin.

[Translation]

Mr. Gérard Asselin (Charlevoix, BQ): Mr. Chairman, I have some concerns about creating a precedent, but since there has been a clear improvement, that you yourself pointed out as Chair, I agree that the report should be tabled now and translated later. Today, we can listen to the witness who has travelled here and who has at least drafted a report. For the benefit of francophone members, I would ask that this witness's report be translated and sent to our offices.

[English]

The Chair: Yes, it will be done. Thank you very much, Mr. Asselin.

Sorry, Mr. Janigan.

Mr. Michael Janigan: Thank you, Mr. Chair.

CAAP is an ad hoc coalition of public interest groups and organizations that came together this summer over the issues associated with the airline merger. We have continued to present representations to the various committees that have been studying this issue.

In general, CAAP has been heartened by the general thrust of the response of the minister and the government to the vexing problem of airline restructuring in Canada. The demise of Canadian Airlines as the only effective competition to Air Canada on most domestic routes and markets means that without effective consumer protection rules, the private monopoly will be disciplined only by the rather uncertain threat of effective competitive market entry.

• 1545

In devising the framework for the brave new world of airline service in Canada, the government has acknowledged that it must be guided by the twin goals of attempting to remove barriers to market entry to encourage the development of workable competition, and to institute consumer protection to prevent monopoly pricing or other consumer-unfriendly practices. These consumer protection rules should, as much as possible, act as a proxy for workable competition without unduly hampering the operation of the merged airline.

CAAP supports the efforts associated with the undertakings given to the competition commissioner by the merged airlines and the proposed amendments to the Competition Act that allow the commissioner to more swiftly intervene to prevent anti-competitive behaviour by the dominant airline. These measures should help to provide some security for a prospective market entrance to compete for market share.

In the United States there is a real concern that concentration in the airline industry has led to a diluting of the anticipated competitive effect upon output and prices. We are starting at a much less advantageous position from a consumer's standpoint in Canada with a dominant airline controlling approximately 90% of the domestic market. Without necessarily abandoning hope for workable competition, at least in some air travel markets in Canada, we must turn our attention to how best to proxy the competitive effect for the market served in the monopoly fashion.

The minister has proposed a package of initiatives, some associated with legislative reform as part of the amendments to the Canada Transportation Act contained in Bill C-26 and others to be put in place without the need for amending legislation. We will attempt to address both of these initiatives.

With respect to Bill C-26, our comments are twofold. First, they are directed with the need for some housekeeping amendments that are designed to carry out the intent of the package, and secondly, for some remedial amendments that are designed to promote the overall effectiveness of the government plan.

First, with respect to housekeeping amendments, we may wish to return to this in questions since it involves some reference to the statutory language and a comparison back and forth. We have noted a number of possible problems with the current amendments in terms of matching the perceived intent of the amendments to the actual wording contained therein.

CAAP's concerns include the following. First, with respect to conditions of carriage, the stated intent of the legislation is to restore powers for the CTA to deal with conditions of carriage for domestic service. Some of these examples are lost baggage and bumping. This is done chiefly by the amendment to subsection 67(3) of the act, which is reproduced in the speaking notes.

Section 86 of the act is the enabling section that sets out the powers to make regulations to impose the appropriate terms and conditions of carriage. In particular, paragraph 86(1)(h) provides for the same but refers only to international service.

While the definition of “tariff” in section 55 is inclusive of terms and conditions of carriage and the regulations to the act provide for the content of the tariff, it seems a difficult fit for incorporation of the power to set conditions of carriage for domestic service, given the way the enabling section 86 is set up.

We go back again to paragraph 86(1)(h). The corrective measures associated with misconduct by a licensee can only be construed as authorized in the agency to take action only in the case of terms and conditions of carriage for international service. We would recommend for clarity and for effect that the term “domestic and” be inserted before “international service” in paragraph 86(1)(h).

On evidence of unreasonableness, proposed subsection 66(3) provides a list of evidence that the agency shall consider in determining whether a fare or cargo rate is unreasonable. It is appropriate that the agency consider the matters set out in proposed paragraph 66(3)(a) and proposed paragraph 66(3)(b), which may provide useful benchmarks for the agency in making their decision.

However, proposed paragraph 66(3)(c) limits the agency to any other information that may be provided by the licensee, including information that the licensee provides under section 83.

I seriously doubt whether the intent of the drafters of this amendment was to limit the agency to information provided only by the licensee. One could, for example, think of studies, measurement, or analysis that were made of both the Canadian airline industry and the international airline industry regarding levels of cost, prices, or cost allocation that may be extremely relevant in the consideration of reasonableness of the fare by the agency.

• 1550

The current proposed section, as drafted, would prohibit consideration of other relevant information that may be provided by the complainant, Transport Canada, or any other person that may have a bearing on the determination of unreasonableness. It is wise to incorporate some latitude for the commission to hear such evidence.

We would accordingly recommend that proposed paragraph 663(c) read:

    any other information that may be provided by the licensee, including information that the licensee provides under section 83, or provided by any other person that may be relevant for the making of a finding under subsection (1) or (2).

We would note that it is extremely rare to find such a limitation on tribunal evidence in the constituting legislation of a tribunal. Ordinarily, a tribunal is given some latitude to develop their own rules and determinations with respect to the evidence that it may accept upon a given issue.

On “Consideration of representations”, proposed subsection 66(5) contains a rather unusual provision, and that is:

    Before making a direction under paragraph (1)(b) or subsection (2), the Agency shall consider any representations that the licensee has made with respect to what is reasonable in the circumstances.

One would ordinarily expect that it will be part of the duty of the agency in making a finding to consider representations from the licensee on what is reasonable. It is somewhat alarming that the agency has been instructed to do so. What is more troubling is that by implication the agency is only statutorily required to hear submissions on reasonableness from the licensee. It strikes us that such submissions on reasonableness should be considered by the agency, whether they come from the licensee, the complainant, Transport Canada, or an interested party. We would accordingly recommend that this section read as follows:

    Before making a direction under paragraph (1)(b) or subsection (2), the Agency shall consider any representations with respect to what is reasonable in the circumstances.

This part of our presentation we entitle “Remedial” because it refers to matters that may not have been intended.

First, when a monopoly exists in an important public service, the role of the regulatory agency is to ensure reasonable rates for the user of the service. CAAP is uncertain why this role is best exercised in the manner proposed under section 66.

While it is useful that a complaint process exists for the agency to determine complaints from stakeholders, it should not be the main foundation for enforcement. Airline passengers, bereft of a competitive market for purchasing their air travel, want the security of knowing that their fare is reasonable, not simply that they have a right to complain. The agency should be required to approve fare increases for monopoly services and, where appropriate, hold an oral or written hearing prior to the same. The reasonableness of existing fares may be subject to the complaint procedure or the procedure for redress on motion from the agency as set out in proposed subsection 66(6).

As well, there should be some minimal procedural requirements associated with the hearing of the complaint. In most cases the written process should be sufficient. The complainant should be provided with the opportunity to respond to submissions of the licensee or any other evidence that is brought before the agency prior to determination. Other matters may require a more formal procedure.

We would recommend in section 66 that the following amendment be made. Essentially, it refers to the last line of subsection 66(1). We would insert the words “after hearing the complaint,” between the words “the Agency may,” and “by order.”

In addition, some rather fundamental matters are not addressed. How is the public made aware of matters such as fee increases or the deliberations of the agency? Currently, the agency does not publicize fare increases. How is the complaint process made known to airline passengers? How do they effectively present complaints before the agency?

Because this section is the linchpin of consumer protection against monopoly pricing, it is rather important that these issues be addressed either in the bill or in the regulations. It would be far better to put in place a structure that would enable effective involvement from the start, rather than proceed from complaint to complaint, as it were, with a patchwork quilt of redress.

In addition, we note the reluctance of the agency to use the cost award powers given to it under section 25 of the act to encourage informed and resourced public participation in important issues before the Canadian Transportation Agency.

The agency already has the powers to act in a way that is comparable to other utility tribunals and commissions across Canada to ensure that public interests are effectively represented when important decisions are made before the agency. We would urge that the agency take advantage of the cost provisions in the bill to enable a more informed deliberative process.

• 1555

Summing up our final conclusions, we support the previous recommendation of the parliamentary committee with respect to the institution of the ombudsman. We believe it has a function that is different from that which has been elaborated for the observer. We believe that the standards of service such as are incorporated in CAAP's passenger bill of rights should be incorporated into conditions of carriage for all airlines in Canada. Finally, with respect to the observer, we believe the function is important, but it may be best played by something like an airline users' council modelled on the U.K. Air Transport Users Council, which has been very successful in acting both as a sounding board for complaints and as a source of policy advice for the Civil Aviation Authority.

We would be happy to answer any questions on any of the matters in our presentation.

The Chair: Thank you, Mr. Janigan, for your submission to the committee.

Colleagues, we'll get right to questions. Roy Bailey, please.

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

Thank you for appearing this afternoon. If the committee looks a little weary, they have reason to be a little bit weary. We might look better now than we will tomorrow morning, but I don't know how much better.

Mr. Janigan, I'm not going to direct a question to you in this first round, and that's not because what you have said doesn't create a lot of questions. But I want to deal with the travel agents as such, because I know very well that in the last five years you've taken some pretty good hits, if you don't mind my using that expression.

During the break, I happened to be in a mall—and I'm old enough to know that you don't go shopping with your wife; you put a time on it, saying we'll meet you at a certain place—and it happened that this crossed my mind, knowing that we would no doubt be into this again after the break. I took the opportunity first to talk to a travel agent. Then I told her I would be out there for about an hour and that if anyone came in, I wanted to talk to them as well, so she would know what I was doing. I was gathering information.

That information that I gathered I want to pass on to you very quickly, because it didn't surprise me. There were two women and a couple—those are the three people.

The basis of my question was why do they come to the travel agent, and what's their feeling, and so on. It's something like going back almost a generation, because what they said was that they liked the personal touch of the travel agency, they didn't feel pressured into buying anything, they felt they had the time to ask the questions they needed, and so on. The other chap said that he liked the calm atmosphere, that he got rattled a bit on the telephone, and so on.

So from that I gathered that there has been no fundamental change in the travel agency and the service you provide, and you do indeed consider yourselves to be part of the airline industry. I think, sitting there, I have to gather that you are in fact part of the airline industry, and a very valuable part of it.

I want to ask you the question, though, do travel agencies also act as a promotion to tour companies that sponsor tours? Do they get a fee for the ticket they sell at that time, or do they get a fee for the service they provide? They don't double-fee on that? Do they get a fee from the company they're representing in selling the tour package as well as the airline ticket?

Mr. Randall Williams: I'm not quite sure about the second question. Do you mean to ask if the consumer is charged a fee?

Mr. Roy Bailey: Yes.

Mr. Randall Williams: By the travel agency, maybe, in some cases. In most cases in Canada now, travel agencies are charging service fees, and on a tour package they would charge a service fee on some occasions. Would they be charged double? No. That wouldn't happen.

Mr. Roy Bailey: All right.

Mr. Randall Williams: On your other comment, I appreciate your comment and your research, certainly. One of the keys to the travel agency, what we see as the value we provide, is that personal service. But that's done right across Canada and duplicated in all communities in Canada, small and large, by large travel agencies and by small travel agencies.

I did want to add that we don't see ourselves as part of the airline industry. One of the key things that has happened over the last few years is that we, as travel agents, have seen ourselves really as agents for suppliers, agents for hotels, agents for airlines. What's happened lately is we now see ourselves as agents for consumers. It's a big change, and a change we've had to make because of the changing marketplace, but one we're embracing quite well. So we don't see ourselves as part of the airline industry; we see ourselves as part of the tourism and travel industry.

• 1600

Mr. Roy Bailey: You state that you sense a growing inequity, as you say, in the airline industry at the present time. Obviously you make that statement because you must feel as an association that there is inequity. Is there also a fear of the monopoly carrier moving to the position where your services will be somewhat deleted, if not become obsolete, through modern technology and so on?

Mr. Randall Williams: We're quite confident that retail travel agents will have an important role to play in Canada's economy for many years to come, as long as there's an environment to do business in. Consumers want travel agencies to exist. They want a retail distribution channel. We provide options to consumers and unbiased professional counselling.

One of the things that's forgotten quite often is that technology isn't there just for the suppliers. Technology is there for retailers as well, and retailers are using technology to get closer to their customers. We certainly don't see technology as making us obsolete. We see technology as a tool for us to get close to our customers.

Sure, we're going to lose a little bit of the distribution we have right now. The tickets that are distributed through travel agents make up about 80% of the market. That might slip to 60%, some will suggest, but don't forget that the total pie is growing. Travel and tourism is the fastest growing economic sector in the world and it's predicted to be for the next decade. So as the pie is getting bigger and we slip from 80% to 60% of the distribution, the total volume is going to be pretty steady. We're confident that retail distribution through travel agents is going to be continuing for many years to come.

The Chair: Thank you, Roy.

Mr. Roy Bailey: I'm sure the rest will have other questions on that.

The Chair: Lou Sekora, please.

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

I was called to the phone so I didn't hear the last of the questions Mr. Bailey asked. Since you were here last, what has changed in dealing with the airlines? You still need that legislation to protect the travel agency. I know that. It seems to be going nowhere. You'd go nowhere if we didn't have that legislation in there. So that's a good thing.

What has changed since the last time you were here? Is there anything the airlines would approach you about and say they want to work on with you?

Mr. Randall Williams: No, nothing's changed. Certainly in the environment we're working in, we're seeing that.... My colleagues here can speak to this question too about what's changed with respect to the airlines providing incentives, other benefits to operating a travel agency, what's known as AD75 tickets, the opportunity to do Fam Trips, etc. The airlines have cut back on that. They've reduced some of the other benefits provided to travel agencies to reduce their expenses.

One of the things we're noting is what came out in the paper today with British Airways. Certainly we recognize that British Airways is having trouble with the dominant carrier scenario. If you can relate that to British Airways, a partner with Air Canada and certainly one of the peers in the marketplace and one of the major airlines, if British Airways is having that trouble, you can imagine the kinds of trouble we could have without proper protection. We need arbitration as part of the negotiation to protect us, as BA is announcing today.

Mr. Lou Sekora: I do business with travel agents, and I certainly appreciate the fact that I can phone and I know there's a professional on the other end. I know they'll answer and if I need them to get me from one place to the other, they'll tell me when and how and everything else and get back to me.

If I phone the airline, it says “Press one if you want so-and-so. Press two if you want so-and-so. Press eight if you want so-and-so. Press something else. It might be 15 minutes before you're answered because we're backed up. You'll be next in line if you care to wait.” It's this kind of garbage, and it goes on and on. I appreciate travel agents, and that's why I'm fighting for them. I think they provide a great service to our communities.

I'll tell you how it came about. I have quite a few travel agencies in my riding and they talk to me on a daily basis. The fact is that the treatment you were getting.... I think they were giving you something like a maximum of $50 per ticket. If you phone the airlines, how much does it cost you to print this ticket? It's $150 to $200. They will give you only $50. Then will they lower the airline tickets? No, they won't lower the airline tickets. Those are things I'm bitter about.

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Thank you.

Mr. Randall Williams: Thank you for your comments.

The Chair: Is that it, Lou?

Mr. Lou Sekora: Yes.

The Chair: Monsieur Asselin.

[Translation]

Mr. Gérard Asselin: First of all, I'd like to congratulate the representatives of the Association of Canadian Travel Agents for the excellent brief they've presented. We've had some opportunities to meet before, which led us to introduce a few recommendations in our committee report in order to safeguard the small businesses known as travel agents.

We do know that a travel agency, especially in the regions, is extremely useful for frequent travellers, leisure travellers or anyone who must travel for whatever reason.

Are all travel agencies in Canada members of the Association of Canadian Travel Agents?

[English]

Mr. Randall Williams: Merci. We represent a membership of 3,000, and there are 4,500 to 5,000 travel agencies in Canada.

[Translation]

Mr. Gérard Asselin: What will happen then? I imagine that the negotiations that you will be undertaking with a major carrier will be.... First of all, is it possible for the members that you represent to agree on a method of negotiation? Is it possible that they will be unanimous in the mandate they will give the association so that it can be in a position to say what travel agents want? Is there a possibility that all your members will come to an agreement?

What will happen to travel agencies that are not members of your association? Will they have to deal with each of the airlines and carriers individually?

[English]

Mr. Randall Williams: That's an excellent question. You see, our role is facilitating. We would be establishing a representative group, one that the majority of our community would accept as a representative group. I've started work to do so. In some cases there certainly will be ACTA members in the group and in other cases there won't be. We want to help facilitate as part of the travel agency community in Canada, because we see that as our role. We have roles that we do for our members, but we also see ourselves as representing the whole travel agency community in Canada. We will facilitate the negotiations with a representative group.

[Translation]

Mr. Gérard Asselin: I imagine that the Minister will want Bill C-26 to be fair for all travel agencies in Canada, whether they are members of your association or independent. That's why Bill C-26 indicates that travel agencies can immediately begin negotiations with airlines. Earlier we saw a model where the travel agent charged the customer $20, which is his recovery fee. This allows your members to negotiate a new agreement collectively. If there's a dispute, the two parties could agree on an arbitrator and if they cannot do that, the Minister of Labour will decide.

I get the impression that even if we insert that in Bill C-26, it will solve only part of the problem, specifically that which concerns members of the association. The independent travel agencies, who are not part of the association, will face the same difficulties. And then it won't be a case of finding an arbitrator but it will be a dispute. There will be negotiation problems. There will have to be piecemeal negotiations with the carrier.

If this is negotiated on a case-by-case basis with the carrier, the risk is that it will be the customer who pays. I imagine that the same will be true for you. If you negotiate a fixed rate or a rate that is a percentage of the ticket price, I would imagine that the carrier, whether Air Canada or any other, will transfer this part of the price of the ticket that they give the travel agent to the customer. That will show up in the price of airline tickets. In the final analysis, it's always the customer who pays, whether directly to the travel agency or to the airline. Eventually, it is always the customer or consumer who absorbs the cost of the service received from the travel agency.

[English]

Mr. Randall Williams: That's well thought out and shows a lot of knowledge of the subject, and I appreciate that.

• 1610

I want to be clear in my response on two points. One is that what we're asking for and what is in the proposed legislation is for travel agents to have the collective right to negotiate minimum compensation for the work we do. The key there is minimum compensation for the work we do.

What we want is a transaction fee so that if the airline decides to sell a ticket from Toronto to Montreal at $99 and expects the travel agencies to sell those tickets that consumers will be calling the travel agency and booking, then it should be acceptable to the airline to pay us a transaction fee for that service, whatever we negotiate—$40, $50, $100, whatever it might be in a fair negotiation. That is the minimum compensation. We would negotiate that with a representative group for all travel agencies in Canada. That's the minimum compensation.

On top of that there will be high-volume producers in Canada, and we would expect, as is the practice today, that the airline would want to reward high-volume producers and would negotiate with them, as well as they do today, for compensation at a higher level. But what we're trying to do is get fair minimum compensation, just the base, so that when the airlines want us to produce a ticket for them, we can do it at a fair fee.

The second part of this is that what we move to is an environment where while the commission that the airlines used to pay for travel agencies paid for a lot of the work we used to do, today we understand that the airline industry wants to reduce its distribution costs. We understand that they have been paying for in the past some of the work that's actually work for the consumer and not work for the airline, if you understand the difference I'm trying to get to there.

We will, and we're prepared to, charge consumers for the work we do on their behalf. So when the consumer comes in and wants to talk about how they'd like a sunny destination, they're thinking about Hawaii or Cancun or Florida, and they ask us what we recommend, that's not work for the airline; that's work for the consumer and the consumer should pay that. Even when we have a minimum compensation, that covers the cost of the transaction of the airline ticket, not the other counselling we'll be doing in advance of.

So the service fee the customer will pay will be for the work in counselling them and providing them professional advice. Then we'll also have a minimum compensation for the work we do, because there's no way the consumer should pay for the work we do on behalf of the airline. If we have an office in Corner Brook, Newfoundland, and they're serving a customer there who can't get through on the phone lines, why shouldn't the airline pay for our distribution when we're servicing the customer, we're counselling them, we're selling them the ticket? That's work we're doing on behalf of the airline.

We've taken the position that we've separated them now. We understand that the airline shouldn't pay for the work we do on behalf of the consumers. But there are two issues here. One, what is the work we do on behalf of the airline? Second, what is the work we do on behalf of the consumer? We are prepared to charge the consumer a service fee. We want the airline to compensate us fairly for the work we do on their behalf.

The Chair: Mr. Dromisky, please.

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

I find this proposal you're making ridden—I believe—with problems for the airlines, more so than for you possibly. You're talking about a membership of about 3,000 out of 5,000, and yet you're talking about a basic elementary fee that you would receive from the airline companies for compensation for the services you provide.

In light of everything you have said so far in your response to my colleague, I can see your group driving the air industry into developing some kind of a scale based on remuneration, in other words, based on the number of tickets you've sold or the number of dollars you've brought into the air company, and then being compensated in that respect. Otherwise, the whole thing would be very confusing and would possibly be totally rejected by the airline.

If you're speaking for everybody, you're actually advocating a pseudo-monopoly as far as services are concerned, the remuneration for those services in this travel business. I believe there's competition already in your industry. I know there is. Some are charging no fees, some are charging as high as $40, as you said, and some are charging $10, $5, $8, $11.50. All kinds of figures are out there in the field. It's really a part of the competitiveness that exists in our society.

• 1615

I know of a company that will not give you a hard-copy ticket—it's an airline ticket I'm talking about—that we normally carry around with us. You get a flimsy piece of paper off the fax machine, because all the tickets are dispensed from a central office in Toronto to all their outlets across the province or across the country for all I know. You have a sheet of paper, and it's an electronic transaction that costs very little for the company. They don't have to buy all those tickets, all the other paraphernalia they need, and all the equipment. It's a very simple method of operation. They too would be benefiting from your results and your success in your negotiations with the airline. However, I mention this to you—I mentioned this before when you were here earlier regarding disciplining your own members, and maybe you recall. For this company I'm referring to, on that sheet of paper, whether you buy a first class ticket or a business class ticket, it says “No refunds allowed on this ticket”.

I can see all kinds of situations where, for instance, an individual who doesn't fly too often is going to go to some event and they get sick—a senior citizen—and they get so sick they forget about the ticket and everything else. They try to get a refund on it after the flight has taken off—maybe three, four, five days later, maybe a week later—and they look at the ticket and it says “No refunds allowed on this ticket”, and they might believe it. They might say, yes, I lost $1,000, I lost $2,000—whatever it might be.

Is there any way of disciplining these people or having some kind of code of ethics among your own members and your own society or your own organization?

Mr. Randall Williams: I'm going to let Trish answer that too, but we do have a code of ethics within our association. I think the comment you're making is this non-refundable policy is an airline policy, not our travel agency community....

Mr. Stan Dromisky: I don't agree with that. I have no problem with full economy and full business class tickets. If I don't appear, I still can use that ticket some other time. There's no such thing as “No refund available”.

The Chair: I think you're asking the wrong person, Stan.

Mr. Stan Dromisky: Yes, I know. That's another point.

Ms. Trish McTavish (Board Member, Association of Canadian Travel Agents): I'm just going to address one issue of your question, and that's your electronic ticket. Many of us are doing electronic tickets for our clients. But I do want you to understand something. It's a huge saving for the airlines. It's really virtually no saving for the travel agent, other than courier or delivery fees. We still have to do the reservation and do all the accounting for it. In our back-office systems, it virtually appears as a ticket. There's a ticket number. It has to go through BSP. We have to do the credit card transactions. Other than the courier cost, if there were to be a courier cost, that is the only saving for the travel agent with an electronic ticket. The saving is hugely on the airline's side with the ticket stock, etc., and BSP. That's where all the saving takes place. I wanted to draw that to your attention.

As for the non-refundability of tickets, generally speaking—not 100% of the time—it is the airlines that actually print everything on the ticket with the fare, and we don't have any jurisdiction over that at all. If there were to be an agent who is trying to tell you a ticket is non-refundable and it's not, then that's an issue the airlines really should be aware of because it's not correct.

Mr. Randall Williams: I don't think the agent would do that.

Ms. Trish McTavish: All of the tariffs and fares carry rules that go along with them. They are automatically printed on the ticket and we have to abide by them.

The Chair: Thanks, Ms. McTavish. Thank you, Mr. Dromisky.

Bev Desjarlais, please.

Ms. Bev Desjarlais (Churchill, NDP): First of all, in regard to the service fee box, I have to admit I absolutely saw no reason why this couldn't be on there, and I saw it as very much a part of it until you said we're not part of the airline industry; we're there for the tourism business.

• 1620

Somehow you defeated your own purpose there. On the one hand you were saying you're very much a part of this, and then you said you're not part of the airline industry. So I saw it a bit differently. But certainly I can't see why the airline industry would have a huge problem putting it on their systems.

The fee you're talking about, though, is strictly the fee that they would have to pay you. Or are you talking about the transaction fee that you end up charging? What I'm wondering is whether this is the fee you agree to with the airline company—

Mr. Randall Williams: No.

Ms. Bev Desjarlais: —or is this the transaction fee the travel agent is charging?

Mr. Randall Williams: This is the transaction fee the travel agent is charging. I'll let Trish answer that question as well, but as I said in my remarks earlier, we are part of an industry that is bigger than just airlines. Certainly we sell hotels, we sell car rentals, we sell attractions, and we sell tours. We sell all kinds of things. That's what I meant by saying that we're not part of the airline industry. We don't report to airlines.

Ms. Bev Desjarlais: Okay. Before Ms. McTavish answers, if that fee is not strictly what the airline is charging you, is it a bit misleading, maybe, to the customer or to the consumer that the fee being charged there is an airline fee rather than the fee they're paying for the travel agent's service?

Mr. Randall Williams: We would ask the same question with respect to the airport improvement fee that goes to an airport authority.

Ms. Bev Desjarlais: But I think it says “improvement fee” right on it. Is that what you're saying? It would—

Mr. Randall Williams: But this would say “agency” on it as well.

Ms. Bev Desjarlais: Okay—the agency fee.

Ms. Trish McTavish: There's just a question I want to ask. If you've purchased a ticket with a credit card from a travel agent recently, you will get the one charge on your credit card for the ticket. Presently, in order to charge our service fee, which we all have to do because of our commissions being cut so badly, we have to put a second transaction through for the service fee. The airlines will not let us attach it to the ticket whatsoever.

It's like if you go out and buy a car and the dealer says, all right, sign here, this is your credit form for the car, and then says, now this is your credit card form for what I make on the car. Our clients are having a terrible time with this. I think if you talk to the consumer you will hear that they don't mind paying us a fee; they want the unbiased information. They need us, just as you gentlemen have mentioned here today. They want us there. They want us to provide that service for them. They don't mind paying it, but they're having huge trouble with the fact that we're putting it on two transactions and one goes through the same day and the next may not even appear on the same statement.

When you get people, small businessmen, who are maybe putting on 10 trips over a statement period, they have their tickets on one month, their transaction fees on the next month, and they have to bill it to someone they're working for. We've just created such a huge mess for ourselves.

We are not trying to hide this fee. We are not trying to take it away so that the client can't see it's there. We are disclosing it totally. All we're trying to do is to make it easier for us to pass this on to the consumer—which they're accepting—without putting them through all the work of having to reconcile it too.

Ms. Bev Desjarlais: In the area of the fee that gets negotiated with the airline, if the airline has the 60% monopoly, what happens with the other airlines you deal with? What type of a fee...? How does that fee come into play? If you're negotiating with a monopoly carrier, what happens with fees with other airlines?

Mr. Randall Williams: The legislation as proposed gives us the right to collectively negotiate and discuss a fee relating to a major carrier, one that has a dominant position of over 60%. It doesn't reflect the situation with other carriers.

Ms. Bev Desjarlais: Okay. So tell me what's going to happen. If you're able to negotiate your fee with the dominant carrier, what happens to the fee with the other carriers?

Mr. Randall Williams: Our hope is that if a dominant carrier is obviously dominant in the marketplace and is prepared to negotiate a fee, when it comes to a reasonable negotiated settlement we are optimistic that the other airlines who are obviously competing in the same environment will respect that fee as well.

Ms. Bev Desjarlais: Do you have any ideas on what would happen if they can't financially respect that fee?

Mr. Randall Williams: Then we'll have a different fee happening in the marketplace.

Ms. Bev Desjarlais: Thank you.

Mr. Randall Williams: As it is now.

The Chair: Thank you, Bev.

Murray Calder, please.

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

• 1625

Michael, you look pretty bored over there, so I'm going to ask you a few questions. In your presentation here, you put in a comment about an ombudsman. I raised this issue about three weeks ago on the committee. One of the things that I found out when we had the Competition Bureau here is that they're not interested in dealing with lost luggage or anything like that, and quite frankly, it's not their job.

So where do we put this ombudsman? I threw out the idea that we either give this extra work to one of the commissioners on the CTA or we appoint a new commissioner on the CTA who would in fact take this job. I'd like your ideas on it. Maybe you can expand a little more on what you put in here.

Mr. Harry Gow (Representative, Canadian Association of Airline Passengers; and President, Transport 2000 Canada): If I may, I will answer that one since the ombudsman thing originally came from me and Michael has carried this in the brief.

I believe your idea of a commissioner especially appointed for this is the correct one. I have observed that where people have a number of functions and an ombudsperson function as well, the ombudsperson function sometimes gets lost or is diluted. When a person has this role entirely, they tend to put their best energies into it. I'll just give an example in French.

[Translation]

I knew an ombudsman, a lady, in fact, Ms. Fortier, who worked for a health care services board in Quebec. Ms. Fortier had very few duties apart from receiving complaints from hospital patients or clients of social agencies. This lady had great credibility and she was able to amicably settle many disputes which generally went no further because people were satisfied.

[English]

In summary, if the ombudsperson has only that to do, they become more credible. The idea of linking them with the CTA is an excellent one, sir, because it means you don't have another split jurisdiction. It's already going to be a bit confusing between the competition people and the CTA. If we can simplify things and give this person powers and identify them within the CTA structure, this means they also have research support, staff support. The CTA is well known for doing good work in the economic field, and I think this would be the best seat for them.

The Chair: Thanks, Murray.

Colleagues, we have a thirty-minute bell, so we will be voting at about five minutes to five. We still have fifteen minutes and three questioners.

Bill Casey.

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

I have a copy of a letter from Air Canada, addressed to “Dear Travel Agency Owner/Manager”. It is dated January 24. It's outlining the loyalty bonus package. It says the present one will be cancelled, and it says—from now on—that:

    You will instead be rewarded for your Air Canada Domestic revenues providing that your revenue growth for U.S.A. and International combined is positive to your peer group....

Is that what you're talking about as far as linkage of domestic is concerned? Because there's no competition, no struggle for market share, they don't have to provide you with a bonus any more for domestic. Is that a fair...?

Mr. Randall Williams: Yes.

Mr. Bill Casey: When you're in position to negotiate as a group, will you be addressing that issue or will you try to change that around?

Mr. Randall Williams: The legislation the way it is now, I think, only calls for the right to negotiate fair minimum compensation. So on those other issues, obviously we're communicating with Air Canada and other carriers, as we do on a number of other things. This legislation before you is not dealing with how to direct that.

We feel there's a major concern, though, in tying domestic performance and international performance together, because they have such a dominant monopoly position in the domestic market that they can really use that to also drive out competition in the international markets.

Mr. Bill Casey: When the legislation passes, will you immediately move to change the minimum fee or to negotiate it with Air Canada? Can you live with the present level or will you be seeking a change right away?

• 1630

Mr. Randall Williams: The current methodology is really a commission. It's a 5% commission. As I said earlier, we see ourselves moving to a transaction fee basis, so whether the airline ticket is worth $1,000 or $500 or $100, there will be a transaction fee associated with that. It will be a set fee. British Airways has already announced that's what they want to move to as of January 1, 2001. We would like to begin negotiation right away.

We're also undertaking, just so you know, a study that will look at the actual cost of producing and delivering a ticket. What is the value, the actual cost and the value, to the airline industry of what the travel agencies perform? We're going right to the travel agency level to determine what are the actual costs of that. We have a committee struck, and it is working with KPMG to look at the actual costs associated with that. So we'll have the proper research when we begin our negotiations with Air Canada.

Mr. Bill Casey: On the sample ticket you have here to put forth your recommendation about a service fee box, normally you see the NAV CANADA charge on here, and I don't see NAV CANADA's charge. Usually they charge right on the ticket. There's a $7.50 charge. Why is that not on this ticket? Do you know?

Mr. Martin Taller (General Manager, Ports of Call Travel Agency): If I can interject on that one, you may find the NAV CANADA fee actually built in. There's a ladder on the ticket, not in the boxes on the bottom but in the pricing grids along the ticket. So on the example that's provided, where you see YTZ—

Mr. Bill Casey: Oh, there it is. Yes, you're right.

Mr. Martin Taller: Yes, the $7.50 is in the lineage.

Mr. Bill Casey: You'd think if they can put the $7.50 NAV CANADA fee in, you could put your fee in.

Voices: Oh, oh!

Mr. Martin Taller: Absolutely.

Mr. Randall Williams: The same with the airport improvement fee.

Mr. Martin Taller: Exactly.

Mr. Bill Casey: Thank you.

The Chair: Thanks, Bill.

Roy Bailey.

Mr. Roy Bailey: We came up with this idea of an ombudsman. In listening to both groups here today, even though we've been given certain guarantees from the minister on how we could improve it, this keeps coming back to haunt me a little bit, because I'm beginning to think maybe our idea was correct in the first place. For instance, here we have the passenger association and we have the travel agency group, and that would be an ideal place for an ombudsman to go to work very quickly in the dispute you have, because it's related to the airline industry.

I just keep coming back to that. I must tell the members of this committee, I keep coming back because I really don't feel comfortable with these growing inequities out there, which remain unsolved at this time, without having somebody who can devote all of their time to that, somebody who can move very quickly, somebody who is unbiased, somebody who is unprejudiced. Somehow I'm getting away from trusting—that's a strain for me—what the minister has said.

I come back to relive that, because I'm hearing from both the presenters here that there is a real need for that. You could work together on your problems. The ombudsman could go to another problem. The ombudsman could go to other services in the whole industry. I think the travel group would feel a lot more comfortable if they had someone to go to rather than the TCA and so on—an intermediate sort of thing.

I just wanted to mentioned that, Mr. Chairman, because it just keeps coming back to me that we were right the first time.

The Chair: Thank you, Roy.

Are there any comments? Mr. Janigan.

Mr. Michael Janigan: We've emphasized in our brief that the observer function has been identified by the minister as a function that takes the place, in some respects, of your recommendation associated with an ombudsman, but really the observer has a very different role.

The observer is to look at policy at a macro level and see how things are working across the whole system. The ombudsman is somebody who takes the complaint of the individual passenger or group of passengers and tries to work through the problem to get redress. He has special access to the airlines, to the department, and to the government, and in effect he takes on this cause and attempts to solve it. That's a very different role from that of an observer, who is essentially there to make sure the system as a whole is running correctly and to give recommendations. The ombudsman may have some key recommendations for an observer to carry out, but it's a mistake to confuse those two functions.

• 1635

Mr. Randall Williams: We'd also like to suggest that if there's a strong retail travel agency association in Canada, consumers will be well served, because we honestly believe we represent consumers. With a strong retail travel distribution network and a strong association representing them, the consumers will have a voice.

The Chair: Thanks, Mr. Williams.

Mr. Gow.

Mr. Harry Gow: In response to a comment you made about travel agents and/or consumers being potential persons to act as ombudspersons, in France the national railway corporation, after many imbroglios with consumers, was mandated by the transport minister to appoint a consumer representative ombudsman. They took someone from the association related to Transport 2000 and set them up as an independent commissioner, and they receive and adjudicate complaints, to the satisfaction of both the national railway and the consumers generally.

Also, the notion that the person might be taken from the travel agency industry would be of worth, because they have the knowledge and the information. Such a person would be perhaps better qualified than a career bureaucrat.

The Chair: Joe Comuzzi, please.

Mr. Joe Comuzzi (Thunder Bay—Superior North, Lib.): Thank you, Mr. Chairman.

Mr. Janigan, I appreciate the review of the legislation, but given the history of the Competition Bureau and what they've managed not to do in Canada, and given the promises made by the legislation, really how confident are you that the average consumer in Canada is going to have access to the proper protection without the benefit of an ombudsperson? How confident are you that the legislation will take the place of a...?

Mr. Michael Janigan: I would not be confident that an individual consumer's complaint could be dealt with in the legislative framework without an ombudsman to shepherd it through.

Mr. Joe Comuzzi: Mr. Williams, say I go downstairs today and buy a ticket with USAir and I want to go to Washington. I don't want to know what your fees are, but the price is $1,500. That's a contract you make with USAir, to fly me to Washington. You make a certain fee on that. Is there a transaction fee included in that ticket? It's USAir, you're flying me from Ottawa to the United States destination, and you're going to fly me back. Is there a transaction fee included in that?

Mr. Randall Williams: Right now USAir would pay the travel agent 5% commission for that.

Mr. Joe Comuzzi: So there's no transaction fee?

Mr. Randall Williams: To a ceiling, to a cap.

Mr. Joe Comuzzi: Say I go downstairs and say, “I'm an Air Canada customer. I want to fly to Washington.” What kind of arrangement does my ticket show then?

Mr. Randall Williams: The same thing, 5%.

Mr. Joe Comuzzi: No transaction fee?

Mr. Randall Williams: No.

Ms. Trish McTavish: Both of them could have a transaction fee as a separate charge—a service fee by the agent, no matter what carrier.

Mr. Joe Comuzzi: So you're going to get 5% from Air Canada or 5% from somebody else?

Ms. Trish McTavish: From anybody, with a cap.

Mr. Joe Comuzzi: I don't understand what you're getting at.

Mr. Randall Williams: What we used to get from the airlines was 10%.

Ms. Trish McTavish: And no cap.

Mr. Joe Comuzzi: Oh, now I understand. Okay.

Mr. Randall Williams: Now we get 5%, because they've unilaterally just dropped our commission.

Mr. Joe Comuzzi: Why did USAir then stop the 10%?

Ms. Trish McTavish: They all did it.

Mr. Martin Taller: They follow suit. Air Canada is a form of oligopoly, and they basically follow suit from one another.

Mr. Joe Comuzzi: If I go across to New York State and buy a ticket to Washington, how much does USAir pay?

Mr. Martin Taller: The same amount.

Mr. Joe Comuzzi: What, 5% or 10%?

Mr. Martin Taller: It's 5%.

Mr. Joe Comuzzi: So they pay 5% in the States?

Mr. Martin Taller: Exactly.

Mr. Joe Comuzzi: Air Canada pays 5%?

Mr. Martin Taller: Correct.

Mr. Joe Comuzzi: Canada or the United States. They used to pay 10%?

Mr. Martin Taller: Yes.

Mr. Joe Comuzzi: So all the airlines got together.

Mr. Randall Williams: Well, some are paying different fees. Some are paying 8%, some are paying 6%, some are paying 5%, some are talking about dropping to zero.

Mr. Joe Comuzzi: All the airlines got together then.

Ms. Trish McTavish: Yes.

Mr. Joe Comuzzi: Thanks.

The Chair: But there's a cap, right?

Ms. Trish McTavish: There's a cap.

Mr. Randall Williams: There never were caps prior to 1995.

Ms. Trish McTavish: Correct.

Mr. Lou Sekora: So if there's a cap of $40, $50, or $60, that's it.

Mr. Randall Williams: Yes.

Mr. Lou Sekora: It doesn't matter how much a ticket is; it could be $10,000.

Ms. Trish McTavish: Right.

Mr. Randall Williams: That's correct.

• 1640

Mr. Lou Sekora: So it's not 5%.

Ms. Trish McTavish: It's 5% to a cap.

Mr. Lou Sekora: Oh, to a cap.

[Translation]

The Chair: Mr. Asselin, one question please.

[English]

We have to go for a vote.

[Translation]

Mr. Gérard Asselin: Travel agents can provide certain services to their clientele, and these are excellent services. A travel agent is not useful just to reserve seats on a plane somewhere, he does a lot more than that. Will there be some negotiations about a percentage of the cost of a ticket that will be granted to you because you've brought a customer to an airline? And what will happen to additional services that you provide as travel agent to a customer, among other things reserving hotel rooms and rental cars when the traveller arrives at the airport? Will the client be asked to pay a percentage of the airfare in addition to fees for additional services? We know that you do more than reserve seats on a plane. You provide auxiliary services such as rental car reservations, for example.

[English]

Mr. Randall Williams: Yes, certainly we do provide other services, and there will be service fees attached to those things. Again, for what we do for the consumer, we expect the consumer, and the consumer has been willing, to pay for that added value. When we book hotels right now, hotels basically are giving 10% commission, and car rentals do provide a commission as well.

The Chair: Ms. McTavish, Mr. Taller, Mr. Williams, Mr. Janigan, and Mr. Gow, thank you very much for your presentations to the committee. We do appreciate all the questions you've answered. Questions may spring up over the next few days, and if we can, we will give you a shout and hopefully get a speedy response.

Thank you very much again.

Colleagues, we're recessed until after the vote, and dinner will be served before our next witness. Thank you, colleagues.

• 1642




• 1820

The Vice-Chair (Mr. Joe Comuzzi): Welcome to the adjourned sittings. This is the committee of transport. What we're here to do is study Bill C-26. Am I right so far?

Mr. Roy Bailey: You're doing well, Joe.

The Vice-Chair (Mr. Joe Comuzzi): Thank you. I'd like to welcome as the next presenters the chair of the Standing Committee on National Transportation and Communications. I went up to the front, ladies and gentlemen, and asked how I should address Ms. MacLean. She said “my first name is Ann”, and she's the mayor of Glasgow—

Ms. Ann MacLean (Chair, Standing Committee on National Transportation and Communications): New Glasgow.

The Vice-Chair (Mr. Joe Comuzzi): —New Glasgow, Your Worship. So you can address her as Ann.

We welcome you, Ann, to the committee.

And, Mr. Robert, you're from Ottawa.

Mr. Richard Robert (Policy Analyst, Federation of Canadian Municipalities): That's right.

The Vice-Chair (Mr. Joe Comuzzi): What is your position?

Mr. Richard Robert: I'm a policy analyst with the Federation of Canadian Municipalities.

The Vice-Chair (Mr. Joe Comuzzi): So you're the policy analyst for the municipalities.

I understand, Your Worship, that you're representative of all the small communities right across this country.

Ms. Ann MacLean: Actually, the FCM represents municipalities across the country. It's the municipal voice at the federal level. I chair the national transportation and communications committee for FCM.

The Vice-Chair (Mr. Joe Comuzzi): That's a very responsible position. I'm sure we're going to be very anxious to find out how all the small communities in this country can best be served. I'll turn the hearings over to you, with one exception.

Mr. Bailey said at the outset of the meeting today—if I can paraphrase what he said—that he sends his wife out; he doesn't go shopping with his wife. But right after he said that, he said “I don't know how I'm going to look tomorrow morning”. Well, I can pretty well tell you you're not going to look tomorrow morning as good as you look today. Maybe Bev will look better tomorrow morning, but I'm not so sure you will, Roy.

Ms. Bev Desjarlais: How bad do I look today, Joe?

The Vice-Chair (Mr. Joe Comuzzi): You look great today, Bev.

Okay, Your Worship.

Ms. Ann MacLean: Thank you, Mr. Chairman.

My name is Ann MacLean and I'm the mayor of New Glasgow, Nova Scotia, and chair of the national transportation and communication committee of the Federation of Canadian Municipalities, or FCM. With me, as the chairman mentioned, is Richard Robert, who is a policy analyst with FCM. On behalf of the Federation of Canadian Municipalities, I would like to thank you for inviting us to discuss our views on Bill C-26.

The Federation of Canadian Municipalities is the national voice of municipal governments. We're dedicated to improving the quality of life in all communities by promoting strong, effective, and accountable government. While we understand that the status quo in the airline industry is clearly unsustainable, FCM is here today to inform you of our concerns regarding the proposed legislation from the perspective of municipal governments that anticipate being affected by the proposed changes.

FCM is especially concerned about the effect the proposed legislation could have on competition in the airline industry. In particular, we expect this to adversely impact small and remote communities throughout the country in terms of the service and rates that will result. FCM does not feel it can place full confidence in the guarantees made by Air Canada. While Air Canada has undertaken to continue to provide service to small communities for a three-year period, the level of service to be provided has not been specified.

We appreciate the new requirements the government has added, which are intended to make the public aware of any proposed changes in air service to these communities. These include the notice requirements for discontinuation of the service, which will be increased from 60 to 120 days, and the need for the air carrier to consult with elected officials from the communities. However, this requirement for consultations does not mean the carrier must respond to the concerns of the community.

FCM believes that a formal regime for consultations between municipal officials and the air carrier should be established in cases where the latter announces its intention to withdraw its services from the community. It is unclear what will happen once the 120-day notice requirement for discontinuance passes. Is it possible that a northern remote community without road or water transport could lose its air service should the carrier choose to no longer serve that community? What if the carrier chose to offer only minimal service at elevated prices?

• 1825

We believe there is a definite need for an open and predictable process with expected outcomes. In our view, these requirements to consult do not appear to carry any further obligation, such as a requirement to prove that the service is uneconomical.

The requirements to consult also refer only to a discontinuation of service and not a change in service that could have a significant impact on these communities. Simply put, it does not appear the provisions are adequate to prevent monopolistic proposals.

FCM has had some serious reservations about the emergence of a dominant airline with respect to service to smaller and remote communities, especially in northern regions, and has brought these concerns to the government's attention since last August. FCM has appeared before this committee before and has written and spoken to the minister on several occasions. Nothing we've heard has allayed concern yet.

Canadians rely heavily on their air service, as we all know. For those living in smaller, remote communities, air services are at times their only viable link to the outside world.

Increasingly, air carriers and the federal government have looked to municipalities to help maintain these air links. There is a real concern that where there is little profit to be made, communities, especially small, remote, and northern centres could end up with no air service whatsoever.

Due to government service offloading, combined with the possibility of service degradation or loss as a result of the airline restructuring, many communities feel their economic and social viability is under attack. Small communities, like large centres, want competition and they also want access to air networks. There is a clear and real need for meaningful competition in the airline industry.

FCM would have liked to have seen the federal government introduce measures such as those noted by the Commissioner of Competition concerning Australia, where foreign airlines are permitted to operate in Australia's domestic market by creating Australia-only subsidiaries.

In the absence of meaningful competition, we believe the federal government should create a subsidy program for communities facing the loss of air service. Furthermore, air service to these communities plays an important role in ensuring our national sovereignty.

Given our demographic and geographic realities and the resulting challenges, we believe Canada should do the same.

In closing, Mr. Chairman, the offloading of program responsibilities by other orders of government has added many burdens to municipal governments and has made it difficult for us to strengthen our local economies and businesses. The effects of this offloading have been even more acutely felt in smaller and remote communities that do not have the tax base or the access to service to compensate for the extra responsibility.

Please do not let the airline restructuring further harm or isolate the economies and the future of Canada's most vulnerable communities.

I want to thank you for the opportunity to present FCM's concerns to you this evening, and I look forward to the committee's questions.

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

Mr. Robert, do you want to add anything to the submission?

Mr. Richard Robert: No, not at this point.

The Vice-Chair (Mr. Joe Comuzzi): All right. We're going to start over here with the person who hopes he's going to look better tomorrow—Mr. Bailey.

Mr. Roy Bailey: Thanks, Mr. Chairman.

Thanks for appearing, both of you. It's a brave...when you look at your mandate—transportation and communication. Of course, Canada is noted for its transportation problems. It's part of our history, and I suppose it always will be.

I appreciate the questions you raised in the middle part of your presentation. They are good questions and questions this committee is working with. I was interested in a comment, though, and I want to get to one of your latter comments in my first question.

You're using the Australian model of a foreign airline coming in to operate some outpost services. Would they be given guarantees of these routes? Explain how it's happening. I read something about it, but now it's left me.

Ms. Ann MacLean: I'll certainly let Richard elaborate a little further, but really, what they become is actually subsidiaries in Canada. In other words, those foreign carriers must have a Canada-only division. They would be subsidiaries.

Mr. Roy Bailey: Right.

Ms. Ann MacLean: It would be the Canadian operation of that particular company.

Mr. Roy Bailey: Do you think that in the case of the demise, shall we say, or the divestiture of Canadian Regional we may tempt somebody coming from outside to fulfil the role they are currently playing?

Ms. Ann MacLean: It is a possibility. It certainly is happening there.

Mr. Roy Bailey: Yes—

Ms. Ann MacLean: Everyone's facing the challenges, as we all know. All countries are facing these kinds of challenges. I don't think Canada is alone.

• 1830

Mr. Roy Bailey: Yes. It's an interesting—

Ms. Ann MacLean: But on the issue of competition, we were mentioning subsidy, and of course in a lack of competition you have to look at regulation. We're not necessarily saying that's the first choice, but there has to be some kind of reliance or guarantee.

Mr. Roy Bailey: With all due respect, I don't personally see in many of the areas now served by Canadian Regional Airlines that there would be any hope of competition on many of their runs. We just hope to be able to continue to service those communities.

The number of complaints that have arisen in the last few months is equally divided between the concern in the remote areas and the concern in our larger centres. So this is a much bigger problem, and I'm pleased to see that you have emphasized the necessity of providing that service.

I have a fear, coming from a province that doesn't have too much population—and I'm sure there are members in these communities, like the member from northern Manitoba—that if you ever took away the present air traffic into some of those communities, it would kill them right off. I'm sure the government wouldn't sit by and let that happen without making some move. On the other hand, I don't think we've actually explored all the avenues.

You say you've met with us before, and I remember that. Have you actually conveyed this message to TCA or the minister himself about putting in some guarantee or some avenue by which we will not withdraw services to communities that completely depend upon those services?

Ms. Ann MacLean: That's been our position all along. That's the position we've been putting forward since—

Mr. Roy Bailey: And what response did you get?

Ms. Ann MacLean: Well, we don't have the changes in there yet. We haven't completely had the response we're looking for. As I said, we're encouraged by the extension of the time that was given.

I would like to mention one thing in response to your comment, and that is that we are open to various options. One of those ways is where foreign carriers can come into Canada, and perhaps they can come into some of these areas where they're en route from other locations. I'm trying to remember the.... Cabotage is the term I was looking for—those kinds of options. Perhaps some of these areas won't be as competitive, but that might be an option. What we're asking for is some kind of assurance or some kind of provision for this.

As I said, when there is no competition there has to be some kind of regulation. This isn't unprecedented. If you look at any monopoly, like utilities, the more profitable areas, the ones easy to service, those that are very profitable, will help subsidize those that are more difficult to service, so that every customer in Canada has access to a reasonable rate and also to an acceptable level of service. So that's not unprecedented.

Mr. Roy Bailey: One last comment, Mr. Chairman.

The Vice-Chair (Mr. Joe Comuzzi): No, I'm sorry, but I'm going to give you another turn in a little while.

Mr. Roy Bailey: All right, thank you.

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

Mr. Lou Sekora: I listened to your presentation, and I know you come from municipalities, cities, like I do. We have a lot of our people who have been mayors and council members and a few other things, so they know how a municipality works.

One thing that bothers me, and I know it would bother you as a mayor, is if somebody comes to you and says they want a subsidy. There are the sports people, the swimming pool people...you name it; I can go on and on. I used to hear subsidy about twenty times a day. You say the government should create a subsidy program. What do you mean by subsidy program?

Ms. Ann MacLean: Well, that's if there are not going to be any other options. That wouldn't be our first recommendation.

There are subsidies now to some of the northern communities. There is some assistance. If there is very little access.... In some cases there may be no access, and that's critical, because there are communities that in wintertime are totally blocked off from the rest of the world, except for air. In those cases where they cannot get enough service, the prices are going to go up. There has to be some kind of assurance that these people will be able to move their goods and services at some reasonable amount.

Mr. Lou Sekora: Did you read Bill C-26, and do you still have some concerns? The minister in there has a right to bring competition into Canada at any time he wants to. Certainly he has the power to do so.

• 1835

Also, I can tell you that in Penticton, British Columbia, I got a call from the MLA, and the provincial MLA said “Lou, they've cut the service from Air Canada and Canadian Airlines to a Beaver”. They're violating the regulation. I went to Mr. Collenette, and overnight they reinstated the flights in there, which is something better than what they were anticipating.

I think what happens with Air Canada is he's slashing and burning everything in sight. I'm just using those terms, “slash and burn”. Maybe it's not the proper way, but I describe it that way, as slash and burn. The fact is they destroy everything that's in front of them, their competition and everything else.

I think they need to be brought into line. This bill will bring them into line. The minister can bring them into line. And I can tell you that I wouldn't think for one minute of making a motion on the floor that we bring different American airlines people into Canada to talk about what kind of service they could give us across Canada to combat this kind of monopoly.

You're right, the small communities must have the service. I got a letter today—as a matter of fact I'll be circulating it tomorrow morning—from the mayor of Kitimat, who's on your board. She's saying, “Well, we used to have airline service for 800 seats a day, and we're now down to 150”. That's not acceptable.

I talked to Air Canada people this morning, and they're shocked that it went down that low. They want to see that letter. Do you know what I told them?

The Vice-Chair (Mr. Joe Comuzzi): Mr. Sekora, you're into tomorrow morning's time.

Mr. Lou Sekora: I know, but I have five minutes. I have five minutes, and I might take seven, like my friend.

Anyway, the fact is that I think we must provide service to these communities. We cannot slash and burn and take out everything. The fact is, I think Milton and his group did many, many silly things. Yes, they have to watch their budget; yes, they have to do a lot of things to change it. But the fact is they should go and see the majors and councils of every city they're giving service and talk to them: Are we doing the right thing? We're not? If we're not, why not? Where do we meet in the middle of common ground, that type of deal? What do we do about this? Those are things I'm just saying.

I'm glad you're here, because I think the FCM serves a great purpose across Canada. I was a member for 25 years, and you do a great service to the communities.

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

Mr. Lou Sekora: With that, I can let you go, because I've had four minutes. Thank you very much.

The Vice-Chair (Mr. Joe Comuzzi): Four minutes? How long did he speak? Eleven minutes.

Mr. Asselin, please.

[Translation]

Mr. Gérard Asselin: First of all, Madam, I'd like to thank you for your presentation as well as for the excellent quality of your brief. You represent the Federation of Canadian Municipalities very well in your brief. Upon reading it, one notes your concern and worries about the services provided to customers, particularly in remote regions.

I myself am from a remote region in northern Quebec where there is only one access road and no railway service. It is widely known that airline service in the regions is very important because it gives us access to professional services and health care. When we have to travel very quickly for business reasons, we often have no other choice than to use the single carrier serving the region.

Since the merger of Canadian Airlines and Air Canada, we've seen that there is competition in order to eliminate one or more carriers and therefore have a monopoly. In its report, the Block Québécois stated that the government should be concerned with preserving airline services in the regions even if that means subsidizing it if it is not profitable or forcing airlines to have a profitable route upon condition that they serve regions that are not profitable.

Do you agree with the recommendation that the Bloc Québécois made in its report and in the dissenting report?

[English]

Ms. Ann MacLean: That could indeed be an option. We would concur with the principle of that. We would concur with the importance of first of all making sure there is competition, and in the absence of competition you'd have to get into some regulation, and possibly subsidy, as we say. So that is a very good option, which we would support.

• 1840

[Translation]

Mr. Gérard Asselin: It is quite possible that there will be no competition. Right now there is, but if the market is divided between two or three carriers, with departures at 15-minute intervals, one or two of the carriers will withdraw from that market voluntarily. At that point, the remaining carrier will have some monopoly over the airfares and schedules. We will then be at the mercy of that carrier and that could mean that this carrier, as we've seen in the case of InterCanadian in Quebec, may decide from one day to the next to interrupt service because it is not profitable. At that point, a region could end up with only one access road and be forced to use an airline that doesn't serve us very well.

I'm convinced that the federal government should look into this. In your brief, you clearly explain your concerns, but I would have liked to see the Federation of Canadian Municipalities state in its brief that it recommends amendments to the Act during clause-by-clause consideration. That way, the Federation of Canadian Municipalities would not have travelled to Ottawa just to say that it is worried and that it fears that Bill C-26 will not serve the interests of remote regions, because its recommendations would be included in Bill C-26. Thus, your presentation could have a positive effect. You would find your concerns reflected in Bill C-26.

We will present your commitments and your concerns when the time comes, but I would have liked to see the Federation of Canadian Municipalities draft a few recommendations about concrete points that it would like to see included in Bill C-26. Could you do that and send it to the committee very quickly?

[English]

Ms. Ann MacLean: Yes, it could, if the chairman would receive that.

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

Ms. Ann MacLean: Thank you very much.

The Vice-Chair (Mr. Joe Comuzzi): If you'll supply us with that information, we'll distribute it.

Mr. Dromisky.

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

I found your report very informative, but I find that the emphasis is really on a major concern regarding remote areas.

I would like to say that as far as the national organization of Canadian municipalities is concerned, they should be very sensitive to the services that are being provided by Air Canada through their regional networks as well as their main lines. But it's the regional networks that we have to be really concerned about, especially in the next two years.

So I'm strongly recommending to you, as Mr. Chairman has pointed out, that you have a very responsible position as chair of the committee you are on to alert all the communities that are being serviced by the network to inform you, as chair, on a regular basis, of any concerns they have on the provision of service, especially, again, and I repeat, in the next two years. It's critical.

Ms. Ann MacLean: I did suggest that to the minister when I met with him. I suggested and offered that we would try to make sure we were providing that kind of feedback.

Mr. Stan Dromisky: That's great.

On the concern you have for the far remote areas, I don't have a comparable concern. This is a wonderful country. We have a very healthy aviation industry.

If you take the province of British Columbia, when I was at an aviation conference recently in Penticton, someone making a speech told us in the audience that there are over 13,000 private licensed planes in British Columbia alone. I know there are thousands in Ontario and Quebec. These are the people who provide much of the service to the far remote areas in carrying cargo, in carrying—

Ms. Ann MacLean: Supplies.

Mr. Stan Dromisky: —passengers and supplies of all kinds.

They're very versatile. They can land with skis, with wheels, and many of them with pontoons. This is the lifeline for many of the northern communities. If one drops out of the sky or quits or something, there's somebody else to fill the gap immediately and provide the service. Competition in that area, of providing services for northern Canada, is extremely severe and very healthy. So I don't have the same kinds of concerns about those far northern communities. It's the network that will be under the control of Air Canada that I think is going to have to be watched very carefully.

• 1845

As another point, I know in many of the communities, even within that network I'm referring to, the mayors, the reeves, chairmen of chambers of commerce, all kinds of community groups, will be screaming for aviation service, that they want a passenger service to their community. But then when the passenger service is brought in, we find that there's practically no one to support that aviation service, and the company says, “Hey, you all scream for planes to come in, but there's nobody getting on the plane; I'm losing money every day.”

On your point about 120 days, some companies and people in the industry think that's far too long. We're forcing them to provide a service for 120 days when they're losing money every single day in that operation. They would like to close down that business as quickly as possible. They might have routes someplace else that are making a profit, but that profit will be going to cover up the loss on the particular route where nobody is taking the plane. Do you understand?

There is a sensitive area there regarding the time of 120 days versus 60 days, and that's an area we have to look at carefully.

Ms. Ann MacLean: First of all, FCM represents all municipalities, large and small, so we have those concerns.

The reason we want to address our remote and smaller communities is because they are the most vulnerable and they will not have the same kind of competition opportunities as some of the other areas of the country. When the safeguards in there are not adequate, there is little comfort to communities. We'd like to anticipate rather than try to react.

Mr. Stan Dromisky: Are you referring to regularly scheduled passenger service when you're talking about those?

Ms. Ann MacLean: The question becomes, what is the level?

Mr. Stan Dromisky: Just a minute, are you referring to passenger service only, regularly scheduled passenger service?

Ms. Ann MacLean: Scheduled passenger service.

Mr. Stan Dromisky: The statement I made before, about how healthy the industry is.... Much of it is on contract, so I have to fly up there and bring six people, or I have to bring two tons of bread up there, or whatever. That goes on every single day through all the communities in northern Canada.

Ms. Ann MacLean: I'm aware of that.

Mr. Stan Dromisky: Thank you.

The Vice-Chair (Mr. Joe Comuzzi): Your Worship, you can respond if you'd like, if there was a question.

Ms. Ann MacLean: I guess what we're saying here with respect to those smaller communities is that in the case where the market will not provide, we have to look for other options. While the honourable member has mentioned there are all kinds of other services, I think those who may represent some of the more northern communities are saying they do have service now that is critical to their economy and their viability, even their health care services, and they must be assured at least a minimal acceptable level of service.

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

Bev Desjarlais.

Ms. Bev Desjarlais: Actually, I hate to follow right along with Stan Dromisky—

Mr. Stan Dromisky: Are you worried about that?

Ms. Bev Desjarlais: —but here's the first question. Do communities in Canada have that guarantee of service right now?

Ms. Ann MacLean: They have the service.

Ms. Bev Desjarlais: Do they have a guarantee of air service?

Ms. Ann MacLean: No community has a guarantee.

Ms. Bev Desjarlais: Okay, so that isn't in place presently. You said they don't have that.

In areas where, say, Air Canada or Canadian Regional flies, do they go into those communities that don't have any other access whatsoever? Are they the only carrier going into a number of those communities?

Ms. Ann MacLean: Yes, or their regionals.

Ms. Bev Desjarlais: Can you give me, say, three to five communities where the only air carrier going into those communities is an Air Canada or Canadian regional.

Ms. Ann MacLean: There's Goose Bay—

Mr. Richard Robert: Sydney, Yarmouth.

Ms. Ann MacLean: Yes. That's Happy Valley-Goose Bay.

Ms. Bev Desjarlais: That's the only carrier going in?

Ms. Ann MacLean: Yes.

There's Nunavut—

Mr. Richard Robert: The capital of Nunavut—

Ms. Bev Desjarlais: Iqaluit.

Ms. Ann MacLean: Yes, and there are actually some other smaller communities that may not be as remote that are also very concerned. There are a number in Atlantic Canada that are very concerned about tourism, for example. P.E.I. is very concerned about what's happening there.

• 1850

Ms. Bev Desjarlais: But they have road access.

Ms. Ann MacLean: Yes, they have road access, but when their needs are very high in the summertime, they're very concerned about the effect that's going to have on price and their level of service.

Ms. Bev Desjarlais: I think in that sense we're talking about remote rule and not having any service whatsoever. So that guarantee isn't there right now. There are some communities that Air Canada or Canadian Regional served, and under the present legislation that service must be guaranteed for, I believe, three years. After that point it will depend on the market as to whether or not there will be service available. It will be based on the rules of competition. Everybody around this table—and I would imagine yourself, just based on your Australia comment—believes that if the market's there, we will have somebody in there to provide the service and there will be competition.

We either don't believe that rule applies, or if we believe it's really going to work, we let the market do the job. Do you not trust the market to do the job or the competition to be there?

Ms. Ann MacLean: In a monopoly, where is the competition going to come from?

Ms. Bev Desjarlais: But even if there's nobody in there, your concern is that Air Canada won't want to fly in there after the three-year time.

Ms. Ann MacLean: Right.

Ms. Bev Desjarlais: So is your point that we should make somebody fly in there?

Ms. Ann MacLean: We can assist and make it more attractive for somebody to try to fly in there, or we can look at options to try to see who could fly in there. Right now, with the monopoly—

Ms. Bev Desjarlais: Okay, and under the CTA my understanding is that when a carrier is going to be moving out of the community now, they sort of get the word out that this is going to be there. We pushed to increase to 120 days to give more opportunity for carriers to come in. But apart from that, right now airline companies don't have to go in. You can't force somebody to go in there.

Ms. Ann MacLean: No.

The Vice-Chair (Mr. Joe Comuzzi): Thank you. I'll give you another round if you want.

Mr. Jackson, are you with us?

Mr. Ovid L. Jackson (Bruce—Grey, Lib.): I'm with you.

They keep referring to Australia all the time. It seems to me that when I heard that intervention about Australia, it had something to do with New Zealand. Apparently, the New Zealanders like to shop in Australia, and they had a special kind of facility. Maybe the researchers can refresh our memories about how that would work with cabotage and the competition, in terms of Air Canada.

The Vice-Chair (Mr. Joe Comuzzi): I think you're asking that person a question instead of...unless you want to get—

Mr. Ovid Jackson: No, maybe you have more information. You keep referring to the Australian model, but it seems to me—it's easy in my mind and I want to get it clear—that in the case of Australia, the biggest reciprocal thing was between them and New Zealand.

That particular case was a special one because the New Zealanders actually wanted to go over there to shop, so they allowed them to use their slots and spaces and all that kind of stuff. I think our particular case with the Americans is very different from that. Apparently there are routes that are quite good, but we don't allow cabotage; we don't allow people to operate from...you know, you can drop off a passenger but you're not allowed to pillage. I don't know if the Americans would allow us reciprocal rights. Have you investigated that, and how would that work?

Ms. Ann MacLean: No, we haven't investigated that. Maybe some of your analysts have.

Mr. Ovid Jackson: Okay. I don't know if anybody can help up front. I'd like to get that cleared up, with that Australia thing.

The Vice-Chair (Mr. Joe Comuzzi): Roy Bailey.

Mr. Roy Bailey: I think what Mr. Jackson is referring to is a different matter. You're referring to an agreement that was reached between the two countries to fly back and forth. It was an agreement not known as cabotage; it was a major airline using both. New Zealand, trying to have their own, kind of bought into the Australian airlines.

• 1855

Ann is talking about the bush pilots in the outback of Australia, which has nothing to do with the air story you're bringing up. That was a unique story in itself, but it has nothing to do with the servicing of the outback regions, where they use Twin Otters and things of that nature.

Mr. Ovid Jackson: So it's different.

Mr. Roy Bailey: Yes.

Mr. Ovid Jackson: Okay. I just wanted clarify that.

The Vice-Chair (Mr. Joe Comuzzi): Does that clarify it, Ovid?

Mr. Ovid Jackson: Yes.

The Vice-Chair (Mr. Joe Comuzzi): It brings it into some perspective. Thank you.

You still have some time if you'd like to carry on.

Mr. Ovid Jackson: No. They kept referring to the Australian model and I wasn't too sure what it was. So maybe you can explain a little further what exactly happens with the bush pilots you were referring to in Australia.

Mr. Roy Bailey: It's a very similar situation in Australia to what we have in northern Saskatchewan. We have one airline—luckily it was already there—known as the Athabasca Air Lines. They have no jets. They have one or two turboprops and the rest are Beechcraft aircraft. It's a similar situation, and the largest number of passengers on a plane is about 20. They service the entire area of northern Saskatchewan.

In that particular case there can be no opposition because it's darned tough for a single unit to make it. But no one in northern Saskatchewan is complaining about that. It's a private company. It's doing good service. You will find that in Prince Albert, La Ronge, and other places the attitude is, “Keep your hands off because we don't want competition here”. They're not complaining. I'm sure you don't have any complaints from that part.

So it is true that in some areas you can't have competition; it just won't work. But as long as you're getting the service, that's the point.

Mr. Ovid Jackson: So we're talking about private entrepreneurs, not a foreign country.

Mr. Roy Bailey: Well—

Ms. Ann MacLean: They can be, but they would have to be a Canadian-only subsidiary. In other words, they would have to make that commitment to be a Canadian-owned subsidiary.

The Vice-Chair (Mr. Joe Comuzzi): We'll have to cut it there. Mr. Casey is next.

Mr. Bill Casey: Thank you. You certainly opened a can of worms with that subject.

Ms. Ann MacLean: We're looking for whatever options can assist our citizens, from sea to sea to sea, to have viable and healthy communities.

Mr. Bill Casey: There's another policy change in Canada that is actually converging with this merger of airlines, and that's the divestiture of airports. That's going to affect municipalities a lot because of the downloading of responsibility and the costs.

For instance, the airport in Sydney was divested to the municipality. At the time it was divested, the municipality saw that the revenue was generated from Canadian Airlines and Air Canada coming in. They had a certain level of revenue. All of a sudden, with the merger now, the flights have been reduced and their revenue has been drastically reduced. Eventually the municipality will be on the hook for that.

A lot of municipalities are surviving on a transition fund, a pool of money that was given to them. I believe Moncton, Saint John, and Fredericton are all in the same boat, where they're losing about $1 million a year. That's exacerbated now because of the merger. That's going to end up in the laps of the municipalities. I imagine it has already been flagged as an issue for your organization, but it's going to get a lot more serious because the transition funds are going to run out.

I just wonder if you've had any complaints about that situation, where the municipalities are threatened with the loss of their air service, not because of Air Canada policy but because of the merger situation.

Ms. Ann MacLean: Yes. Thank you for mentioning that, because it has been a concern of FCM. Also, of course, the NAV CAN fees will be reduced, and the municipalities are finding it difficult to be able to accommodate those operations. As I mentioned here, municipalities have been asked over a period of time to be an important part of that air link.

Another factor at play is the emergency services. It's another issue of downloading, and we met with the minister about that recently. Because municipalities are under the regulations, they are going to be asked to provide emergency services. First of all, we're not convinced that those services are the ones that are actually going to be adequate, so we need to have that clarified. Also, there are no dollars to that downloaded responsibility.

• 1900

All of those things are happening at the same time as these mergers are happening. As I mentioned, I just spoke to it briefly because I wanted to address Bill C-26. All of those relate to the impacts that the downloading, the divestiture...and this is happening.

Mr. Bill Casey: Have they increased the standards? I know they put out a discussion paper to increase the emergency measures standards. From the federation's point of view, are the increased standards going to become the regulations now?

Ms. Ann MacLean: We are of the understanding that the minister was going to come forward with a statement on that sometime in April. We have not received that yet, but he did advise us that there would be a statement made with respect to the regulations. We also mentioned that there would have to be some dollars with regard to that, but we're not quite sure how that's going to translate.

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

We've had questioning from everyone with the exception of Mr. Calder and Mr. Hubbard.

Do you want to ask anything, Mr. Hubbard?

Mr. Charles Hubbard (Miramichi, Lib.): No.

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

Mr. Murray Calder: We have talked a little about an ombudsman for any problems. The idea has been thrown out that we have an extra commissioner put on the CTA to take care of problems like that. What's your opinion of that?

Ms. Ann MacLean: We believe that would be a positive thing.

Mr. Murray Calder: Okay.

Mr. Chairman, now I have your attention, I'm all done.

The Vice-Chair (Mr. Joe Comuzzi): Thank you. I compliment you, Mr. Calder, on your brevity. Was there an answer to your—

Mr. Murray Calder: Yes, and it was a good one.

The Vice-Chair (Mr. Joe Comuzzi): Isn't that amazing? I was just being informed of something over here and I apologize.

You have a small question, Bev.

Ms. Bev Desjarlais: You referred to the Australian domestic market. The Competition Bureau director, or whatever his title at the bureau—I think it is Mr. von Finckenstein—mentioned the Australia domestic market. From what I had seen when I looked into what they were doing, they operated under somewhat different situations. They didn't have Canada's weather, for one thing, in Australia, so operating costs were a whole lot different.

As well, and I don't think Canada quite hits this level, I believe 95% of Australia's population is urbanized along one coast or in a couple of major centres and the other 5% is located in the rest of Australia. So I think Canada is quite different, although everybody seems to think Australia and Canada are so much alike. I think when we see the reality of it, we're quite different.

My question goes back now to the regional airlines that go into communities. In areas where only those regionals go in, is there enough of a market for another airline to be going in there? In the areas where you specifically have just a Canadian or an Air Canada regional, much along the line where InterCanadian was the only one, is there enough of a market for more than one carrier?

Ms. Ann MacLean: In some cases there will be and in others there won't. As you said, Canada is very diverse, and those things would have to be assessed.

Ms. Bev Desjarlais: Do you think it would be detrimental, or would it be favourable, if Air Canada has to divest of the regionals and they're not in line with Air Canada? Do you think that would be detrimental to those regionals or do you think you'd still have businesses in there operating?

The Vice-Chair (Mr. Joe Comuzzi): Ponder that question, because it's a difficult question and I'm going to....

Ms. Ann MacLean: That would be a subjective question for me.

The Vice-Chair (Mr. Joe Comuzzi): You're absolutely right.

Ms. Ann MacLean: That would be more a technical question and certainly an economic one as opposed to perhaps a political—

The Vice-Chair (Mr. Joe Comuzzi): Your Worship and Mr. Robert, I thank you very much for making an excellent presentation. You've noted, obviously, from the members' questioning that they're very concerned about what will happen with respect to the small and remote communities in this country.

• 1905

We want you to know, Your Worship, that you should feel free to contact this committee at any time you see something that is offensive to any one of the communities you represent. I think we're committed here to ensure that those facilities and those services should be maintained in this country.

So I thank you so much for taking the time to—

Ms. Ann MacLean: Thank you, Mr. Chairman, and I also appreciate the interest of the members. We will send you that information.

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

The next witnesses are from Les gens de l'air du Québec.

Welcome, Mr. Martel, Mr. Alain.

Mr. Martel, you're the president of the organization, as I'm told, and Mr. Alain is the vice-president. I notice you've submitted your brief. The usual procedure is to summarize your brief. I'm sure there are members who would like to ask you questions.

The hearing is now entirely in your hands, Mr. Martel, and you can do it whichever way you feel comfortable.

Mr. Serge Martel (President, Les gens de l'air du Québec): We'll just start with the mémoire that we've prepared, and then we'll proceed with the questions, if you don't mind.

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

• 1910

[Translation]

Mr. Serge Martel: Mr. Chairman, dear members of Parliament, we thank you for your willingness to listen to us within the scope of the work of the Standing Committee on Transport on Bill C-26, first presented to the House of Commons on February 17, 2000.

The protection and promotion of the cultural and socio- economic rights for francophones working in the aviation field were at the core of the objectives that motivated the founders of our association in the 1975. Our intervention will limit itself to the consequences of the bill regarding amendments to the Air Canada Public Participation Act and more specifically to amendment 18 of the bill.

Passing this bill with its current content, without any changes, would only legalize an unjust discrimination that never stopped against francophones working in the air carrier industry in Canada. The legislator omitted to subject the moral persons specified in article 10.3, for now Canadian International and the regional carriers, to Parts V and VI of the Official Languages Act. Part V covers language of work while Part VI concerns the participation of English-speaking and French-speaking Canadians.

We believe that it is not necessary to describe Part V in detail. As for Part VI, we have annexed an explanatory text drawn from the Treasury Board Manual. And we would like to quote Michel Bastarache's book entitled Linguistic Laws in Canada:

    Language equality between individuals also requires that French be recognized as a language of work in federal institutions. It would be absurd to grant equal status to both official languages if one of them was subsequently prohibited as a language of work.

The author continues with these lines that describe quite well the importance of Part VI of the Official Languages Act:

    The declaration of subsection 16(1) implies a further consequence: the equitable or proportional representation of both official language groups in the federal administration. The assumption behind the declaration is that both official language groups are equal. Obviously, equality is not an absolute. It does require, however, equitable representation of both language groups.

And now, a bit of history to prepare the future. It is the duty of this committee to extract from past events the lessons needed to prepare a better future and thus prevent injustices that should never have occurred. Considering the limited time span that we have, we will use graphs and tables which will speak for themselves quite well.

We will begin with Canadian International. We must remember that this carrier was created by the merger of numerous airlines of which only CP Air had a national status. The others were mostly regional carriers. One important thing is that Canadian was never obliged to comply with the Official Languages Act except for some provisions imposed by Transport Canada.

Table 1 clearly shows the stagnation of the number of francophones within Canadian groups of pilots. Moreover, francophone pilots hired by this corporation since 1987 account for only 4.1% of new staff. If we take into account what happened to its feeder airline in Quebec, Inter-Canadian, there are good reasons to worry. Since Canadian was not obliged to comply with the Official Languages Act, we were not able to collect the same type of data for all its staff. You have here a table that illustrates the participation of pilots.

Let us now look at the situation at Air Canada. Before drawing a picture of the evolution of the francophone level within Air Canada, let us quote the words of Mr. Claude J. Taylor as reported by Mr. Pierre Jeanniot during the fifth annual meeting of l'Association des gens de l'air in April 1980:

    To be a real Canadian airline, we believe that Air Canada's employees of both official language groups should reflect the community, the province and the country, as much by their number as by their representativeness within Air Canada.

Already in 1981, the Crown corporation set precise objectives. In response to a question from Senator Asselin of the Standing Joint Committee on Official Languages, Mr. Taylor reiterated the commitment of the corporation to attain a 25% proportion of francophones by 1986. The same words were used again in 1987 by Mr. Jeanniot before the same audience. Yet another affirmation of this nature and the cock would have crowed!

• 1915

The following graph illustrates a completely different reality. We can clearly see that within 20 years, the level of francophones within Air Canada, far from showing progress, has in fact, in 1998, gone back to the level it was at in 1978, 17%.

The rise in the number of complaints as shown in the following graph is a reminder of the still accurate words contained in Mr. Bastarache's work, as previously mentioned.

In comparison, it is curious that the francophone levels within VIA Rail and the Canada Post Corporation were respectively 39.9% and 23.8% in 1997. Another interesting fact is that among all the institutions that report to Treasury Board, Air Canada has the greatest number of employees for whom the first language is unknown.

Air Canada's group of pilots does not escape from the low francophone representation despite the statements given by two Air Canada CEOs before the Standing Joint Committee on Official Languages. The objective then stated was to attain a francophone representation among the pilots of 24 to 25%. We are still quite far from that goal.

Indeed, since 1980, the francophone level has risen by only 5.8% to settle at 15.8% at the beginning of the year 2000. At this rate, it will take Air Canada 32 years to achieve their goal of 25%. If this keeps up, many good aspiring francophone pilots will see their career halted before it even starts.

Yet, Pierre Jeanniot had indeed promised in 1985, “without any outside constraint”, as he said, that about 40% of the new pilots recruited by Air Canada would be francophones until the 24% level was attained.

But apart from a five-year period between 1985 and 1990, there has been a constant decline as shown in the following graph. The percentage dropped down to 13% in 1999. If that trend continues, it will be mathematically impossible to reach the fair representation goal for francophones. This low-francophone representativeness within Air Canada reveals a constant problem that only an outside intervention could rectify once and for all.

Here now is the family picture, because everyone's under one roof now, aren't they?

It is clear to all that, despite the different judicial status separating Air Canada, Canadian and the regional carriers, the three entities will now become one. The following picture is incomplete since we could only collect data for the group of pilots. As we have mentioned earlier, Canadian International and the regional carriers are not obliged to transmit statistics concerning their employees to Treasury Board.

The following table gives a good picture of the francophone presence among pilots. This is an overview. Given the current francophone representativeness within Canadian International and the regional carriers, it is unrealistic to think that the 25% objective within our new national carrier will ever be reached unless all its constituents are covered by Part VI of the Official Languages Act. This condition, of course, should apply to all employees of this new national monopoly.

In conclusion, all this wishful thinking and the above evidence brings us far away from the statement given in 1981 by Mr. Claude Taylor, then Air Canada's CEO, who stated:

    Air Canada recognizes its vital role in contributing to national unity which in its simplest terms is to bring Canadians together: to meet, to communicate, to get to know each other and to understand what being a Canadian is all about. It is in this context of contributing to the national understanding that I believe we have had our greatest successes and the ones of which we are the most proud.

Such a statement appears again to be wishful thinking. We can say, without any doubt, that the air transport industry was and still is very resistant to the application of the Official Languages Act. The leaders of the new Air Canada should learn a lesson from their Belgian counterparts who, in a federal and linguistic duality context, understood and applied the notion of equity.

• 1920

Many generations of francophones have paid for the constant discriminatory attitude of the Canadian airline selection committees. Who knows how many dreams have received a plain no as an answer? These are the irreparable wrongs that Bill C-26, in its current version, will allow to continue by not correcting them.

As we have shown through this presentation, the status of francophones within a corporation that has to abide by the Official Languages Act remains unacceptable. By letting the air transport industry operate without abiding by Parts V and VI of the Official Languages Act, the Canadian Parliament will jeopardize what is left of linguistic duality in Canadian skies.

The Association des gens de l'air du Québec has prepared proposed amendments to Bill C-26. These are appended to the brief. Our amendments are aimed only at respecting francophones working in the Canadian air transport industry and putting an end to injustices that have been going on for the last 30 years. We ask the support of all political parties to bring the amendments prepared by our association to the floor of the House of Commons.

We would like to close this presentation by quoting an editorial written by Roger Bellefeuille, which appeared in the newspaper Le Soleil on January 31, 1985:

    Francophones have a right to their reasonable and fair share of what has been Trans-Canada Airlines [...]. Quebeckers would like to "travel together" with the others, but not by being the only ones to get second-class seats.

Thank you.

[English]

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

With your permission, Mr. Bailey, I'll turn the first round of questioning over to Mr. Guimond.

[Translation]

Mr. Michel Guimond (Beauport—Montmorency—Côte-de- Beaupré—Île-d'Orléans, BQ): Mr. Martel and Mr. Alain, I would like to thank you for your presentation and offer my congratulations. I would ask you to answer briefly because we have only five minutes.

I will try to impose discipline on myself and not go into long preambles. I have a tendency to do that, unfortunately. Sometimes we francophones use words...

Mr. Martel, today in La Presse, on page A12, there was a headline: "Un projet de loi discriminatoire pour le français dans l'air" (a bill that discriminates against French in the air). I imagine that La Presse had obtained a copy of your brief. The article reflects your assessment of Bill C-26, in the sense that if no changes are made, this legislation will perpetuate a climate of discrimination against francophones. Is that the case?

Mr. Serge Martel: That's right. Les Gens de l'air believe that a Crown corporation, that is, a monopoly, or a company that is allowed to use the Canadian flag as it does business around the world and that Canadians take to be a national company should respect the social make-up of our country and should ensure equitable representation in the workplace.

Mr. Michel Guimond: Quebec and the Maritimes recently experienced the bankruptcy of an air carrier, InterCanadian. Our committee met twice, I believe, with Mr. Myhill and Mr. Cochrane, as well as with Mr. Michel Pagé. They told us about how that company's survival was threatened and said that if nothing was done, it would have to fold. That happened on November 20, 1999, and led to a petition in bankruptcy being filed in February, I believe.

Inter-Canadian had some 1,000 employees. It had its beginnings in the succession of employers of Intair. One could perhaps go back even to Nordair and Québecair. So there were a certain number of francophone pilots.

• 1925

We know that Air Canada has the wind in its sails, or perhaps I should say the wind under its wings. Do you have figures on how many former francophone pilots from InterCanadian have been hired by Air Canada?

Mr. Antonin Alain (Vice-President, Association des gens de l'air du Québec): Yes, our figures indicate that they have hired three francophone pilots.

Mr. Michel Guimond: Three out of how many? Four hundred or 425?

Mr. Antonin Alain: Out of about 100 pilots.

Mr. Michel Guimond: I think we need to make a distinction. Is it true that the Gens de l'air represent not just pilots, but also flight attendants and ground workers?

Mr. Serge Martel: We represent ground workers, technicians, flight attendants, pilots and air-traffic controllers.

Mr. Michel Guimond: Mr. Martel, you are a pilot, are you not? Mr. Alain, I do not want to be disrespectful to you because of the colour of your hair, but I imagine that you are a retired pilot.

Mr. Antonin Alain: I was a pilot and I still am. You might say I am an experienced pilot.

Mr. Michel Guimond: You are still a pilot, but you are no longer working for an airline.

Mr. Antonin Alain: No, no.

Mr. Michel Guimond: I just wanted to make a distinction....

[English]

The Vice-Chair (Mr. Joe Comuzzi): Mr. Guimond, can we get to the question?

[Translation]

Mr. Michel Guimond: We need to make a distinction between the taped messages indicating where the toilets and emergency exits are located, and the ability of the cabin crew to give instructions in both official languages. Mr. Randell seemed to be saying that, for regional flights, bilingual recorded messages were all that was required to ensure that passengers could be evacuated safely.

In the planes that you fly, are there recorded messages for every eventuality? Is there one that indicates what to do in the case of a puncture or if a fire starts in the cabin? Does it tell us to take out our dentures and take off our shoes, to hold our knees and unbuckle our belt? I have never been involved in an emergency landing. Does a taped message say all that in both official languages of Canada? We want to get out of Canada, but we are told that this is a wonderful bilingual country from coast to coast to coast and that we should not leave. Your brief seems to say the contrary.

[English]

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

[Translation]

Mr. Serge Martel: That was quite a preamble. I can tell you that the Association des gens de l'air has always said and continues to maintain that the cabin crew should always give safety instructions in both official languages and that recorded messages should not be used for that purpose. We are a bilingual country and there are francophones travelling everywhere in Canada. I believe that a national company has a duty to assign bilingual employees on its aircraft. The crew members are trained to deal with emergency situations, whereas the passengers are not accustomed to these sorts of events. I do not feel that, in such situations, passengers could understand instructions given in another language or in recorded form. I entirely agree with you that a member of the cabin crew should give instructions in both official languages.

[English]

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

Mr. Guimond, let me compliment you on your discipline in the very first question you asked, but you really lost it in the second.

Ms. Desjarlais.

Ms. Bev Desjarlais: I've lost track of where I was. In regard to sections 5 and 6 and your desire to have the amendments added to the act, presently do they apply to all the carriers throughout Canada, the regionals that are there?

Mr. Serge Martel: Presently sections 5 and 6 are applicable just in the case of Air Canada, because Air Canada has to follow the official languages law. So sections 5 and 6 are applied just to Air Canada.

• 1930

You have to understand that now, as a Canadian, if you fly from Ottawa to Toronto, then from Toronto to Hawaii, you might be using an Air Canada aircraft. You'll be bilingual to Toronto. Then from Toronto to Hawaii, if you're with another part of that company, yes, in terms of the language of service, you'll be served. But as a passenger.... As a national carrier, to us it's the same carrier; it's still a national carrier and it carries the flag of Canada.

Ms. Bev Desjarlais: Are you aware of any passenger whose life has been lost as a result of not getting proper safety instruction?

Mr. Serge Martel: They're probably dead.

Some hon. members: Oh, oh!

Ms. Bev Desjarlais: Are you aware of any?

Mr. Serge Martel: No.

Ms. Bev Desjarlais: Okay.

I recognize your position as far as bilingualism is concerned. I don't argue that. I know myself that when I get the safety review, it doesn't just come in language but in action. The cards are in action because the language of the universe is that if you can show someone by sight what they should be doing, it often has a far greater result. I'm not talking about taking your dentures out and doing the fetal position. The card is there. All that is done in diagram as well.

Having worked in a hospital with numerous people who didn't speak the English language but who spoke Cree or Ojibway or another language, I can never recall instances where there were serious problems as a result of the language barrier. So although I recognize the bilingualism aspect, as far as the safety aspect goes, I would like to know if there really are serious problems that have happened as a result of the safety issue.

Mr. Serge Martel: Probably so far the only problem we have had would be frustration in regard to the official language that is not respected.

Ms. Bev Desjarlais: Okay, and that's fair enough.

The Vice-Chair (Mr. Joe Comuzzi): Thank you very much for very good questions.

Mr. Bailey.

Mr. Roy Bailey: Thank you. I want to get a response from you in the sense of you talking about the French or the English component. For instance, both of you speak English. You speak English much better than I speak French. So when you're talking about the francophone who applies to Air Canada, you're no doubt talking about, say, a pilot, a young man or a young woman, who obviously is bilingual, right?

Mr. Serge Martel: Yes.

Mr. Roy Bailey: Having said that, they are at an advantage, as you are at an advantage compared to myself because you understand both official languages. I understand one and bits of others.

In your presentation—I'm not criticizing you for this, but for someone sitting back who's not on this committee and who would, say, look at your charts, they would say that what you're doing here is not hiring these bilingual people—by “bilingual” I mean francophone English-speaking people—simply because they are francophone.

I find it difficult that any company in Canada would not hire a young person coming on, be they a stewardess or anyone else. Their name could be Alain or Guimond or Asselin, or whatever, but they would be francophones and yet they would be able to communicate in both languages. I find it difficult when I look at your chart to see that only 5% or whatever it was are being hired.

Mr. Serge Martel: The chart you're looking at is the table from Canadian.

Mr. Roy Bailey: Oh, okay.

Mr. Serge Martel: We made a difference between Canadian Airlines and Air Canada. We made a difference simply because Air Canada is subject to section 6.

Mr. Roy Bailey: Okay.

Mr. Serge Martel: Here we want to prove that after thirty years of promises, mostly in the Senate three times in the 1980s, and in the media in 1985, they've had only five years of good results. Since they've been privatized, the only increase is due to attrition; it's because there are fewer francophones taking their retirement that you have anglophones.

• 1935

Mr. Roy Bailey: Okay. I have just one last comment. Thank you for that. I wanted to get that straight here. It looked like sheer discrimination, because Bailey would get a job and Guimond wouldn't, and I wouldn't want to think that's happening in Canada.

Mr. Serge Martel: It has happened.

Mr. Roy Bailey: Simply because of the French, just because of their background?

Mr. Serge Martel: Well, look at the numbers.

Mr. Roy Bailey: I know, but are you saying that is a discriminatory practice that's taking place with Air Canada?

Mr. Serge Martel: They made obvious declarations many times during the 1980s that they would bring up the proportion of francophones to a level that represents the fabric, the tissue, of Canada, and that hasn't been done yet.

Mr. Roy Bailey: Okay. I have just one last comment, Mr. Chairman—

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

Mr. Hubbard, Mr. Jackson, and Mr. Calder, no questions...?

Gentlemen, Mr. Alain and Mr. Martel, I thank you very much for coming here and making this submission to us this evening. It will be taken into consideration.

I don't think you have any more questions, do you?

Mr. Michel Guimond: Yes.

The Vice-Chair (Mr. Joe Comuzzi): You do...? I gave you 15 minutes at the outset.

Mr. Michel Guimond: Yes, but we still have time. The next witnesses will be—

The Vice-Chair (Mr. Joe Comuzzi): Mr. Asselin, do you have a question? Would you like to take the floor?

Mr. Gérard Asselin: No.

The Vice-Chair (Mr. Joe Comuzzi): You have not had the opportunity.

This is a final question.

Mr. Michel Guimond: Thanks a lot. It will be difficult.

[Translation]

Following on what was said by my colleague, Mr. Bailey, who has shown considerable open-mindedness in this committee and his remarks about respect for the two cultures in Canada, is there a pool of young francophone pilots that could be recruited? I come from Chicoutimi and I attended the Chicoutimi CEGEP. There was a pilot training program in Chicoutimi at that time. Are the young graduates from Chicoutimi all working in aviation? Are they taking their pick of seven or eight job offers? Do some of them have to go into areas other than aviation, even though they are qualified, because there are no openings for them in Air Canada or Canadian?

Mr. Serge Martel: You have asked a very relevant question, Mr. Guimond. When we started our study, we did ask ourselves whether there really were enough francophone pilots. We asked for statistics from the Chicoutimi CEGEP, which showed that, over 10 years, 22% of all those who graduated from the CEGEP as qualified pilots had to go into other lines of work. The problem is not a lack of francophone pilots.

There is no doubt that at some point, in the community, when a young person goes to see a guidance counsellor or someone else about a future career and says that he or she would like to go into aviation, the automatic answer by the resource person at the school is to say that that is not a good area to go into because there are not many opportunities for this or that reason. The job openings have always been few in number, which discourages people from going into it.

This figure of 22% was confirmed to me by the alumni association of the CEGEP. I unfortunately do not have the document here, but it was confirmed and I can send you the document, Mr. Guimond.

[English]

Ms. Bev Desjarlais: May I ask one question?

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

Ms. Bev Desjarlais: In regard to those pilots who are graduating, do they come out qualified to fly Air Canada jets, or do they need time where they have to be flying in smaller planes? And maybe those smaller services aren't available for them to fly within...?

Mr. Serge Martel: Yes. It's just the principle of—how do you say that in English?—communicating, of les vases communicants.

Mr. Roy Bailey: That's right.

Mr. Serge Martel: If you don't have any openings in the major companies, the people from the small companies, the pilots from the small companies, are not going to be able move up.

• 1940

Ms. Bev Desjarlais: The ones that are graduating, though, are they able to put in their number of hours with those smaller companies in the smaller planes and get their advance training?

I fly with so many young pilots who come from all over Canada on the planes I end up flying on; they're getting a lot of hours in my small planes. They come because they don't have those services available in their own provinces and can't get in the number of hours, so they come to northern Manitoba and put in a number of hours.

But they're not qualified to fly Air Canada jets. They sit and wait for me in the little airports and they study. They're all putting in their extra time trying to get on to larger planes so that they can hire on to larger airlines, but they're not qualified, coming right out of school, to go to Air Canada.

Mr. Serge Martel: You're right. To get into any second-level carrier like the regional carriers or Air Canada, you need a certain amount of experience. To get that experience, you have to start at the third-level carriers.

Mr. Roy Bailey: Bush carriers.

Mr. Serge Martel: Yes, as a bush pilot or in a charter company in Montreal or Toronto.

Ms. Bev Desjarlais: Are they able to get that?

Mr. Serge Martel: But the thing is, if there's no moving up, those people stay in the—

Ms. Bev Desjarlais: But my question to you is this: are they able to get in those hours and still not get on to the other carriers?

Mr. Serge Martel: Yes.

Ms. Bev Desjarlais: Or are they unable to get those hours?

Mr. Serge Martel: Yes.

Mr. Michel Guimond: What about everybody in Canada—

Mr. Roy Bailey: Everybody in Canada, not just francophones.

Mr. Michel Guimond: Not just the francophones.

Ms. Bev Desjarlais: No, that's right.

The Vice-Chair (Mr. Joe Comuzzi): Thank you. Does that answer your question?

Ms. Bev Desjarlais: Yes.

The Vice-Chair (Mr. Joe Comuzzi): Gentlemen, thank you. Thank you, Mr. Martel and Mr. Alain, for making this presentation.

• 1942




• 1944

The Vice-Chair (Mr. Joe Comuzzi): Mr. Hayes, welcome. Mr. Parrot, welcome.

The Canadian Labour Congress, ladies and gentlemen, has a presentation, which has been delivered to you.

• 1945

Mr. Parrot, you've been here many times. You're in charge from here on in. You can read the presentation verbatim or you can summarize it. I'm sure there are many questions that will be asked of you.

I notice that you don't have Mr. Georgetti with you.

Mr. Jean-Claude Parrot (Executive Vice-president, Canadian Labour Congress): No.

The Vice-Chair (Mr. Joe Comuzzi): I just ask because I like names that end in “i”. I thought he'd take me out for some pasta after this was over or something.

Welcome.

[Translation]

Mr. Jean-Claude Parrot: Thank you. I would like to read you my brief very quickly. It is not very long and, since I am replacing someone else, it may be easier. I have all the explanations in English, but I will read it in French.

To begin with, on behalf of our 2.3 million members, I would like to thank the committee.

When we were before this committee last fall, we emphasized the need for government regulation of domestic transport, the need to provide quality airline service to every community in Canada and the absolute importance of maintaining high standards and enforcing airline safety. We emphasized the importance of keeping jobs in Canada and full protection for current airline employees in any restructuring, and we acknowledged that our domestic airlines system will have to be rationalized and restructured.

We outlined our position on the maximum level of ownership by a single shareholder and limits on foreign ownership and control of national airlines. As we indicated, every Canadian and every community throughout this country are affected. This bill offers only short-term assurances of some level of service for most major Canadian communities.

We are aware that this committee, in its December report on the airline industry, rejected subsidies for air service to small and remote communities and agreed that the dominant carrier should not be forced to cross-subsidize its unprofitable routes. But without subsidies, we have a real fear that air service will be reduced or even eliminated in many remote communities in the Yukon, B.C., Saskatchewan, Northern Ontario, the North Shore region of Quebec and the Maritimes.

This committee might consider copying the U.S. legislation on essential air services. I should say that this was recommended to us by someone else and that I do not necessarily know the details of that law.

Clearly, air transport policy and the merger of the two national airlines and their regional services go well beyond the narrow interests of shareholders and investors. This bill must ensure that the public interest is served.

We had hoped that the restructuring process would lay the groundwork for a stronger, more efficient and more financially stable industry, which would be of benefit to consumers, workers and public. The public interest in the merger of the national airlines is profoundly important. It affects every community, a wide cross-section of users and consumers, etc.

In its purported attempts to protect consumers from price- gauging, the government, in this bill, is again relying on its blind faith in the effects of competitive forces, even though it is dealing with a monopoly air carrier.

With respect to the merger approval process, the public interest in this bill is solely in the hands of the Minister. The former National Transportation Act was better. It defined the public interest based on identifiable past policies, government direction and precedents.

We recommend specifying the criterion that defines the public interest and cementing it in the Act. The legislation should clearly establish the minimum threshold for applying a public interest test when approving any merger, regardless of the minister or the government of the day, and we suggest a legislative provision along the lines of the proposal included in our brief.

Without this definition, it remains uncertain whether these considerations will form part of the review of any future merger transactions. Regrettably, in this bill, a vital Canadian industry is being restructured in accordance with the wishes of its shareholders.

• 1950

Under domestic airline deregulation over the past 15 years, we have moved in Canada from a near monopoly regulated by the government in the public interest to a virtual monopoly in domestic scheduled services that is acting entirely in its private interests, that is, to maximize value for the shareholder.

We fear that, if measures to promote and create airline competition are adopted, destructive competition will re-emerge. In the absence of more comprehensive measures, the airline industry will continue to be plagued by periodic market failures at this and other levels of the industry. It may not happen immediately, but if there are no controls on the addition of new domestic capacity and ongoing financial fitness requirements for new operators, subject to an annual review, destructive competition will re-emerge.

Destructive competition brings to mind, among other things, flights carrying very few passengers. I believe we made that point in our brief in November.

This bill does not give the government sufficient powers in the domestic airline industry to achieve a fair balance between the forces of competition, on the one hand, and the protection of the public interest, on the other.

As promised by the Minister, this bill does introduce a merger approval process.

I will not read the next two paragraphs. I will move to the concerns of airline workers.

Clearly, a major interest of the labour movement is to ensure that the thousands of airline workers who have a direct stake in any restructured industry are adequately protected. If the restructuring and rationalization is carried out over a longer time frame, it is possible to have no layoffs.

We had hoped that a maximum number of jobs would be preserved. Also, 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 program.

I think there's something missing here. I will have to look at the English version. I'm not sure what it is, but I will come back to it.

The package should include: income support; retraining; job search and relocation assistance; and, priority access to job openings in the industry. If phased in over three or more years and supported by investor and government payments for buy-out packages, several thousand positions could be eliminated without a single layoff.

To hold Air Canada to the employment commitments that the Minister has made, we would agree with the Canadian Union of Public Employees' recommendation that the Air Canada Public Participation Act, as part of a new section 10.1, read as follows:

    No unionized employee of Air Canada, Canadian Airlines, and any wholly or partially-owned subsidiary as of December 21, 1999 will be involuntarily laid off or involuntarily relocated from one base to another prior to March 31, 2003.

There are significant problems with the Minister's approach to workers' rights, as it finds expression in Bill C-26. The pledge of no involuntary layoffs and no involuntary relocations from one base to another applies only to unionized employees of Air Canada, Canadian and wholly-owned subsidiaries. The protections are only in collective agreements.

Air Canada has taken advantage of this situation by insisting that existing contracts must be extended to 2004 or 2005, with the surrendering of the ability to negotiate beyond fixed wage increases in the extra years, if these employment protections are to be provided.

• 1955

CUPE flight attendants faced with this offer have rejected these contract extensions as too high a price to pay for what ought to be guaranteed by the federal government as a result of the failure of airline deregulation. Does this now mean CUPE flight attendants are not covered by the promised job protections, because they have refused to play Air Canada's concessionary game of long- term agreements? It is certainly arguable that these job protections apply in any event now, given that Canadian Airlines is under court-supervised restructuring proceedings. American so- called "vulture-fund capitalists" are threatening to push Canadian into receivership on May 3 in any event if they don't get their way.

That is inconsistent with the enforceable undertakings given to the Competition Bureau on December 21, 1999, which shall survive any bankruptcy or court-supervised restructuring of the CAC.

With respect to severance and pensions, we liked this committee's recommendation on airline restructuring that the new dominant carrier must negotiate early retirement and other incentives, but this bill has nothing on this particular recommendation.

For a legislated, three year, no layoff pledge to work, it must be backed up by a government worker assistance fund. This would be part of a longer term program of worker assistance that would help workers deal with restructuring that may go on for many years at the new Air Canada and elsewhere in the industry.

Adequate, government-supported severance packages will help the new Air Canada renew its workforce and minimize disruption to the current workforce caused by a merger.

Workers at both Air Canada and Canadian Airlines also need legislated assurances that the current pension plan surpluses at both airlines will be protected and used to benefit all workers, including enhanced severance packages. They must not be syphoned off by corporate shareholders when the respective pension plans are wound up or merged.

As regards seniority lists, in order to alleviate the current enormous tensions within the workplace, and to prevent years of costly wrangling before the CIRB, we urge this committee to consider an amendment from CUPE at Canadian Airlines to create a process for the resolution of this dispute in a fair and equitable manner, without prejudging the outcome.

With respect to Canadian ownership and control of Air Canada, we are concerned about the foreign ownership of airlines and allowing foreign carriers to operate in Canada. No country allows foreign carriers to compete with its domestic carriers 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 off the most lucrative routes with no obligation to serve smaller centres and remote communities. In other words, we want foreign ownership limits to be raised.

Canadian content requirements should be implemented to protect a proportionate share of Canadian jobs at all airlines operating in Canada. Last November, we recommended that the single-shareholder ownership limit in Air Canada remain at 10% to preserve its widely- dispersed ownership structure and that foreign ownership in the industry be limited to 25%.

We strongly oppose the provisions in this bill that will give four members of Cabinet the power to raise the current 25% foreign ownership limit of Air Canada. We are also opposed to increasing the single-individual shareholder limit of Air Canada from 10% to 15%. The review of the decision two years after the fact gives us no comfort.

We said share ownership was not the only issue. The contractual arrangements that both airlines have with their foreign partners in international alliances have reduced the ability to respond to the needs of our domestic system. This bill should also define genuine Canadian control of an air carrier, particularly in light of the growing influence of commercial agreements on airline operations.

Who controls and runs the reservation system, as we learned, may be far more important than voting and non-voting shares. We want the reservation system kept in Canada. Decisions are being made to benefit foreign corporations—not the people of Canada.

This brief is respectfully submitted on behalf of the Canadian Labour Congress. I hope the question period will be better. Kevin Hayes, who is with me, is a CLC representative. He was very much involved in the drafting of this brief.

• 2000

[English]

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

Mr. Hayes, do you have anything to add to the brief, or will you just wait for questions?

Mr. Kevin Hayes (Senior Economist, Social and Economic Policy, Canadian Labour Congress): We'll wait for questions.

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

Mr. Bailey.

Mr. Roy Bailey: Thank you, Mr. Chairman.

Thank you, gentlemen, for coming tonight.

Last night CUPE was here, and previous to that we had the Canadian Auto Workers. What group or portion of the airline industry do you have a vested interest in?

Mr. Jean-Claude Parrot: All those represented by both CAW and CUPE.

Mr. Roy Bailey: They're all within your umbrella.

Mr. Jean-Claude Parrot: Yes, they are.

Mr. Roy Bailey: Okay. Thank you.

You mentioned that you felt the old bill was better because, to use your words, it was more sensitive to the public interest. Could you explain what you mean and correlate that with what's going on today, please?

Mr. Jean-Claude Parrot: Yes, and Kevin may want to add to this. Basically when we talk about public interest, I think it is quite important that there be a guarantee not only that the service will be maintained in the large communities, but also that there will be consideration for the other communities. There's also the whole issue of the rates. When you get into what is almost a monopoly, it is important that there be some rules to ensure that the rates for the airlines are checked very carefully and some of the other aspects in that regard.

Maybe you want to add to this, Kevin. I know you did some work on that.

Mr. Kevin Hayes: I think, as Mr. Parrot has mentioned, the public interest of course includes the protection of consumers, service to all parts and communities of this country, and things such as bilingualism, which you just had a discussion on. In the final analysis, Canadian control is an important element and the degree of ownership by a number of individuals or institutions. In other words, we want fairly wide ownership. Finally, as we've repeated many times, we want a significant degree of regulation, because in effect it's a monopoly we're dealing with.

Mr. Roy Bailey: I'm just going to move now to something that hit me this summer. I moved from transportation to communications. As of July 1 the CRTC ruling falls on SaskTel, the province I'm from. I became involved in this simply because our utilities—power, gas, telephone—have long been cross-subsidized. Coming from a province that is mainly rural and coming from a rural area of that province, I sent up some 600 letters, and I hope we have won the battle in persuading SaskTel to get their house in order so that in that utility we could cross-subsidize.

My thought as you were doing your presentation was, is there that much difference, then, from your perspective—and I'm not saying whether or not I agree—between the cross-subsidization we currently have in many parts of Canada for the utilities I mentioned and cross-subsidization perhaps in the transport industry? Is that what you're saying?

Mr. Kevin Hayes: Yes, that's what we are in fact saying. I think the analogy you're using is a very good one. Where you have essentially a monopoly, it does make sense to have that kind of cross-subsidy, particularly where there's an obligation to provide services in areas that are unprofitable. Clearly, given the geography of this country, there's no way a national air carrier is going to make money on certain routes, and there should be that kind of cross-subsidization.

Mr. Roy Bailey: Thanks very much.

Mr. Chairman, I don't want to get into that. I wanted to draw your attention to the correlation between communications and transportation. We've been through it many times before.

I've asked enough questions tonight, sir, and thank you very much.

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

Mr. Hubbard.

Mr. Charles Hubbard: I want to follow up on one of their themes here of cross-subsidy, which was the term used a minute ago by Mr. Bailey. I fly sometimes into Vancouver and even Montreal, and when I buy a ticket and get on the plane, for some reason I have to pay for the airport I'm going to use. This is a kind of subsidy that I pay as a consumer, and I always resent that. I see these big fancy airports being built up at the travelling public's expense.

• 2005

In terms of subsidization, are you saying that maybe every passenger in Canada should pay $5 or $10 extra on each ticket, which would be used by the government to subsidize the routes the government would have to somehow regulate in terms of service to smaller communities, such as Charlo, Kevin?

Mr. Kevin Hayes: There are many ways of going at the pricing for the purposes of cross-subsidy, but I think we would argue that given that it's a monopoly privilege going with that, the carrier itself in fact would bear a big part of the cost.

You could do it in any number of ways, including by user charges of that type, but in the final analysis that's probably what would happen if you built it into a price structure that's regulated. To some extent you're getting there the same way. In other words, the large urban users and people going through could be cross-subsidizing. When we talk about cross-subsidy, I think we mean it more in the context of the usual way utility pricing is done when it's a monopoly.

Mr. Charles Hubbard: We've heard a lot about people being concerned about the monopoly Air Canada has, but by the same token we hear of other carriers that want to pick out the best routes and try to put pressure on Air Canada to lower its rates in terms of certain cities in the country. With what you're saying there, even though we would have a monopoly, I would be concerned that you're inferring that only Air Canada would have to cross-subsidize. Would WestJet, Royal, or any of these other ones have to be involved in this cross-subsidy program in terms of a pool that someone is going to administer?

Mr. Kevin Hayes: The pricing obviously would relate to the kind of traffic flows and the cost relative to the revenues and so forth, so there would have to be some fine tuning. If WestJet got routes that were highly profitable and they were forced, let's say, to provide services to certain other routes that clearly are not profitable, yes, WestJet probably should be doing the same thing. In other words, the thrust of what we're advocating is a regulated air system in Canada. So in some cases with Air Canada it might be international travellers who are subsidizing.

Mr. Charles Hubbard: I think, Mr. Chairman, someone maybe read the page I wrote in our report of last fall. Kevin, I'm not sure if you read that—

Mr. Kevin Hayes: No, I didn't.

Mr. Charles Hubbard: —but in any case, maybe you should.

The Vice-Chair (Mr. Joe Comuzzi): [Inaudible—Editor]...like your report.

Mr. Kevin Hayes: We're on the same page.

Mr. Roy Bailey: The same song sheet.

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

Mr. Guimond.

[Translation]

Mr. Michel Guimond: Mr. Parrot, I want to state right off the bat that before becoming a member of Parliament, I worked in labour relations for some 16 years, but on the employer side: I was a damn boss. I recognize the contribution you have made to advancing the cause not only of postal workers, but indeed, of all workers throughout your career as a union activist and as part of your current duties. I want to take this opportunity to pay tribute to you publicly and thank you for that contribution.

Mr. Parrot, I am pleased to see that your organization shares the views of the Bloc Québécois with respect to Canadian control of Air Canada. We agree that the single shareholder ownership limit in Air Canada should remain at 10%, and that foreign ownership should be limited to 25%.

While I certainly don't want to generate dissent within your organization—and I am sure you will say that the individual unions that are members of the Canadian Labour Congress are all independent bodies—we are aware of the positions taken by certain leaders of member organizations, including Buzz Hargrove, President of the CAW, who had a somewhat favourable bias towards Onex, and had asked that the foreign ownership limit be increased or abolished. You may recall an excellent program broadcast in Quebec in the 1970s called "Qui dit vrai?"(Who is telling the truth?). So, what is the basis for the position you have taken here?

• 2010

Mr. Jean-Claude Parrot: When there are opposing views, the parties have to get together and talk about it. Let me give you an example. When we negotiated the process at the Canada Post Corporation, all the parties finally reached an agreement on what the legislation should contain in the way of protection for workers. In that area, we are pursuing common objectives and can certainly agree.

As for subsidies, we believe our position reflects the interest of all members represented by the union movement. That position was established on the basis of mandates we have been given in the past, as well as CLC policies, which were passed at conventions. We have come to the conclusion that this is the right approach.

Mr. Michel Guimond: On another topic, I would like to hear your views on the much discussed matter of merging seniority lists. If this were a baseball game, I guess my questions could be compared to curve balls thrown inside the plate. But once again, as parliamentarians, we are trying to thoroughly analyze the situation. Yesterday, we heard testimony from one of your affiliates....

Mr. Jean-Claude Parrot: CUPE.

Mr. Michel Guimond: Ms. Denise Hill, who did not appear before the committee, sent us a brief instead. Based on my understanding, she is President of the airline division and her union is affiliated with the CLC. In her brief, she made the point that there is a clear distinction to be made between Canadian and Air Canada flight attendants.

Mr. Jean-Claude Parrot: Yes, anyone who has ever travelled by air knows that.

Mr. Michel Guimond: Yes. Ms. Hill was saying that in the event of a merger of Air Canada and Canadian, the leadership of the Air Canada component would be concerned that merging seniority lists on the basis of the service date, as Canadian flight attendants are asking, would put their members at a disadvantage. I know that you don't generally want the members you represent to start fighting each other. As parliamentarians, how should we deal with this difference of opinion?

Mr. Jean-Claude Parrot: I think an agreement is possible. Obviously we cannot simply ignore workers' seniority, whatever group they happen to belong to. You can't let people decide that since this new entity has been created, that it alone will set the ground rules. We have to find some common ground.

Seniority issues are not generally as problematic as they may seem. It is important that people understand the purpose of a seniority list. It is also important for them to understand that they will not necessarily lose their job simply because they have less seniority than another worker. Because I am not familiar with the collective agreements covering these particular workers, it is a little difficult for me to give you a more specific answer. I have already had to deal with seniority issues in cases of company mergers and I have to say that these issues were resolved fairly easily. The legislation has to provide some guarantee that we will be able to protect the interests of all individuals as well as the gains they have made.

[English]

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

Mr. Jackson? Mr. Calder? Ms. Desjarlais.

Ms. Bev Desjarlais: Thank you.

I have just a couple of questions. I know you indicated that you don't have all the specifics of the essential air service agreement in the U.S., but do you have any idea how long that type of legislation has been in place?

Mr. Kevin Hayes: No, I don't. As Mr. Parrot has mentioned, we didn't go through this bill.

I'm just hoping there isn't something in there we would regret saying.

Ms. Bev Desjarlais: Okay. We'll find it tomorrow and go from there.

• 2015

Mr. Jean-Claude Parrot: To be honest, it came from one of our affiliates. We were concerned.... In fact, I don't think we should have put it in there without having all the information.

Ms. Bev Desjarlais: We'll see what we can find on it, then.

My other question is with regard to the airlines possibly being subsidized to go into some routes. What you prefer to see is that if you have the monopoly carrier, then you must go into some of these routes even though they're not extremely profitable or whatever. You have to provide that service because you've been given the right to have a monopoly carrier.

Do you have any concerns with regard to the divestiture of the regional airlines? Has anything come to your attention about it, or do you have any thoughts from the CLC perspective as compared with other perspectives?

Mr. Kevin Hayes: No, we don't. As you've alluded, there are some different perspectives here on what might be involved. Clearly, the objective we're after here is that the paramountcy, or the absolute necessity or central principle, of having every community serviced in this country by a domestic airline policy is an overriding public interest.

Now, as to the mechanics of the relationship of these regional carriers with this national domestic one, there are all kinds of ifs, ands, and buts. Some issues are arising, and the one we've flagged here, of course, is the protection of the workers in these regional airlines in the event of divestiture or mergers or takeovers or whatever.

But from the point of view of services, no, we haven't gone into it because clearly you can achieve that objective in numerous ways.

Ms. Bev Desjarlais: Okay.

I also want to make a point of thanking you for bringing up the issue of the pensions. After what we saw with the Royal Oak mine in the territories and the situation those pensioners are in....

I think this is the first time it's actually been brought up. Quite reasonable...and I certainly thank you for bringing it to our attention.

The other little note I want to make is actually for Mr. Bailey, when he talked about SaskTel getting their house in order with regard to the whole issue over there. SaskTel has had their house in order for some time, and have been trying to get the CRTC on line.

Mr. Roy Bailey: No, they're getting it in order to prepare for the CRTC ruling. You misunderstood me.

Ms. Bev Desjarlais: Oh, okay. Because they agree with this cross-subsidization.

People kind of cringe from and shudder about cross-subsidization—and I'm sorry Mr. Hubbard left—but I don't see how we would treat subsidization any differently from how we would treat equalization payments to some of the have-not provinces. I don't think we should cringe at the word “subsidization” when we're ensuring that we have equal services throughout Canada.

The Vice-Chair (Mr. Joe Comuzzi): Thank you very much for those comments, Ms. Desjarlais.

Mr. Clancy.

An hon. member: King Clancy?

Mr. Bill Casey: That would be “Casey”.

Voices: Oh, oh!

Ms. Bev Desjarlais: Would that be Mary Clancy?

Mr. Bill Casey: It's just because my name doesn't end in “i”.

The Vice-Chair (Mr. Joe Comuzzi): That's right, but it ends in “y”.

Mr. Bill Casey: Respect.

The Vice-Chair (Mr. Joe Comuzzi): Do you have a question?

Mr. Bill Casey: I do, yes, a few.

You're aware that the plan is for the divestiture of Canadian Regional. I'm wondering if you have any concerns about how that process is going. It doesn't seem to be much of a process, actually, and those people must be in limbo. Are you involved in that at all?

Mr. Kevin Hayes: The affiliates are certainly involved, as you know, but no, the Canadian Labour Congress is not involved in any direct way.

Mr. Jean-Claude Parrot: Usually if the affiliates call on us to help, we can do it easily, but there's a lot of autonomy among the affiliates in regard to dealing with their own issues among and between themselves.

Mr. Bill Casey: The seniority issue has come up in several presentations, as you know. The pilots seem to be confident that they're going to reconcile their differences and resolve the issue on seniority.

I mean, there are two absolutes—first, what Air Canada wants to do, whatever that is, and two, date of hire. What are the options in between? What could be arbitrated as compromises?

Mr. Jean-Claude Parrot: Oh, on seniority, compromises are not easy to make. I'm not sure we can arbitrate a compromise on seniority.

• 2020

I myself am a great believer in seniority. I've always sold it to all members of my union, part-time, full-time, or mixed. Everybody has the same kind of seniority, from the beginning up. It was not easy to sell, but we made it, and it worked a lot better. So I'm a believer in seniority. When people start to work, their seniority starts.

I think there are ways to work with that, but I recognize that seniority is not applicable to every situation. There's a difference between the calculation of seniority and the use of seniority, and that sometimes gets complicated.

I don't know enough about their collective agreement and their practice in the past to be able to get too much into that, but surely there are ways to deal with it. Others have done it, I know that, and I'm sure it should be resolvable. But they'll probably need something happening to make it happen.

Mr. Bill Casey: Finally, you said you're opposed to the ownership increase from 10% to 15%. Why is that? What's your problem with that?

Mr. Jean-Claude Parrot: That's a technical one, so I'll pass that on to Kevin.

Mr. Kevin Hayes: Step by step, it's eroding. When we're dealing with these numbers, again, dealing with a monopoly carrier, given that it's a major part of public policy—air transport and so forth—I think the more you allow control to slip away the more worrisome it becomes.

When the Onex bid was in the works, we saw, as you know, how dangerous a few percentage points might be.

Mr. Bill Casey: Good point. Thanks very much.

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

Mr. Asselin, do you have a question?

[Translation]

Mr. Gérard Asselin: Mr. Chairman, I would like to ask a short question. At the bottom of page 1 and the top of page 2 of your brief, you refer to the committee's report, in which we stated our opposition to subsidies for airlines serving small and remote communities. You say that without subsidies, you fear that carriers will feel no obligation to provide such services. What will happen to people living in regions such as the North Shore of Quebec—where there's only one access road—who have to go to Chicoutimi or, of ten, to Quebec City for specialized professional services in a variety of different areas, such as health care, architecture, etc.? Air travel is the fastest mode of transportation. You were saying that our committee should consider copying American legislation with respect to essential air services. Could you send us some information on that?

Mr. Jean-Claude Parrot: Yes. In fact, this is something we would like to take a closer look at. We may also forward some additional comments on this particular issue.

Mr. Gérard Asselin: Fine. Thank you. That's all, Mr. Chairman.

[English]

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

Mr. Bailey.

Mr. Roy Bailey: Thank you.

I'm very concerned, as I'm sure the whole committee is, after the presentation...and the gap in seniority and so on between CUPE...between Air Canada and Canadian. To me it's a very serious thing. I mean, we're talking about families and futures and everything. The dilemma is there, the problem is there, but the question is, who's going to solve that?

Now, we have with us you people, the Canadian Labour Congress. If there isn't an umbrella organization that could move in to help, then there will have to be legislation of some type, or arbitration. At any rate, whoever brings this about—and obviously it will be the Canada Labour Relations Board or something—the government is going to get the finger pointed at them.

Is there no way in which this huge labour relations board across Canada could get the proverbial monkey off our back, or off the government's back more than mine, and help facilitate this? If it's just going to be the government, nobody wins. Certainly the government loses, and somebody else will lose. Everybody won't be satisfied with this. This is a big problem. On top of that we have Canadian Regional Airlines, which really don't have any basis of affiliation with some of the unions at all, which should also come into this.

• 2025

It seems to me that you, as senior, with years of experience, could in fact lend a hand in this situation.

Mr. Jean-Claude Parrot: There is no doubt that the more we talk about it, the more there is a need to have a way of bringing the parties together to resolve that issue. I believe that. To me it is important to find that way. I think what you are inferring too is, why doesn't CLC do that? I think that's what you're saying.

Mr. Roy Bailey: Well, help at least, assist.

Mr. Jean-Claude Parrot: Yes, and that's a good question for us.

In regard to the legislation, to me what's important is always that the rights of the people be protected. The legislation should give a minimum protection, definitely, to the people on what they have acquired. I know this may be different, but when they passed the Canada Post Corporation Act, we all had protection in the act to guarantee us that we were not going to get pushed anywhere without following the rules that were there. That helped. So from a legislation point of view, at least there should be a guarantee that each worker should have the protection they have acquired.

But that being said, with restructuring, with changes that are going to occur, the question is whether there should be bumping of people. Seniority sometimes means that; sometimes it does not. That's why I say it depends on how you use seniority, because people do have big fights about seniority, only to find out finally that was not the real issue.

In this case people fear they're going to be bumped; people fear they're going to be moved from their place of work. The issue should be addressed very carefully. We can do a lot of things without having everybody suddenly get mad, because they're all affected. We're going to look at what we can do ourselves, but the legislation definitely should at least give clearly a good minimum protection to the people in that regard.

Mr. Roy Bailey: Thank you very much.

The Vice-Chair (Mr. Joe Comuzzi): You want a small question?

Ms. Bev Desjarlais: It is very small.

I don't have any problem understanding this, but I'll just clarify it with you. The CLC does not have a legal mandate to tell those unions what to do. That's why there's a need to have legislation or something in place that says you have to do this, this, and this, because legally you don't have the right to do any of those things.

The Vice-Chair (Mr. Joe Comuzzi): Thanks, Bev.

I wonder if the members of the committee would allow me to ask a question. I haven't asked one yet.

An hon. member: Absolutely.

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

Ms. Bev Desjarlais: You always ask five or six.

The Vice-Chair (Mr. Joe Comuzzi): Only when I'm sitting down there.

It seems the immediate problem we face today is the challenge of coming to grips with the 44,000 people presently employed with either Air Canada or Canadian Airlines, and all the problems with the melding of the pilots and the melding of the seniority lists and the machinists and so on. That's something we should really be concerned about.

I wonder, Mr. Parrot, why we're not looking forward to the future. I'm basing my question on the success we saw in Canada some 25 or 30 years ago, when we decided to enter a thing called the Auto Pact. We've seen in the last 30 or so years the emergence of Canada as basically the leader in manufacturing of automobile parts and automobile assembly in Canada. As a matter of fact, I read a report this morning that said that in the month of June, Canada will out-produce the United States in the manufacture of automobiles.

I also think we have a better labour agreement than they do. The Canadian Auto Workers have negotiated a far better agreement—not a far better, but a better agreement—than the UAW, their counterpart in the United States.

• 2030

With that background, if we look ahead in the aviation business, which is not only North American but global, if we could guarantee—and Mr. Parrot, this is where you and Mr. Hayes and the other people, such as Mr. Hargrove, could really play an important role—if we could guarantee all of those immediate concerns with the labour force to make sure that's solidified, we'd have an opportunity here to expand and become one of the world leaders in the aviation industry, as we have become in the automobile business.

If we compare it to the car business, it doesn't matter who owns the factory, as long cars are being produced in this country. It doesn't matter who provides the operating capital, but it matters that we guarantee Canadian content. I'd like your comments on that.

Mr. Jean-Claude Parrot: When you talk about a service such as the airlines, it is clear to me that a very important element is to ensure service to the people of this country. In that way there is a certain difference: we have to ensure that what I call the damage of deregulation is repaired.

There's some opportunity right now to correct some of the damage that has taken place, and we should use the opportunity to do that. That means maybe doing things differently from what we have done in the field of the automobile, where the situation from the point of view of service is quite different.

The Vice-Chair (Mr. Joe Comuzzi): I don't want to debate with you on that issue, Mr. Parrot, but in one of my other lives, I used to be in the automobile business, and I can recall, I swear—

Mr. Roy Bailey: Used cars?

The Vice-Chair (Mr. Joe Comuzzi): No, no, no.

I can recall a time when we sold automobiles in this country that they would put you in jail for selling today. They were that badly made. Then the Japanese came into the marketplace, and we decided we had to get better at what we were doing. Not only have we become better; we have excelled. Competition brought that in, forced us into doing that. Why can't we do the same thing in the airline industry?

A voice: Good point.

Mr. Jean-Claude Parrot: Competition is far from having only success stories.

The Vice-Chair (Mr. Joe Comuzzi): Well, this is a great success story.

Mr. Jean-Claude Parrot: We have a lot of stories that show competition reduced the rights of the workers, reduced their wages, reduced their working conditions. We compete all the time with situations in countries that have lower standards than we have, and we seem to want to go down that road. Obviously, for me, that's not a success story.

In the case of the auto workers, let's not forget they had the opportunity of having a very strong union, which had been in place for a long time. Employers may not like it all the time, but they have been able to sit down with the union and negotiate together and finally reach an agreement, and that helped. When the issue of competition came, as you mentioned, well, they found ways to deal with it. But in the case of a service that needs to provide service in areas that maybe are not as easy in regard to profit, the scenario might be completely different.

The Vice-Chair (Mr. Joe Comuzzi): I don't think it is, but we won't argue that point today, sir.

Thank you very much. You've been excellent. You realize from the tone of the questions that we're very interested, and we think you have a marvellous role to play in the future of this airline industry. Thank you very much.

Ovid, do you want to take the chair for a minute? Do we have another visitor?

A voice: Yes, one more.

A voice: We need quorum.

The Vice-Chair (Mr. Joe Comuzzi): Are we all through?

• 2034




• 2038

The Vice-Chair (Mr. Joe Comuzzi): Ladies and gentlemen, we welcome Mr. Rowe, chairman and CEO of I.M.P. Group International Inc. I'm more familiar, Mr. Rowe, with CanJet.

Mr. O'Rourke is the vice-president?

Mr. Bernard P. O'Rourke (Senior Vice President, General Counsel, I.M.P. Group International Inc./CanJet Airlines): I'm the in-house chief counsel.

The Vice-Chair (Mr. Joe Comuzzi): In one of my other lives I was one of those too. It's good to hear.

I welcome you both. As you know, Mr. Rowe, you can read your submission or you can paraphrase it. I'm sure there are members of the committee who have some questions of you, so you feel comfortable. The hearing is now turned over to you and we'll listen to how you want to present it.

Mr. Kenneth C. Rowe (Chairman and Chief Executive Office, I.M.P. Group International Inc., and Principal, CanJet Airlines): Thank you very much, sir.

Ladies and gentlemen, I'd like to first say that I appreciate you allowing me to come before you for a few minutes to talk about one issue. It's a quarter to 9 at night and I see you've had a long day. It's a quarter to 10 my time—I'm on Halifax time—so I've had a long day too. I'm going to try to keep it short and keep it to one issue that affects CanJet. I'll focus on answering your questions as to why we're asking in the submission, which we're leaving in French and English for each one of you tonight, for the minimum requirement for change in the bill that's being proposed.

• 2040

You've just heard who I am. I am chairman and chief executive officer of I.M.P. Group. For those of you who do not know much about I.M.P. Group, we are one of Canada's leading aerospace companies, with aviation facilities coast to coast from Vancouver to St. John's. We employ nearly 4,000 people in Canada. Of those, 1,000 are in Montreal and Quebec and 1,000 to 1,500 are in the Atlantic region. The rest are spread across Canada and overseas.

We've had a long aerospace and aviation history, 30 to 40 years. We took over Air Atlantic, which was in receivership a few years ago. After running it for two years as a partner with Canadian Airlines, with the problems with Canadian Airlines at that time, we saw what was coming and decided not to renew our commercial agreement in 1998. From that time forward, we've been trying to see where there's an opportunity to restart a similar operation to what Air Atlantic was, and we've arrived at CanJet.

I think most of you know that CanJet is very similar to Southwest, easyJet, Ryan Air, and WestJet. It's a low-cost airline where one is motivated to keep the costs down and pass that on to the passengers to give an alternative to the full-service airlines, which are very expensive to run. I was one of them as Air Atlantic, tied right into oneworld, where I had to pay for the system and all the other bells and whistles that went with it.

This is a completely different type of airline. I think it's responding to the government's policy changes. We find ourselves in a monopoly in offering an alternative service, particularly in central and eastern Canada, which has not yet been fully serviced with this type of airline, which we hope to accommodate over the next two years.

This brings me to the one item. I was dealing with the Competition Bureau and Transport Canada during the times of change when I had the problems with Hamilton, as some of you will remember. When we applied for Hamilton, Air Canada decided to lock up all the gates. There are no slots there, as you're aware, and we had to make sure we had accommodation at Hamilton at that time, when we were going to start there. We may still go to Hamilton, but not initially. We put a delay on Hamilton while we revamped what we were doing with CanJet because of certain developments that took place at that time.

We are now in the process of starting CanJet, as you're aware. We will be flying our first airplanes this summer. We will be building up a fleet of aircraft to service particularly central and eastern Canada.

I realize that, with the best of 20/20 vision, those in government who were making these arrangements to accommodate new-start airlines such as ourselves and to give the one-year delay time for us to set up and get established really did not quite understand the detail and the time it takes to get an airline up and running. Although we'll be up and running this summer, well before the September deadline that restricts Air Canada from starting their so-called discount airline, whatever it may be called, we will only be half up and running with our fleet.

At present we have 20 aircraft and we'll only have 10 in the air. We'll have six before this year's end. We'll have another six starting next year. We're really only halfway there. So we won't be fully up and running with our present plan of having 20 aircraft. It may go further in time, but right now we're focusing on this certain territory. There may be some transporters.

We really need more time. If this type of airline, whatever it's going to be called.... I'm an accountant by profession and I personally don't know how you can fly an airplane on a Friday with full service and then, on a Saturday, with the same crew, same collective agreements, same cost, with perhaps one less sandwich or chicken meal, suddenly have a low-cost airline. I just don't know how someone does that.

• 2045

But that's not my problem. My problem is if, in spending millions of dollars and trying to give a response to the government in a competitive airline environment instead of a predatory one, I find that this vehicle is going to be used to try to put out the threats that Air Canada may proceed to do this. And I understand Mr. Milton quoted that others are doing it in Europe. Well, of course, Europe is not a monopoly environment. And as you all know by now, or have seen in the press, British Airways did this, which is what he was alluding to, with their Go Fly airline in their attempt to stop the growth of Ryan Air and easyJet, where there's lots of competition at discount and full-service levels. They've just released their first year's results, and they've lost £25 million, which is roughly $70 million Canadian. This is just a repeat of what happened in the States when major airlines tried to start their own low-cost, because they have to use the same collective agreements. There are no lower costs, and it can be used only as an attempt to try to use it.

We're worried that although there are certain what you might call allowances to the Competition Bureau, that they can give cease-and-desist orders, there are all sorts of ways.... I know, as a business manager, there are all sorts of ways you can have a subsidiary and unload costs that are very hard to distinguish from the outside. I can give you a whole list of them in the airline industry, if you'd like to ask me in the question period how that can be done.

So what I'm asking for is really.... I don't see that it's in the public interest to allow Air Canada to start what we call a so-called discount airline at all. But what I've said in my submission to you, in both languages, is that at a minimum, they should be restricted for five years to allow CanJet and any other new-start airlines to get themselves established, because one year is simply not enough. And we're the main example of it. As a new start right now in eastern Canada...we're starting an airline; we're a well-financed, large group. With years and years of experience, it's going to take us two years just to get our 20 airplanes in the air, without talking about establishing markets.

So to talk about one year.... I'm asking for a bare minimum of five, or they should just be banned altogether, because as a full-service airline, it's not in the public's interest to say, “We can be a low-cost airline at the same time”, because you simply can't.

They may never start it, because as you know, the unions are bickering at one another. They can't force people from the unions to go into the subsidiary; it's all by choice. They have all sorts of problems, and I don't envy Mr. Milton in his present job of trying to keep this whole bag of tricks going together right now, because of the problems he's facing. But that's his job. I'm not here to defend Mr. Milton.

But I'm saying that if it's the intent of the federal government to put that one year in to allow new starts to start airlines and have a competitive marketplace in the airline industry, we're saying five years is a minimum, or they should not be allowed at all.

If they can lower prices to what we're going to be offering, and the only difference from what we're offering is a sandwich, a cup of coffee, or a meal—because we offer the seat and we get them from A to B—then why can't they do it now with their full-service airline? Why do they have to create another one and say they can do it with that one when they'll be on the same routes we're going to be on and we're going to be on the same routes they're going to be on? They're not only against us, they're against their own line, and I think that's ridiculous. As a shareholder of Air Canada, I find it ridiculous too. But that's beside the point.

If you see what I'm getting at, it's going to be formed only to try to shut out the WestJets, the CanJets, and any other competitor that may be threatening their marketplace by sucking off their mainline—their customers. Of course, we're going to take some of their customers. That's what the government wants us to do. And we're going to offer a different product.

I paid $1,200 to come here economy today on Air Canada, and I got a cup of coffee. But I'm going to be offering half that, and you might have to pay for the coffee. Having said that, how are they going to justify flying one at $600 and one at $1,200 on the same route?

• 2050

Now, I don't know, from a business point of view, how one does that, because we're in the business, really, of making money, not running airplanes. That's the real business we're all in.

I don't want to be facetious, but it's late at night and I don't want to get too serious either, because we're all a little tired. But I want to make the point that I feel the government should have a strong recommendation from this committee to go back and amend that legislation, that as they have the monopoly in the full-service side, the others should be allowed to offer different products without their trying to be everything to everyone, when they cannot really financially justify it. If after five years, if you allow us even the five years—the minimum lot—they want to do it, then I would think there are enough smart accountants in the government for them to show them—particularly Transport Canada—their full business plan on how they're going to achieve competing with these lower-cost competitors that don't have the overhead and costs they're carrying to give that full-service airline they're running.

So, ladies and gentlemen, and I don't want to repeat myself, but we're here for one purpose. We don't see it being in the public interest to allow Canada to set up a charade of a discount airline at all, and if for some reason the government wants to say “You can do what you like”, then we think we need at least five years to establish a full alternative service in this country, particularly in our area of this country, and we need to establish those marketplaces. I think at that time we may have whatever they wish to offer us in competition.

But to try to attack us after one year, and then for us to come running back to the government saying they're not charging the proper maintenance fees, they're not charging this or that to their airline—all ways to try to justify it's a lower cost—is not what we're in business to do.

I would be willing to answer any questions you'd care to ask me if I'm being unreasonable in making this request.

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

Mr. O'Rourke, do you have anything to add?

Mr. Bernard P. O'Rourke: Not particularly. I don't want to bore the committee with tedious detail with respect to the amendment we're seeking. It's very straightforward.

The Vice-Chair (Mr. Joe Comuzzi): Could you leave the amendment?

Mr. Bernard P. O'Rourke: Everyone has a copy of this amendment we're seeking to Bill C-26. I think it's pretty much self-explanatory. Mr. Rowe has clearly—

The Vice-Chair (Mr. Joe Comuzzi): Mr. Rowe, could you just clarify one point? This committee, from its previous hearings and now that we're reviewing legislation, has heard conflicting evidence before it, and it has to do with the Hamilton airport.

Members of the committee, correct me if I'm wrong, but we at one time heard that CanJet was negotiating at the Hamilton airport and was in the process of negotiating for the slots, the gates, or whatever, in order to commence operations. When the bid was accepted by Canadian on Air Canada's buyout of Canadian, within 24 hours we were advised that Air Canada moved in and locked up all the facilities at Hamilton airport.

In subsequent questioning of Mr. Milton, he advised us that Air Canada had not done that. Do I have that story correct? Could you...because we'll have Mr. Milton here tomorrow morning.

Mr. Kenneth Rowe: I don't want to contradict Mr. Milton, but in his defence, perhaps, sometimes presidents don't always understand what their people are doing. But let me tell you the facts, which can be certainly confirmed by the private managers of Hamilton airport.

When we approached Hamilton airport for terms and conditions, we were in negotiations on those terms and conditions and suddenly we were told that Air Canada had sent four of their people across and in one day tied up all the counter spaces.

There are no slots. Do you understand the difference between slots and counters? Slots are time to get a flight, like we have at Pearson. I think Pearson is one of the few airports in Canada where you have to get slots to take off because of the congestion.

• 2055

But the gates—gates are the counters you go to and hand your baggage to. If you can't have any counters with people to look after your passengers, you can't access them to the airport.

They had tied up the complete load of gates. In my discussions with the Competition Bureau and Transport Canada, they agreed, and in their negotiations with Air Canada they told them they had to release those gates. We were allocated gates in Hamilton at that time.

Those are the actual facts on Hamilton, which can be confirmed by the president and general manager of Hamilton, whom I'm sure you know, Joe.

Mr. Bernard P. O'Rourke: Perhaps I might add that with respect to Hamilton gate access, slot access at airports, major airports coast to coast in Canada, it's intriguing, and the committee should bear in mind...I think it's very significant that the undertakings Air Canada provided to the federal government, the Minister of Transport, which underlie this legislation, specifically indicate that Air Canada must voluntarily relinquish slots, gates, etc., with respect to terminal access. I think that answers the question.

The Vice-Chair (Mr. Joe Comuzzi): But specifically on the Hamilton airport, you were thwarted from continuing your endeavours until such time as the Competition Bureau intervened and demanded that the counter space be made available.

Mr. Kenneth Rowe: Yes, we were simply blocked out of Hamilton.

The Vice-Chair (Mr. Joe Comuzzi): What was that hiatus from the time it was locked up to the time it was released?

Mr. Kenneth Rowe: I think we were advised late last year that gates at Hamilton weren't available to us any more because Air Canada, which was a.... As you know, Hamilton had been lacking in traffic for a long time, and I can understand that when Air Canada came along and wanted to give them this big promise of their discount airline and they were going to put hundreds of jobs there, it was a big attraction for them to forget our negotiations, and they gave them all the gates.

The Vice-Chair (Mr. Joe Comuzzi): Which is a four-month period from the time—

Mr. Kenneth Rowe: I think it was a number of months before we quit.

The Vice-Chair (Mr. Joe Comuzzi): So that set you back four months.

Mr. Kenneth Rowe: I don't know who's in the room tonight, but if there's anyone from the Competition Bureau or Transport Canada, then they know I was there meeting with them, with Transport Canada, on this problem.

The Vice-Chair (Mr. Joe Comuzzi): Thank you for clarifying that.

Mr. Bailey.

Mr. Roy Bailey: Thank you, gentlemen, for coming in. You might know that we had Mr. Smith from WestJet here the other day.

I have a few quick questions for you. You are suggesting five years to get operating without competition to establish a low-cost route. I believe Mr. Smith said he didn't want any interference for at least two years. There may be some significant differences there because he has a larger fleet and is rapidly increasing the size of his fleet. This low-cost airline would be a first cousin then to WestJet?

Mr. Kenneth Rowe: Would be a what, sir?

Mr. Roy Bailey: A first cousin type of thing, a low-cost—

Mr. Kenneth Rowe: We'd be a competitor of WestJet.

Mr. Roy Bailey: All right, a competitor.

Mr. Kenneth Rowe: They've indicated they'd like to be coast to coast, and good luck to them. They'll get what they can get and we'll get what we can get. I don't mind competition from WestJet. What I would be concerned about is—

Mr. Roy Bailey: I know, yes. You don't want Air Canada coming in—

Mr. Kenneth Rowe: Yes.

Mr. Roy Bailey: —and cutting out of the skies in two years or even.... Yes, I can understand that. I personally agree to that, simply because you're not going to get competition if you allow the dominant carrier to do that. We're here, this committee is here, and this bill is designed for competition.

You say you have ten aircraft airworthy right now ready to go?

Mr. Kenneth Rowe: No, we have six aircraft that will be in the air from summer to fall. At the turn of the year we'll have ten. And to crew them and get them into place and into...it's going to take the best part of next year to get ten aircraft.

Mr. Roy Bailey: What's the type of aircraft that you have?

Mr. Kenneth Rowe: The initial ones are 737 120-seat aircraft.

Mr. Roy Bailey: These are the bigger ones.

Mr. Kenneth Rowe: Yes, these are all big jets.

Mr. Roy Bailey: With a jet that size you're not going to really be servicing the same type of route perhaps that WestJet services in western Canada. You would require some bigger centres then, would you?

Mr. Kenneth Rowe: No, because it's the same size of aircraft. They're flying 737s.

Mr. Roy Bailey: Yes.

Mr. Smith indicated in the previous groups that have come in—this question goes back to that—that he was basically interested in a city, say, of 25,000. He wasn't really interested in some of the things that this committee is very much interested in, which is some of the area served by Canadian Regional Airlines, and obviously your type of operation would not go into some of those areas that are currently being served by Canadian Regional Airlines. Is that right? It would be too big an aircraft to.... Am I wrong in assuming this?

• 2100

Mr. Kenneth Rowe: Yes, you are wrong, sir.

Mr. Roy Bailey: Then in terms of what we figure may be divested by Canadian Regional Airlines, you would be open to pick up some of these routes?

Mr. Kenneth Rowe: No, I will go into whatever routes I feel we can get a share of the market from, no matter who's flying on them. But Canadian Regional is really servicing their main line and they're already into the main airports. They service St. John's and Halifax and the triangle, but they have, as you know, an old fleet of F-28 30-year-old airplanes, which you've often flown on, if you've been on them, between Toronto and Montreal and Ottawa. They're a very old fleet of airplanes, but they are jets and they can land on any major airport they want to. They have configured into a two-class, business and economy.... I think they have to be under the 70 seats, because they're under the same scope clause we were when we were with Air Atlantic. They wouldn't allow us to fly any more jets because Canadian pilots restricted us. That was one of the reasons we exited that relationship with Canadian, plus the fact that their financial position was deteriorating. They were carrying at any one time millions of dollars of my receivables, my money, unsecured, and we don't like that type of business relationship.

Mr. Roy Bailey: Do you intend to operate a low-cost transatlantic...?

Mr. Kenneth Rowe: No. What does one know what one goes to? The world changes so fast. We're starting with a short-haul carrier, jets. We have to have a large number of seats to amortize the costs over those seats, and we have to keep it short haul or you won't make any money, because you burn up seats in the air, literally, the fares of seats, the longer you go.

So Mr. Smith's type of model is changing from what he started off with because of his orders for these new longer-range aircraft. I really don't know what his plan is, and it's not my business at the moment, because we're focused very much on short haul, Winnipeg east to St. John's, all the major airports, and we've chosen to go into Pearson instead of Hamilton as a start to service the Toronto market. We will revisit Hamilton later when we've accommodated ourselves where most of our passengers really want to go to in eastern Canada, and that is into Toronto.

Mr. Roy Bailey: Thank you very much, sir.

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

Mr. Murray Calder: Thank you very much, Mr. Chairman. Mr. Rowe, I want to go into this. You're purchasing 737s right now. You'll have ten up in the air by the end of the year.

Mr. Kenneth Rowe: No, I didn't say that, sir. If you don't mind me interrupting, I said I'll have six by the end of this year and I'll have another four in the spring.

Mr. Murray Calder: So these are brand-new aircraft, or are they refurbished?

Mr. Kenneth Rowe: No, they are at least second-hand airplanes, simply because you cannot get new airplanes right now, and I have a September deadline set by the federal government. Otherwise I have no protection. If this one year is maintained and I don't start by September, I could be dumped on immediately.

Mr. Murray Calder: Let's pick a route here. Say, for instance, you're going to set up a flight that will go out of Mount Hope and land in Ottawa and you're going to go into competition with Air Canada's RapidAir. Is that something you're considering?

Mr. Kenneth Rowe: We're considering at the moment going on all major airports from Winnipeg to St. John's, and then we will visit the secondary airports as more airplanes become available, and then we will be doing transborders. That's the priority list.

Mr. Murray Calder: You're concerned about Air Canada and you want this five-year extension. What type of jet would you anticipate Air Canada would be using doing this same type of a haul?

Mr. Kenneth Rowe: They've already indicated—I'm just telling you what I read, and that's all we do know. According to what I last read and heard, they were going to use the old 737s Canadian have been flying and have no use for. They've renegotiated those leases, I understand. They're the ones they indicate they're going to use. I assume they're going to retire their DC-9 fleet. I came up on one of the DC-9s today, and it's 30 years old. So I assume that's their business decision, to use the 737s and then gradually move on from there.

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Mr. Murray Calder: Okay. Now we've got two aircraft that are identical, so you basically have the same maintenance cost, same fuel consumption, the whole nine yards. Would your pilots then be under a union contract? Are they going to make more money than the Air Canada pilots, less money, or the same?

Mr. Kenneth Rowe: They're going to initially make less, but they're going to be on profit-sharing and motivated. Part of the profits will go on some prorated basis to all the employees in CanJet. That is motivating the people who are applying for jobs, very similar to WestJet. So they could earn more if we make a profit. If we don't, the pain is spread around between the company and the employees.

Mr. Murray Calder: So we can compare the two airlines, Air Canada and CanJet. We can basically figure overhead costs, the whole nine yards. And you're concerned that Air Canada would, through lower prices, make it impossible for you to expand or to carry on business.

Mr. Kenneth Rowe: Yes, in a way, if they use it as British Airways have been using Go Fly in the U.K.—if they're trying to use it to put out competition that they think is a threat. Why on earth would you try to have a low-cost airline in a high-cost organization? I don't know how you do it on an accounting basis, quite frankly.

Mr. Murray Calder: But the thing is, you've already stated that we're going to be working with pilots who are under a union contract, who are going to be making more money than your pilots are making. You have the same aircraft, which are going to have the same fuel consumption, maintenance costs, everything else like that. And if Air Canada comes in with a lower price, shouldn't we be able to go to the Competition Bureau and say this is predatory pricing—they're doing this at a loss?

Mr. Kenneth Rowe: And Air Canada will give you all sorts of arguments that they're not. By the time you get through to taking any real action, I'll be out of business. That's what usually happens in these circumstances.

Mr. Bernard P. O'Rourke: I'd like to interject on this. Obviously what we're discussing here tonight is very important in terms of the national strategy for the country.

It's very interesting, when you look at the undertakings Air Canada provided and the legislation, as to how this whole thing is structured. My point is predatory pricing. The power to determine what is and what is not predatory has been taken away from the Competition Bureau by this legislation. It will be defined by Order in Council.

As a lawyer, when I saw that, I thought it was absolutely extraordinary. The federal cabinet is going to define what predatory pricing is? I was concerned. Quite frankly, as a lawyer, I thought that was very interesting. Should that not be left with the regulator?

Yes, we have big penalties in the legislation—$10 million fines, and people can go to jail. But guess what? The crime is not defined. That's of great concern.

So your point is well taken, Mr. Calder. But at the end of the day, what is and what is not predatory is not defined. Secondly, with the structure of airline accounting policies, it becomes very nebulous to determine.... When you say they're roughly comparable, they're not. The cost structure of Air Canada versus the classic worldwide well-known discount model—Southwest, Ryan Air, easyJet.... It's well known. WestJet didn't create this concept. It's very successful. It's been used for years. The cost structures are fundamentally different.

So I just wanted to make the point about predatory pricing, because it's a bit of a double whammy.

Mr. Murray Calder: No, I understand, because when we had Konrad von Finckenstein in front of us here, he seemed to be happy with the improvements that were being made and the extra powers that were being given to the Competition Bureau. So it sounds like he's missed that.

Mr. Bernard P. O'Rourke: Well, if you read his recommendations to the Senate committee on transport, prior to this legislation being drafted, many of his recommendations were not accepted by the federal government. Many of the recommendations of the Senate committee were not accepted either, with respect to predatory pricing specifically.

So even though he's happy.... I mean, obviously everybody has to work together for the national good, but at the end of the day there's a theme here. I think the Canadian government wants to maintain a tricky balance here. All we're saying is if we want competition, you can't ensure competition through regulation. You ensure competition via creating an environment that enables competition.

• 2110

We're asking for a proper, reasonable window of opportunity. It's not a coincidence that Air Canada agreed to a one-year window. Who in their right minds could start an airline in one year? It's never been done. It took WestJet three or four years to get stabilized. That's why Stephen Smith says he's happy with two. Of course he is, because he's stabilized. He doesn't want us to become a threat.

Our company, by the way, is larger than WestJet. IMP is a significant, low-key—from the east coast—player in the aerospace industry in Canada.

I think this should be taken seriously by the committee. I think that what we're asking for is quite reasonable. If the federal government felt strongly about this, there should be an outright ban. Why should Air Canada want to have the discount sector?

Mr. Murray Calder: It's a good point, and that's what I'm trying to dig out here.

Mr. Bernard P. O'Rourke: Yes.

Mr. Murray Calder: Thank you very much, Mr. Chairman.

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

Mr. Guimond.

[Translation]

Mr. Michel Guimond: Mr. Rowe, there is something I want to say to you.

[English]

The Vice-Chair (Mr. Joe Comuzzi): The translation isn't going through.

[Translation]

Mr. Bernard P. O'Rourke: I don't speak French very well.

Mr. Michel Guimond: Well, my comment is addressed to Mr. Rowe.

[English]

I will speak in French. The only problem is you have to understand what I say.

Mr. Bernard P. O'Rourke: I studied French at university, but if you don't practise it you don't keep it, unfortunately.

The Vice-Chair (Mr. Joe Comuzzi): Mr. Rowe, can you hear it in English?

Mr. Kenneth Rowe: Yes. You can give it to me in English or Russian. I don't mind.

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

[Translation]

Mr. Michel Guimond: Mr. Rowe, I don't want to upset you. I simply want to say that you seem exasperated. The reason for that may be the late hour, but I would simply point that most of my fellow MPs and myself have been attending meetings since 8 o'clock this morning. You seem to be both exasperated and aggressive. While your attitude is perhaps understandable, I wanted to let you know that this does not upset me, since as an aggressive person myself, I have to be willing to accept comments made by people who are equally aggressive.

Your demand is clear. I would like to know whether you have been in touch with Transport Department officials or with the Minister himself to present that request. The Minister surely has experts in the Transport Department to advise him, who are probably listening to us as we speak and will be able to inform us of the government's position.

I understood you to say that you would like to service the Hamilton-Ottawa-Montreal triangle. Are you still intending to service the City of Montreal as well, with your six aircrafts? Have you started negotiations with the Montreal airports? And if so, are the negotiations going well? Are the Montreal airports intending to offer you, as they offered WestJet, whose President, Mr. Smith, appeared before the committee yesterday, the possibility of landing in Dorval, Mirabel or Saint-Hubert, on the south shore of Montreal? I read in the newspapers today that the Montreal airports intended to offer him Mirabel, but not Dorval. So, what exactly is the situation in Montreal?

[English]

Mr. Kenneth Rowe: The Montreal situation is a difficult one. It has been for some time.

Let me first of all say that I employ 700 people at Dorval. We're a very large tenant there, and we have a large workforce because we own Innotech Aviation and Execaire there, who have facilities across the country, with their prime operation in Montreal. So we know the Montreal management there very well at the airport from when it was run by Transport Canada and under the present management group. We're already having difficulties with them on both sides. I can go into detail, but I don't want to take up the time of the committee at this time of night over the aviation side.

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On the CanJet side, yes, we have been in negotiations with them, as we have with all other airports. On the airline side, they are not as difficult. It is still a high-cost airport to service as a low-cost operator, as Pearson is, of course—and even more costly.

One has to weigh where your customer wants to go to and what business you're in on how you split between the leisure and the business market. We have a slightly different market in central and eastern Canada than, say, western Canada.

Am I speaking too fast for the translation?

Mr. Michel Guimond: No. At the end of my mandate I will be bilingual. I'm from the Saguenay region and we never speak English in the Saguenay region. I want to learn the other language. This is the reason why I try to—

Mr. Kenneth Rowe: That's okay. I took French for five years.

Mr. Michel Guimond: I'm a francophone. I'm an open-minded person.

Mr. Kenneth Rowe: I've lived in Halifax for over 30 years.

Mr. Michel Guimond: You can go faster.

On the first question, if they present the amendment to Transport Canada or if they have discussion about the amendment....

Mr. Kenneth Rowe: Yes. I think in the end we will end up at Dorval.

Let me go back to your first question about whether this was discussed. From the aggressiveness and exasperation...perhaps there's a combination of time and lateness in the process I've been through from the beginning in this. Because when I was in negotiations with the Competition Bureau and Transport Canada...I recognize they had a hell of a difficult job with this situation. I understand all the economics and the political side of the jobs at stake. It wasn't easy for them.

When I was suggesting CanJet and they asked me how long I would need to take to set this airline up, I said two years. As you know, what came back was one year for any start-up other than WestJet. This indicated to people like myself that it wasn't satisfactory. That is why we're in here tonight, trying to say not at all or at least five years. So that answers your first question.

For whatever reason they cut it back to one year in their negotiations with Air Canada. As I said in my opening remarks, they didn't really understand the complexity of the time it takes to set up a full airline of the size we're talking about. At one year we're simply only at 50% start-up without even really developing any of our markets with a mature schedule in place.

The second question, sir, was around what again? Is that okay?

Mr. Michel Guimond: Yes. Thank you, Mr. Chair. You have a very nice smile, Mr. Rowe.

The Vice-Chair (Mr. Joe Comuzzi): I have a strong suspicion that this meeting should come to a close very soon.

Ms. Desjarlais.

Ms. Bev Desjarlais: Mr. Bailey touched on flying into communities of around 25,000 or less.

It's not that you have any plan not to go into communities. You're saying you're going to have 120-seat aircraft and you need them filled in order to make it profitable.

Mr. Kenneth Rowe: Yes, you're absolutely right. You have to have a certain load factor to make it profitable. We have a bunch of turboprops still sitting on the ground from Air Atlantic. I may even put them in the air as CanJet Express and run them into some of these smaller communities and hook them into our main line, CanJet. That is being looked at by our management right now.

If it's going to be low fares, the aircraft itself has to have the seats to multiply to cover the costs of the flight. So we cannot afford business class or anything like that. We need the seats in there comfortable...but the maximum number of seats...and we fill it at the price it takes to fill it. And that's what we call price yield management, which now even hotels use today. It's very similar to what was started with the airlines.

Ms. Bev Desjarlais: I've never asked one of these questions that pertain to making my life easier, as Mr. Keyes did. Everybody has had their chance. Mr. Hubbard had Miramichi and Charlo. Could I have Winnipeg to Ottawa leaving Sunday at 7 p.m.?

Some hon. members: Oh, oh!

Mr. Bill Casey: Wait five years.

Mr. Kenneth Rowe: It's going to cost you five years of votes.

Some hon. members: Oh, oh!

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The Vice-Chair (Mr. Joe Comuzzi): That sounds to me like a very reasonable time to leave Winnipeg and a very fine time to arrive in Ottawa.

Mr. Casey.

Mr. Bill Casey: I think your concerns were well backed up by the testimony by WestJet. I forget the flight, but I think it was from Moncton to Toronto or Moncton to Hamilton. WestJet put a line on and Air Canada immediately dropped the fee, the price, to match it on that line, even though on the flights from Moncton to Montreal and on all the other ones parallel to it they didn't change the rate. As Mr. Smith said, this is not an example of predatory pricing; this is the definition of predatory pricing. Anyway, I think your motion is well-justified.

Another proposal that WestJet brought up was to allow a one-year holiday from the 120-day notice period if you want to try a new route. So you have one year to try a new route before you're obligated to give a 120-day notice of discontinuance. Have you thought about that, or is this an issue for you?

Mr. Kenneth Rowe: It's certainly not an issue for us at the moment, Mr. Casey. As I said, we're going to be flying the major cities, Winnipeg to St. John's, and if we have to quit the major cities, then I think we'll be quitting them all at one time for different reasons. If we can't make it in the big cities, God help us in the small ones.

Mr. Bill Casey: Your comment is fascinating about the CanJet Express, because that's an area that really is left out of this whole competition scenario the government is espousing. They want to encourage competition, but there is no competition from Moncton to St. John's, from Newfoundland or Halifax to Saint John, New Brunswick. There are no WestJets or any competition to the Air Canada regionals. So is it a likely possibility that you will really go into that?

Mr. Kenneth Rowe: The premier of New Brunswick has asked me to come up there. He's putting a meeting together with the airports of Moncton, Fredericton, and Saint John.

As you know, New Brunswick has no direct flights out of New Brunswick to the States without going through Nova Scotia or central Canada. That is a deterrent to business, conventions, and other forms of income generated by our air transportation system.

So I'm going to be looking at that too to see whether or not we can get them some service with our smaller aircraft, but it won't be exactly along the same lines as CanJet, which is simply a very low-cost, hopefully, most of the time, a fairly full type of larger airplane flying from A to B in the shortest time possible.

It's like a low-cost restaurant; you have to turn the seats over. You can't have fat cats sitting there all night and paying $7.50 for their sandwich and taking the seat. A low-cost airline is very similar to a low-cost snack bar. You have to keep turning those seats over and getting your aircraft productive as many hours of the day in as many sectors as you can.

Mr. Bill Casey: Do you see CanJet acting as a feeder to other international airlines like BOAC? You probably read about BOAC's problem.

Mr. Kenneth Rowe: We've been approached by a number of the American airlines right now to connect with them. If we go into a code-sharing arrangement, which you have to do to hook into their passenger reservation system...their baggage, AITA, and all those other things...we're back to where we were with Canadian and to a very high-cost, full-serviced airline like Air Canada, and that is not our model.

We did say that if your passengers want to connect to us in Terminal 3, we'll be flying to all the airports. British Airways is having trouble with this pricing thing, which we've just heard about. We're there and we'll be putting on more and more flights between these major cities until...what the market can stand, and if any of your passengers want to get on our aircraft, we'll work with you, but we're not going to code-share with you and carry all the baggage of your systems like we did with Canadian. We understand that this will then make us very easy prey to someone like Air Canada taking us out on their own terms.

Mr. Bill Casey: Okay, thanks very much.

The Vice-Chair (Mr. Joe Comuzzi): Mr. Rowe, do you have anything else you'd like to add?

Mr. Kenneth Rowe: I must apologize if you felt I was a bit aggressive at the beginning.

The Vice-Chair (Mr. Joe Comuzzi): No, no.

Mr. Kenneth Rowe: I wasn't trying to beat up on you, because I think to some extent we're all singing from the same prayer book.

The Vice-Chair (Mr. Joe Comuzzi): I'm sorry. Did we do anything to offend you?

Mr. Kenneth Rowe: No, no.

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The Vice-Chair (Mr. Joe Comuzzi): Mr. O'Rourke, do you have anything you'd like to add?

Mr. Bernard P. O'Rourke: I will editorialize a little on the approach of my comrade-in-arms. What you see is entrepreneurial passion. It's as simple as that.

I think you really believe in this.

We've been in the airline business before; we've been in aviation. I.M.P. operates the largest fleet of corporate jets in Canada currently today through Execaire in Montreal. We're a very credible player. We've operated very safely...well-financed, etc. We want to get back into the business.

Mr. Rowe has an entrepreneurial vision. He believes there's a model that will work and it's been proven worldwide.

You have to be given a window of opportunity not only just to start it but also to become established. Once that's done, if we can get the support of the committee, the by-products, the benefits that can evolve from that are things such as CanJet Express.

We do have eight surplus turboprop aircraft right now sitting on the ground. They could easily be placed into service to be a feeder either in central Canada, eastern Canada, or, for that matter, western Canada.

I'm a believer. I think it's a great thing. I believe in competition. What's been seen in western Canada with WestJet could easily be done here. There are a lot of benefits, and it will keep Air Canada on the straight and narrow.

The Vice-Chair (Mr. Joe Comuzzi): Do you have any of those aircraft that take anywhere between 45 and 50 people?

Mr. Kenneth Rowe: Our largest turboprop is the Dash 8-37.

Mr. Bernard P. O'Rourke: We do have as well three BAe146-200 aircraft. They're jetliners. They're on lease to SwissAir operating out of Zurich.

Mr. Kenneth Rowe: To close, Mr. Chairman, we're not looking for any government money, handouts, or anything like that, and we don't mind competition. We have a record of succeeding and we enjoy competition. If you look at the history of our company, we lead in practically every sector we're in, and we're into aviation, aerospace, hotels, marine supplies, medical supplies, you name it.

We've been very aggressive in driving everyone along these lines, which is part of my drive, and I enjoy doing it. I don't mind competing with Air Canada as long as it's a reasonably level playing field and they cannot be allowed to use their powerful monopoly position to extinguish any form of competition in its formative stages.

In other words, it's like a child. You don't want to beat it up before it's a teenager, even if it needs it then. You're not going to start cuffing it around the ears when it's five years old.

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

Thank you. This meeting is adjourned.