TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, May 12, 1999

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[English]

The Chairman (Mr. Raymond Bonin (Nickel Belt, Lib.)): I call the meeting to order. Thank you very much, ladies and gentlemen.

We welcome today, to contribute to our study on the competitiveness of the airline industry, Peggy Nash, the assistant to the president of the Canadian Auto Workers union. We all know CAW represents many groups in the airline industry. We're very interested in hearing from her how the competition could be improved, or at least how we could take out some impediments that prevent doing things better for airlines.

So we'll invite you to make a presentation. Then we'll open the meeting to questions from members. I want you to feel very comfortable. This is a very casual committee. There's no pretension here. We work well together, and I want you to feel you're one of the gang.

Ms. Peggy Nash (Assistant to the President, Canadian Auto Workers Union): Thank you very much, Mr. Chair. I appreciate the opportunity to appear before this committee on behalf of the CAW.

The short timeframe we had to prepare our presentation has meant we don't have an especially large delegation to appear before you today; I'm flying solo. But we certainly look forward to making a presentation. While I am here on my own, our presentation reflects the views of our national union, which represents 215,000 members across Canada, of which about 10,000 are in Canada's airline industry.

I have circulated a written presentation in English and French. I don't intend to read the presentation, you'll be relieved to know, but I will leave it with you. What I would like to do, though, is review the key points in the presentation, so the main points are presented, and then leave time for questions.

Our remarks today will be focusing on two key areas: primarily on the situation of Canadian Airlines and their viability; and secondly, and more briefly, on the situation of NAV CANADA.

The news we've all been reading about most recently is the situation of the tremendous losses at Canadian Airlines. Of course, last year they had a very disappointing year where they lost $137 million. For the first quarter of this year, they recently reported losses of $108 million. Actually, that is a little misleading. If they hadn't had a return on a one-time investment, they would have in fact reported a loss of about $130 million in the first quarter alone.

Their cash position is quite restrictive. In fact, it's at about the same point it was in the fall of 1996, when they had their last major financial crisis. However, we don't believe the situation at Canadian Airlines is a crisis at this point. We don't believe there is cause for a panic. However, we believe their growing financial decline is cause for concern and warrants the federal government playing a role, as I'll detail in just a few minutes.

Of course there are always cyclical losses in the airline industry. The first quarter is always a low period, but the loss Canadian Airlines is showing right now is certainly fairly dramatic. Reading about Canadian Airlines' losses in the newspapers, I felt as though it was déja vu all over again.

As I said, it was only in the fall of 1996 when Canadian Airlines was in a crisis, and for the third time they extracted concessions from their employees as a way of getting more financial solvency. At the time, we argued that would not solve their problems in the long term, and unfortunately we were right. Giving them more money just prolonged the situation of disastrous competition with Air Canada and delayed another crisis.

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At that time, we called on the federal government to play a more constructive role in terms of recognizing some of the fundamental problems underpinning the Canadian airline industry. In fact, the federal government really played a counter-productive role by urging the employees at Canadian Airlines to make concessions and, when our members refused, by implementing a provision of the Canada Labour Act in an unprecedented way to force open our collective agreement and force concessions on our membership.

Unfortunately, we were right. Wages weren't the problem and wage cuts were not the solution to the losses at Canadian Airlines. If you look at the airline industry today, if there's a company that can't make money in the airline industry, you have to ask yourself, when could they make money? The economy is doing fairly well. Travel is up, tourism is up, business travel is up, interest rates are down, and fuel prices are down. Air Canada had a gruelling strike that could have only benefited Canadian Airlines. Canadian Airlines still cannot make money. So it's clear that the problems lay deeper than just wage costs.

Nobody can credibly argue that Canadian Airlines has a problem with their labour costs. In fact, their costs are substantially below those of their major competitor, Air Canada, and far below those of U.S. airlines. Their labour costs per air seat mile fell by 3% last year, even as the company was losing $137 million. So as we say in our brief, if wage cuts could turn this company around, Canadian Airlines would be a financial powerhouse by now. So clearly that is not the case.

Some have suggested that the way around Canadian Airline's financial difficulties is for them to target the low end of the market and reinvent themselves as a low-cost, no-frills carrier, and they may be trying to find their way around our collective agreements in order to compete at the low end of the industry. While it is true that competition from companies like WestJet Airlines have not helped Canadian Airlines, especially in what they call the western triangle—WestJet has certainly affected their business—that's not the fundamental problem Canadian Airlines is facing.

For them to go the route of a no-frills kind of carrier is not the solution. We've had a number of low-cost, no-frills carriers come and go in the Canadian airline industry. We don't think that's the solution for this carrier.

In fact, what they have been targeting, which makes sense, is the high-yield business traveller market. This is where their competitive position vis-à-vis Air Canada has continued to weaken. Part of the solution they implemented in 1996, which was a way of cutting costs, has in fact exacerbated this problem. They tried to change aircraft, cut capacity in the east, and cut some of their in-flight services, and that has in fact further eroded business travel.

With the system of the airline industry in Canada, as I'm sure this committee knows, you really depend on those short-haul feeder routes to feed the larger transcontinental or international routes. These are the more high-yield and profitable routes where Canadian Airlines has done fairly well, especially internationally.

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So their solution in 1996 to cut wages, but especially to change some of their feeder routes, has exacerbated their problem here. For this reason, we don't think the solution to Canadian Airlines lies in downsizing the carrier. The more you downsize the more you erode those feeder routes, and that again affects your high-yield routes.

The fundamental financial problem—we said this in 1996 and we say it again today—with Canadian Airlines is the destructive competitiveness in the domestic airline industry. We have experimented with U.S.-style deregulation in Canada for more than a decade. On the one hand, we have Canadian Airlines' disastrous situation, but quite frankly, Air Canada is not in terrific shape either. The kind of hub-and-spoke model in the U.S. just doesn't work here and has resulted in a kind of oligopolistic competition. You have these two large carriers slugging it out against each other, not in any kind of free-market style competition, but locked in this kind of two-kids-in-a-sandbox kind of competition, with one trying to knock the other out of the box. They're just succeeding in destroying each other. So unless Canada abandons this kind of destructive competitive policy, our airline industry will continue to be damaged.

We are proposing three strategies for rebuilding the financial strength of Canadian Airlines, but we believe this should all take place in the context of a changed policy around regulating the airline industry.

The first change we would like to see is on foreign ownership. We believe, in the current context of the airline industry in Canada today, foreign ownership restrictions should be eliminated. National ownership was important in a period when Canada believed in a truly interventionist airline policy and we really were actively trying to create an east-west infrastructure and had ownership in the airline industry. That has all changed. There's a general deregulation of foreign investment rules and a growing north-south orientation of airlines, as opposed to east-west. So we don't believe there's a purpose served any longer in having any restrictions on foreign ownership.

The second strategy we are proposing, and this would have to be linked entirely to the first, is there would have to be commitment to a Canadian content level. By that we mean airlines that serve Canada would have to put jobs and services in Canada. So you couldn't have an American-based or British-based carrier just stopping off within Canada. They would have to put in reservation services, airport services, maintenance services—all the kinds of jobs the industry requires. We liken it to the auto industry, where it is entirely foreign-owned but we have content requirements that require jobs, resources, and content levels in this country. That has created in Canada one of the most productive and profitable auto industries in the world, completely foreign-owned.

The third strategy we would propose is that the federal government take a minority stake in Canadian Airlines. Canadian desperately needs cash, and we believe the federal government needs to show, as an example to the private sector, it has confidence in Canadian Airlines by investing $100 million a year over the next three years. The company would then be required to match that through foreign partners.

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Canadian Airlines desperately needs investment. It needs new aircraft and other new equipment, and this investment would help it, especially in the domestic market. For those who say the government would just be throwing money at it, this would really make sense, because Canadian Airlines, through the company directly and through its employees, pays about $500 million in taxes a year. So we would be talking about a very modest amount of that money being reinvested in the company, not as a giveaway but as an investment.

I draw the committee's attention to the model of Bombardier, formerly the De Havilland plant, in Downsview, Ontario. The provincial government made a major equity investment in that plant in the early 1990s. It was a plant that could have completely gone under or could have been kind of a minor player in the aviation parts industry. Instead, through that equity investment and other private money, that plant was turned around. Today it is an enormously profitable facility, employing over 6,000 workers, whose products are sold all over the world. So that can be an extremely good investment by the government on the part of citizens.

Again, we believe these measures will only be effective if there is a change in terms of the kind of irrational competitive structure the airline industry is in today. We need some kind of system of managing capacity in the airline industry and eliminating the kind of destructive, wasteful competition that has plagued the airline industry over the last 10 years.

The active equity participation by the federal government in Canadian Airlines would really spark their rethinking of their unquestioning loyalty to the doctrine of deregulation. Again, we don't believe minor tinkering or focusing on wage cuts will in any way address what is, again I want to stress, a deep structural crisis in the airline industry. We're putting forward these proposals as a way of being proactive before Canadian gets into another full-fledged crisis. We're certainly open to other ideas and thoughts about how to do this, but we believe it all has to take place within the framework of putting rules back into the airline industry.

Just to conclude on Canadian Airlines, it really is a solid company. It has more than 16,000 employees. It has excellent service, a very good route structure, and could do very well in a different regulatory environment. Unfortunately, the situation now looks very dim. We believe that after the negative role the federal government played in the last crisis in 1996 they cannot now try to sit out this impending financial crisis. They have to play an active role.

Just briefly on NAV CANADA, we want to make the point that again we have a situation where part of our national infrastructure, in terms of air traffic control, was privatized and deregulated, which has created a number of problems. This was supposed to be a low-cost way of dealing with air traffic control. If you look at Canadian Airlines' books, they show an increase of 50% in airport and navigation fees over last year, so this certainly has not been a low-cost exercise.

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At the same time, the company is focusing on reducing costs in a way we believe is creating enormous problems in terms of their staffing and also potentially in terms of safety. The air traffic controllers recently rejected a tentative agreement by 95%. They're extremely angry, not only about their working conditions but about the way this system is being managed.

There are terrible staff shortages. The centre for training air traffic controllers in Cornwall has been closed, yet a number of controllers are approaching retirement age, so new people will need to be hired. The current staff is working long hours with, in some cases, bizarre shift schedules. Now NAV CANADA, through their new collective agreement, wants to increase working hours and decrease their sick time.

We're also led to understand that NAV CANADA will be lobbying politicians in Ottawa to take away the air traffic controllers' right to strike, which of course would be a serious mistake. NAV CANADA really needs to bargain a collective agreement rather than trying to force air traffic controllers into a collective agreement they don't want by removing their right to strike.

The fundamental problem with NAV CANADA is that this is a very important safety element in our national infrastructure with respect to air safety. Clearly, safety and not cost cutting should be the priority. In order to meet safety objectives, NAV CANADA really needs to have adequate staff and adequately trained staff in order to do the job.

That concludes my presentation. I welcome any questions from the committee. Thank you.

The Chairman: Thank you very much for a good presentation. It really addresses the issues we're looking to resolve.

We'll proceed now to question period and we'll go to five-minute rounds. Is that okay?

I should mention that this chair knows that when members take five minutes to ask a question, there's no time for the answer. At the last meeting, I proved that I will enforce that rule. This leaves you the option of combining the two questions with the next questioner if you wish, so it gives you more leverage. At the end you'll have lots of time for closing remarks, if you wish.

The list is as follows for now: Mr. Bailey, Mr. Calder, Ms. Desjarlais, Mr. Keyes, Mr. Asselin, Mr. Nault, Mr. Dromisky, Mr. Guimond.

Mr. Bailey.

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

You don't mind my calling you Peggy, then?

Ms. Peggy Nash: No, that's fine, Roy.

Mr. Roy Bailey: There's a reason for that, Mr. Chairman, because as soon as Ms. Nash came in and I saw he name was Peggy, I mentioned to Bev that there used to be a song. But she doesn't know it; she's too young. No, I'm not going to sing it.

Didn't your union work on the agreement that reduced the salary of Canadian Airlines employees in 1996-97? Did they not take a salary cut to make the company more viable?

Ms. Peggy Nash: Yes. As I said, that only happened when the federal government enforced legislation that forced us to open up a signed collective agreement our members had with Canadian Airlines and put Canadian Airlines' offer to a vote. We did not negotiate that offer.

Mr. Roy Bailey: Are the salaries today in the two major airlines in Canada the same for the same jobs?

Ms. Peggy Nash: No, they're significantly lower at Canadian Airlines. Canadian Airlines workers—our members at least—today are making in wages what they made about 10 years ago, whereas I was just involved in negotiating a new agreement with Air Canada where there was a significant pay increase. So the gap is growing. They're not at the same level by any means.

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Mr. Roy Bailey: Thank you.

I have the distinct feeling that from time to time those who make massive ticket sales, and so on, tend to favour Air Canada over Canadian Airlines. Are there any grounds for my suspicion?

Ms. Peggy Nash: I'm sorry, I don't understand your question.

Mr. Roy Bailey: For instance, if you go to a ticket agent because you're going to make a trip somewhere, many agencies automatically refer you to Air Canada rather than Canadian Airlines. Is that just my suspicion, or does the industry feel that way? Does Canadian Airlines feel that way?

Ms. Peggy Nash: I don't know whether that's so or not. I know there are certainly incentives, like the point system for business travellers especially. Part of it has to do with the route structure, and part of it might have to do with feeder lines, so I can't answer your question.

Mr. Roy Bailey: You talked about putting $100 million into Canadian Airlines over a period of three years. I'm not arguing the validity of that. I guess I'm saying this committee, when we deal with VIA Rail and highways... Once the government started investing in transportation again, without any substantial investment—recognizing that's a small thing—we would have some competition out there in the country with our highway structure and our VIA Rail passenger train structure. So you would expect that as an airline, would you not?

The Chairman: Excuse me. Before you respond, am I correct in saying it's $100 million per year for three years?

Mr. Roy Bailey: It's for three years.

The Chairman: It's not over three years.

Ms. Peggy Nash: I guess I'm the wrong person to ask, because I happen to believe that part of the responsibility of government is to invest in national infrastructure, both material—like roads and airlines, etc.—and social services. So I think that's part of what government should be doing.

But we're not talking specifically here about the government just opening up the vault and telling any company that wants to come in to take their money. This would be an investment whereby, if the government got the fundamentals right, they should get that investment back and perhaps make a profit. Again I look to the Bombardier-De Havilland example, which turned out to be a very profitable and lucrative investment on the part of the Ontario government.

The Chairman: Thank you.

Mr. Calder.

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

Canadian Airlines obviously has a lot of problems, but I think one of its problems is the fact that AMR is in there. It currently owns 33% economic of Canadian Airlines and 25% voting. AMR also exercises operational and financial control of Canadian through contractual agreements.

I'm very curious about the fact that an American company is, quite frankly, pulling money out of Canadian Airlines. That's one of the reasons why Canadian Airlines is having problems. From what I can see, they're bleeding them.

I pulled some information off the Internet here, and Canadian actually is improving, if you take a look at it from a revenue aspect. In the first three months of 1998 ending March 31, their total revenue was $637.9 million. In 1999 it was $703.7 million. It's the expense side that's going up here. In 1998 it was $736.2 million, and of course they were running a deficit at that point of $62.3 million. Now in 1999, even though fuel costs have decreased—wages have gone up a bit but not substantially—they're running an expense of $805.7 million, and of course you have $102 million of a shortfall in revenues.

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One of the interesting columns is right at the very bottom, and it has this thing called “other”. “Other” cost Canadian $147.6 million in the first three months of 1998. This year, in the first quarter, “other” cost $167.7 million. I'd like your comments on this, Peggy, because what I see right now is a company that actually is improving, yet it's losing more money.

Ms. Peggy Nash: Yes, they're improving. They just can't make any money, which is their problem. Part of the irony of this situation is the more planes they fly, the more seats they fly, the less money they make. I mean, these guys would make more money if they sat at home and did nothing, but a lot of people would suffer.

But I disagree with you about AMR. I think what AMR has done for Canadian is provided very necessary capital investment that they desperately have needed and in fact still need, which is the obvious problem they're facing today. They have also provided a lot of expertise in terms of computer expertise, marketing, and systems. There are a variety of services AMR provides that, yes, Canadian pays quite handsomely for. But if you look overall at AMR's investment, this has not been lucrative for AMR. They've put a lot of money in here that still has not turned around into a profit.

The other big thing that AMR gives Canadian is through their alliance—the oneworld alliance, of course. It's that feeder system that is so important. American does not have the transpacific routes that Canadian does, so in fact they're feeding people from all over North America, especially into the Vancouver gateway, which is very important to Canadian. So while they're certainly paying a hefty price for the services they're getting from AMR, overall I believe this relationship has been beneficial to Canadian.

Mr. Murray Calder: So then you would probably be in agreement that to save Canadian, you're looking more at a vertical integration rather than a lateral one?

Ms. Peggy Nash: Well, what we're looking at is more capital investment, obviously. They don't have cash, and they need it. But we are also looking to join with that a commitment to jobs and services in Canada. What we don't want to be is a spoke in an American airline's hub. We want to maintain that infrastructure within Canada. We want to maintain the airline service. We want to maintain the jobs and the tax base that have been beneficial to Canada.

The Chairman: Ms. Desjarlais.

Ms. Bev Desjarlais (Churchill, NDP): If Canadian Airlines hasn't been able to make a go of it after what took place in the last round, and if we accept that it's the management strategy of Canadian Airlines, how will putting in $100 million a year improve that?

Ms. Peggy Nash: I'm not just saying it's the management strategy. I agree with you, if it were a question of just pouring more money into Canadian, we would say don't do it, just as in 1996 when we said, if all you're going to do is cut wages, you're just giving more time to Canadian to keep doing what it's doing wrong. The fundamental problem is the structure of the Canadian airline industry.

The U.S. style of deregulation, the supposed free-market deregulation, doesn't operate in Canada. You have in essence two large carriers, an oligopoly of these two large carriers that are slugging it out and damaging each other. Even Air Canada, which looks like the winner here, is not in great shape either. Its shares go as junk bonds. So what we're doing is taking this very important piece of our infrastructure and allowing it to continually be damaged and eroded.

So what we're saying is let's stop pretending we have this lovely free-market system here. We don't. Unless we have some rules in place that stop these two carriers from the kind of destructive competition they're engaged in, whatever we do at Canadian isn't going to solve the problem. But if we embark on those other three measures that I talked about, that will get Canadian back on its feet. Then we should address the larger problem.

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Ms. Bev Desjarlais: How is opening up the foreign ownership going to benefit Canadians in all areas of Canada, not just Vancouver, Montreal, Toronto and Winnipeg? How is that going to benefit the rest of Canada?

Ms. Peggy Nash: Well, Canadian needs money, and they can't find the money in Canada.

Ms. Bev Desjarlais: They're also not providing services to a lot of other places. For that matter, neither is Air Canada going into a lot of other areas of Canada any more. There's less and less service into a number of communities where there used to be service. That's not there any more. So there's an impression out there that these major carriers are just working out of urban centres, directing traffic in other countries. But Canada does not have enough competition and affordable rates in parts of the country other than urban centres. So how is foreign ownership going to improve service for all Canadians?

Ms. Peggy Nash: I remember 15 years ago when Air Canada used to fly—and Canadian... well, it wasn't Canadian then—to a lot more smaller communities than they are today. After Air Canada was privatized, and with deregulation and a lot of changes in the Canadian airline industry... I mean Transair, Wardair, EPA... I can count for you all the carriers that have come and gone over the last 15 or 20 years.

So this industry has restructured itself, and now you have these very small feeder carriers operating out of some of these smaller communities feeding to the majors. You have two majors, Air Canada and Canadian.

How does foreign investment benefit Canadians? What it does is allow those two carriers to continue. Unless Canadian gets some capital, I think the writing's on the wall for the long term. I don't have a crystal ball. All I can tell you is that without a one-time financial return on an investment this first quarter, they would have lost in this first quarter what they lost in the whole of last year. That's not good.

They need cash. Kevin Benson said it publicly. So if they can't get it in Canada, they're looking elsewhere. But they have a cap of 25%, which they've reached now. So our argument is that the federal government should put some money in and increase the foreign ownership or take the cap off, so that they can get the cash they need to buy equipment. Most of their planes are leased. They don't own their own equipment. They desperately need to upgrade their fleet. And unless they get cash, they can't do it and continue operating as a viable carrier.

The Chairman: Mr. Keyes.

Mr. Stan Keyes (Hamilton West, Lib.): Thank you, Mr. Chairman.

Ms. Nash, thank you for your presentation. Do you have any expertise in the airline industry itself?

Ms. Peggy Nash: I'm a former Air Canada employee. I don't know if that helps.

Mr. Stan Keyes: No, but aside from that—I don't know what you did at Air Canada—what about knowledge of the industry itself, how it operates, how it works, the inner workings of an airline industry?

Ms. Peggy Nash: Yes, I think I have a fair understanding.

Mr. Stan Keyes: Okay.

There are some things you mentioned in your presentation. If Canadian Airlines could not earn a profit in 1998, you said, with the strong economy and a punishing strike in its major competitor... You're aware that the strike wasn't going to do much for Canadian's profit base? You know something about the airline industry, so you know that even though there was a strike at Air Canada, it wasn't going to do a whole hell of a lot for Canadian Airline.

Ms. Peggy Nash: Are you asking me a question?

Mr. Stan Keyes: Yes. Are you aware of that?

Ms. Peggy Nash: Well, people had to travel with some carrier during the Air Canada strike.

Mr. Stan Keyes: Yes, but that might not necessarily be Canadian. Canadian Airlines will tell you that while there was a strike at Air Canada, you don't predict a strike. Therefore, you don't go out and lease planes or purchase aircraft in the event that there might be a strike at your competitive airline. So at the end of the day, they didn't have the aircraft to carry the additional passenger loads that Air Canada was giving up.

Ms. Peggy Nash: But you know, if you look at that strike and look at the aftermath, that explains perfectly what I'm talking about. What Air Canada did after the strike to get back its market share was hold seat sales and slash the prices of tickets across the country. So then Canadian had to slash their prices to meet that competition. That affects the bottom line of both companies. That's exactly what I'm talking about.

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Mr. Stan Keyes: But I'm trying to get at your remark that the Canadian Airlines could not earn a profit in 1998 even though there was a punishing strike. The punishing strike could not contribute to their profit.

Ms. Peggy Nash: Why not?

Mr. Stan Keyes: Maybe it could afterwards, but not during the strike, because as I told you earlier, they didn't have the aircraft to pick up all the extra traffic flow.

Ms. Peggy Nash: But I would presume that if they had empty seats during the strike, those seats would have been filled.

Mr. Stan Keyes: They were filled. But that accounted for a very small percentage of the overall traffic volume that was available to them with the Air Canada strike.

Is this the first time the CAW has put increased foreign ownership on the table for any kind of a Canadian private sector company?

Ms. Peggy Nash: No.

Mr. Stan Keyes: They've done it before? With whom?

Ms. Peggy Nash: Aerospace.

Mr. Stan Keyes: To increase foreign ownership? I wasn't aware of that.

You represent workers at Air Canada as well?

Ms. Peggy Nash: Yes.

Mr. Stan Keyes: And Canadian. How many do you represent at Air Canada, for example? Would it be a whole lot?

Ms. Peggy Nash: About 4,500.

Mr. Stan Keyes: About 4,500? I suppose you're aware of the attempts by the two airlines to compare notes and examine the possibility of route-sharing between the two, to do exactly what you're alluding to, and that is to try to work out some kind of an opportunity that both could seize and both be profitable with. That's what they're attempting to do now.

But the talks between them—I haven't seen any evidence that they're going all that well. There have been talks, but I don't know if they're still going on or if they're going on at all. I guess this leads to the perception that obviously Air Canada would like to be the sole-source airline for the country of Canada for its domestic routes, etc., and they'd do far better if Canadian didn't exist.

Would the CAW somehow get involved? Since it has employees in both Air Canada and Canadian, would it ever get involved to try to coordinate the employees at the two airlines, for them to go to management from the other end? If management is trying to do something at one end, and it doesn't appear to be working too successfully, from what I've seen, then you drive it from the other end, where the employees are actually coming forward and saying they all want a job tomorrow.

At the end of the day, it's a job for everybody. So they as a team would come forward from the other end and tell management they understand that both are working hard to make a profit, but neither of the airlines are being too successful at it—well, Air Canada obviously a lot more successful than Canadian—but they all want a job at the end of the day. So they would ask what they can do to try to facilitate some coordination between the two airlines.

Ms. Peggy Nash: We've had those kinds of discussions with both companies and—

Mr. Stan Keyes: With the employees of both companies?

Ms. Peggy Nash: Yes, primarily with Canadian, because they're the ones who perceive themselves to be the most insecure.

Mr. Stan Keyes: I don't think there's any perception there.

Ms. Peggy Nash: But Air Canada is not in the greatest of financial shape either, and certainly we've had some discussions, more at a leadership, a workplace representation level, across the country. But when we talk with the companies—obviously we do, and they listen to us—it is our impression over the last several years that they don't seem to be able to work it out between themselves. That's why we're calling on the government to play a role here. If they could work it out and there was some rational route-sharing or whatever, that might make a lot of sense. But we're still waiting, and a ship can go off the edge of the earth here before that actually gets resolved, which is our concern and why we wanted to be proactive this time.

The Chairman: Monsieur Asselin.

[Translation]

Mr. Gérard Asselin (Charlevoix, BQ): First of all, I would like to congratulate you and thank you for your presentation. I believe that what we are experiencing today is only the tip of the iceberg. When the Liberal Party took office in 1993, the Prime Minister and the Minister of Finance had only one objective in mind: to reach a zero deficit. This was done to the detriment of air transport and the safety of passengers, and in all other areas as well.

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In your document you mention the wage freeze for air traffic controllers and the constant deterioration of working conditions. This isn't terribly reassuring for the passengers. And it makes me rather nervous when you say that it is difficult to attract and keep experienced air traffic controllers.

You didn't mention the cuts made at NAV CANADA. We know that they are the ones who did the hatchet job that the Liberal government wasn't able to do; NAV CANADA was asked to do this through the Air Traffic Safety Board and the Department of Transport. NAV CANADA was asked to make these cuts and, after that, they say that it isn't their fault. But who is responsible? The federal government is still responsible for airports and air transportation.

When you say that the passengers haven't yet felt the effect of these cuts, I'm sure you mean that they haven't benefited from lower fares. But what has reached the passengers is insecurity. The cost of a ticket has not dropped, but insecurity amongst the passengers has increased, which means that business is down.

Also, you say that you hope they won't wait for a serious accident to happen. Not too long ago, in Baie-Comeau, there was a plane crash that killed seven people. The problem was with the lack of air traffic control: they thought the plane was behind them when it was actually in front. In Gaspé, two pilots and two passengers were killed in a plane crash. There was a lack of air traffic control and communications.

In your document, you mention that they want to reduce the number of sick leave days. Long work hours could cause some air traffic controllers to make mistakes. You hope that the committee or the minister will not give NAV CANADA permission to remove the right to strike from its employees; I really hope that it won't be the case because it wouldn't be democratic. NAV CANADA should take the necessary time to negotiate in good faith with the air traffic controllers, however many of them remain.

I'm somewhat surprised that in the part of your document that deals with NAV CANADA, that I reread twice, you didn't mention staffing cuts and the closing of some facilities. These have extreme repercussions on passenger safety and the safety of the on- board crew. I can't understand why you didn't mention the problem of the cuts made by NAV CANADA and its effects on air transportation.

Rest assured that neither Air Canada nor Canadian will tell us that this affects the safety of their staff or of the passengers. These companies are compensated either directly or indirectly in return for their silence. As a union, you should tell the government about the problems that you have experienced following these cuts; today you have an opportunity to do just that.

The Chairman: The only problem that we have is that you have the proper forum to do so, but the member hasn't left you enough time to respond.

As chairman of the committee, I should have ruled a number of comments made by the member out of order, but I prefer to be flexible. The question that my colleague wanted to raise was perhaps that the companies are not competitive because of the discontent among their employees and a number of other reasons, and that's why I allowed him to continue.

It was a lovely speech, but I can tell you that a neutral chairman would have a hard time recognizing the relevance of the comments that were made. This committee is not a forum for airing one's grievances, and I would ask the members of the committee to be constructive. We have a lot of work to do. Stirring up old quarrels is not very productive.

I will give you two minutes to answer, if you wish.

[English]

Ms. Peggy Nash: Well, I would just say that in a sense it is a false kind of competitiveness to have NAV CANADA focus so single-mindedly on cost-cutting to the detriment of its real purpose, which is safety, whether that cost-cutting is in terms of staff cuts and lack of services or whether it is really intolerable working conditions. It's not good for the employees and not good for the public, and ultimately it's a false economy. It hasn't translated into savings for airline passengers. Again, if you look at the costs to the airlines, as I indicated in my presentation, it was a 50% increase in Canadian's costs to pay for NAV CANADA. So clearly this system isn't working, and I think it can be anti-competitive but also anti-social in its outcome.

• 1625

The Chairman: Mr. Nault.

Mr. Robert D. Nault (Kenora—Rainy River, Lib.): Thank you, Mr. Chairman.

First of all to Ms. Nash, thank you very much for coming. I think it's very appropriate that the CAW, which has always been a very proactive union, would come to talk about things that, I would suggest, 20 years ago unions wouldn't talk a lot about, and I think that's a refreshing change.

I wanted to talk about your three points in particular, because I think that's the meat of the whole proposal that you present to the committee. Regarding the issue of Canadian air carriers having the restrictions for foreign ownership removed completely, is it your suggestion to have an unfettered removal completely, or to have something like we did when CN was privatized and there was a restriction on 10% ownership per shareholder or tranche, if you will, when they bought stocks? It is a very different method of getting the same solution in that you don't get one big American airline coming in and buying up, you know, 50%, 60% of Canadian, but in fact then you can still get foreign ownership and the infusion of new equity.

Could you clarify that, or have you thought that through at this point yet? Or would I read into it that you're just saying, remove the restriction completely and we'll see what happens.

Ms. Peggy Nash: Well, I think what we're doing is really exploring at this point, and trying to put forward our ideas, which are still open to other ideas. You raise a good point about whether any one shareholder should be limited. We, quite frankly, hadn't put that in and haven't had a lot of discussion about it. The one restriction we do put in is around the requirement—what we call content requirements here.

Mr. Robert Nault: I want to get to that in a minute.

Ms. Peggy Nash: We hadn't looked at restrictions, but it's something we certainly could look into further. We hadn't looked at it and rejected it.

Mr. Robert Nault: At the CAW, both you and I know relatively well that you have some fairly capable economists of your own. One of the problems with the whole issue of having these clear commitments regarding fair Canadian content levels is that it obviously will have an impact on investment or an interest of a foreign owner to come in, if there are restrictions as to what they can do or cannot do at the corporation. Has there been an analysis, for example, of that? What you're basically saying here is that, including reservations and ticket services, in fact there will be no job loss. They can't move them to a central location where it can be all done out of... God knows, I think they do it in places like Mississippi, Texas, you name it.

Ms. Peggy Nash: New Delhi.

Mr. Robert Nault: I think Canada does them all, right? I think lately we've heard lots about that. This has an impact on who would want to invest. Have you done some research on that through your economists at the CAW, to see what kind of impact this would have? The Canadian airline industry is very different from the auto industry. I mean, the fact remains that we got an Auto Pact—and I think people who were around in those days would confirm that—because they wanted access to the Canadian market. This is a domestic market to some extent in that it's not the same kind of business they're in. So if you had these content rules built in, it might affect your ability to attract an investor.

I'm just curious as to whether you've thought that through and how we would approach that, if we were to write in some form of regulation or legislation that would affect the abilities of an investor when it comes to jobs and where they would go or how they would be created.

• 1630

Ms. Peggy Nash: Our theory is that if there's a possibility of making money, there will be an investor, so if the company looks like it can be profitable, even if there are restrictions, there will be somebody who's willing to invest.

The reality is that you have a very good-quality airline here with some excellent routes and top-notch service, and it ought to be able to make money. It's just that the situation it's in, in terms of our market right now and the nature of the competition, doesn't allow it to do that. It's domestically that Canadian Airlines is losing money, not internationally; they're making money internationally.

You're right, it would be even more profitable if reservations and the ticket processing and the maintenance were done in very low-wage parts of the world, but obviously that's not in our interest as Canadians. So these are reasonable requirements to put on an investor, that if we open up something so important as our airline industry to foreign investment, what we would have to get from it is the commitment that the jobs and the infrastructure and the service, in terms of the communities served, are still going to be maintained.

As to specifically how that would work, obviously that would be the subject of a lot of discussion and working through, but all I know is that if there's a will to get there, I'm sure we can fashion some rules. As long as there's a company that can make some money for an investor, they'll move in.

The Chairman: Mr. Dromisky.

Mr. Stan Dromisky (Thunder Bay—Atikokan, Lib.): Mr. Chairman, I'm not going to spend any time arguing about figures that appear in this report, because we haven't the time for that right now. We can come up with a whole set of new figures and all kinds of figures, depending upon the viewpoint and who's making the presentation.

I'm concerned about the statements about workers here. First of all, my understanding is that as far as conditions of employment are concerned, those conditions are negotiated between the workers and management. It has nothing to do with the federal government. Is that true?

Ms. Peggy Nash: You're talking about NAV CANADA. I think air safety is of concern to the federal government, and the reason we're raising the situation of NAV CANADA is not that this committee is involved in the specifics of the collective bargaining process, but that the impact could have ramifications in terms of passenger safety.

Mr. Stan Dromisky: Okay, but you have no proof right now, or your union has no proof, whatever those ramifications might be and how they materialize, that safety is being jeopardized in the aviation industry in Canada.

Ms. Peggy Nash: What we have is a lot of air traffic controllers who are telling us that they are exhausted, frustrated, and concerned about how NAV CANADA is operating right now. With respect, that is the reason we're bringing that to this committee, not because the committee will be involved directly in negotiations but just that it could affect safety.

Mr. Stan Dromisky: I have just returned from an international workshop I attended in Vancouver. We're talking about the human factors here. Did you know that over 80% of our accidents are caused by the human factor? I'm talking about pilot judgment. As far as the technical aspect is concerned, the accidents in that area have been drastically reduced in the last 20 years. For every million flights, it might be that two or three are caused by technical problems.

My understanding is—and I don't know if this is true or not—if a person is working for NAV CANADA and he's exhausted and they ask him to come in for another shift shortly after... is he doing that for double time, time and a half, for the extra money, or is there a threat that if he doesn't come back in, he could be fired? I really don't know. My understanding is that these people are responsible, professional people. If they're sick, exhausted, or too tired and cannot make the kind of judgment they should be making regarding the flight of planes and the safety of Canadian passengers or anyone else, they should say, I'm sorry, I cannot function for the next eight hours; you'll have to get somebody else to take my place.

I don't know if that's true. What I'm asking is, is that true? Is that option available for the employees?

• 1635

Ms. Peggy Nash: People have the right to refuse unsafe work if they believe they're putting themselves or someone else in danger. But I think the issue they're raising is that because of extreme staff shortages, people are being scheduled for hours of work that they wouldn't normally be scheduled for, and it's leading to a lot of stress and burnout. There may well be situations where people say, “Listen, I just can't do it”, and then they face the outcome of that. But I think what we're raising here is that there are problems we should be concerned about in terms of understaffing in the airline industry. This is an important service. It's not just the working conditions of those workers—

Mr. Stan Dromisky: No, I understand that.

Ms. Peggy Nash: —it's something that affects, obviously, huge numbers of people.

An hon. member: You and me in particular.

Mr. Stan Dromisky: Yes. I feel very strongly about that. If management is forcing the employee to carry an extra burden when they're exhausted, something should be done about a situation like that. That's why I raised that question. I feel that the worker has a right there to say, no, I'm too tired, I'm exhausted, I'm sick, or whatever. Do you understand?

Ms. Peggy Nash: Yes. I think it's part of a negative pattern that has been happening. There may well be people who decline to do certain shifts, but I think there are probably as many people who end up working them.

The Chairman: Before I go to Mr. Guimond, unless I'm mistaken—and I ask the members of the committee to correct me—in this study on competition of airlines, I don't suspect that there's going to be a large chapter on air safety. Canadian airlines are amongst the safest in the world. If that's an issue with the safest industry in the world, members will have to explain to me how we can fit this into a report that affects competitiveness. If anything, safety is one of our strong points.

So for those of you who are addressing questions on safety, I wouldn't want to leave the impression that airlines in Canada are not at the top of the heap, because they are. Feel free to correct me if I'm wrong.

[Translation]

Mr. Guimond.

Mr. Michel Guimond (Beauport—Montmorency—Côte-de-Beaupré—Île-d'Orléans, BQ): Thank you, Mr. Chairman, and thank you, Ms. Nash. Before asking Ms. Nash a question, Mr. Chairman, if I may, I would like to make a comment.

It is true that members are free to make comments or ask questions if they so choose. When we go too far, you call us back to order and you very kindly question the relevance of our comments. I would like to tell you, Mr. Chairman, that I was uncomfortable when I heard the preliminary remarks made by my colleague Mr. Keyes. He knows that I have great respect for him. Our opinions may differ on some things, but on others we agree. He asked Ms. Nash to be more specific about her qualifications and her knowledge. I don't think we have ever asked a witness appearing before us to list all of their diplomas. We have before us a witness who has taken the time to reflect upon the matter and to submit a report. I do have problems with her report and I will tell her what I don't agree with. I'm not trying to be too easy on her, but I didn't like the comments made by Mr. Keyes. There is a notable difference: when we have witnesses representing management, the Liberals frame their questions in a certain way, and when the witnesses are from the unions, the line of questioning is very different. In any case, that's just my opinion.

The Chairman: In answer to what you've just said, as chairman, I allowed Mr. Keyes to make his comments, as well as Mr. Guimond, and I don't feel at all uncomfortable about it. You may continue. You have three minutes left.

Mr. Michel Guimond: Ms. Nash—

[English]

Mr. Stan Keyes: On a point of order, Mr. Chairman, I want to state for the record, and so that Ms. Nash doesn't become uncomfortable, that all it says on her brief is that she's the assistant to the president of the Canadian Auto Workers. I think it was a relevant question to ask, if she has had any involvement in the airline industry, given some of the things that she presented in her report. I wanted to know what her expertise was in the airline industry so I could gauge that against the comments that were made in the report. When other witnesses come before us, if they're with VIA Rail, they usually state that they're an engineer in this particular area, or whatever, so you never have to ask.

I have nothing in front of me, Mr. Chairman, that tells me what Peggy Nash does as the assistant to the president, so that's why I asked the question.

• 1640

[Translation]

The Chairman: If I may, I would like to clarify that point. Are you an employee of the Canadian Auto Workers Union, or were you elected to your position?

[English]

Are you an employee of the Canadian Auto Workers, or are you in an elected position whereby you can speak for the membership? I'm a former member of CAW, and an employee is not mandated to speak on behalf of the membership but an elected official is. Can we determine that? I think that's what the question was.

[Translation]

Ms. Peggy Nash: The question put by Mr. Keyes did not make me uncomfortable. I'm responsible for negotiations between the airlines and the members of the Canadian Auto Workers Union, and I am assistant to the president of the CAW. When I am at the bargaining table or appearing before a committee such as yours, I represent the president of our union.

The Chairman: Very well. We will start over. You have five minutes.

Mr. Michel Guimond: That means that from now on, we will ask our clerk to ask the witnesses coming before us to supply us with their job description as well as an organization chart.

The Chairman: In the future, we will continue as we always have: the chairman will chair.

Mr. Michel Guimond: Ms. Nash, I will continue along the same lines as Mr. Nault, who asked questions about your three recommendations. More specifically, I will deal with the recommendation to eliminate the federal restriction relating to foreign ownership.

It might seem strange for a separatist or a sovereignist like me to advocate the sovereignty of Canada and to want to protect it against American intrusion, but I believe that your recommendation is absurd. It makes no sense. You don't know how much it hurts me to say this, but it makes no sense whatsoever. It's like when I denounced the government when the Seaway was privatized. They wanted to give the Americans the St. Lawrence Seaway, that allowed us to bring together this big beautiful country. That is my comment and I would like to hear what you have to say about it.

In the second part of your recommendations, you say that clear commitments should be made in terms of preserving jobs. If American Airlines decided to invest in Canadian, it wasn't for some frivolous reason, but because they hoped to make a return on their investment. If they were allowed to buy 100% of the shares, and if they were to decide to cut jobs or have the reservation system based in Dallas, all of the talk in the world won't... I must admit that I find your brief upsetting and disappointing. I had some telephone interviews to give and I apologize for having had to leave. In any case, I would like to hear what you have to say. And I will have two more questions for the next rounds.

[English]

Ms. Peggy Nash: I'll respond to your second question, why does General Motors invest in the Boisbriand plant outside of Montreal, first.

They do it because they have to if they want to sell cars in Canada. So why couldn't we put rules in place that say if American, or British Airways, or whatever, invests or wants to make money in the Canadian airline industry, they would have to make a commitment to jobs and services in Canada? If they can make money doing it, they'll do it. You're right, they exist to make money, and they could make more money. GM would make more money if they didn't have those restrictions, if they didn't have those requirements, but they make money anyway. I think it's reasonable that we put in those restrictions. Again, if they can make money they'll do it.

• 1645

In terms of the foreign ownership, I agree with you that in the best of all worlds we would have a national Canadian airline, there would be a commitment to that airline, there would be rules around that airline, and we would support that. But we had that; it was called Air Canada. We privatized it. We brought in American-style deregulation and now we're in a situation of crisis—maybe not of crisis but of big problems. I think you can't put the genie back into the bottle and say now we want to create such a situation as we had 15 years ago.

I don't hear anybody saying they want that. The world has changed. We're not, as a country, saying our most important ties are east-west ties across the country. I'd like to think they were, but everything I hear is north-south. We hear hemispheric trade, and if that's the direction this government is going in and has gone, then I don't see the point of keeping this restriction on the airline industry when the result could be that a major carrier dies and 16,000 workers lose their jobs. I value the jobs more than I value the national loyalty.

The Chairman: Okay. For the second round, three minutes. Mr. Bailey, Ms. Desjarlais and Mr. Nault.

You have to go? Mr. Guimond.

[Translation]

Mr. Michel Guimond: I said earlier that I have two more questions.

The Chairman: We will not run out of time.

[English]

Mr. Bailey.

Mr. Robert Nault: Roy, can I ask a question before I go?

Mr. Roy Bailey: Sure.

The Chairman: Ms. Desjarlais, do you agree to let Mr. Nault go? He has to leave.

Ms. Bev Desjarlais: Okay.

The Chairman: Thank you.

Mr. Robert Nault: I want to ask this question before I run off to another committee, as it relates to the union membership.

I think this is important. I'm very much one of those people who agrees with you that we've moved on. I think the unions in the country, and particularly CAW, are keeping pace with that kind of progress. Part of that is the whole issue of foreign ownership.

Would you be able to tell us some time in the not-too-distant future just what the membership does think about the whole issue of foreign ownership? I don't think there's anything wrong with that, but I do think it's important to clarify unfettered foreign ownership versus some sort of criteria, like what we did with CN. I'm a very strong supporter of the 10% limit per investment. I think that restricts our being swallowed up and gives us an opportunity to then manage that file. At this point, has the membership been asked the specifics of this or do they in general agree with the position of the president, whom you're obviously representing?

Ms. Peggy Nash: The position we're proposing here is a position taken with the leadership of our union at Canadian Airlines. So they are in support of this. We haven't had the opportunity to go across the country and meet with our Canadian membership at Canadian Airlines. We will be doing that over the next few weeks. But our position has been made public and we haven't had any negative feedback, but we'll be talking further with our membership in the weeks ahead.

Mr. Robert Nault: The other issue is that even though in private conversations your president tends to suggest that it's nice to have the governments involved, when it comes to negotiation he's not all that keen about governments sticking their nose in the negotiation process. Why would he be inconsistent and want the government to enter into some sort of equity position of putting $100 million in? If you can go out and get two or three investors to do the exact same thing, why would we want the government to be a shareholder in it? If you get all these politicians involved in this, it doesn't make for good running of a business. If we give you the kinds of regulations you need, would you not think your number 3 recommendation is not necessary, if there are investors out there who would be more than willing to invest?

Ms. Peggy Nash: I look at the government involvement from the other way around. The government was involved in the 1996 crisis with Canadian in a very, in my view, detrimental way, by forcing a company offer to a vote when in fact our members had a collective agreement. They cannot now sit this one out. If we're on our way to more problems in the future—

Mr. Robert Nault: I would look at that the other way around.

Ms. Peggy Nash: I know you would, but I'm just trying to answer your comment.

• 1650

Mr. Robert Nault: Why would you want us to repeat the same mistake twice if you assume—

Ms. Peggy Nash: We don't want you to impose a company offer on us this time. But I think the issue right now with Canadian is that they're casting around looking for investment. If they can come up with all of the investment and things are fine from that angle, great, but I think they're really struggling.

I'm not a close financial adviser to Kevin Benson of Canadian Airlines, but they don't seem to be coming up with the kind of money they've been looking for, and our concern here is that they may go off into another area like a no-frills carrier or drastically change the nature of the airline, which, again, we think won't solve the problem and will really be harmful to the people who work there. So that's why we're saying that for the government to play a role here may help leverage some investment from the private sector. If it's not necessary, that's great.

The Chairman: Mr. Bailey.

Mr. Roy Bailey: Thank you.

When you speak of the three principles of a savings plan, you mention foreign ownership, and the moment you mention foreign ownership of course the natural foreign ownership is stateside, the U.S. Is there any European or Asian money currently invested in Canadian?

Ms. Peggy Nash: Yes, there is. I don't know all of the details of their financial ownership, but I know certainly they have leases on aircraft with Asian owners. I think they've tried to get money from a variety of sources and have money from a variety of sources, but the major foreign investment has come from Americans.

Mr. Roy Bailey: If we have the cap removed... and you have drawn a very interesting analogy to the car industry in that respect. I was interested in this because you come in the second point by saying that all carriers in Canada:

must be obliged to respect clear commitments regarding fair Canadian content levels, including reservation and ticketing services, which would be proportional to each airline's business in Canada.

You're referring to Air Canada, right?

Ms. Peggy Nash: We're not referring to proportional to each carrier, but proportional to that airline's business in Canada. You could structure it in a variety of ways, but one way could be based on revenue; it could be based on passenger seat miles. It could be a variety of ways. But for, say, each amount of dollars made in Canada you would have to create x number of jobs, or for each number of seat miles flown in Canada you would have to create x number of jobs. Or it could be just a commitment that there would be reservation offices in Canada, for example, or maintenance facilities in Canada. There is a variety of ways to do it.

Mr. Roy Bailey: Last question, Mr. Chairman. I know we're in a hurry.

When Canadian was here—

The Chairman: One moment, when Air Canada and Canadian were here, it was in camera. Just keep that in mind.

Mr. Roy Bailey: Okay, but the point I want to make is this. Do you think more foreign investment in Canadian would give us more privileges and landing rights in some of the foreign countries to which we are limited now?

Ms. Peggy Nash: The route structures are things that are negotiated right now. That has nothing to do with ownership. What it would do is it would be more similar to the current alliances and code shares as opposed to route allocation.

Mr. Roy Bailey: Thank you.

The Chairman: Ms. Desjarlais.

Ms. Bev Desjarlais: This isn't from an Air Canada in camera discussion, it is from another meeting with Air Canada that I had, so I don't have any problem commenting on this.

A statement was made by someone from Air Canada that they quite frankly feel that one airline would operate a whole lot better than two within Canada and would enhance the service within Canada as compared to having two competing. I would like your comment on that.

• 1655

I have to comment on your statement that jobs are more important than national loyalty. I was quite taken aback, quite frankly, and I'm not a sovereignist from Quebec, either. His loyalty would be there.

Jobs can come in many fashions. I think your concern would appear to be jobs strictly in the sense of Canadian Airlines, and I would question you as to whether you think all those jobs would disappear if there were one airline or whether a number of those jobs, if not all, might be picked up by one airline in order to provide service.

You also made a statement that this is a domestic problem. It's not the international routes that are the problem, it's a domestic problem. From my perspective, domestically we're not getting the service we used to have, so the routes that have been taken, such as deregulation and allowing foreign ownership, and everything else that has been done to date has not improved service overall in Canada. It hasn't, and it hasn't improved the competitive rates, because we all hear that it's not there. So if it's a domestic problem and with what has been done—and I suggest that what you're proposing is a little more of the same—are we going to have that much less service? Maybe there has to be another route that gets looked at.

Ms. Peggy Nash: I'm really glad you asked that question. Let me clarify my statement about loyalty. I didn't mean national allegiance; what I meant was ownership of a company. What we're talking about now is an industry that has been privatized, and while it used to be seen as a key nationalistic strategy in terms of building our country—I used to think of the railway that way, and it was an intentional piece of nation building, as the airlines were in a later era—it does seem that has been abandoned by the federal government.

In that context, if you have two companies that are privatized, what is the difference in terms of the ownership as long as there are rules those companies have to play by? Again, I point to the auto industry, where they are entirely foreign-owned companies but they have to abide by the rules of the Auto Pact. Yet you have other companies that are technically Canadian-based companies, and I'll use the telecommunications industry as an example, where they're outsourcing jobs like crazy to China, Mexico, all over the world. So it's in that context as opposed to any disloyalty to Canada.

In terms of whether we should have just one carrier, I look back more than a decade, when we had the debate about airline deregulation, and there were two points: one was lower cost, and the other was increased competition. I think it has been a failure on both counts, so we could end up with a monopoly. Would that be the right way to go? There are a variety of scenarios. You could have one carrier as the international and one carrier as the domestic, as you have, say, in France.

What we're looking at is the current structure based on our history that has two national carriers and a regulatory system that is kind of laissez-faire in terms of competition, which is destroying one company and seriously damaging the other. So we're saying that in this current context of two corporations, if we want to maintain some kind of competitive alternative structure, let's get some rules for that competition so that we don't have both employees of the companies and consumers being hurt more than they already have been.

[Translation]

The Chairman: Mr. Guimond.

Mr. Michel Guimond: The comments that my colleague from the NDP just made surprise me. I don't want to question his loyalty to his wonderful country, but if there were a move towards making Canada the 53rd American State, I'm sure that she would be all for it. In any case, we will already be sovereign when the time comes.

• 1700

Once again, Ms. Nash, I must—

[English]

An hon. member: I think you hurt his feelings.

Ms. Bev Desjarlais: That's not even what I said.

[Translation]

Mr. Michel Guimond: My party is very close to the CAW and we have nothing to hide: like the NDP, we more or less share the same bed on that point. If I wanted to be nice, I would compliment you on your brief and I would shower you with praise.

My second comment will be similar to my first questions. I don't want to be too soft but I don't want to make you angry. I don't want you to think that the Bloc is at odds with the CAW, but I want to tell you that I'm surprised and disappointed that your brief doesn't mention that situation experienced at Air Canada, especially now that, as the chairman rightly pointed out, there is a study underway on the competitiveness of the Canadian air transportation system. I could tell you why NAV CANADA has had an effect on competitiveness, but I don't have enough time.

I said that I was disappointed that you hardly mentioned Air Canada. Do you think that Transport Canada is fair or unfair to Air Canada in its allocation of international routes? You might even have to say a bad word about Canadian.

The Chairman: You have 30 seconds.

[English]

In 30 seconds.

Ms. Peggy Nash: Ask me something easy. First of all, I just want to say that although we are focusing on the serious problems with Canadian Airlines, we are also talking about Air Canada, because they are both operating in the same climate. Canadian Airlines is just a more serious example of the destructive competition in the airline industry, but both companies have been damaged, Canadian Airlines just more seriously.

In terms of the international route structure, I'm not going to say that one should get this or one should get that. I think they're a product of the historical development of the two companies. Where Canadian Airlines is making money is through their international routes. Even with the Asian crisis, that has been a big source of income for them. So I wouldn't do anything really dramatic with their route structure until some of the fundamentals in the airline industry are fixed. I'm sure Air Canada would like to take a look at the international route structure.

The Chairman: Mr. Keyes.

Mr. Stan Keyes: Yes, they sure would. I'm really glad to hear you say that, Ms. Nash, because I think the government has ways of striking some balance. That's just one of the ways in which the government can produce balance in the airline system. If Canadian Airlines suddenly was plunged into outright competition head to head with flying to Taipei, there might be problems for Canadian Airlines that even get worse. So there has to be a balance struck, and I think that's one of the avenues.

I just wanted to follow up on what my colleague Mr. Nault was speaking of on your statement that foreign ownership should be eliminated. From what we've been speaking about for the last hour and a half, I understand that an outright elimination of and open season on foreign ownership just couldn't happen. There'd have to be the restrictions, I think, percentages, etc. Of course, you'd favour foreign ownership across the board for both airlines or for any airline. Is that correct?

That being the case, can you see that you have two airlines that are at this level right now, 1,000 feet off the ground, and they're in the trouble they're in because of the competitive state they're in.

• 1705

Now you introduce foreign ownership. Doesn't that just raise the stakes to 30,000 feet off the ground, but they still have the same competitive problem, because foreign ownership now... It's just a race of who owns how much, but you still haven't dealt with the basics, the things that are ailing the airline industry in this country. All you're doing is just raising the stakes of the problem, you're not really getting at the root of the problem.

Ms. Peggy Nash: Yes, I agree with that.

I think any one of these measures on its own, or even all those three measures, are not going to solve the problem—just throwing money in, just foreign ownership, just the commitments to services in Canada—because unless you deal with the nature of the competition between Air Canada and Canadian, no matter how much money they both have to spend, and that's what the foreign investment would be about, they would still use it to try to destroy each other.

Mr. Stan Keyes: Exactly.

Ms. Peggy Nash: The stakes would just be higher. What we need to get our arms around is the nature of that destructive tendency. I talked about a sandbox earlier, and it really is like two kids slugging it out in a sandbox, and until one of them leaves and goes home crying, they're both going to keep at it.

Mr. Stan Keyes: To be fair, I guess that's the business of business, isn't it? Somebody has to be on top and wants to be the leader and wants to satisfy the shareholders who own their company, so that's all part of it. But of course we're dealing with tens of thousands of people's lives, virtually—their paycheques.

I just want to take one more statement a little further than my colleague Mr. Nault did, on the business of the minority equity stake in Canadian that you suggest the federal government should take. I'll take it a step further than Mr. Nault did by saying that if you're an investor, and I guess all of us around the table invest, usually in shares of some company or another... Usually, in speaking to my friends on investments, I shy away from companies that suddenly get cash infusions from government, because the perception is that it's a bailout for that particular company. So as an investor I say, no thanks, I'm not going to bother with any of that.

I like the idea, and I think we should look at the idea of the foreign ownership question and then get into the details on how much foreign ownership and how much any single buyer of shares would be allowed to purchase, etc., and welcome all the foreign investment partners that could be generated as a result. But my only fear would be to suddenly have the federal government come along and chuck down some money, and then at the end of the day say, oh, we own one-third.

The two things that cause me alarm are, one, what investor wants to invest in a company that's receiving money that looks like a bailout; second, once that company is one-third owned by government, we go back to the business again of business not being run by business but being run by government. That whole thing has changed over the last five years.

Ms. Peggy Nash: Yes. There are only two things that I think I would view differently.

One is that we're not talking about the government running the airline in this case. This is an equity investment we're talking about. That's a whole different debate, about nationalizing the airlines. We're really talking about an investment here, an equity investment, and not in a sinking ship, hopefully.

Our view is that if the government is going to put some money in, they would want that money to do well, and they know in this current environment it can't do well, so they would have to fix the big picture.

Again I look at the Bombardier situation. You know, it's amazing where that plant in Toronto could have... If that had gone to where it was headed, which was just to become a small-parts maker in the aerospace industry—they had really major management problems in terms of how they structured that work—that plant would have been closed by today. They were down to about 1,200 workers in that place, and the government put some money in, which leveraged an outside investor coming in, and today that is an extremely profitable plant—the order books are full, and from the taxpayers' viewpoint it was a significant investment, a profitable investment. From any private investor's viewpoint that was a hell of deal, if people had got in there.

• 1710

I'm not in the business of selling shares or buying them, for that matter, but if this were run properly in the correct kind of environment, a saner kind of airline environment—all the fundamentals are there for Canadian to be a very good carrier, a very profitable carrier.

The Chairman: Thank you.

On the third round, you have three minutes. Monsieur Guimond, Mr. Bailey, Ms. Desjarlais.

[Translation]

Mr. Michel Guimond: Ms. Nash, you didn't answer my question on international route allocation. I will give you part of the answer. In view of the number of passengers required to open a second destination, Air Canada has complained that Canadian moves its passengers through Seattle or through Los Angeles in order to benefit from the lucrative Asian market. Let's say that you need 300,000 passengers per year; some planes land in the United States and leave money in Seattle and Los Angeles when buying fuel and food and maintenance, and this to the detriment of Canada.

Transport Canada says that there aren't enough passengers to warrant a second destination. If you add the people who leave from Canada and travel through Seattle and Los Angeles, there would be enough passengers to have a second route to the lucrative Asian market.

You didn't answer my question, but, in any case, that's up to you.

I will continue with another example. The minority participation in—

[English]

The Chairman: He has 30 seconds, that's why.

[Translation]

Mr. Michel Guimond: Okay, I will wait for the fourth round.

The Chairman: You didn't get an answer.

Mr. Michel Guimond: On that? I agree.

[English]

Ms. Peggy Nash: I was trying to listen in translation and hoping that I understood your question. You're asking, based on the number of passengers who are going through U.S. gateways overseas, would it not make more sense to open up additional routes out of Canada to Asian destinations that Air Canada could service? Is that what you're asking?

[Translation]

Mr. Michel Guimond: That's right. I would have liked to hear you say earlier that Transport Canada's policy for international route allocation is unfair. That's the type of answer I would have liked to hear, but you don't want to say it because it's unfair to Air Canada, it favours Canadian.

[English]

Ms. Peggy Nash: Well, I don't know that it makes sense at this point in time. I understand what you're saying and I understand where Air Canada is coming from in terms of desperately wanting to get access to more Asian routes.

Again, all I would say is, given Canadian's situation right at this minute, I don't know that it's the best time to make those changes. I understand that Air Canada wants them very badly and that it costs them... people connect not only out of Seattle and L.A.; they'll go transcontinental, they'll go through Chicago or through New York or Detroit to get across the continent. So certainly there is business that Canadian companies are losing because of the current international route structure. Air Canada certainly believes it is unfair because it wants to serve those markets.

All I can say is, if at this moment Canadian were to lose some market share on the Asian routes, which is one of the few places they're making money, then that would also be very problematic for them. I don't think you can look at the Asian routes in isolation from the bigger problems of the Canadian airline industry.

The Chairman: Mr. Bailey.

Mr. Roy Bailey: I'm interested in a bit of a comparison, albeit there's no country quite like Canada in the air industry.

• 1715

You had mentioned, and it's obvious, that most of the overseas carriers... You touch down, say, at Pearson and you see national airlines, right? The national airlines of France, Air India and so on—these are national, these are government-owned. Is it only on the North American continent, between Canada and the United States, where there are no national overseas flights, government-controlled and so on? Is it possible that if one company had all the overseas flights and the other one had the domestic market they would both survive?

Ms. Peggy Nash: No. That's really the point, and it's a good point. The international routes are all regulated. It's not an open competition.

Mr. Roy Bailey: Okay.

Mr. Peggy Nash: Where it is regulated and controlled and companies like Air Canada have to apply to get certain routes, the companies that service those routes—there's a lot of choice and they make a lot of money, including Canadian. It's only within Canada, because of our U.S. kind of deregulation that doesn't fit our geography here, that the companies are losing money, especially Canadian.

Mr. Roy Bailey: Air France, that's overseas only. Domestically in France, it's...

Ms. Peggy Nash: Air Inter.

Mr. Roy Bailey: Thank you for that.

The Chairman: In France it's possible to do international flights from Paris, but in Canada international flights mean ferrying from Vancouver to Montreal for an international flight. It's just not applicable.

Ms. Peggy Nash: Our geography is very different.

The Chairman: Ms. Desjarlais.

Ms. Bev Desjarlais: I want to thank you for commenting about the NAV CAN situation and the cost. Are you aware of what the differences are between, say, landing fees and navigational-type fees within the U.S., how they compare to Canada? Are you aware of what those figures are?

Ms. Peggy Nash: I'm sorry, I don't know that.

Ms. Bev Desjarlais: Okay. That'll be the question for John, then, some day along the way.

This is in regards to the NAV CAN situation and the safety factor, because I think by being brought up here it does become part of the competitiveness factor. It's fine and all well and good to hope that everybody realizes that maybe they're too tired or not quite fit to fly an aircraft, but if that were the case we wouldn't have truckers driving when they're tired or any of us driving home when we're a little tired; we wouldn't have numerous situations like that in the workplace.

The bottom line is that people get pushed and they try to work under those conditions. And when people see this as acceptable, I always try to remind them how they would feel if it was their doctor operating on them after he's worked 24 hours in a row without any sleep, and how they would feel. Those are the types of situations you never want to be in. Hopefully, we never lose sight of that factor when we're working.

I think we're at the top of the safety heap, and I would like to keep us there. I think it's good that it's coming forth as a concern before it does become a major issue. So I want to thank you for your comments.

The Chairman: That concludes the third round.

The fourth round, Mr. Guimond.

[Translation]

Mr. Michel Guimond: My question will deal with the minority interest in Canadian for which the federal government will have to invest $100 million. You gave Mr. Keyes the example of...

A voice: Mike.

Mr. Michel Guimond: I have no control over how the sound reaches your ears.

[English]

Maybe it would be better if I asked my question in English, but as a separatist it's not easy for me.

[Translation]

On the $100 million minority interest, in answer to a question put by Mr. Keyes, you gave the example of De Havilland in Toronto; you might have also mentioned Canadair. The opposite is happening: the federal government sold its businesses to the private sector. It isn't the same thing at all. You are asking the federal government to invest $100 million of taxpayers' money.

• 1720

I would like to describe something to you. In my riding, we have Montmorency Falls, the highest falls in Canada; it is 30 metres higher than Niagara Falls. With your proposal, I feel like I am in a little rowboat moving towards the falls while paddling furiously to avoid it. Your proposal goes totally against the policies of this government and those of the previous government. This government privatized the airports, the ports, CN, NAV CANADA, VIA Rail; the previous government privatized Petro Canada and Air Canada.

Do you really think, Ms. Nash, that a single mother with two children who works as a sales clerk for minimum wage in a ladies' clothing store wants her tax money to be used to make up Canadian's deficit? Do you think that the average, normal, non-unionized taxpayer who is working hard to make ends meet wants his taxes to be used to finance a $100 million contribution to Canadian Airlines?

The Chairman: I wouldn't dare prevent you from giving the committee an answer even though the three minutes are up; I will give you the necessary time to answer and to make closing remarks.

[English]

Ms. Peggy Nash: First of all, I'd like to know what a better solution is, because I haven't heard one yet. I also think there are a lot of people who are making very low wages as sales clerks and in fast food and a lot of other places, who very much would like to have a decent-paying job, whether it's at Canadair or Bombardier or Air Canada or Canadian Airlines. If we don't, as a country, decide that those jobs are valuable and useful and worth preserving, then the people who have those jobs now won't have them, and our children won't have them, for the future.

So I think this isn't just about taxpayers' dollars. I think it's about the good of the country. We need decent-paying jobs, whether they're in manufacturing, airlines, or the service sector, and they don't happen by magic. Governments have to decide that this is an important part of our economy and they have to help it happen. That's what we're proposing. I don't think they happen automatically.

I would just argue that if someone thinks that for an industry this important... and important not only in terms of the $500 million that is paid annually in taxes, but important in terms of our national infrastructure. Part of what makes Canada such a good environment is having strong services like the airline industry as part of our infrastructure in terms of how we get around this vast country of ours. This is important. Nobody should underestimate—and I know this committee doesn't, because you're holding these hearings—the fundamental problems here.

Just a little bit of tinkering, as was done in 1996 with Canadian, in terms of wage cuts, tinkering in terms of a little bit of capital—that doesn't fix the overall problem here. It is a much more fundamental problem, and what we're proposing is not to undo 20 years of policy from various governments but rather to recognize where we're at today and to try to make the system that we're in work much more effectively than it has been working over the last decade.

I would like to thank the committee, not only for listening to my presentation on behalf of the CAW, but also for your very interesting questions and debate.

The Chairman: We would like to thank you for your presentation and for your very good responses. If you have any other documents you feel would be helpful, please just forward them to the clerk, and every member will be made part of it.

Thank you very much. And for those people you represented—the director, the president, the membership—I don't think they could have done a better job than you did. You did an excellent job. Thank you.

The meeting is adjourned.