TRAN Committee Meeting

Notices of Meeting include information about the subject matter to be examined by the committee and date, time and place of the meeting, as well as a list of any witnesses scheduled to appear. The Evidence is the edited and revised transcript of what is said before a committee. The Minutes of Proceedings are the official record of the business conducted by the committee at a sitting.

For an advanced search, use Publication Search tool.

If you have any questions or comments regarding the accessibility of this publication, please contact us at accessible@parl.gc.ca.

Previous day publication Next day publication

37th PARLIAMENT, 3rd SESSION

Standing Committee on Transport

EVIDENCE

CONTENTS

Thursday, March 11, 2004

1100

Captain David Coles (Chair, Original Air Canada Pilots Merger Committee, Air Canada Pilots Association)

The Chair

Capt David Coles

The Chair

Capt David Coles

1105

1110

1115

The Chair

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, CPC)

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

1120

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

Mr. Jim Gouk

Capt David Coles

The Chair

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ)

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

1125

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

Mr. Mario Laframboise

Capt David Coles

M. Mario Laframboise

Capt David Coles

Le président

The Honourable Jim Karygiannis (Scarborough—Agincourt, Lib.)

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Capt David Coles

Hon. Jim Karygiannis

Mr. David Jadis (Member, Original Air Canada Pilots Merger Committee, Air Canada Pilots Association)

Hon. Jim Karygiannis

Captain Steve Babb (Original Air Canada Pilot, Air Canada Pilots Association)

1130

Hon. Jim Karygiannis

Capt Steve Babb

The Chair

Mr. John Cannis (Scarborough Centre, Lib.)

Capt David Coles

Capt Steve Babb

Mr. John Cannis

Capt Steve Babb

Mr. John Cannis

Mr. David Jadis

Mr. John Cannis

Mr. David Jadis

The Chair

Mr. David Jadis

The Chair

Captain Dan Adamus (Vice-President, Canada Board, Air Line Pilots Association International)

1135

1140

The Chair

Capt Dan Adamus

The Chair

Mr. Jim Gouk

Capt Dan Adamus

Mr. Jim Gouk

1145

Mr. Art LaFlamme (Senior Representative, Canada, Air Line Pilots Association International)

Mr. Jim Gouk

Mr. Art LaFlamme

Mr. Jim Gouk

Mr. Art LaFlamme

Mr. Jim Gouk

Mr. Art LaFlamme

Mr. Jim Gouk

The Chair

Mr. Jim Gouk

Capt Dan Adamus

Mr. Jim Gouk

The Chair

Mr. Mario Laframboise

1150

Mr. Art LaFlamme

Mr. Mario Laframboise

Mr. Art LaFlamme

Mr. Mario Laframboise

Mr. Art LaFlamme

The Chair

Mr. John Cannis

Mr. Art LaFlamme

Mr. John Cannis

1155

Mr. Art LaFlamme

Mr. John Cannis

Mr. Art LaFlamme

Mr. John Cannis

Capt Dan Adamus

Mr. John Cannis

Capt Dan Adamus

Mr. John Cannis

Capt Dan Adamus

Mr. John Cannis

Capt Dan Adamus

Mr. John Cannis

Capt Dan Adamus

Mr. John Cannis

Capt Dan Adamus

The Chair

Hon. Jim Karygiannis

Capt Dan Adamus

The Chair

Mr. Richard Nolan (Vice-President, Air Canada Component, Canadian Union of Public Employees)

1200

Mrs. France Pelletier (Chair, Health and Safety Committee, Canadian Union of Public Employees)

Mr. Richard Balnis (Senior Researcher, Air Canada Component, Canadian Union of Public Employees)

1205

Mr. Richard Nolan

1210

The Chair

Mr. Jim Gouk

Mr. Richard Balnis

Mr. Jim Gouk

Mr. Richard Balnis

Mr. Jim Gouk

Mr. Richard Balnis

Mr. Jim Gouk

Mr. Richard Balnis

Mr. Jim Gouk

Mr. Richard Balnis

Mr. Jim Gouk

Mr. Richard Balnis

The Chair

Mr. Jim Gouk

Mr. Richard Balnis

1215

Mr. Jim Gouk

Mr. Richard Balnis

The Chair

Mr. Mario Laframboise

Mr. Richard Balnis

Mr. Mario Laframboise

Mr. Richard Balnis

Mr. Mario Laframboise

The Chair

1220

Mr. Dick Proctor (Palliser, NDP)

Mr. Richard Balnis

Mr. Dick Proctor

Mr. Richard Balnis

Mr. Dick Proctor

Mr. Richard Balnis

Mr. Dick Proctor

Mr. Richard Balnis

1225

The Chair

Mr. Christian Jobin (Lévis-et-Chutes-de-la-Chaudière, Lib.)

Mrs. France Pelletier

Mr. Christian Jobin

Mrs. France Pelletier

Mr. Christian Jobin

Mrs. France Pelletier

Mr. Christian Jobin

The Chair

Hon. Jim Karygiannis

The Chair

Hon. Jim Karygiannis

1230

The Chair

Mr. Onkar Athwal (Vice-President of Operations, BC Maritime Employers Association; Canadian Coalition for Maritime Security)

1235

Mr. Kevin Docherty (Vice-President and General Manager, Montreal Gateway Terminal, CP Ships; Canadian Coalition for Maritime Security)

1240

Mr. Onkar Athwal

The Chair

Mr. Jim Gouk

Mr. Onkar Athwal

Mr. Jim Gouk

Mr. Onkar Athwal

1245

Mr. Jim Gouk

Mr. Onkar Athwal

Mr. Jim Gouk

Mr. Onkar Athwal

The Chair

Mr. Mario Laframboise

Mr. Onkar Athwal

Mr. Mario Laframboise

Mr. Kevin Docherty

Mr. Mario Laframboise

Mr. Kevin Docherty

Mr. Mario Laframboise

Mr. Kevin Docherty

1250

Mr. Mario Laframboise

Mr. Kevin Docherty

Mr. Mario Laframboise

Mr. Kevin Docherty

Mr. Mario Laframboise

M. Kevin Docherty

Mr. Mario Laframboise

Mr. Kevin Docherty

Mr. Onkar Athwal

Mr. Mario Laframboise

Mr. Onkar Athwal

Mr. Mario Laframboise

Le président

Mr. Christian Jobin

Mr. Onkar Athwal

Mr. Christian Jobin

Mr. Onkar Athwal

1255

The Chair

Hon. Jim Karygiannis

Mr. Onkar Athwal

Hon. Jim Karygiannis

Mr. Onkar Athwal

The Acting Chair (Mrs. Lynne Yelich (Blackstrap, CPC))

Mr. J. Clifford Mackay (President and CEO, Air Transport Association of Canada)

1300

1305

The Acting Chair (Mrs. Lynne Yelich)

Mr. Jim Gouk

Mr. J. Clifford Mackay

Mr. Jim Gouk

Mr. J. Clifford Mackay

Mr. Jim Gouk

Mr. J. Clifford Mackay

Mr. Jim Gouk

Mr. J. Clifford Mackay

Mr. Jim Gouk

Mr. J. Clifford Mackay

1310

Mr. Jim Gouk

Mr. J. Clifford Mackay

Mr. Fred Jones (Vice-President, Air Transport Association of Canada)

Mr. Jim Gouk

Mr. J. Clifford Mackay

The Acting Chair (Mrs. Lynne Yelich)

Mr. Mario Laframboise

Mr. J. Clifford Mackay

Mr. Mario Laframboise

1315

Mr. J. Clifford Mackay

The Acting Chair (Mrs. Lynne Yelich)

Mr. Dick Proctor

Mr. J. Clifford Mackay

Mr. Dick Proctor

Mr. J. Clifford Mackay

Mr. Dick Proctor

Mr. J. Clifford Mackay

Mr. Dick Proctor

Mr. J. Clifford Mackay

Mr. Dick Proctor

1320

Mr. J. Clifford Mackay

Mr. Fred Jones

Mr. Dick Proctor

Mr. Fred Jones

Mr. Dick Proctor

The Acting Chair (Mrs. Lynne Yelich)

Hon. Jim Karygiannis

Mr. J. Clifford Mackay

Hon. Jim Karygiannis

Mr. J. Clifford Mackay

Hon. Jim Karygiannis

Mr. J. Clifford Mackay

Hon. Jim Karygiannis

1325

Mr. J. Clifford Mackay

Hon. Jim Karygiannis

The Acting Chair (Mrs. Lynne Yelich)

CANADA

Standing Committee on Transport

NUMBER 005

3rd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, March 11, 2004

[Recorded by Electronic Apparatus]

Á (1100)

[English]

Captain David Coles (Chair, Original Air Canada Pilots Merger Committee, Air Canada Pilots Association): I am Captain Coles.

The Chair: Please be seated, and anyone with you is welcome to sit at the table.

I just finished mentioning what we're doing today. I have received requests, as chair, for different representatives to consult with me and I chose to open it up to the whole committee. There will be no decisions made today. There's no obligation to have a quorum. This is your opportunity to explain your situation or anything you wish to speak about. We'll invite you to make a five-minute presentation, maybe 10 maximum, but no more.

Capt David Coles: We're set up for about 10 minutes.

The Chair: Okay, but we won't go longer because that then gives me five minutes per party. Please proceed.

Capt David Coles: Very good. Thank you.

We also have some documents that we can pass out as soon as they are available.

Good morning. I'm Captain David Coles, the chair of the Original Air Canada Pilots Merger Committee. With me is merger committee member, First Officer Dave Jadis, and original Air Canada pilot, Captain Steve Babb.

This is primarily a labour relations story and a story of unfairness, but a story whose ramifications will inevitably be of great interest to the transport committee.

At the beginning of 1997, Captain Babb was an A310 wide body training captain for Royal Airlines, who chose to take a $100,000 per year pay cut to move to Air Canada for the opportunities and career potential that Air Canada represented. He would never have gone to Canadian Airlines, even at the same pay, because of the obvious financial problems that company was facing and the non-existent career opportunities. Yet here we are, seven years later, with a merged airline, an entirely unjust seniority list, known as the “colour award”, and Captain Babb's opportunities—everything he came to Air Canada for—taken from him and simply transferred to the Canadian Airlines pilots.

The facts surrounding this seniority integration case can leave no doubt in anyone's mind that the root cause of this unjust seniority result is the way in which the Canada Industrial Relations Board has managed this case over the past four years.

In June 2000, the Air Canada pilots and the former Canadian Airlines pilots entered into a protocol, appointing Morton Mitchnick as the sole arbitrator to determine how the two seniority lists should be merged. That protocol can be found in tab 2 of your information package. Paragraph 3 of that protocol outlined the powers of the arbitrator. In summary, they included that, “The arbitrator shall integrate the seniority lists based on such principles as he finds applicable....” Arbitrator Mitchnick went on to award a ratio merged seniority list that complied in principle and result with past pilot seniority arbitrations.

In tab 3 of the information package you'll find a copy of Arbitrator Mitchnick's final award. It provides an excellent background to the facts in this seniority case.

In May 2001, the former Canadian Airlines pilots applied to the CIRB to have the Mitchnick award reconsidered under section 18 of the code. The board's review resulted in CIRB decision number 183, issued in July 2002. In the CIRB decision, the board endorsed Arbitrator Mitchnick's general ratio method as appropriate, but the board proceeded to overturn the Mitchnick award because the arbitrator had not used the correct principles under the code for the construction of the seniority list. However, these correct principles had never been expressly stated anywhere, either in the code itself or in any previous board decision, nor had the parties ever raised the issue of the correct code principles at any time during the arbitration. We were shocked that the board, having expressly agreed that the arbitrator could apply such principles as he saw fit, would now overturn him for failure to comply with previously undefined principles.

However, the CIRB made two things very clear in decision number 183. The board defined what fairness would be in this case, namely, matching jobs on the merger date and moving forward together with no winners and losers. The new seniority list would have to fully comply with the correct principles, and the board was legally bound to ensure compliance with those principles.

When it became clear that further arbitration was required, the parties agreed to remit the matter to a panel chaired by arbitrator Brian Keller. The board stated that any final award must comply with the principles of decision number 183 and that the board was legally and duty bound to ensure full compliance. All parties on the arbitration panel itself understood that any award would have to withstand such scrutiny, and the entire arbitration was conducted on that understanding.

The Keller award was released on June 16, 2003. The award failed in all respects to abide by the principles outlined in decision number 183. Every one of its departures from those principles imposed a further unjust and devastating devaluation of seniority on the original Air Canada pilots. The result was exactly the kind of winners-and-losers scenario that decision number 183 specifically stated should be avoided at all costs. It is clear and unequivocal that the Keller seniority list could never withstand a review of compliance against the enshrined code policy; no one can rationalize this result with decision number 183's definition of fairness.

To give the committee a sense of the scope of this award, you can look at tab 9 of your information package, which contains a seniority list. You can look at the last eight pages, and you'll see that almost 700 original Air Canada pilots have been placed on the bottom, with precious few former Canadian Airline pilots joining them. Layoffs in that group will be at a ratio of eight Air Canada pilots for every one Canadian Airline pilot, yet the ratio of Air Canada pilots to Canadian Airline pilots is 2 to 1.

Á (1105)

If you look at the first pages of the seniority list, you can see they are dominated by former Canadian pilots. This has allowed them to improve their positions and income while the original Air Canada pilots are forced to lower-paying positions.

Relative seniority is a numerical representation of your position on a seniority list. If there were 1,000 pilots on a list, number 500 would be at the 50th percentile. Relative seniority is therefore a good approximation of a job the pilot held pre-merger.

If you look at the middle of the list and focus on the column that indicates each pilot's pre-merger relative seniority, you will see in every case that the former Canadian pilots have been moved dramatically up the list, in many cases as much as or more than 20%.

We'll speak of Captain Babb's example. At page 25 of the seniority list Captain Babb's name can be found in the right-hand column. His pre-merger relative seniority was about 77%, and his initial Keller seniority number was 2671. To find the former Canadian pilot who was at the same 77% level pre-merger, you will have to go to page 19. He is Mr. R. Stamers and his initial Keller seniority number is 1979. Mr. Babb and Mr. Stamers are 692 numbers apart. A fair seniority award would have these two pilots within a stone's throw, not hundreds of numbers apart and more than 20% in relative seniority apart. It is interesting to note that on the Mitchnick list these two pilots were only eight seniority numbers apart.

In June 2003 we asked the board to exercise the jurisdiction it retained to conduct the review Mr. Lordon had stated the board was duty bound to perform. That review was granted, with an open hearing on June 26, 2003, and reiterated in CIRB decision 236, released July 9, 2003. Decision 236 can be found in tab 6 of your information package. Decision 236 confirmed the board was legally required to review the Keller award for compliance with the principles outlined in decision 183.

The board issued decision 263, found in tab 7 of your information package, on January 28, 2004, just over five weeks ago. In this decision the board simply declined to continue the review of the Keller award the former chair of the board had repeatedly stated the board was duty bound to perform.

Finally, and most remarkably, decision 263 purported to change the governing principles of seniority integration the board itself had found must apply in this very case. Paragraph 63 of decision 263 states:

In light of the pilots' submissions, as represented by the merger committees, the Board is of the view that the issues now underlying the pilots' dissatisfaction with either of the arbitrators' awards or the Board's decisions are based on financial considerations, that is, their rank on the seniority list, not a breach of their rights under the Code.

With a single sentence in decision 263, the board has now determined that concerns about seniority rankings on either the Mitchnick or the Keller list do not engage any question of Canada Labour Code principles. In effect, by applying this standard of review, the board states that the Mitchnick award was correct and should have remained in effect. All of these policy reversals, and specifically the last one, are simply too bitter a pill to swallow for the original Air Canada pilots.

For the 2,000 original Air Canada pilots, two-thirds of the combined pilot group, there has been the added stress of bearing the brunt of Air Canada's downsizing. Every employee knows that with cooperative work with management, economic problems can be overcome and contractual issues can be resolved, but a flawed seniority list is forever.

The CIRB is duty bound to ensure that the rules are applied evenly and without bias. The CIRB cannot be allowed to shirk their responsibility to ensure fairness and an even-handed application of the Canada Labour Code. The board cannot hide behind convenient excuses to allow a bad award to stand.

We know this committee's major concern is not what has happened in a seniority award but rather what could happen because of the CIRB's actions. It is the significance of this last point that we will now address.

Every airline pilot in the world is acutely aware of the relationship between stress and the ability to perform their job at the highest professional level. Pilots are no different from anyone else. They can have financial problems, marital problems, sick parents, the pressures of raising children, or the furnace going out. The Air Canada Pilots Association understands intimately how these pressures can affect a pilot during his career, and, in reaction, it operates one of the most progressive wellness programs for pilots in the world. Even now, the ACPA programs are currently undergoing constant and significant improvements.

Á (1110)

The individuals directly responsible for the success of this program described the effects of stress in this way. Each of us has ten boxes in which to place our stress. At any time, the routine of daily life fills five or six of these boxes. When there are unexpected or threatening events that an individual has no control over, these boxes begin to fill. If all of these boxes are full and then more things happens, it impairs the ability of an individual to perform his or her job effectively.

The reactions of a pilot under maximum stress are no different from anyone else. It will be an unpredictable reaction and will vary with each individual. It may be withdrawal, anger, irrational reactions, or more physical, with a wide variety of health problems.

In the current environment, each pilot carries the stress of Air Canada's financial problems, the underlying concern for their jobs, and how that will affect their families. These family stresses include the real or potential loss of income and the direct effects that this seniority award has on monthly flying schedules, which in turn can place enormous pressures on some of these families.

Added to all of these stresses is the stress caused by the underlying anger of the CIRB's simplistic dismissal of an obviously unfair result. It becomes easy to see why the original Air Canada pilots' ten boxes are becoming full. All you need to do is add an ill child or parent, a death in a family, or any one of a hundred different life events, and a pilot either could or should not be on duty.

The facts and circumstances that led to Air Canada's rescue of Canadian Airlines in the latter part of 1999 are well known. The federal government needed a solution that would save 16,000 jobs. At that time, every original Air Canada employee understood that there would be a price to pay to save those 16,000 jobs. However, never, in our wildest dreams, did we ever think that we would be required to pay so much.

As disappointed as the original Air Canada pilots were with the Mitchnick list, they were prepared to move on. The Keller list, however, is outrageous and has made the price unbearable. Two arbitrators have issued two radically different awards, with the second award in no way meeting the principles that the CIRB described as fair in accordance with the Canada Labour Code.

The board must seriously review this file to clarify what the rules are. Right now, nobody knows. The Keller award is simply wrong. Without a resolution, the original Air Canada pilots group will continue to live with the stress of being relegated as losers by the CIRB's well-documented failure to uphold their rights. The CIRB, the very body that is charged by the government and the Canada Labour Code to ensure that a consistent standard of fairness is applied, has failed us.

The original Air Canada pilots have a great deal of difficulty trusting our futures to the CIRB until such time that a consistent standard of fairness is established. This blatant denial of justice has led to despair, and that despair is being taken directly onto the flight deck.

We do know that it is the pilots' nature to fix things themselves. They will do whatever they think is necessary to force the changes that they think need to be made. Until now, we have been able to focus this energy, this inherent need to fix things, by letter writing and by having our pilots contact their representatives to explain the severity and unjust nature of the Keller award and the CIRB's action. We are unsure how long we will keep that focus. The only thing we can predict accurately is that without a fair resolution the pilots' reactions will be unpredictable.

Thank you.

Á (1115)

The Chair: Thank you.

I should mention that we also have with us Steve Babb, an original Air Canada pilot. Welcome.

We also have David Jadis, member of the original Air Canada pilots merger committee. Welcome.

We have four minutes per party; that's for the question and the answer. My colleagues know that four minutes is four minutes with this chair.

Mr. Gouk.

Mr. Jim Gouk (Kootenay—Boundary—Okanagan, CPC): Thank you, Mr. Chair.

I have another serious matter to raise, but I will hold that for later until some point when I think it might be more applicable.

One thing you referred to in your testimony is that after the Mitchnick report, the Canadian Airlines group asked for and got a review. Are you in opposition or protest to their right to have asked for that review?

Capt David Coles: Absolutely not. It's part of the Canada Labour Code.

Mr. Jim Gouk: What you are basically looking for is the same thing following the Keller report that they had following the Mitchnick report.

Capt David Coles: That's correct.

Mr. Jim Gouk: Okay.

One of the things that's noted throughout, before the Mitchnick report, after the reversal of the Mitchnick report before we got into Keller, was direction for the two parties to get together to try to negotiate a settlement. What steps were taken in regard to that, and why was that not successful?

Capt David Coles: After decision 183, we were given 120 days to attempt to negotiate a solution between us. In doing so, this committee put two proposals on the table to the former Canadian Airlines pilots. They did not put any proposals on the table, and subsequently, we ended up back in front of the labour board on October 3, 2003, actually. They were ordered to put a proposal on the table, but at that point it went nowhere.

Mr. Jim Gouk: During the hearings on both Mitchnick and Keller, did both parties put their positions forward to that arbitrator?

Capt David Coles: In both cases, yes, both parties put their positions forward.

Mr. Jim Gouk: Can you, in a very succinct manner, tell us your position versus their position?

Capt David Coles: Our position followed the provisions of decision 183, as we understood them, and that was match jobs with jobs, effectively match, for example, 767 captains with 767 captains, 320 captains with 320 captains, etc., so that the list would be matched with the jobs that everybody brought to the merger.

Mr. Jim Gouk: And what were they proposing?

Capt David Coles: Theirs varied depending on what point in the process we were in. It varied from a straight date-of-hire solution that would have placed their entire seniority list, say 35 people, in the top half of ours to a series of “re-ratioing” proposals that would occur over a number of years that would have the net effect of doing the same thing as date of hire.

Á (1120)

Mr. Jim Gouk: In the summary of the Keller report it states that the Air Canada pilots group walked out, stopped negotiating. What was the reason for that? Why did they walk out at that point?

Capt David Coles: There is a series of reasons that led up to that. Evidence had been closed at that point. There was a series of executive sessions subsequently where our data experts were supposed to be running sample seniority lists for the panel. In the final days that was not happening. There were no seniority lists being run, and the former Canadian pilots were allowed to submit more evidence without our knowledge and without our ability to respond to it. Then our nominee, Mr. Menno Vorster, was advised what the solution was going to be without having any sample seniority lists run, and that solution is what we see as the seniority list now.

Mr. Jim Gouk: I presume you challenged the fact, as you say, that they presented evidence and you did not. Did you get a response or a rationale from them in answer to your challenge?

Capt David Coles: No, the chair dismissed it as being a non-issue.

Mr. Jim Gouk: Do you feel this was a critical part of the presentation to Keller, the running of the models, at that point in the hearing?

Capt David Coles: Absolutely. The decision was made without any of our data experts being able to provide him any information at all.

Mr. Jim Gouk: The way your seniority list has now turned out as a result of this, did anybody clearly know that's how it would turn out as the decision was being moved towards?

Capt David Coles: We certainly did, and we made that known very loudly to the chair of the panel. Whether he fully understood what he was doing, I can't answer that for him.

The Chair: Thank you very much.

I encourage my colleagues to follow Mr. Gouk's lead. He got five questions in in five minutes. I usually have a hard time getting one question in in five minutes.

[Translation]

Mr. Laframboise, please, you have five minutes.

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): Thank you, Mr. Chairman.

If I understood correctly, you have just been following the process up to now. So you appealed to the Canadian Industrial Relations Board.

[English]

Capt David Coles: That's correct.

[Translation]

Mr. Mario Laframboise: And the Canadian Industrial Relations Board refused to review or amend its award number 263. Please, explain what this is all about.

[English]

Capt David Coles: Yes. What happened was we were provided a review of the Keller award. The chair, Mr. Lordon, provided for the review. We were actually doing the review with the assistance of FMCS. We were unsuccessful in resolving the issues as ordered by Chair Lordon. Then it went back to the tripartite panel at the board and they reversed that decision and said the review would not happen.

[Translation]

Mr. Mario Laframboise: If I understand correctly, you wrote again on February 18, 2004 to ask the Canadian Industrial Relations Board to review its decision. Is this the proper process?

[English]

Capt David Coles: Yes, that's correct.

Á (1125)

[Translation]

Mr. Mario Laframboise: And when will this appeal be heard, in your view. Do you have an idea of what the answer will be or do you think it will be once again a drawn-out process?

[English]

Capt David Coles: About the length of time, we're unsure. Where we are right now is that submissions have been made. Responses have come in just this week. We have until March 19 to respond to the information provided by the former Canadian pilots this past Tuesday. That has to be in on the 19th. Any time after the 19th, the board can decide what to do. There are no time limits after that.

[Translation]

Mr. Mario Laframboise: There is no time limit. Did you get the impression that they wanted to get to the bottom of the issue in terms of the questions they asked?

[English]

Capt David Coles: It's our hope they would review this very quickly.

[Translation]

Mr. Mario Laframboise: Do you have any other recourse available under the legislation? If they turn you down, do you have another avenue to pursue?

[English]

Capt David Coles: There are legal challenges filed at the Federal Court of Appeal. Other than that, if we get to the 19th of March and the board says they will not proceed with any further review, that's it.

[Translation]

Mr. Mario Laframboise: Does the minister have any powers...? Are there any powers under the Canadian Labour Code that would allow the government to intervene?

[English]

Capt David Coles: Section 107 of the code allows the labour minister to ask the CIRB to carefully consider the reconsideration application. That's paraphrasing slightly, but yes, there's provision in section 107 of the code, and we've asked her to do that.

[Translation]

Mr. Mario Laframboise: And you have already asked the minister to do this, is that right?

[English]

Capt David Coles: We have, yes.

[Translation]

Mr. Mario Laframboise: But you do not yet have an answer

[English]

Capt David Coles: Not directly. The answer we've had through the director general of FMCS is that the minister has full confidence in the new chair of the labour board to see this process through.

[Translation]

M. Mario Laframboise: Therefore, the minister reserves her right until the decision come down? Would that be it, more or less?

[English]

Capt David Coles: I can't speak for the minister, but I would presume that's the case.

[Translation]

Le président: Thank you, Mr. Laframboise. You managed to ask seven questions: fantastic.

Mr. Karygiannis.

[English]

The Honourable Jim Karygiannis (Scarborough—Agincourt, Lib.): Good morning, and welcome.

Your concerns about where the 10 boxes might be are serious concerns that the government takes into consideration.

However, on another issue, when we talk about security and passengers on an airplane, one of my concerns is certainly the pilots. Their well-being is something we're really concerned about. We're looking to the deliberations too to have a speedy end. But one question I have is, as you are absolutely the foremost authority on that plane, whatever you as a pilot say goes, doesn't it?

Capt David Coles: Certainly, as the captain, yes.

Hon. Jim Karygiannis: So from the time people get on to the time you land, you're the absolute authority?

Capt David Coles: Absolutely.

Hon. Jim Karygiannis: And do you feel comfortable that whatever happens on the plane, you have the right to control the plane, land it, lift off, take it where you want—of course, with guidance?

Capt David Coles: I'm not sure exactly what you mean, but—

Hon. Jim Karygiannis: You're in control.

Capt David Coles: —as captain of the aircraft, I'm in command.

Hon. Jim Karygiannis: Discussions will be coming forth a little later about the number of stewardesses we should have on a flight. I know from conversations I personally have had with you—and I just want to put this on the record—the deliberations we're going to be hearing concern the number of seats per attendant. The department is looking at having 50 seats per attendant, and we hear from the stewards that they have to have 40.

Do you, sir, as a captain feel very comfortable that one steward for 50 seats is acceptable?

Capt David Coles: I'm speaking as an aircraft commander and I'm not speaking on behalf of the Air Canada Pilots Association in this case.

Hon. Jim Karygiannis: As an aircraft commander...?

Capt David Coles: As an aircraft commander—

Hon. Jim Karygiannis: Who is the person I put my life in the hands of when I fly with you....

Capt David Coles: The world's standard, generally speaking, is 50 passengers for one flight attendant. We have that exception on Dash 8-300s and RJs now. I would be comfortable flying with 50 passengers for one flight attendant.

Hon. Jim Karygiannis: And your fellow pilots? Gentlemen?

Mr. David Jadis (Member, Original Air Canada Pilots Merger Committee, Air Canada Pilots Association): I would concur with Captain Coles' comments on that.

Hon. Jim Karygiannis: Mr. Babb, I'm going to put my life in your hands, sir.

Captain Steve Babb (Original Air Canada Pilot, Air Canada Pilots Association): To be honest with you, Mr. Karygiannis, we only have a few minutes here today to bring to light a very serious concern we've brought to the transport committee today. I would prefer that we have the opportunity to answer questions based on where our seniority list is going and what the government is prepared to do to facilitate good public policy.

Á (1130)

Hon. Jim Karygiannis: And I certainly, sir, am concerned about those 10 boxes.

Capt Steve Babb: Thank you.

The Chair: Mr. Cannis, you have a minute and a half.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Mr. Chairman.

Captain Coles, quickly then, in your opening statement you talked about a $100,000 pay cut. I'm sorry, I didn't catch that. Could you comment just briefly on that? I have one more important question to ask.

Capt David Coles: It's Captain Babb's example. Perhaps I can let him answer it.

Capt Steve Babb: Yes, Mr. Cannis. I was a charter pilot here in Canada working for a company based out of Montreal at the time. I certainly went into the opportunity to come to work for Air Canada knowing very well the expansion and the opportunities that were playing out in the industry here in Canada.

There was certainly a realization on my part that with what was going on at Canadian Airlines through this same period of time, the idea of ever—

Mr. John Cannis: Seriously, would you take a $100,000 drop in your income? For what?

Capt Steve Babb: Sir, I did take a $100,000 drop in pay for the opportunity to go to work at Air Canada and to be part of the seniority list and the group of pilots at Air Canada.

Mr. John Cannis: I don't see too many people willing to take a $100,000 drop in salary. For what?

Anyway, the other question I really want to ask is this. You indicated, Captain Coles, that the Minister of Labour is aware of the issue and she's considering it. Isn't this a Labour issue primarily, about the decisions that were rendered? My question here is, since the Minister of Labour at some point in time has to express her views and choose a direction, what would the transport committee do for you?

Mr. David Jadis: That's a very good question, Mr. Cannis. Although it's the labour board's policy that may be governing this case right now, the outcomes of these actions by the labour board will fall directly into the laps of this committee. Absolutely, that's how it will play out.

Mr. John Cannis: How?

Mr. David Jadis: Well, Captain Coles made reference to the 10 boxes being full. There were two comments that were made. I'll try to deal with them as quickly as I can.

The Chair: You have less than a minute.

Mr. David Jadis: Okay, I'll do it in less than a minute.

Captain Coles talked about the unpredictability of the pilot group. We also talked about the 10 boxes being full. Collectively, as a pilot group, we—the 2,000 original Air Canada pilots—have had enough.

You saw what we were prepared to do last June with the CCAA proceedings. That's one side of it. The other side of it is that you have to remember that more often than not we pilots go on flights in such proximity that Captain Coles and I can spend 10, 12, or 15 hours together on a flight deck, or we can go on trips that are four or five days long.

The ramifications of that proximity, and the way it plays out with respect to flight safety on the flight deck, and the issues we're dealing with, and the 10 boxes being full, and the tension you can cut like a knife—that's not a Labour issue, sir; that is a Transport issue. That is a Transport issue in both cases that will come back into the lap of this committee and that of the minister responsible. That's how you transfer it from a Labour issue to a Transport issue. We wouldn't be here otherwise.

The Chair: Thank you very much for being here today.

For those of you who just came into the room who think I'm really strict with time, what we're doing now is unprecedented. Groups have asked to meet with the chair in my office, and we've opened it up to the whole committee. So I don't feel bad when I cut it off at 30 minutes.

I hope this was helpful for you. It's helpful for the members, and you still have the opportunity to meet with whomever you want. We thank you very much for being here.

I now invite, from the Air Line Pilots Association International, the vice-president of the Canada Board, Mr. Dan Adamus, and the senior representative, Canada, Art LaFlamme.

Welcome. We invite you to make a presentation of 10 minutes or less, followed by questions.

Captain Dan Adamus (Vice-President, Canada Board, Air Line Pilots Association International): Thank you, Mr. Chair. I'm Captain Dan Adamus, and I'm here representing the Air Line Pilots Association International. As well, I am a pilot for Air Canada Jazz. With me today is ALPA's senior representative for government affairs in Canada, Art LaFlamme.

The Air Line Pilots Association International, ALPA, represents more than 64,000 professional pilots who fly for 43 airlines in Canada and the United States. Both as our member certified bargaining agent and as a representative in all areas affecting their safety and professional well-being, ALPA is a principal spokesperson for airline pilots in North America. ALPA, therefore, has a significant interest in the economic health and well-being of this industry.

Simply put, with Canada's major carrier in bankruptcy protection, the airline industry in Canada is in crisis and requires major surgery. ALPA, which represents the pilots at Air Canada Jazz, has recognized this, and we've been actively working with the company over the course of the last several months to find solutions so that it can adapt to the changing economic environment.

However, these efforts likely will be for naught if the status quo continues. For that reason, we believe it is doubly important that our views be known, and we thank you for the opportunity to make these submissions.

In our view, the current circumstances that are obviously aggravated by the tragedy of September 11, 2001, a sagging economy, SARS, the war in Iraq, highlight the fact that the present policies do not serve the interests of the industry. There are simply too many seats chasing too few passengers. The competition rules are not effective in preventing predatory pricing. The Government of Canada continues to view the airline industry and passengers as a cash cow. Government-mandated monopolies, airports, and NavCanada continue to raise fees when the airline industry can least afford it, and many remote communities are not well served. To use an aviation term, the industry is in imminent danger of spiralling downward out of control.

While we believe that strong medicine is needed, ALPA is not, however, advocating a return to the days where the government controlled access and fares on each and every city air route in the country and where the government owned and operated airports and the air navigation system.

In ALPA's view, a healthy and viable industry is one that is profitable, accessible, and affordable. In addition, as an organization that represents employees who spend their careers in the industry, we think it is important that the government recognize a further important industry value, and that is stability.

These objectives must be reached with a balancing of market-based solutions and government regulation that establish order in the marketplace and that are appropriate to the specific circumstances facing us today. In this regard, we believe that the government simply does not have the luxury of inaction. Additionally, Canada's small population, the nature of its geography, and the reliance of many Canadians in both urban and smaller remote communities on air transportation require a policy direction that would produce incentives for airlines to service remote areas.

Further, we believe it is imperative that Canada maintains its national interest in ensuring that it has a domestic airline industry that meets its unique needs and conforms to its national policies. We believe that maintaining current domestic ownership requirements as well as retaining the current bilateral basis of international air service agreements can best achieve this.

Former transport minister David Collenette released a document in February 2003 entitled Straight Ahead: A Vision for Transportation in Canada. This document, in our view, missed the mark entirely. It was rooted in the weeks following the collapse of Canadian Airlines and the bankruptcy of Canada 3000, where Air Canada became, for a brief period, the dominant carrier. Transport Canada reacted with short-term and ineffective measures. A fresh start is required.

Canada's population is relatively small with respect to its size. What has worked elsewhere, particularly in the U.S., given the size of its market, cannot be assumed as the way to proceed here. A made-in-Canada solution is required, and we strongly believe parliamentarians, and in particular this committee, should lead a debate among all stakeholders in conducting this overhaul of air policy in Canada.

Á (1135)

This submission sets out ALPA's concerns regarding the Government of Canada's policy in relation to the industry in which our members work and earn their livelihood. The issues are complex and the problems are not easily solved. It will take the concerted efforts of the Government of Canada and the stakeholders in the industry to correct the problems of today and meet the needs of the future.

ALPA has presented its arguments in greater detail in a paper submission that has been provided to this committee. In ALPA's view, a healthy and viable industry is one that is profitable, accessible, affordable, and, we must stress, stable. Therefore, in order to promote a healthy, competitive airline industry that operates both in the best interests of the workers in the industry and the Canadian travelling public, and for the reasons outlined in our submission, ALPA's recommendations are as follows.

For market entry, we believe the government, before providing a licence to a new entrant, must consider the following criteria: current capacity in the system, financial viability of the new entrant, and the public interest.

For competition regulation, ALPA recommends that the competition commissioner be given the resources to actively investigate complaints from any credible source and the powers to effect timely enforcement of the competition regulations.

For service to small and remote communities, ALPA recommends that incentives be offered to carriers and/or that it be made a condition of entry to the marketplace to ensure that there is transportation available to link remote communities to larger centres.

On financial policies affecting the airline industry--we have several recommendations--ALPA recommends that the government abandon the security charge in its entirety and absorb all additional post-9/11 security costs now being borne by the industry.

ALPA also recommends that the federal fuel excise tax be eliminated.

ALPA recommends that the federal government cease to collect rents from airports and that those savings be passed on to airlines and the travelling public.

ALPA recommends that airport legislation be passed to ensure airport authorities are transparent and accountable and that there is an appeal mechanism for inappropriate or unfair fee increases.

ALPA encourages the government to allow Canadian carriers to benefit equally with foreign buyers through programs similar to those to promote export of Canadian-built aircraft. In addition, ALPA believes that the tax and accounting rules in Canada need to be amended to be equivalent to U.S. requirements for the purchase or lease of aircraft.

And finally, ALPA recommends that legislation be passed by Parliament that would require airports and NavCanada to have a system of protection or insurance from fee increases during downturns in the economy.

On the subject of undue liberalization of international air service agreements, ALPA believes it would be impractical and unwise for the Canadian government to permit foreign airlines to conduct cabotage operations in Canada.

For foreign investment and domestic control, ALPA recommends that the changes to foreign ownership rules be considered only if the current Canadian air policy framework has clearly failed to provide for a viable and competitive domestic market, and even then, changes should only be made with the appropriate safeguards to protect the interests of Canadians.

We thank you again for the opportunity to appear before you today to make our views and recommendations known to the committee, and I'd be pleased to answer any questions you may have.

Thank you.

Á (1140)

The Chair: Thank you very much for your presentation--within 10 minutes, I must say.

You have listed a number of recommendations. Are you asking for all of them, without exclusion, or some of them?

Capt Dan Adamus: I think when you go into negotiations you have a wish list, absolutely.

The Chair: Thank you.

Mr. Gouk, five minutes.

Mr. Jim Gouk: One of the things you mentioned is a Competition Board with teeth, and certainly not only have we heard this from many people in the past, but we've talked about it as well.

Most of the evidence we've received suggests that if the Competition Board had teeth and cracked down, Air Canada would be on the receiving end in most cases. We've heard evidence from WestJet and from other carriers.

In my own home region there are two airports roughly the same distance from Vancouver. The fare for one is less than half the fare for the other, and the only difference is that the one with the higher fare has Air Canada only and the one with the lower fare has Air Canada and WestJet. So where exactly would it benefit your airline if the Competition Board cracked down and got some teeth?

Capt Dan Adamus: I believe what we're looking for here is in the area of predatory pricing. We believe there are some airlines that simply charge too little a fare to pay their bills. When you see fares advertised at $29 one way, for the life of me, I cannot figure out how the bills get paid. These are the sorts of things we think the Competition Bureau should be able to look at, make a decision on, and act on quickly.

Mr. Jim Gouk: A fuel tax is certainly something we've looked at before, and I fundamentally agree with it. If you're not getting a benefit from it specifically, as is argued with roads and the motorists and truckers who use them, there's certainly an argument for it. It is something that I think we can look at. We've done something similar with airport rents. The deferment of rents was a farce and did absolutely nothing for the airlines, so that's something the committee could revisit.

On NavCanada fees, the problem is that they are user-pay. One of the big components is the airline industry itself on their board. When there's a downturn they still have to provide the service, and at the same time their revenues are down because of less travel. How can we ensure against fee increases when they are simply recovering the cost of the service they provide? What are you looking for?

Á (1145)

Mr. Art LaFlamme (Senior Representative, Canada, Air Line Pilots Association International): Thank you.

Prior to the last downturn, NavCanada had a contingency fund of about $50 million, but it evaporated very quickly. It was totally inadequate to absorb the shocks that the industry suffered. So what we're looking for is a form of insurance, or a reasonable contingency fund, that would absorb shocks such as we've had over the last few years.

Mr. Jim Gouk: Yes, but the contingency fund was the surplus of what they charged versus what their operating costs were. To develop a bigger contingency fund they'd have to charge even more. That's counter to what you're looking for, is it not?

Mr. Art LaFlamme: Well, sometimes you have to go through a bit of pain for the long-term gain.

Mr. Jim Gouk: Okay, I'll keep that point in mind.

I know your airline is looking at some downsizing, with smaller aircraft. You're looking at some Bombardier regional jets, but also buying the Brazilian aircraft. Are you challenged by the fact that your competitors who are using these same aircraft get a subsidy to buy the Canadian aircraft when you don't? Is that a problem for you? Have you tried to address it through the government?

Mr. Art LaFlamme: Yes, we're very concerned that Air Canada's business plan be successful upon exiting bankruptcy protection, and a big part of that is a fleet of regional jets. For the company to operate in a cost-effective manner it has to be competitive, and it has to be able to obtain these jets at the same price its competitors would obtain them. The fact is that an American operator of Bombardier regional jets can go through the Export Development Corporation, but Air Canada and Air Canada Jazz cannot.

Mr. Jim Gouk: This seems to be an absurdity, but can you tell me if it's accurate or not? If you could make an arrangement with an American air carrier to buy Canadian-built Bombardier jets and sell them to you, would you get them cheaper from that American airline than you could buy them from Bombardier here in Canada?

Mr. Art LaFlamme: From what we're told, that's correct.

Mr. Jim Gouk: That's an interesting situation.

The Chair: You have about 15 seconds.

Mr. Jim Gouk: What's your position--because this is going to come up--on the change in formula for flight attendants within your airline, particularly on the smaller aircraft?

Capt Dan Adamus: It is certainly a tough question, which we've thought about for the last number of days because we knew we were going to be asked it.

First of all, we are an international union with members on both sides of the border. In the United States, the ratio is one in 50. ALPA's policy, which we've stated publicly, is to have the best possible ratio of flight attendants to passengers as possible. I'll leave it at that.

Mr. Jim Gouk: So you want as many as possible, whatever that is?

The Chair: Thank you, Mr. Gouk.

Monsieur Laframboise is next for five minutes.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

I would like to say first of all I am very happy to see you have been doing this analysis. I can see you are very consistent. It is not the first time that you bring recommendations and I find them very appropriate. The problem is that the same Liberal MPs are still around. Some changed positions but I don't see why they would change their mind and their views about the air industry. This means that whatever recommendations you make will not be accepted. The committee itself had recommended in its unanimous report to reduce the fuel tax. This was not implemented, nor were many other recommendations that the Liberals had rejected.

However, there is one aspect that is somewhat new. You caution us against the open skies concept. You say it would be unwise for the Canadian government to permit foreign airlines to conduct cabotage operations in Canada. That is a note of caution. I would like you to elaborate on this. You seem to be opposed to any open skies policy.

Á (1150)

[English]

Mr. Art LaFlamme: I'll respond in English.

ALPA on both sides of the border is very concerned with the potential for foreign workers operating to foreign standards within each country. The Canadian Transportation Agency recommended a North American environment for aviation. But it's unlike the manufacturing industry, where a company moves to Mexico and sets up operation under Mexican rules. I'm not criticizing Mexican airlines, but do we want Mexican airlines operating to their labour standards, to their rules, in Canada and transporting Canadian passengers? That's one aspect.

As well, it would serve to completely destabilize the Canadian marketplace, which is already destabilized more than enough, and we feel that foreign operators would cherry-pick the routes in Canada to the detriment of carriers like Air Canada and even WestJet. So I think it's not possible in the current economic environment or in the economic structures that exist in North America.

Does that answer your question, sir?

[Translation]

Mr. Mario Laframboise: You seem to be very concerned about regional service. You say there is a problem in this regard and you mention specifically the essential air service program that exists in the United States. We already have discussed this in committee but the idea was rejected by the Liberals.

You seem to be very concerned. We can see that discount airlines are doing well, but should we be specifically worried about regional air transport?

[English]

Mr. Art LaFlamme: On that issue, we are concerned with the operations in small, remote communities. We've been told there's always somebody to fill in the void, but usually it is with much smaller aircraft and with much more infrequent service, which we feel creates a vicious circle effect that leads to people taking aircraft even less often, reducing the frequency of service even more and with even smaller aircraft, and that tends to isolate the smaller and more remote communities from the rest of Canada.

So we're of the opinion that you build a highway and people will come. You don't reduce a four-lane highway from Ottawa to Montreal to a two-lane highway because traffic is reduced over a period of one year.

[Translation]

Mr. Mario Laframboise: NAV CANADA is about to reduce it's services in the regions. Are you concerned about what the agency is doing?

[English]

Mr. Art LaFlamme: NavCanada has announced a review of level of service, looking at a number of changes to the services it provides across the country. I know there are processes to be followed by NavCanada, and they're in the initial stages. But again, we are concerned with respect to the legislation for NavCanada that there is no consideration for interdependency, that is, how do airports, the air navigation service, and the airlines operate together in a dependent fashion?

So Air Canada goes and does its thing, reduces services, which has impacts on airports, which has impacts on airlines. I think those aspects need to be looked at when they're reviewing levels of service.

The Chair: Merci, Monsieur Laframboise.

Mr. Cannis, for five minutes. I understand you wish to share with Mr. Karygiannis. You will manage the time.

Mr. John Cannis: Thank you, Mr. Chair.

I was reading and listening very carefully to some of your recommendations, and if I may, I'd like your comments on this. You indicated in one of your recommendations that the federal government should cease to collect rents from airports and that those savings should be passed on to airlines and the travelling public.

Do you know what arrangement currently exists between the revenue and the payments to the federal government, how it's structured? Could you tell me?

Mr. Art LaFlamme: Well, that was part of the lease agreements with the national airports, to agree to rent payments to the federal government as a condition.

Mr. John Cannis: Based on revenue.

We both agree there's a formula--if there's an increase in volume, the payment increases. If it decreases, it doesn't. Do we agree on that?

Á (1155)

Mr. Art LaFlamme: Yes.

Mr. John Cannis: So I don't see where the fault is. If there's no volume, they're not collecting money--unless you have another scheme that will make it foolproof.

Mr. Art LaFlamme: It's my understanding that Toronto's rent payments didn't decrease with the downturn in passenger traffic over the last couple of years.

Mr. John Cannis: On your last point, when you said you recommended legislation be passed by Parliament that would require airports, NavCan, etc., to have protection or insurance from fees, some of these fees were off-loaded by the airlines and passed on to the consumer, to the user. I don't even recall. If anything, I've heard complaints from people that the costs were always going up, so they never really saw the benefits of how it was off-loaded. Why didn't that happen?

For example, on airport tax, I was on the committee when we agreed, Mr. Chairman, that it be reduced. The government did take that initiative. I can tell you, Mr. Chair, there were many complaints. People said it didn't reflect on their tickets. What happened?

Capt Dan Adamus: I think what we're looking for here is accountability.

Mr. John Cannis: From the government or from the airports?

Capt Dan Adamus: From the airports.

Mr. John Cannis: In your statement here, when you say you want transparency and accountability, you are saying--and I would like this to go on record--that the airport authorities have not been accountable or transparent. Is that what you are saying?

Capt Dan Adamus: Yes.

Mr. John Cannis: There's money going in that you are not sure of.

Capt Dan Adamus: That is correct.

Mr. John Cannis: We have an airport boondoggle authority unfolding here.

Capt Dan Adamus: I think you only have to look across the countries at the new airports that have been built. If I may use the term, a lot of them are Taj Mahals.

Mr. John Cannis: Aren't they collecting fees from airport usage, airport improvement fees?

Capt Dan Adamus: That is what we are targeting, the airport improvement fee. The extra $10, $15, $20, or $25, whatever they are collecting, is going against the ticket. It adds to the increased costs to passengers when they are travelling. That hurts the industry.

The Chair: Thank you, Mr. Cannis.

Mr. Karygiannis, you have a minute and a half.

Hon. Jim Karygiannis: Thank you.

I certainly listened to you with great interest. I was concerned that you stayed away from the number of seats per passenger, but I'm sure that, as you're the captain, you will finally have to make a decision when you are flying the circuit.

I looked with interest at, and I want to pick up on, what my colleague Mr. Cannis said. Do away with this, do away with that, do away with this, do away with that. In your statements, do you want to do away with the government? Do you want to do away with excise tax? Do you want to do away with the rent?

Where are we going to get the money to provide security? Where are we going to get the money to make sure that whatever we have right now exists?

Capt Dan Adamus: It's infrastructure. We feel this airline has taxes upon taxes and user fees upon user fees. We don't have a problem paying our share, but when you look at other modes of transportation, such as rail, there are subsidies that go in.

You have a passenger who wants to go from Toronto to Ottawa. You look at the price of the ticket on rail or flying. Because of the extra costs endured by the airline industry, it is obviously a much higher fare to travel by air. We're only looking for a fair shake here.

The Chair: Thank you very much.

I thank you for being here with us. You heard my comments before. We appreciate the information you shared with the members, and nothing prevents you from approaching any member individually, if you wish to do so.

I now welcome the Canadian Union of Public Employees. We welcome the chair of the health and safety committee, France Pelletier. Welcome.

Welcome to the vice-president of the Air Canada component, Richard Nolan, and to the senior researcher for the Air Canada component, Richard Balnis.

We welcome you and invite you to make a ten-minute presentation. We would appreciate ten minutes and no more. At five minutes per party, we now fill the 20 minutes, and that's a full half hour.

Please proceed.

Mr. Richard Nolan (Vice-President, Air Canada Component, Canadian Union of Public Employees): Thank you.

Good morning to all of you. We would like to thank you for inviting us to talk with you this morning.

We've already introduced France Pelletier and Richard Balnis. We have also met with some of you earlier.

We represent approximately 8,000 cabin personnel--that's flight attendants and “in-charges”, working at Air Canada, Air Transat, Calm Air, Cathay Pacific, and First Air.

We are here today to ask you to take action on a very critical issue because we believe that passenger safety is at risk. Transport Canada at this time is entrusted with ensuring passenger safety. September 11 has highlighted the safety and security needs.

In as little as 60 days, a new regime that reduces the number of flight attendants on large passenger aircraft could be in place, a move from one in 40 passengers to one in 50 seats. In 30 days we're meeting for a discussion in Ottawa, and an exemption decision by Transport Canada will come 30 days later.

Our problem is that the process in developing those regulations has been biased and secretive. We believe this change should have been brought to the attention of all Canadians, airline passengers, and the standing committee.

The standing committee is the check when Transport Canada is out of balance. Regulatory changes are supposed to be put forward in the interest of all Canadians under the aegis of parliamentarians. You are the check when Transport Canada is out of balance.

Â (1200)

Mrs. France Pelletier (Chair, Health and Safety Committee, Canadian Union of Public Employees): Passenger safety is at risk. We must keep in mind that the flight attendants are the first line of defence when things go wrong. There is no 911 at 35,000 feet. Fewer flight attendants means reduced safety for passengers. Our principal and primary role on board an aircraft is to maintain the safety of the passengers on board.

Crash investigations provide conclusive evidence that more flight attendants can make the difference of life and death or safety and injury.

Flight attendants are trained to respond to in-flight emergencies such as on-board fires and cabin decompressions. We must be prepared to handle unruly passengers, which is known as air rage. Now we are trained on how to restrain passengers. We need to recognize when there are safety breaches on board an aircraft such as the shoe bomber incident, which we're all very well aware of.

We must conduct emergency evacuations in 90 seconds. We deal with medical emergencies on board aircraft almost on a daily basis. We deal with births and deaths. We have enhanced training in the administration of oxygen for passengers who need to be on continuous oxygen for hours on end on board an aircraft.

Since 9/11 we've had increased security responsibilities and training. We must be constantly aware of security breaches, once again, plus we have increased responsibilities in training that is just coming up for flight attendants on assisting passengers with disabilities.

Mr. Richard Balnis (Senior Researcher, Air Canada Component, Canadian Union of Public Employees): I would like to begin at slide 5 and take you through the technical examination of the ratio and the documents we've provided to each of you in the kit.

The Canadian staffing ratio of one in 40 passengers was established in 1971. The Australian ratio still remains at one in 36 passengers. The United States ratio used to be one in 44 seats, but in the early 1970s, under pressure from the airlines, it was increased to what has already been discussed at the committee, the one in 50 ratio. The U.S. National Transportation Safety Board criticized that move as not having undergone the proper and necessary safety analysis.

In 1995, Air Canada and Bombardier sought and received an exemption. In your package you will find a safety survey of flight attendants who are operating that aircraft. If I can draw you to pages 2 and 3 of the survey, you can see that the people on board the aircraft who had to operate these aircraft indicated that they had difficulty performing their routine and emergency safety duties, indicating to us that there was a problem.

Since 1999, there has been a push to bring the one-in-50 rule from the small aircraft to the larger aircraft. Transport Canada officials have rejected these requests and have said that the case has not been made. Now we have another lobbying campaign, led by WestJet and the Air Transportation Association of Canada, to create a one in 40, one in 50 flip-flop rule. Carriers could choose to use one rule for one aircraft type and the other rule for another aircraft type. This proposal was formally opposed in 2001 by accessibility groups, both ACPA and ALPA, and by flight attendants.

Moving on to page 7, in March 2001, Transport Canada rejected this proposal and stated that “WestJet and ATAC have not provided any compelling reason for the regulatory change”. Transport Canada safety officials went on to say it is “persuasive that further reduction in the number of cabin crew can have a negative effect on safety and certainly will not enhance safety”.

In the next document you will see an e-mail from one of those Transport Canada officials named Frances Wokes. She concludes, in reporting to her boss, “...the arguments put forward are persuasive and have convinced me from a safety point of view that this should not be pursued.”

Now two years later we have exactly the same proposal going forward. We're very much concerned that the documents in 2001 that rejected this proposal--these secret analyses--are not being released so we can have a full public debate on this new proposal. There is an e-mail that has been entirely exempted by the Access to Information Act. There is a 30-page staff analysis, where the official commenting on all the proposals has been exempted, and our request to have it released to us has been refused. That is why we are here today.

In addition, the work that Transport Canada has done to justify its proposal has been incomplete and biased. It has failed to consider realistic risk scenarios. It did not look at the security issue. In fact, there was no security staff from Transport Canada on the risk analysis team. One of the members of the four-person team was a former industry lobbyist who pushed for one in 50. We have since learned that another inspector was actually nominated by ATAC before the team met.

They did not consider all the issues. They admitted they did not complete the risk analysis. In our view, they did not follow the Treasury Board guidelines for public consultation. Nonetheless, their study still concludes that the one in 40 current option scored 404 points on their elaborate scoring system, compared to the one in 50, which only scored 256. So even in a flawed and biased process, they still found that the current rule was the best rule.

We are very much concerned that the credibility of Transport Canada is at stake. A decision made in haste will undermine the aviation industry, and public confidence in air travel will be compromised.

Â (1205)

Mr. Richard Nolan: As Mr. Balnis just said, we believe the credibility of Transport Canada is at stake. Your standing committee should protect the aviation industry, against itself if necessary. If this committee does not act on these new rules, the rules could be in place within 60 days. Transport Canada has started the clock ticking, and in our opinion its process is a sham: it's rigged, it excludes the public, and it excludes critical evidence.

What we are asking of you is for the committee to ensure that a full and public examination of all the evidence takes place before any decision on flight attendant staffing levels is taken and that in the interim the committee ask the minister not to bypass this essential process by exemption. You should ask for the release of all documents that were withheld.

We would like to thank you for your attention, and we look forward to your questions.

Â (1210)

The Chair: Thank you very much.

We will proceed to questions. Mr. Gouk, you have five minutes.

Mr. Jim Gouk: Thank you.

First I want to clarify a slightly different point of concern to CUPE. We were fighting very hard for you because we thought there was a big problem with the designation of flight attendants as aircrew and the outflow problems from that decision, which caused problems for them with their collecting EI. Has that been largely resolved now through negotiations with the CCRA? Could you just confirm that?

Mr. Richard Balnis: Thank you to this committee.

We met with CCRA and HRDC and they realized they were wrong. They have allowed us to sit down with our employers and negotiate new methods of calculation that in effect take one flight credit hour and multiply it by two.

We have a memorandum of understanding signed at Air Transat that will hopefully help their 300 people, but at Air Canada they have yet to sign that memorandum. They are simply being slow and difficult. So for flight attendants at Air Canada we have not resolved it yet, but all of them have returned to work.

Mr. Jim Gouk: Is there a cost factor for the airline, or is it simply a matter of calculation for...?

Mr. Richard Balnis: There would be no cost factor because EI is EI. It's funded by employers and employees, so there wouldn't be an additional cost.

Mr. Jim Gouk: Presumably the airlines would monitor the transcript of this and let them know that....

I would be very curious as to why they are dragging their heels on this one when they have so many other problems and they could get this one out of the way.

With regard to this issue, there's no question that 40 is safer than 50, but 20 would be safer than 40. The relative question is, what is adequate safety and where is the argument between the 40- and the 50-seat rule? If all cars had governors and never went over 30 miles an hour, obviously we would prevent a lot of traffic fatalities, but there has to be practicality measured in. So where's the line between required safety and an adequate level of safety between the 40- and 50-seat rule?

Mr. Richard Balnis: In our opinion, in 2001 Transport Canada very clearly drew the line that it is at one in 40 passengers. They also believed this provided the industry sufficient flexibility.

I believe the entire industry is not seeking a one-in-50 rule; that's why they're seeking the flip-flop rule. So in fact carriers do see the benefits of one in 40 with its flexibility. I guess the big issue is that one in 50 is seen as the standard, and the big myth of that is that the National Transportation Safety Board said, you have not done the safety work to justify going from one in 44 seats to one in 50 seats, so it is unproven as a safety issue.

Our view is if you want to move it, then have the full public debate, but don't have documents censored where we can't see the position of Transport Canada in having the full debate. We can't have a full debate when one hand is tied behind our back and one eye is blindfolded. Let's have the full debate.

Mr. Jim Gouk: Have they been asked this point-blank, with you pointing out that you rejected this in the past but now you accept it? Aside from specifics, what has changed?

Mr. Richard Balnis: We don't believe anything has changed. There was a proposal from ATAC in October 2002, a letter that was sent in. We have not seen that letter, which was considered by TC senior management as telling us what had changed. They refused to distribute it to us during the risk analysis process, so if there was a change, we don't know what it was because they're not giving us the letter. If they gave us the letter, at least we could understand it and say, you're wrong--or maybe you're right.

Mr. Jim Gouk: I assume I'm correct in assuming that you asked for this and they have turned you down. Did they give you any rationalization for why they turned down your request for this information?

Mr. Richard Balnis: There were two reasons. First, during the risk analysis process, the team said you're not going to get it. Second, when we asked for it again, when we went to this public risk information library, they said the Access to Information people have screened it and you can't see it. So they gave two reasons, both of which I would say are equally suspect.

Mr. Jim Gouk: You mentioned a four-member board in which one you say was an industrial lobbyist and one was appointed by ATAC. Who were the other two members of the board?

Mr. Richard Balnis: The others were also in Transport Canada; one is ex-military and one is just another Transport Canada inspector.

The Chair: Go ahead, Mr. Gouk.

Mr. Jim Gouk: Was your organization asked for input in terms of a position on the board?

Mr. Richard Balnis: We asked for a position after the team was convened and we were denied.

Â (1215)

Mr. Jim Gouk: After it was convened?

Mr. Richard Balnis: After it was convened, yes, sir.

The Chair: Thank you, Mr. Gouk.

Monsieur Laframboise, cinq minutes.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

I find this very interesting and I am anxious to see the reaction of the Liberals, because I have been here, on the Committee, for a good many years now, and the Liberal MPs used to criticize the former minister for taking decisions without calling upon the Committee. What you are telling us today is that the government plans on changing the rules without the Committee having the opportunity to carry out its analysis.

I find it very interesting that you are putting this request to us. I will therefore most probably be moving a motion requesting that the Committee hear the witnesses and, more particularly, obtain the famous secret documents that they do not want to hand over to you. In some respects, if there is one committee that should be entitled to those documents, it is this one.

Mr. Chairman, I might even venture to ask you—you perhaps have that ability—to go and get the documents from Transport Canada. In any event, you would see just how far you can go with your powers as chair of the Committee, because it is absolutely unbelievable that there be secret documents in a file as important as that of security.

What you are saying, in essence, is that in the United States the ratio was increased to 1 for 50 but that for the move from 44 to 50 there was no risk analysis done. In the final analysis, it will be the same here if we adopt this in the next 60 days, in other words there will have been no known risk analysis.

Is my understanding correct?

[English]

Mr. Richard Balnis: Yes, sir, you're absolutely right. That's exactly the same situation. What happened in the early seventies will happen now. They'll introduce a rule. But it will even be different from the U.S. We're going to have a very complex rule. We'll have one in 40 on one aircraft in one airline. We'll have one in 50 on another aircraft in the same airline. We'll have another airline with one in 50, another airline with one in 40. It's even more complex than the U.S. situation. We're very much concerned that it will also be difficult to enforce. So I guess it's even worse than the situation that would be in the United States.

We are still analysing the proposals put forward by Transport Canada, and at this stage of the game it doesn't look like they are creating an equivalent level of safety with the new one-in-50 rule. But we're still analysing this stack of paper they've put out and all the changes they have made.

[Translation]

Mr. Mario Laframboise: Will you have enough time to prepare yourselves within the deadlines that they have set for you?

[English]

Mr. Richard Balnis: Quite frankly, the answer is no. Transport Canada has reached the point where they drop things on you in 30 days. We are very fearful that on April 6 to 8 they will accept their own proposal and say “CUPE, write a dissent”. They'll give us 30 days to write it in. Then the senior managers who made the proposal will sit down and say “CUPE's dissents are rejected; Minister, sign an exemption”, and a whole rule in the industry is changed.

We're saying if we want to analyse the issue properly, in the interests of all Canadians, take the time, provide the documents, have the debate, do the work; then, if it's justified, make the change.

But at this stage of the game we are debating with one hand behind our back--and one leg also--because we only have another two or three weeks. And in fact the justification documents they have provided are skimpy--as usual, unfortunately. They don't tell us which aircraft would be affected or could be affected. We now have to figure that out in three weeks' time. This, unfortunately, is also a factor in why we can't get the analysis done in time for that.

The other aspect is, if an exemption is issued, they will preclude the Canada Gazette process--the way more Canadians can have an opportunity to participate and give their views on whether it is safe or not.

So they are rushing it, and we believe they should take the time, in a full, clear, and transparent manner, on this issue. That's why we've come to you, because, quite frankly, you may be the only ones who can help us ensure that the process is returned to full transparency.

[Translation]

Mr. Mario Laframboise: I am obviously pleased with the request you are making of us. My conclusion continues to be difficult. The Liberal MPs that now control the Transport Department are doing exactly the same thing they criticized the previous administration for. This continues to astound me to this day.

The Chair: Thank you, Mr. Laframboise. I must underscore the fact that you are the only member of the Committee attacking the other political parties. You have done so three times in a single intervention. I do not believe that this will enhance the harmony and goodwill we need in order to do a good job. If all MPs started attacking the other parties, this would become very personal. We are here for the witnesses. I would prefer to see our political quarrels remain outside of this room. But if it is your choice to do this, then I will allow it, on the condition that you attack no individual by name.

[English]

Mr. Proctor, five minutes.

Â (1220)

Mr. Dick Proctor (Palliser, NDP): Thank you.

I certainly am not going to attack individual people. But Mr. Balnis mentioned negotiating with one hand behind his back. We see the government patting itself on the back for releasing documents around the sponsorship scandal, releasing cabinet documents instead of waiting the 30 years, and other documents are being released immediately. It seems to fly in the face of all that, that people are unable to get the document that apparently would justify the change that the ATAC group would like to make. That's one thing.

One of you mentioned the National Transportation Safety Board, and I'm wondering where they fit into the process. We know what they do after an accident, but what do they do before an accident? Are there roles they have to play?

Mr. Richard Balnis: The National Transportation Safety Board I was referring to is the U.S. one. We have the Transportation Safety Board. In this case the NTSB issues their top 10 safety problems. So they look after accidents, but they also look at the system and make recommendations.

One of the issues is that when the change was made from one in 44 seats to one in 50 seats, the chair of the board simply said, “I don't think you've proven your case, regulator. You haven't done the work.” And that became one of their safety concerns that they published. Eventually, they gave up because they just weren't listening any more. So they look into the smoking hole, but they're also the watchdog, and that's something our TSB does here.

Mr. Dick Proctor: Should they be doing more in a preventive way? Should we be encouraging them to be doing more here?

Mr. Richard Balnis: I would not disagree with encouraging them to do more, but my concern is that the fuse has been lit, it's a very short clock, and by the time they act, the ship may have left. That's why we're taking the extraordinary step of coming to you with our problem and saying we need your help at least to make sure the process is done in a reasoned fashion with all the information. The folks across the river may not be able to get the pressure on before the minister acts.

Mr. Dick Proctor: The minister would presumably act by way of ministerial exemption. Is that how it would work in the 60-day time slot?

Mr. Richard Balnis: That is our great fear. There has been a practice developed in Transport Canada that after they finish their so-called CARC consultation and all the dissents have been dealt with, the staff feel they can then issue an exemption prior to a regulation. We feel that is totally inappropriate. We know that has been done in the past, and we're fearful they may do this again, unless they're encouraged to do otherwise.

Mr. Dick Proctor: In the study that we don't have, do we think that safety regulations analysis was looked at? Do you know?

Mr. Richard Balnis: I'd like to draw your attention to page 63 of this document with a cover page. I'm quoting from the document. This is a Transport Canada position and staff recommendation to a committee of senior managers:

The arguments and issues raised by those who oppose this measure

--which is the ATAC measure--

are persuasive that further reduction in the number of cabin crew can have a negative affect on safety and certainly will not enhance safety.

Given the sensitivity of the issue, the risk of lowering public confidence in aviation safety, that it violates one of our operating principles of promoting a shared commitment to enhancing aviation safety in Canada and internationally, and given that it exposes the Minister to the risk of being accused of lowering safety standards and in view of the fact that there is nothing to be gained and much to be lost by further discussion of the matter, it is recommended that CARC

--which is the group of these senior managers--

direct that no further consideration be given to this issue.

That was in March 2001. There's something there that was exempted. Then in October 2002 a letter appears, which we haven't seen, that continues on. What changed in two years? We don't know. So we believe, based on the analysis done in 2001, that the case wasn't made, and it hasn't been made again. But we need the information to have it fully discussed.

Â (1225)

The Chair: Thank you, Mr. Proctor.

Monsieur Jobin, pour cinq minutes.

[Translation]

Mr. Christian Jobin (Lévis-et-Chutes-de-la-Chaudière, Lib.): First off, Mr. Chairman, I would like to congratulate you for the comment you made earlier with regard to the personal attacks being launched amongst parties. It is my belief that all of the members of this Committee are here to work together for Canada and in order to help Transport Canada make the right moves as well as to discuss good bills. All Committee members are here to defend their brilliant ideas and to put their intelligence to good use. With the knowledge that certain MPs here in this room will never have the opportunity to form a government, we do not criticize them; we enjoy working with them despite it all.

I have a question for the representatives of the Canadian Union of Public Employees. You represent a group of individuals, but I would like you to try to convince me or the members of this Committee that you are not here solely to defend the interests of your members but rather because of your convictions with regard to the safety of people.

What effect would changing the standard from 40 to 50 truly have on people's safety, in the aftermath of September 11? What additional tasks that you must now carry out aboard airplanes with the change of the standard from 40 to 50 might imperil people's safety?

Mrs. France Pelletier: Precisely. Since September 11, flight attendants have been given additional responsibilities. There must be much more surveillance in the cabin. There have been several cases where we have found knives; passengers had managed to get through security with knives. Very recently, there was the case of a man who had gone through security checks with a knife he was using to peel an orange. There have been other cases where we have found can openers on board. We are constantly on alert. You need a good many people on alert on board large aircraft carrying passengers.

There are also responsibilities due to the fact that there occur many more medical emergencies on board airplanes. We encounter all kinds of medical emergencies virtually every day, and these situations mobilize several people at the same time. Since September 11, since the decision to lock the cockpit door, communication between flight attendants at the rear of the airplane and the pilots has become critical. We need greater communication because we cannot see one another. First of all, the pilots cannot exit the cockpit and there is a requirement for much more surveillance in the cabin. If there is an emergency on board, more than one person is needed to deal with the situation. There must be some liaison, there are all sorts of things that are required. In the case of a passenger who has had one drink too many and who is out of control on board an aircraft, it is no longer sufficient to have one person speak to him or her. We are now trained to try to restrain passengers in these situations. All sorts of things can happen and one must not forget that all of this takes place 40,000 feet in the air. The removal of a flight attendant is simply not logical. Even as the situation now stands, with the present number of cabin personnel on board, we are having trouble doing our job. To my mind, it would be ludicrous to remove yet another attendant.

I hope I have answered your question.

Mr. Christian Jobin: Are you yourself a flight attendant?

Mrs. France Pelletier: Yes, sir.

Mr. Christian Jobin: This is therefore a situation that you face every day.

Mrs. France Pelletier: At present, I am not working as a flight attendant, but I am in constant contact with flight attendants and I see the reports. All of this lands on my desk.

Mr. Christian Jobin: Thank you.

[English]

The Chair: A minute and a half belongs to Mr. Karygiannis.

Hon. Jim Karygiannis: I could blame everybody for a lot of things. I heard Monsieur Laframboise blame the Liberals, and I heard Mr. Proctor saying open the things. We can go on ad infinitum, but there is a process—

The Chair: Mr. Karygiannis, at least they didn't name the members. You went beyond that. Let's keep it civil.

Hon. Jim Karygiannis: Thank you, Mr. Chair.

Well, you can blame everybody about everything, but let's make something very clear: the minister has announced that we would like to sit down with you. There's a consultation process we would like to start with you in April 2004. We would like to invite you and we would like you to sit down with us. And if you want to take this for the record, as the parliamentary secretary to the minister, I would like to sit down with you.

This is a serious thing; the security of our passengers is a very serious matter. It's not something we're going to play across party lines. When you're flying up there, there's no Liberal, Conservative, or Bloc party. The security is paramount. We have introduced measures with CATSA to make sure that things like the shoe bomber do not occur in Canada. There are very strict rules.

Your association was in front in saying, “Get these things moving”. We heard from the association of the pilots.... One in fifty, there's no problem with them....

But I would like to reassure you that we would like to do this in a fashionable manner. You can do it with the press, and that's fine, but I would like to invite you to sit down with us. The consultation process has to be done, and we'd like to make sure that whatever you need is on the table for you to guide us and work with us, so that we do have a safe transportation mode with airplanes, because we take security as paramount—with no ifs, ands, or buts.

Â (1230)

The Chair: Thank you very much.

So you have an invitation to meet with the parliamentary secretary and others in the government. I thank you very much for being here. You asked for a few minutes with the chair; you had half an hour with the total committee. I hope it was helpful to you. It was helpful to us and the dialogue can continue.

I now invite witnesses from the Canadian Coalition for Maritime Security.

While our guests are approaching, to my colleagues I will say there was no food today, but I've asked that there be food at every one of our meetings. They are all between eleven o'clock and noon, one o'clock. To me that's a normal time to eat, so expect a few sandwiches at our meetings in the future.

Please approach.

I welcome the vice-president of B.C. Maritime Employers Association in Vancouver, Mr. Onkar Athwal; and the vice-president and general manager of Montreal Gateway Terminal, CP Ships, Montreal, Mr. Kevin Docherty.

You are welcome, and we invite you to make a 10-minute presentation so that we have time to allow for questions.

Mr. Onkar Athwal (Vice-President of Operations, BC Maritime Employers Association; Canadian Coalition for Maritime Security): Mr. Chairman, thank you. On behalf of the Canadian Coalition for Maritime Security, we welcome the opportunity to address this committee.

We will be brief. I'll be speaking for about five minutes and Mr. Docherty will be speaking for probably four or five minutes as well.

The British Columbia Maritime Employers Association represents, on the west coast, 72 member companies employing over 5,000 employees directly, with an annual payroll approaching $250 million to $300 million.

Mr. Docherty is with me here today representing the Quebec area. The coalition represents private sector maritime operators from British Columbia, Ontario, Quebec, and Atlantic Canada, in addition to maritime associations from across Canada.

We are here to express our concerns about the competitiveness of Canadian ports. To comply with its international commitment, the federal government is implementing new national security regulations without providing the funding to pay for them. As a result, private port operators are shouldering the burden of these new national security expenditures, something that we believe is a public responsibility.

Maritime business benefits all Canadians. National marine trade alone in Canada has an economic impact of over $20 billion annually and generates over 200,000 to 250,000 direct and indirect jobs. The value of Canadian international maritime trade is in the neighbourhood of $100 billion annually, based on 2001 figures.

We are here to make the case that national security must not threaten the competitiveness of our ports and our export industries. Canada's maritime industry is vital to the country's prosperity. Let me provide you with some background.

Canada is a signatory to an international agreement known as the international ship and port facility security code, ISPS code for short, adopted by the some 138 members of the international maritime organization at the urging of the United States post-9/11. To comply with the ISPS code, in early December 2003 Transport Canada released over 600 new draft marine transportation security regulations, which will come into force July 1, 2004. Bear in mind that these regulations were developed over a period of about three months, from August to October.

The initial upfront costs, we estimate, are in the neighbourhood of $100 million, at a minimum. There are approximately 404 private sector facilities and Transport Canada facilities across this country. If you look at a minimum figure of $250,000 per facility, as an average, you're at $100 million. On top of that, you have the port authority expenditures of between $40 million to $50 million, and then you have the tugboat operators, the ship owners, and so on. This does not include ongoing operating costs that will raise the bill even higher.

Some of you may ask why this is a concern now since Ottawa provided $172 million for increased security last year. The answer is that none of that money made it down to the port authorities or the port operators. That money was simply for internal government use.

There was no funding made available to maritime operators for the millions of dollars in security, hardware, and payroll costs that are being incurred already, prior to the implementation of the regulation, so that we could actually be in compliance by July 1.

Like its U.S. neighbours, Canada has committed to these international security upgrades. However, unlike its neighbours, Canada has not committed to the other side of the equation: the hard capital costs to make Canada and the world safer.

As it stands now, Transport Canada's regulations will put the Canadian maritime industry at a serious competitive disadvantage with the U.S. and weaken the country's marine trade. Let me be clear. Canada's maritime operators are fully committed to supporting Ottawa's international commitment to increase marine transportation security, and we are making every effort to meet the July 1, 2004, deadline.

Even in advance of seeing draft regulations, Canadian maritime operators were and continue to incur significant costs to meet the requirements of the new regulations. We know we must have secure ports, not only for our own national security but to ensure that the goods we bring into Canada can easily be accepted for transshipping into the U.S.

However, without federal government funding, Canada's maritime industry will be at a serious competitive disadvantage with a heavily funded U.S. industry. In the U.S., billions of dollars have been allocated to improvements in homeland security. The U.S. government understands that national security, trade, and transportation are federal responsibilities that require federal investments.

Â (1235)

The U.S. government has to date committed $909 billion for border protection. Of that, close to $700 million was dedicated to port authorities and facility operators to offset costs for security improvements, with more funding expected. In December there was round three of the grants. About $179 million was given directly to port operators to cover security infrastructure.

There is currently a bill before the House of Representatives asking for an additional $800 million per year for five years to fund port security. There is an additional bill introduced by Senator Hillary Clinton in the Senate asking for $4 billion per year for five years, and then additional money as required to fund security infrastructure across the nation, including ports, railways, bridges, and tunnels, etc.

To tighten up security at ports, port facilities and vessels will require a heavy investment in various types of equipment: monitoring devices, lighting, scanning equipment, fencing, gates, surveillance systems, etc. At a time when the rising dollar, high municipal taxes, and other government-mandated costs are already squeezing the industry, the cost of compliance with the security code is an added cost to be passed on to customers, leading potentially to serious secondary effects.

To speak more about this, I would like to ask Kevin Docherty to comment.

Mr. Kevin Docherty (Vice-President and General Manager, Montreal Gateway Terminal, CP Ships; Canadian Coalition for Maritime Security): Thank you, Onkar.

As Onkar just mentioned, the negative effects of these regulations go beyond our waterways and ports. As you are likely aware, Canada's export industries, like lumber, pulp, sulphur, coal, potash, wheat, and others, are commodities operating in an extremely price-competitive world. For some Canadian industries the cost of doing business in Canada will simply be too much. The option is not one any of us wants to see: losing market share and losing business.

Port facilities that largely handle imports can hardly pass on their new security costs to offshore customers given the very competitive relationship Canadian ports have with their U.S. counterparts. Seattle is fiercely competitive with Vancouver, Boston competes heavily with Halifax, and Montreal competes with U.S. ports. In each case, much of the cargo coming into Canadian ports is destined for the U.S. market. Thus we are not only talking about an impact on Canadian ports, but Canadian trucking and railroads. In each case, there is a risk of significant loss of Canadian jobs and Canadian business, not just jobs at ports and on railroads, but jobs lost through declines in Canadian exports, because these costs must be paid for, if not by the federal government, then most likely by our customers.

Importers, faced with higher costs at Canadian ports, will simply opt for the less expensive U.S. option. In the interim, we expect Canadian exporters to bear the brunt of the costs for the security investments.

So please understand that this is important, not just to ports or to port communities or to railroaders or truckers, but also to every exporter in Canada. The consequence of the federal government failing to finance the obligations it made under the name of national security could be a significant loss of jobs and economic opportunity.

Some have asked, “Why should taxpayers cover our increased security costs?” Others have said that these increases in costs ought to be borne by users, as with Canada's airports. The answers are straightforward. These are not our security costs. These are federal government investments to combat terrorism and other domestic security threats. This is about Canada's security.

Downloading security costs through a user fee system is also unworkable. Unlike the airline industry, which charges a security tax to a captive passenger market, maritime operators are not able to pass along the costs of security upgrades without risking a loss of business. Most of our customers are not captive. They have port alternatives. Customers, such as exporters, have the option to simply move their business to gateways south of the border.

As to why taxpayers should help with these costs, it must be recognized that these are investments to improve national security, no different, in principle, than if it were an increase in expenditures for policing or for the military. All we are seeking is to not be put at a competitive disadvantage with U.S. facilities to which our customers, in most cases, can have easy access.

Onkar.

Â (1240)

Mr. Onkar Athwal: Thank you, Kevin.

The Canadian Coalition for Maritime Security requests that the committee recommend that the federal government commit a minimum of $100 million in federal grants in the upcoming federal budget for implementation of federally mandated maritime security improvements. These would be by way of grants provided to marine facilities and other operators after they have been certified as compliant with the regulations and registered with the IMO as compliant.

Kevin and I would be happy to answer any questions you might have about the effects of these new regulations on businesses and the surrounding regions.

Thank you.

The Chair: Thank you very much.

Mr. Gouk, five minutes.

Mr. Jim Gouk: Thank you.

I certainly lament the decimation of port police and other port concerns that have occurred over the past number of years. Now, obviously, post-September 11, there's new attention on this.

It's unfortunate that it was left to that point, because the structure was in place. When the structure was in place before, when you had better port policing than you have right now, what was the funding source to cover the cost of port police at that time?

Mr. Onkar Athwal: First of all, as I understand it, the federal port police are funded through the federal government. Secondly, with regard to the structure being in place, I would tend to disagree with you that the structure in place at that time was what is contemplated by the new security regulations. This is something totally different.

The policing that was in place then was largely taken over by the local police forces and the RCMP. Those forces are still in place. The structure we are talking about today is to prevent the importation and the exportation of terror, basically through cargo. We're talking about putting in fences, camera systems, water patrol boats, and security card systems for every employee coming on board, the checking of cargo, and the examination of people coming on board. It's a whole different world than was in place at the time of the port police.

Mr. Jim Gouk: You used the comparison to show a difference, from your perspective, between the port situation and airports, the security screening where the airline industry itself and the passengers are paying for that. You say it's not the same because they can pass the cost on. I have a little trouble understanding the rationale there.

Mr. Onkar Athwal: I guess the rationale is as follows. Cargo has an option to move. If you increase the cost of cargo, that cargo can either move through U.S. ports, in many cases, or offshore suppliers can supply the same goods to our customers. Imports can easily be moved through the U.S., as opposed to Montreal, Halifax, or Vancouver.

As a simple example of the import cargo we handle, for the bulk of the cargo on the west coast in containers now, a considerable amount is not Canadian goods. They're goods destined for the U.S. coming in through Canadian ports--through Vancouver, New Westminster, Halifax, Montreal. If we can't compete with the ports down south, Seattle, Tacoma, Portland, and New York, then that cargo very easily will be diverted to the U.S. ports. That's the difference.

Â (1245)

Mr. Jim Gouk: Okay. The thing is, of course, that the airline industry is finding much the same thing. There are a lot of people, because we live so close to the border, who go across the border for international flights. Other people have said that between the delays with security and the cost of security, they're going to drive a car.

I don't disagree with a lot of what you're saying, but the reality is that it has to be more across the board. If there's a cost to providing security to Canadians, then we shouldn't be sectorizing it. We look at the ports, at the railways, at the bridges, and we're concerned about those. We don't have individual costs for Canada Customs to protect our border, so why do we have it in the case of the airlines and, in your situation, for the ports?

Mr. Onkar Athwal: Let me give you one simple example. Saskatchewan ships potash. Much of that flows through Vancouver's Neptune Bulk Terminals. It also flows through a terminal in Portland that Canpotex owns.

The terminal in Portland has received direct grants to offset their security costs. The terminal in Vancouver hasn't. That's the unfair competitive disadvantage. Couple that with the rising dollar and we have more competitive problems.

Mr. Jim Gouk: I agree. I sympathize with your situation, except that we have this in almost every sector, not only in security, but in agriculture and in our forest industry. On this whole question of subsidy, who gets what and how much should they get, we have to try to come to terms with this. Obviously, we can't subsidize absolutely everything, but I recognize the concern.

It's interesting that you mention potash and Portland, Oregon, because we've lost a tremendous amount of Vancouver traffic to Portland already due to a labour situation overall. We don't want to lose more again because of this.

I've listened as best I can. I have some other stuff I was looking at quickly too.

What is the quantitative amount that you probably have in this document? Could you give it to us again, the cost that you see that we need to spend to provide you with the security that meets the requirements?

Mr. Onkar Athwal: Let me give you a range. The information we have from the terminals that have volunteered to come forward with their costs--because in many cases, the individual companies are nervous about sharing on a competitive cost basis--shows that the price tag for compliance by July ranges, for grain elevators, in the neighbourhood of, on average, about $213,000 to $220,000 apiece, to $2.5 million for a multi-use terminal that handles containers, steel, lumber, and pulp.

There are 404 facilities across Canada. The numbers I have from Transport are as follows: in the Pacific region, 95 privately owned, 2 owned by Transport Canada; in the prairie northern region, and I assume this would be Churchill, 2 facilities privately owned; in Ontario, 111 facilities, 16 privately owned and Transport-Canada owned--

The Chair: Thank you. We have an idea. We have to move on.

Monsieur Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman. I would like to begin by reassuring my colleagues. Since launching myself into politics, when I dish it out I expect to get some back in return. So it was fair ball.

I wish however to fully understand your presentation. You are telling us that of the $172 million invested in security last year by the federal government, nothing flowed to the companies, absolutely nothing was given to you to help cover part of what the security measures were going to cost you. Is that really the case?

[English]

Mr. Onkar Athwal: That is correct. All of that money went for internal government agencies. Not one cent went to any operator or port authority in this country.

[Translation]

Mr. Mario Laframboise: What you are telling us, therefore, is that the 1st of July is the date at which you will have these additional expenses. Have you already begun to incur costs?

Mr. Kevin Docherty: Yes, we have begun to make expenditures. We cannot wait; we must protect our industries and be ready for the 1st of July.

Mr. Mario Laframboise: Is that the 100 million dollar amount or will the total reach $100 million on July 1st?

Mr. Kevin Docherty: We do not yet have the full details on the ISPS code. It will perhaps go even higher, we do not know, because we do not yet have the final regulations.

Mr. Mario Laframboise: If I understand correctly, then, when we talk about competition from the Americans or from elsewhere, these additional costs will be tacked onto the icebreaking and dredging costs you already have to pay?

Mr. Kevin Docherty: No. In our case, the ice removal and dredging costs do not affect us; they affect the shipping lines.

Â (1250)

Mr. Mario Laframboise: Perfect. When you compare yourselves with your American counterparts, does the industry pay a portion of these costs? Is there a portion or a ratio that you could give us, or is all of it paid for by the government?

Mr. Kevin Docherty: According to the information we have, in the case of the Americans, it is the government that gives the grants. In our case, private companies do not spend their own money.

Mr. Mario Laframboise: Not a cent?

Mr. Kevin Docherty: To the best of my knowledge.

Mr. Mario Laframboise: Clearly, what you are asking is that it be the same thing here, in Canada.

M. Kevin Docherty: Yes, a little.

Mr. Mario Laframboise: Are you in the midst of negotiations right now? Are you holding discussions directly with the government?

Mr. Kevin Docherty: I will let my partner answer your question.

[English]

Mr. Onkar Athwal: We have spoken to Transport Canada and we met with the minister approximately two weeks ago. The answer we received was that they're looking at it--no firm commitments; they are working on the topic.

[Translation]

Mr. Mario Laframboise: There is therefore no commitment to meet with you or to look at solutions. There is absolutely nothing as we speak.

[English]

Mr. Onkar Athwal: They gave us no firm commitment on funding, yes.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

Le président: Mr. Jobin and Mr. Karygiannis will share their time.

Mr. Christian Jobin: I fully understand your concerns. I am the member of Parliament for Lévis et Chutes-de-la-Chaudière, and the St. Lawrence Seaway is, as it happens, just across from my riding office. I see boats go by every day, but perhaps not in sufficient numbers to my mind, because we should make better use of our shipping here in Canada since it is the most environment-friendly and the safest mode per kilometer that exists.

I set up a discussion group in my region, that covers the North shore and the South shore as well as Quebec City and Lévis, precisely to interest people in perhaps building something together or lobbying the government for it to adopt a true policy framework for marine transportation issues, the use of the St. Lawrence Seaway and the shipbuilding industry.

I am also worried about a shipbuilding yard in our area called Davie. To my mind, it is one of the jewels of the shipbuilding industry in Canada, but it is in great difficulty at the present time.

It is my belief that the marine industry in Canada, compared with that of our neighbour to the South, is perhaps not as strongly supported as it should be. In the St. Lawrence Seaway, it is presently being charged for the cost of ice removal, dredging and pilotage and soon they are going to tack on the cost of security, which will be charged to users or others who will have to pay the tab.

It is our belief that we should really give serious thought to this and develop a true policy framework that would encompass these various elements. Right next door, in the port of New York, our American neighbours are making major investments. Soon, those who deal with ship owners will have the choice between using the St. Lawrence Seaway or the port of New York City.

Must the $100 million amount for the government absolutely be paid for 100% by the government, or could there be some sharing? I know that you are asking that it be 100%, but might there be some cost-sharing agreement for the amount?

[English]

Mr. Onkar Athwal: The $100 million is a bare minimum contribution. Certainly we would welcome any amount. We think the actual cost will be much higher than $100 million. If you look at Transport Canada's own facilities on the St. Lawrence Seaway, I understand the Welland Canal estimates run in the neighbourhood of $40 million alone for security upgrades—$15 million to $20 million in fencing and camera systems alone. This is going to be a huge issue for everyone, and certainly we're willing to come up to bat to do our share.

If you look at what we're asking for, we haven't asked for any contribution toward ongoing costs. Once we build the infrastructure, there's an ongoing maintenance cost for every facility across this country in increased security personnel, maintenance of equipment, and so on. We're not asking for that. That is going to be borne by industry alone at this point in time. All we're asking for is help with the initial capital investment.

[Translation]

Mr. Christian Jobin: Do you believe that these amounts, that could be passed on to users, might chase away users of our Canadian waterways?

[English]

Mr. Onkar Athwal: Yes, that may be the effect. For the St. Lawrence Seaway and all of the small facilities, you have, for example, in Quebec and Ontario 184 facilities. Many of these facilities are very small; for example, one facility may handle two barges that go to the U.S. That facility has to build the same infrastructure and the same security systems. They can't afford to do it; they'll go out of business. The smaller terminals in the smaller communities, which may handle one vessel a month, won't be able to do it. That cargo will move through larger terminals and larger ports, thereby having a negative impact on all of those smaller communities.

Â (1255)

The Chair: Merci, Monsieur Jobin.

Mr. Karygiannis, you have two minutes.

Hon. Jim Karygiannis: Thank you.

I appreciate your being here with us and bringing to light the very important matter of security as well as transborder shipping and everything else that's tied in with your ports.

The budget is to be tabled in a couple of weeks, so we don't know if your wish is going to be fulfilled or not. I will not profess to be an expert on that issue.

Is $100 million just the tip of the iceberg, or is it something that will suffice to meet all your needs? You're representing a vast sector of great importance. Is this $100 million an ongoing thing you're looking for on a yearly basis? Are you looking for a one-shot infusion? Can you elaborate on that?

Mr. Onkar Athwal: At this point in time, what we're looking for is the one-shot infusion to help defer the costs of the initial infrastructure. As was said, we have to be in compliance with the international code by July 1, so most of those costs will be incurred this year; however, some of the infrastructure may not be put in place: there might be temporary measures until we've had time to put it in place.

Certainly this is not a case where we're going to be coming to the well every six months saying we need another $200 million or $300 million. This is a case where we're talking about the initial start-up capital costs.

Hon. Jim Karygiannis: Do you foresee an ongoing concern, such that you might be coming back saying, we need to have a substantial amount in order to maintain the level of security? Or is it a case where you get $100 million and say thank you very much and goodbye? Which is it exactly?

What I'm trying to sense is whether this is an ongoing concern, such that we might need to call you back or you might need to renegotiate.

Mr. Onkar Athwal: I think on an ongoing basis the government needs to be aware that this is not a problem that is simply going to be dealt with once. Security will need to be looked at on an ongoing basis.

July 1 this year will bring us into compliance with the international code standards. Will those standards be changed? Absolutely, they'll be developed further. Will the requirements be even stricter? My guess is they will continue to become stricter as time goes by.

Our regulations primarily—

The Acting Chair (Mrs. Lynne Yelich (Blackstrap, CPC)): I'm going to have to interrupt. I'm sorry, it's time to call this to an end.

Thank you very much for joining us and bringing some light into this issue, because ports constitute a very big issue.

Our next group will be the Air Transport Association, better known as ATAC.

I'd like to welcome our guest presenters this afternoon. You have ten minutes together to make your presentation; then there will be five minutes from each of the members here.

We'll start the ten minutes right now, if you'd like to begin, Mr. Mackay.

Mr. J. Clifford Mackay (President and CEO, Air Transport Association of Canada): Thank you, Madam Chair.

[Translation]

Madam Chair, Committee members, good afternoon. I am pleased to be here for the beginning of a new Parliament with a standing committee made up of a majority of new members.

The airlines have recently undergone exciting and tumultuous years. We have always had an excellent relationship with this Committee, even during times of crisis and with the various legislative measures that were taken.

[English]

Indeed, in the black period of last spring, which was a terrible time for our industry, this committee spoke out strongly and correctly about the crisis in our industry, and our members were grateful and impressed with the work that was done.

[Translation]

We are very happy to be able to work with you on these difficult issues that are of concern to all of us.

[English]

Before I start, I'd like to again thank the committee for taking this time and also to recognize the new members of the committee.

Before I go further, I should introduce Mr. Fred Jones, our vice-president of flight operations, and I may be joined somewhat later by Mr. Warren Everson, who unfortunately is in a meeting he could not get out of.

Madam Chair, we believe next year will be a very active year and an interesting one for Canadian aviation and also for this committee. However, the last three years have been very stressful years for us, both for the people in the industry and for our investors. We've seen the collapse of the technology industry, 9/11, huge increases in security and insurance costs, the failure of a major Canadian carrier in Canada 3000, two wars--one in Afghanistan and another in Iraq--SARS, and BSE. And as you are all aware, our largest carrier is currently under bankruptcy protection.

All of that being said, there's some reason to think that the tide is turning for our industry, that we are starting to recover lost ground, and that we are starting to enter into a period of growth. We expect Air Canada to emerge from its protection some time in the next few months, and we hope to see it reinvigorated with new investment. WestJet continues to be among the fastest-growing and most successful airlines in the world. It's expanding its service in Canada and it's also contemplating U.S. service. Other low-cost carriers such as CanJet and Jetsgo are continuing to grow and are offering very competitive alternatives to our customers.

Both of our major charter operations, Skyservice and Air Transat, are having a strong season this year, and for the first time in years a number of our smaller operators are expressing guarded optimism about the marketplace.

Overall traffic is rising. A number of our employees are now being called back, which is the first time we've seen that happen in years, and it's very good news. We hope the tourism sector, which is so important to our industry, will be robust this summer.

That being said, Madam Chair, there are certainly problems we need to address in the coming year. Many of you have heard from us in the past about the federal airport rent formula, which channels an ever-increasing amount of money into federal coffers more than a decade after the federal government stopped managing or contributing anything significant to the airport infrastructure in this country.

This issue must be dealt with in the coming budget. We urge that rents be frozen immediately and that a process be started to rebuild a rent formula with more modest federal expectations on revenue and much greater fairness than in the current formulas that are spread across the country. You will see in the documentation we circulated, Madam Chair, a letter we recently wrote to Minister Valeri laying out our views in more detail on that matter.

We also think the government urgently needs to respond to a serious threat to the system that's implied in the huge cost increases we're seeing go on at Pearson airport in Toronto. The management recently revealed that they have assumed more than $5.3 billion worth of debt associated with major capital projects and that they intend to increase revenues from airlines and passengers by more than 150% in the next five years.

The committee should know that the GTAA's business plan is based on assumptions that are extremely optimistic, that passenger traffic will grow over 50% in the next five years, for example. If these assumptions are wrong, then the cost to consumers and to carriers is going to be extremely high. There's an urgent need for all stakeholders to start to recognize this problem and for us to work collectively to find solutions to keep the cost at Pearson down. Pearson is too important a piece of infrastructure, not only for Toronto but for the whole nation, to allow things to escalate out of control in terms of cost.

We're still struggling under a very heavy burden with the security tax, the ATSC. It's one of the largest in the world, and unlike with other modes of transportation, it's entirely borne by the passenger. Even more worrisome, the policy of saying that 100% of security must be user pay in our mode is, we believe, unsustainable in the long term. If there's another major incident, we just don't know how you could continue to increase that charge and have any prospect of a reasonably stable economic environment for air transport.

· (1300)

As you have heard from earlier witnesses, Canada's aviation policy needs to be overhauled, and we hope this committee will play a major role in that. For more than a decade, federal policy in aviation has really focused on maximizing federal financial returns, and many of you around this table, I know, are very familiar with some of those issues.

A secondary fixation has really been on the influence of what was perceived to be the dominant carrier in the country. Both of these goals, we would argue, are way out of date, and they need to be replaced with a strategy for promoting travel and airline cost efficiency for the good of the whole economy.

Finally, I know you heard earlier from some witnesses about regulatory issues, which have been argued to be a safety issue. From our perspective, these issues are not a safety issue; they're an economic issue. We would suggest, respectfully, that the committee may wish to leave aside consideration of that issue. Transport Canada has done detailed studies on the safety side, and we are satisfied that there is no safety issue here, that the issue is more one having to do with labour-management relationships. Mr. Jones can speak in much more detail since he is an expert on this matter, if you wish to have any further questions, Madam Chair, on that side.

With that, I thank the committee for their patience in listening to this short presentation. Thank you very much.

· (1305)

The Acting Chair (Mrs. Lynne Yelich): Thank you very much.

We'll go to our first question from Mr. Gouk.

Mr. Jim Gouk: Thank you.

I'll deal first with airport rents. You've indicated in here that you feel that airport rents should be done away with. Do you think they should be eliminated, or should they be reduced to some more sustainable level?

Mr. J. Clifford Mackay: We would like to think they could be done away with, sir, but frankly we're not sure that's a practical solution. What we have proposed in the letter we just sent to Minister Valeri is a scheme that would recognize in principle that because of the ownership of the land, there is some return to the taxpayer that is reasonable. We've suggested a formula for the determination of that return, and then anything above and beyond that, we would argue, must be justified on strong transport policy grounds.

One issue that is out there that has not been resolved is how do we find a way to ensure the long-term viability of smaller airports in the country that don't have a large enough market to generate the revenues for themselves? We're quite prepared to discuss ways and means of using rent over and above the base rent that I just defined to find a solution to that problem.

Mr. Jim Gouk: In other words, have those major airports, in lieu of paying rent, to some degree fund an ACAP-type program for smaller airports?

Mr. J. Clifford Mackay: Quite possibly, and obviously we need to sit and work out the detail. But we believe there is a strong, compelling transport policy reason for addressing that problem, and if there's a way to do it without turning to the taxpayer, we're quite prepared to look at that.

Mr. Jim Gouk: Last year the government came out with a scheme to defer some airport rents. Did that provide, in your opinion, any relief to the industry?

Mr. J. Clifford Mackay: No, unfortunately, because the deferral was just that. It required the airport authorities to continue to carry that liability on their balance sheet. While it probably had some short-term positive cash effects on a couple of airports, it had absolutely no effect on rates and charges because they had to impute that into their forward liability scheme.

Mr. Jim Gouk: Do you feel it's necessary for the industry at large to have some control that is perhaps missing now over airport authorities in terms of how they expend your money, which in turn reflects in the rents they charge to their users?

Mr. J. Clifford Mackay: Yes. We've said in the past that particularly with regard to the larger airports, which have significant monopoly power in their markets, we believe the government's model is not balanced properly. It needs to be rebalanced at the board level so that the stakeholder interests are much more representative there. The way we would propose that be done would be really through two things: one is a piece of legislation that would regulate the way in which prices are set; and secondly, a board that is more representative of the stakeholder interests--local, federal government, and users.

Mr. Jim Gouk: With regard to CATSA, notwithstanding the cost factor of it, does CATSA create a bottleneck problem at some airports for users? Is it potentially possible for that to be addressed by a change in the authority of CATSA, perhaps putting them under the operation of the airport authority as opposed to as a stand-alone?

Mr. J. Clifford Mackay: It's difficult to find one formula, because it very much depends on the size and nature of the airport. There are certainly some circumstances in very large airports, where they have the infrastructure and the volume, where they could probably run a screening operation on a stand-alone basis. That becomes much more difficult in smaller airports, particularly given the new security requirements, which are expensive, frankly. We don't believe one model would fit all.

With regard to CATSA operationally, we have been quite pleased with their response to date. They are setting performance targets and are trying to meet them in terms of the smooth flow of passengers through the airport. We have had individual problems, there is no doubt about it.

We remain concerned, and I know they remain concerned, that if traffic grows back to the kind of level we saw in the year 2000, before the dot-com meltdown, and even further, we are going to have capacity issues. That is going to cause real difficulties. Frankly, I don't have a simple answer to that problem.

· (1310)

Mr. Jim Gouk: Earlier we had the flight attendants' representatives here. They raised one particular issue with regard to ATAC, saying that ATAC had requested reconsideration of a previous ruling of Transport Canada not to change the formula. They tried to find out what it was you asked for and what was different. They have not been successful in getting that, and consequently we're not aware of it either.

Could you tell us what that is, and would you be willing to table that information with the committee?

Mr. J. Clifford Mackay: Certainly.

I'll ask Mr. Jones to speak very briefly to that, because he's much more knowledgeable than I am.

Mr. Fred Jones (Vice-President, Air Transport Association of Canada): The original proposal made by ATAC was considered by senior management in Transport Canada through their regulatory committee and was rejected. The rationale for that decision was essentially that we hadn't proven an equivalent level of safety for the one in 50 configured seats versus the one in 40 passengers.

So we took that away and did some homework ourselves, in the form of an investigation conducted by the association. We took that back to Transport Canada, again through the regulatory committee, and said this issue should be looked at freshly. They then took it upon themselves to conduct an independent risk assessment of their own, which CUPE and other industry stakeholders participated in, and came to their own conclusions. These were very similar to our own, that this is not a safety issue.

Mr. Jim Gouk: Can you provide that information to us?

Mr. J. Clifford Mackay: We certainly can provide you with the ATAC-generated information. Obviously, the department would have to respond on its own behalf.

The Acting Chair (Mrs. Lynne Yelich): We will now go to Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you.

You are making requests, but you seem to be saying that the industry is doing well or is going to do well. I am having great difficulty understanding that. I can understand this: you are a lobby group and you want to please the Liberal government somewhat. I do not see that as a problem because I do not have to please it.

I am having difficulty understanding because ADM, for example, announced to us today that there has been a drop in the number of passengers from 9.9 million to 8.9 million over the course of one year. Thus, even if there are some companies that did well, there are a million fewer passengers in Montreal. This is the reality if we compare 2002 and 2003. That is what Aéroports de Montréal announced is it not?

[English]

Mr. J. Clifford Mackay: The answer is yes, there is still some reduction in passengers. We're still not back to where we were before all of these disasters hit us in the last few years. That's the bad news.

The good news is that the market is actually showing signs of growth, both internationally and domestically. For the first time, we're having forecasters talking almost unanimously about anywhere from 4% to 7% growth, depending upon which market you are talking about. We are coming back.

I would just like to address one of the implications of your question: if things are getting better, then what's the problem? The bottom line is that the government's policy framework, frankly, is out of date. They are still treating the industry as if it were not operating in a free market. They are imposing taxes they would never impose on other sectors. We absolutely need a competitive air transportation industry in this country, so we need to sit down and have a careful examination of our policy frameworks to ensure what the industry should really be doing—being efficient and providing the best service we can at the cheapest prices, so that we encourage economic growth. Some of the taxes I mentioned simply don't help the situation.

[Translation]

Mr. Mario Laframboise: I much prefer it when you have that attitude because otherwise, we would have the impression... At the same time, ADM is announcing a $17 million loss for last year. Obviously, if ever there were a drop in the rent, you would not be the ones getting the money. The losses will be absorbed, and, as you and I very well know, the losses are due to bad administrative decisions, to lawsuits that led to convictions.

As recently as yesterday, it was announced that there would be an amount of $18.8 million for the embellishment of the Pierre-Elliott Trudeau Airport. This money will be used to install hard-wearing granite and marble in the airport. That is the reality.

There remains a whole portion of your industry that you do not control, and if ever there were reductions, my fear is that it would be the airport authorities that would gobble the money up, which would be of no assistance to your industry.

Why does this worry me? Because you turn around and attack the airline stewards as you attempt to turn a profit and cut back. Earlier you stated that the cabin crew issue was not a matter of security. I am telling you that it is a matter of security but the problem is that the security reviews have not been carried out. This is what we have been told.

Therefore, one must stop somewhere and look at where there is a problem. There is a problem with the administration of all of this money. I hope that the easy solution will not be to reduce personnel on board aircraft because there was a time when we wanted cabin crew members to be well-trained, we wanted to have more of them, we wanted to avoid security problems. Now you are telling us that the cabin crew issue is not a security issue. I would tell you that two years ago the flight attendants were a security issue.

· (1315)

[English]

Mr. J. Clifford Mackay: Let me just try to address that in two parts. First on the broad question, you're right we do have concerns that if, for example, the government were to renegotiate the airport rent formula and that did not flow through to the benefit of our customers, that would be a very bad outcome. We would hope it would be done in such a way that customers would benefit, and it wouldn't simply go to yet another project that might not be as efficient as it should be. So we agree entirely with you.

On the question of the flight attendant ratios, which you raised, our view is very simple. We start off with safety, and we're very satisfied that either regime is safe--one in 40 or one in 50. If we weren't satisfied, I can tell you we would be the first to say, don't go there. Frankly, it's very bad business to have unsafe operations. We're satisfied.

So it then becomes a question of what's the most efficient way to operate so we can provide the service at the least cost. I think that's clearly a matter between management and their labour unions or their employees. It's a matter that we suggest, respectfully, be left there. It's not an issue of public policy.

The Acting Chair (Mrs. Lynne Yelich): Thank you.

Now we'll go to Mr. Proctor.

Mr. Dick Proctor: Thank you very much, Madam Chair.

Just to follow up, you indicated in an answer to an earlier question, Mr. Mackay, that you would release the documents on this from ATAC. Will that include the letter you wrote to Merlin Preuss on October 2, 2002?

Mr. J. Clifford Mackay: There's no problem with any of that. That's all a matter of public record. They are things we normally provide to the regulatory review process.

Mr. Dick Proctor: As we understood from the previous witnesses, parts of that letter weren't available.

Mr. J. Clifford Mackay: Frankly, I have no knowledge of that. Fred may have some.

Mr. Dick Proctor: I must say, I find there's a bit of a disconnect. You are almost encouraging this committee to participate in the overhaul of aviation policies, and then in the very next paragraph in your brief you're encouraging us to stay out of this issue around the number of flight attendants on the planes. I certainly think that safety concerns ought to be a fundamental issue of this committee.

Mr. J. Clifford Mackay: I couldn't agree with you more about safety concerns, but it's been our position for many years that the best place to go for the answer on safety is to the experts, and that's what we do. That has been done in this case. An independent risk assessment has been done, and it has determined that there is no substantive difference in the safety regimes. On that basis we would argue that there doesn't appear to be any role to be played from a public policy point of view beyond that point.

Mr. Dick Proctor: I guess the difficulty is that what you make available may resolve it--that's what you're saying--but nobody has been able to see that.

Mr. J. Clifford Mackay: With respect, sir, that's not what we're saying. It's what the authorities of the federal government that are charged with aviation safety are saying. It's their risk assessment, not ours.

Mr. Dick Proctor: For my own understanding, I live in Regina so I get to fly a lot, but it doesn't necessarily make me an expert on it. For one in 40 passengers, one in 50 seats, explain to me what is at risk here. What are we talking about?

· (1320)

Mr. J. Clifford Mackay: Fred, do you want to talk to that now?

Mr. Fred Jones: Sure. I have a couple of points, if I could, sir, to address this question and the previous question, if you don't mind.

Different systems evolved in different ways, in terms of what the ratio is. We're unique in Canada at one in 40 passengers. Virtually the rest of the international aviation community, with the exception of Australia, is using one in 50.

The aircraft themselves, virtually every airline aircraft in Canada, are certified to one in 50, as far as the evacuation certification is concerned. American carriers operating into and out of Canada, carrying Canadian passengers, are to a one in 50 standard.

Canadian aircraft today, operating domestically inside Canada, are operating some of them to a one in 50 standard. Those would be the Regional Jet, the ATR-42, and the Dash 8. The concept is not foreign to the Canadian air carrier community.

There were two risk assessments conducted, as I said, one by ATAC and one by Transport Canada itself that we participated in. We have many years of experience with one in 40. We are unique. Our position was that our operators should have the option of electing between one or the other.

Mr. Dick Proctor: What's the business about the one in 50?

Mr. Fred Jones: I guess there are many differences. The one in 50 configured seats essentially means that if you have an aircraft that's half full, you still have to provide flight attendants as if the aircraft was full, up to the number that would be required for a fully occupied aircraft. There are advantages and disadvantages to both regimes. We're only saying we want the flexibility to adopt one or the other.

Mr. Dick Proctor: Thank you.

The Acting Chair (Mrs. Lynne Yelich): Now we'll go to Mr. Karygiannis.

Hon. Jim Karygiannis: You seem to be very much in favour of GTAA, and you sing the praises of them. I could be wrong in what I was hearing, but we heard from previous presenters that some airport authorities are building Taj Mahals and really going out of their way.

As I live in Toronto, I was wondering if you could summarize the GTAA and their focus on doing things.

Mr. J. Clifford Mackay: Certainly, and this is our perspective, obviously, sir.

The first thing I should say is that we do not disagree that the airport infrastructure in Pearson needed upgrading and needed expanding. This has been debated for the last 15 years, and as you know, it went through a number of changes as a result of changes in government and other things in the last 15 years. That's not the issue.

The issue is all about how much is enough, what does it cost, and are we getting a bang for the buck. It has been our view as an industry for a long time--and there have been very acrimonious debates about this--that what has gone on in Pearson with this current development program is that we're paying too much for too little.

Back about four years ago there was a major dispute over this precise issue between Air Canada--which is, of course, the largest user of the airport, and it's also their key hub--and the airport authority. Air Canada went so far as to produce an alternative configuration, which would have cost almost $2 billion less and provided the same level of capacity as what is coming onstream now. That was rejected out of hand.

We have a fundamental issue that we think the airport is getting to be way too expensive. Last fall, IATA came out indicating that in their view it was now approaching the fifth most expensive airport in the world.

Hon. Jim Karygiannis: Sorry, let me make it perfectly clear. Is GTAA doing a good job, or did GTAA bungle it, in your view?

Mr. J. Clifford Mackay: In my view, we think GTAA has done a bad job in their capital development program. They've put us in a position where we have one of the most expensive airports in the world. That's not good for the system.

Hon. Jim Karygiannis: Continuing on that same avenue, is GTAA running the airport efficiently or inefficiently?

Mr. J. Clifford Mackay: Our independent assessment is that their productivity doesn't come anywhere near approaching the productivity of other major airports in North America, so they're not as efficient as they should be.

Hon. Jim Karygiannis: Is the GTAA friendly to the people who encounter it, be it the limo drivers, be it--

· (1325)

Mr. J. Clifford Mackay: It's difficult for me to speak to that. But I can tell you from a carrier point of view that it is almost unanimous that the GTAA is a very difficult place to be.

Hon. Jim Karygiannis: Thank you.

The Acting Chair (Mrs. Lynne Yelich): Thank you very much for joining us this afternoon. We will look forward to seeing you again, I'm sure.

The meeting is adjourned.