Bill C-38 (Historical)

James Moore Port Moody—Coquitlam—Port Coquitlam, BC

Mr. Speaker, I rise to speak to Bill S-33, an act to amend the Carriage by Air Act. The bill exists for only one purpose. It adds the convention for the unification of certain rules for international carriage by air signed at Montreal on May 28, 1999, as schedule VI to the Carriage by Air Act.

Bill S-33 is the third transport related bill to be tabled in the House since September 11. It is the third transportation focused bill to avoid such timely and important topics as the death of airline competition in Toronto, Montreal, Halifax and St. John's; the collapse of Canada 3000; the launch of Air Canada's Tango, and the urgent need to address present airport security concerns.

The Minister of Transport has laid before parliament three bills since September 11: Bill C-34 on September 26 to create the transportation appeal tribunal, Bill C-38 on October 25 to amend the Air Canada Public Participation Act and Bill S-33 on September 25 to update an airline liability convention passed in 1929.

All are important but none are of any real urgency whatsoever to everyday Canadians. The government has allowed the Standing Committee on Transport and Government Operations to hold hearings and pretend to be working on weighty matters. Meanwhile across the country an airline went bankrupt, thousands of people at Canada 3000 and Air Canada lost their jobs, Canadians called for air marshals on flights, and the travelling public called for better and tighter airport security.

I hope the Standing Committee on Transport and Government Operations will consider these matters within the context of meaningful legislation because they are the transport related topics foremost in the minds of Canadians and, most important, to encourage Canadians to keep flying.

I shall focus my attention on the task at hand which is the consideration of Bill S-33. If anyone is wondering why this subject should concern the House, the answer is found on the back of every airline ticket issued for international travel. There are two pages in English and French right beside the coupon that the airline takes when it issues a boarding pass. It includes the following notice:

If the passenger's journey involves an ultimate destination or stop in a country other than the country of departure the Warsaw Convention may be applicable and the Convention governs and in most cases limits the liability of carriers for death or personal injury and in respect of loss or damage to baggage.

The reference to the Warsaw convention invokes a legal regime that governs the process by which airline passengers or their families may make a claim against an airline for death or injury resulting from an accident during an international trip. The process was designed in 1929 to build confidence in the fledgling air industry and it consisted of two main planks.

First, article 28 allowed a claim to be brought in one of three places: the carrier's head office, the place where the ticket was bought or the place of destination. For example, in the case of Air India 182 which was destroyed by a terrorist bomb on June 23, 1985, the family of a Buffalo resident travelling from Toronto to London on that fateful flight could bring a claim in Buffalo where the ticket was bought; in London, the place of destination; or in Mumbai, India, the airline's principal place of business.

Second, article 22 made the airline liable for death or injury to passengers and limited this liability to 125,000 gold francs, then worth roughly $138,500 in today's Canadian currency.

In essence the convention was a great idea. On the one hand claimants did not have to travel halfway around the world to present a claim, as inevitably one of the potential places to present a claim was nearby. On the other hand airlines were prima facie liable for injury or death to passengers so claimants did not have to go through a lengthy or complex trial to get the money.

As many of today's airport security procedures around the world reflect the aftermath of September 11, the 1929 Warsaw convention was very much a creature of its time.

A decade earlier, from June 14 to June 15, 1919, Captain John Alcock and Lieutenant Arthur Whitten Brown made the first non-stop aerial crossing of the Atlantic. Five years earlier, on April 26, 1924, Imperial Airways initiated daily London-Paris air service. Two years earlier, on May 21, 1927, Charles A. Lindbergh astounded the world by landing in Paris after a solo flight from New York across the Atlantic in The Spirit of St. Louis .

In the year preceding the drafting of the Warsaw convention both the first U.S.-Australia and the first California-Hawaii flights landed safely at their destinations.

In 1929 a several hundred mile long trench was dug in the Arabian desert so that Imperial Airways could launch a service from London to Delhi via Cairo and Baghdad without the pilots getting hopelessly lost while flying over the vast expanse of sand. On September 24, 1929, James H. Doolittle became the first to fly from takeoff to landing entirely by use of instruments and radio aids and without reference to the ground.

The venerable DC-3 had not yet flown. It would be a decade before Pan American Airways would fly the first trans-Atlantic passenger service. Some of the engineers who would build the 747 four decades later had not yet been born.

In 1929 KLM turned ten, Qantas turned nine, Imperial Airways turned five and Lufthansa turned three. Trans-Canada Airlines would not be created for another eight years. To say that the international airline industry was in its infancy is a huge understatement.

The Warsaw convention boosted consumer confidence in the airline industry at the very moment that confidence was needed most. Like most countries, Canada ratified the Warsaw convention and implemented it in domestic law by adding its text as schedule I of the Carriage by Air Act.

The years passed, technology improved and airlines became safer. Where once airline accidents seemed to be a daily occurrence, better training, aircraft construction, navigation and instrumentation led to a vastly improved safety record. The safety was so improved that on March 26, 1940, U.S. commercial airlines completed a full year of flying without a fatal accident or serious injury to a passenger or crew member.

Two other technologies would dramatically improve both airline safety and passenger comfort. The first of these was the Boeing Stratoliner, which made its maiden flight on July 8, 1940. It had a pressurized cabin which allowed it to fly at altitudes of up to 20,000 feet thereby avoiding turbulence. The second was the Boeing 707 which made its maiden flight on July 15, 1954, introducing the world to the jet age.

The years passed and accidents still occurred although safety had dramatically improved. In an 18 month period between October 1952 and April 1954 six de Havilland DH-106 Comets crashed at various airports in Italy, India, Pakistan and Africa.

A new engineering concept called metal fatigue was discovered, as was the inadequacy of the now 25 year old liability limit in the Warsaw convention. Legislators began to realize that the Warsaw convention needed a touch up right about the same time that Boeing engineers were putting the final touches on the 707 prototype.

The buying power of the 125,000 gold francs also declined rather dramatically and what had once been seen as a quick, fair settlement was now rather paltry. On September 28, 1955, negotiators from around the world met at The Hague for the purpose of modernizing the Warsaw convention. The result of the negotiations was The Hague protocol and article 11 doubled the former liability limit to 250,000 gold francs, largely restoring its buying power.

Canada ratified the protocol and included its text as schedule III to the Carriage by Air Act. For a short time it appeared that the Warsaw convention, as amended at The Hague in 1955, would be a success. However with growing inflation the buying power of 250,000 gold francs began to wane.

There were two further attempts to modify the convention: the Guadalajara convention of September 18, 1961, and Montreal Protocol No. 4 of September 25, 1975. Neither raised the liability limits, although Canada ratified both by adding them as schedules V and IV respectively to the Carriage by Air Act.

In the absence of further amendments to the Warsaw convention which might raise the liability limits, skilful lawyers tried a variety of means to get around the limits.

Article 3 of the convention required the delivery of a passenger ticket and required that the ticket contain “a statement that the transport is subject to the rules relating to liability established by the convention”. Moreover, article 3.2 of the convention required the carrier to deliver a ticket in order to avail itself of the provisions which limited its liability.

As early as 1965 in Warren v Flying Tiger Line, the U.S. court of appeal, second circuit, considered whether a passenger had to be given a ticket including the statement of limited liability prior to boarding the plane.

At around the same time another line of cases was studying the fascinating question of how large the print had to be in order to give the passenger true notice of the limitation of liability. In 1966 the district court of New York heard the case Lisi v Alitalia and decided that four point print was too small, leaving open such crucial questions as what font and type size might be acceptable.

Font and type size arguments were a favourite way of getting around the liability limitations. For many years they were a principal weapon in any court case against a carrier, especially when the ticket stock had been printed in another country and was being examined in a U.S. court.

In both Canada and the United States the issue of type size went all the way to the supreme court. In 1979 the Supreme Court of Canada in Ludecke v C.P.A.L. permitted 4.5 point type. In April 18, 1989, the U.S. supreme court in Chan v Korean Airlines stated that carriers would no longer lose the benefit of the convention's liability based on type size arguments.

Nonetheless it was obvious that $20,000 U.S. was an inadequate amount to compensate a family in Europe or North America for the death of a loved one, notwithstanding that the $20,000 could be got almost immediately without the need to go to trial.

Thus lawyers began to explore article 25 of the Warsaw convention which excluded limited liability in cases where the airline was guilty of wilful misconduct. The article essentially said that there were cases in which the airline's negligence was so great that the Warsaw convention limits should not apply. In other words, had the airline taken reasonable measures, the accident would not have happened and the passengers would not have died.

This line of argument has been used in virtually every case involving suspected terrorism or the shooting down of an aircraft such as Air India 182, Pan Am 103, EgyptAir 990 and Korean Airlines 007.

Claimants who manage to prove that an airline was grossly negligent can get more than $20,000 U.S. in compensation from an airline for the wrongful death of a passenger. In virtually every other case claims are limited to $20,000 U.S., unless the passenger was travelling to, from or via the United States.

America has a higher standard than the rest of the world. While the rest of the world explored ways to get around the $20,000 limit, the U.S. imposed the Montreal agreement on all international carriers serving the United States. The agreement dates from May 13, 1966, and raises the Warsaw convention liability limit to $75,000 U.S.

As part of the agreement the following text appears in airline tickets of virtually all international carriers serving the United States:

Advice to international passengers on limitation of liability. Passengers on a journey involving an ultimate destination or a stop in a country other than the country of origin are advised that the provisions of a treaty known as the Warsaw convention may be applicable to the entire journey, including any portion entirely within the country of origin or destination.

For such passengers on a journey to, from, or with an agreed stopping place in the United States of America, the Convention and special contract of carriage embodied in applicable tariffs provide that the liability of certain carriers, parties to special contacts, for death of or personal injury to passengers is limited in most cases to proven damages not to exceed U.S. $75,000 per passenger, and that this liability up to such limit shall not depend on negligence on the part of the carrier.

For such passengers travelling by a carrier not a party to such special contacts or on a journey not to, from, or having an agreed stopping place in the United States of America, the liability of the carrier for death or personal injury to passengers is limited in most cases to approximately U.S. $10,000 or U.S. $20,000.

Back in 1966, Canada could have followed America's lead and insisted on similar or even identical wording to be applied to all travel to, from and via Canada. This was not done.

Today, some 35 years later, the government presents Bill S-33 through which the government essentially ratifies the Montreal convention which creates a new higher liability regime. If and when the Montreal convention enters into force, Bill S-33 would automatically raise the liability limits on all round trip international flights originating in Canada and on all flights between Canada and another ratifying country.

The Montreal convention was concluded on May 28, 1999, and to date only 12 nations have ratified it. Canada will be the 13th. Both Mexico and Japan ratified it over a year ago, while in the past year Canada has done nothing. Neither the United States nor any of our trading partners, except for Japan and Mexico, have yet ratified the treaty and it will likely not come into force until they do. The convention needs another 17 ratifications before it enters into force, and this could take decades. For example, Montreal protocol No. 4 was concluded on September 25, 1975, but did not enter into force until June 14, 1998, some 23 years later. Thus, there is no urgency whatsoever in Bill S-33.

The government has waited until today to ratify the Montreal convention and could wait several more years. The higher liability limits of the Montreal convention do not apply to anyone until 30 countries ratify it. There really is no rush for the legislation.

If the government really wanted to increase the Warsaw convention liability limits beyond the current paltry sum of $20,000, it would do well to follow America's lead and adopt a regime similar to the U.S. government's imposed Montreal agreement of 1966, which is what it did. Thirty-five years have passed and it is not too late to follow America's lead.

To my knowledge our government has never considered such a step so one can only conclude that raising the liability limits is not a burning concern for the government. In the meantime, the higher liability limits do apply on Canada-U.S. transborder flights and on all travel via the United States.

The Montreal convention raises the Warsaw convention liability limit from around $8,300 U.S. to roughly $135,000 U.S. For that reason alone we should support Bill S-33 which would ratify the Montreal convention and make it an instrument of our domestic legal system.

The Montreal convention also makes it easier for claimants to get their hands on the money and deals with such modern day realities as code shares and e-tickets.

Bill S-33 is a good idea but it is not one that is more urgent than the aviation security legislation which the American congress passed just this past week.

Since September 11 my office has been flooded with calls relating to airline competition, the need to improve airport security and to put air marshals on planes. Rather than debate the issues that are foremost on the minds of Canadians, our government has chosen to update a 72 year old treaty.

Bill S-33 is worth supporting but, like so many other transport related bills brought before the House since September 11, it does not address a pressing concern. We will support the bill but in supporting it I want to clearly state that it is time the House considered aviation security legislation today. That issue, unlike the modernization of the Warsaw convention, is foremost on the minds of Canadians.

This is the third non-urgent transport related bill that the House has seen since September 11. While we will support it, it is no more urgent than the other two. It lets the government claim to be working while adopting largely motherhood legislation that will have relatively little immediate impact on most Canadians.

It is time to stop posturing. It is time to stop the busy work and get down to the transport issues that concern Canadians. At committee I will be calling for the bill to be passed as quickly as humanly possible so that we can be ready to deal with the aviation security legislation that Canadians have called for each and every day since September 11.

We support Bill S-33 as it is important legislation, but within the context of what the country is facing, what the air industry is facing and what Canadians want this place to address vis-à-vis aviation security and competition in the air industry, the legislation is of little concern to Canadians.

Judy Wasylycia-Leis Winnipeg North Centre, MB

Madam Speaker, I am pleased to participate in this debate. I begin by thanking my colleague the member for Churchill, the NDP transportation critic, for the incredible work she has done on this issue over the last number of months and years.

The crisis in this country's transportation sector and particularly the airline industry is a very serious one. It is critical in terms of the future of our economy and the very identity of our nation.

My colleague from Churchill has outlined our opposition to Bill C-38. She has indicated to us that this bill represents an inadequate band-aid approach to a very deep rooted, far reaching problem. Concerted action on the part of the government is needed, not tinkering, not playing around at the edges, but actual involvement in this crisis. It needs to initiate a clear strategy for getting our airline industry back on a solid footing.

We often talk about the ties that bind. When we look at the ties that bind, there is no more important institution than Air Canada. Over the years we have turned to Air Canada, our national railway, our post office, our pension system, our health care system, our quality education system. All those are examples of great institutions once all within the public sector that united this country and helped us build on, and not see as a negative, our diversity. Air Canada has been part of that tradition. It has been part of our approach as a nation to the difficulties we face as a people who are spread out in such a wide geographical area, who come from so many different regions with such a wide range of income levels. Air Canada is fundamental to who we are as a nation and where we will go in the future.

Today we are facing a crisis of such proportions that we may see a collapse of Air Canada. In that context, is this bill appropriate and up to the task of preserving a national airline that reaches out to provide transportation to every part of the country, to every region no matter how small, no matter how remote? The answer clearly is no. The bill does not even begin to tackle this very critical issue nor does it address the concerns of Canadians, of workers, of people who depend upon the airline industry for transportation and for their livelihoods.

I do not need to remind anyone what the collapse of Air Canada would mean for our economy. It would be disastrous. My colleague from Churchill has said that over and over again. As a result of the mismanagement by the government supplemented by the tragic events of September 11, the whole airline industry is on the verge of a collapse which would have cataclysmic consequences for our nation. As a result of this crisis, more than 9,000 jobs are at risk. This is causing hardship, distress and anxiety for the proud working men and women who have contributed so much to the industry and who have invested their working lives to ensure that air transport in the country is a viable system for Canadians.

The instability in the airline industry not only affects the thousands of men and women who work for Air Canada, but it also has had a ripple effect on all of our communities. Certainly, small independent travel agencies, particularly in my community of Winnipeg, are suffering greatly because of the instability in the industry and because of the crisis in Air Canada. Let us not forget all of the people involved in the entire transportation system who desperately turn to the government for leadership.

I want to indicate what it would mean for a community like Winnipeg if Air Canada went bankrupt and were allowed to collapse due to negligence and passive reaction by the government.

Winnipeg alone would be looking at the loss of an aircraft maintenance base with more than 800 employees which services contracts from all over the world. It would be looking at the loss of a 400 to 500 person reservations office. It would be looking at the loss of pilot flight operations and in flight operations and the loss of an entire cargo sector. There would be the loss of approximately 150 airport customer sales and service workers as well as the loss of ramp and baggage workers serving over half the Winnipeg airport. There would be the loss of an entire building of finance employees. It would also be looking at the loss of many subsidiary or spinoff services such as Air Canada Vacations. The list goes on and on. It would have a disastrous impact on every community in the country and on our need as a nation to build on the ties that bind and not accentuate our differences because of geography.

As has been said over and over again, the bill is totally inadequate to address the task at hand. What is needed desperately is for the government to say, no matter how hard it is, that it made a mistake years ago when it got into the whole business of privatization and deregulation, off-loading and outsourcing in the interests of trying to balance the budget on the backs of Canadians.

It is not too late to say that the public sector plays an important role. An institution like Air Canada within the purview of the Government of Canada is an absolutely critical part of our society and country. Let us look at finding ways to ensure an equity position in Air Canada and finding enough of a control and hold over the ownership of Air Canada to preserve jobs, to serve communities no matter how far and remote they are, and to address all of the transportation needs of Canadians.

We have heard from others in the House today, especially the Alliance members, how one should simply turn to the marketplace, to foreign investment, to the kinds of scenarios which have been tried but have failed Canadians over the last number of years. It would be worthwhile to look at the fact that changing the ownership rules is clearly not a solution to Air Canada's problem. As has been said over and over again, some foreign investment at best would bring in a short term cash infusion and would keep Air Canada in the air for a few more months. The solution we are proposing is to address the reasons Air Canada is losing money and look at the role that government ought to be playing in terms of a regulatory framework and government involvement.

Too many times we have heard from the Alliance and other members in the House how much of a burden it would be to actually think about re-regulating and deprivatizing an institution like Air Canada. Many in the Alliance Party have a hard time imagining the possibilities under a re-regulated airline system. They have a hard time understanding the benefits to all Canadians of proactive government involvement in an area as vital as transportation.

I hope we can overcome that kind of ideologically blinkered position and actually look at a proactive government role once again in this area. We owe it to Canadians who have invested in the corporation with their working lives. We owe it to every community that needs to be connected to the rest of the country in order to feel some sense of identity and belonging to this great nation. We owe it to the world to show there is another way that public institutions can play an important role in providing services to people and recognize that sometimes services for people are more important than profits for corporations.

I urge members across the way especially to think again about their role with respect to Air Canada and the airline industry. I urge them to come forward with a package of proposals that will ensure that Air Canada survives and that will look at putting our entire airline industry on a stable footing.

Mario Laframboise Argenteuil—Papineau—Mirabel, QC

Madam Speaker, I am pleased to take part in the debate on Bill C-38. As the minister's parliamentary secretary, the hon. member for Chicoutimi--Le Fjord has said, this is a simple bill, since it contains only three paragraphs. It calls for the current 15% limit for shares an Air Canada shareholder could own to no longer apply. Thus the control such a shareholder could have over the administration of Air Canada is no longer subject to a limit.

Obviously, the parliamentary secretary and hon. member for Chicoutimi--Le Fjord is trying to sell this as a cure-all, a bill which will finally enable Air Canada to escape from its economic woes.

It is a disquieting choice by the government. This is what I am going to try to point out to the people of Quebec, to the employees in the airline industry, and to the employees of Air Canada who may be listening to us.

We must look at what the Government of Canada has decided, as opposed to what other governments, the U.S. government in particular, have done. Immediately after the events of September 11, the American government announced a massive investment of $15 billion into its airlines: $5 billion in direct assistance and $10 billion in loan guarantees. This was announced within days of September 11. When the bad economic news became known, for example the bankruptcy of Swissair, Switzerland made the decision to invest 38% of shares in a company called Crossair. An announcement has already been made that public funds would be used to revive the Swiss airline industry. These are, of course, societal choices.

I will quote the hon. parliamentary secretary, the member for Chicoutimi--Le Fjord. He expressed the Canadian position very aptly in saying “Corrective steps will be taken as problems arise”.

Clearly, the government has opted for a piecemeal approach when it comes to solving problems in this sector which is of such great importance to Canadian industry. The airline sector supports an entire aerospace industry. We are talking about a number of companies that manufacture aircraft in Canada, including Bombardier, companies that manufacture motors, including Pratt & Whitney, and companies that manufacture parts. We know that Montreal is the world's second greatest centre when it comes to aerospace manufacturing. Obviously, if Canada chooses not to support its aerospace industry, as is the case now, we see results such as the Canada 3000 bankruptcy.

This is a tough blow to the airline industry, obviously, and I will speak later about the government's reaction. Canada's second largest carrier has gone bankrupt. It was decided to let it go bankrupt. Let there be no mistake on this. Quebecers and Canadians must understand the situation. The government had announced a $75 million loan guarantee for Canada 3000, but with requirements that were so demanding and difficult that it was clear from the outset that the company would not be able to fulfill them.

So the government never paid out its loan guarantee and the company declared bankruptcy. What is worse is that top management was in such a terrible state that they even decided to refuse work sharing. Three weeks ago, the directors of Canada 3000 refused a work sharing program for their employees. They already knew they were on the verge of bankruptcy.

The Government of Canada and the Minister of Transport should therefore have known that Canada 3000 was on the verge of bankruptcy. In this regard, perhaps the government wanted to appear as Canada 3000's white knight, knowing all the while—and on this Canadians and Quebecers must not be deceived, unlike the press, into thinking that the government was helping Canada 3000—, that the company was close to bankruptcy.

None of the help announced materialized. Canada 3000 was given no loan guarantees. With the conditions that were set It was clear from the start that their announcement was meaningless. Today we see the result. There are 4,800 employees now out of work and they have no guarantee they will get their jobs back. This is human capital we had in Canada in the aviation field, and the government has done nothing to help them.

Those are the facts of the matter. What is the government doing for Air Canada? The parliamentary secretary and member for Chicoutimi—Le Fjord put it clearly when he said that when the government learned the cost of insuring the aircraft would be astronomical it had to help. It helped with insurance costs.

Subsequently there were costs relating to the six day closure of airspace. It agreed to cover the costs. It was not the $160 million cited by the member for Chicoutimi—Le Fjord, this was for loan guarantees. Between $37 million and $50 million was given to the airlines to cover their losses during the closure of the airspace.

The government dealt with the situation on a day to day basis. As the parliamentary secretary mentioned, corrections were made as problems would surface.

But the problem is that the airline industry is practically bankrupt. In a speech delivered just a few weeks ago, the Minister of Transport said that Air Canada had $1 billion in cash on hand and could still borrow, sell its aircraft and use them to borrow $3 billion. But the government is making a company go bankrupt. When we decide to make a company sell its liquid assets—as with Canada 3000, which no longer had any cash and went bankrupt—we push airlines to the brink of bankruptcy.

Today, we are dealing with Bill C-38, which proposes that private shareholders be allowed to own more than 15% of the capital stock, a measure that is supposed to save the company. The harsh reality is that not one witness told us that passing this bill would generate an interest for Air Canada's stocks, for the simple reason that the government is in the process of making Air Canada get rid of its liquid assets. This is the reality. Therefore, there will be no massive buying of stocks.

The Caisse de dépôt would make a bad investment if it decided to convert these debts, as suggested by the Canadian Alliance member, into company stocks. Debts are interest loans that were given to the company. Therefore, it would be a bad investment to convert them into capital stock, since stocks are not constantly increasing in value these days. So, it would be a bad investment to convert debts, that is the loans given to the company, into shares. This is the reality. There will not be a keen interest for these stocks. It will be a long term solution for Air Canada.

When the situation becomes normal again for airlines worldwide, then Air Canada will probably have succeeded. We hope so. We hope that its fate will not be the same as that of Canada 3000. The government will probably react, because Air Canada is the largest carrier. It will, as the parliamentary secretary said, wait and see.

So, probably when Air Canada is on the brink of bankruptcy, the government will decide to make a major investment. But in the meantime, how many other companies, such as Canada 3000, will have shut down? This is the reality.

How many companies will have disposed of their liquid assets, as Air Canada is now doing at the suggestion of the Government of Canada, borrowing on everything they can, selling their airplanes and leasing instead, that is taking money for their airplanes and turning around and leasing them themselves from a leasing company in order to come up with the money to get through the crisis, which will last how long? That is what is difficult to understand. It is certainly hard for all the workers in the airline sector across Canada and for Air Canada workers to understand. The government is going at this in dribs and drabs, rather than announcing massive investments in the industry, as the Americans did.

This is what Canadians and Quebecers need to understand: in difficult times such as these, in the wake of September 11, the workers of Canada's airline sector are not to blame for the sad events which took place, but they are the ones now paying the price. They represent human capital in a highly competitive sector.

Before September 11, we were highly competitive in the airline sector, in the manufacturing of planes and parts and in the entire aerospace industry. But how will Canada be able to support companies that manufacture planes when they receive orders from American and Swiss companies because those countries have decided to help their industry?

Obviously, Canada 3000 will not be buying any more planes. How are we going to be able to sell the entire aerospace industry internationally, when Canada is not supporting the airline industry?

We are sending a very poor message to the rest of the planet, while others have decided to provide direct assistance to the industry. The Americans have decided to provide direct help; the Swiss have decided to provide direct help. These countries, or their airlines, will likely buy—or so one hopes—aircraft from Canada, a country that will not have helped its air industry while in crisis as the result of an event for which it was not responsible.

The government has a responsibility, the responsibility of passing the message that neither the aviation industry nor its workers should have to bear the brunt of September 11. Before that date, things were not as cut and dried. Obviously, the Bloc Quebecois will never agree with a policy sanctioning poor decisions by airline administrators; it is up to the shareholders to do that, through shareholder meetings. As for the rest, a clear message is necessary, not one such as we have received today about taking things one day at a time, claiming that this is what will rescue Air Canada from its problems. This is wrong. Air Canada will not be saved in the short term by this means. It will keep on losing its liquid assets.

As the minister said, once again Air Canada will be encouraged to sell its aircraft in order to amass some capital and then to lease them back. Air Canada's level of indebtedness will be increased and its shares will be increasingly less interesting. I repeat, as we speak, it would be a bad decision for the Caisse de dépôt et de placement du Québec to convert its debts or loans with a fixed interest rate to shares. Their behaviour is unpredictable, particularly their rate of dividend. They will surely not go up in value in today's conditions, when everyone is aware that there are constant losses month after month in the aviation sector.

It is easy for us to support a bill such as the one under consideration today, but it is difficult to do so without commenting on the crisis that the airline industry is experiencing. It is also difficult to believe, as the parliamentary secretary and member for Chicoutimi--Le Fjord predicts, that this is one of the most important bills in terms of Air Canada's future. The minister did not even show up to deliver the message this morning. With all due respect to the member for Chicoutimi—Le Fjord, this is not one of the most important bills for the airline industry in Canada, otherwise the minister would have come in person today to deliver the message about this bill that is apparently of such importance.

The bill is important. It will allow shareholders, who complained in the past that they could not control the board, to participate. It is therefore good that the 15% ceiling was removed and that those who want to invest for more than 15% ownership in Air Canada may now appoint directors proportionally to their share of ownership in the company.

Once again I will repeat for Quebecers, all of the witnesses who testified before the committee were unanimous in stating that the passage of this bill would not result in investors running out to buy more than 15% ownership of Air Canada tomorrow morning. The situation is very difficult. And we will be seeing more and more difficult situations.

The minister himself said so, and I repeat, Air Canada will have to divest itself of its $1 billion in cash. It will have to sell its aircraft. That represents $3 billion it could put its hands on, but that would put it in debt. It is up to the government.

In the meantime, it will affect the other companies that do not have as much cash as Air Canada. It is a fairly well managed company and it has considerable liquid assets, an advantage Canada 3000 did not enjoy, like other companies that are losing more and more money with each passing week, have less and less cash and will need help.

Here again, there are no programs. The minister is not here today to make an announcement, which could have accompanied the message sent by Bill C-38, that there would be real help for the airline industry in the form of direct aid to anyone deciding to buy part of Canada 3000.

Why not announce help and make it a condition for the new buyers of bankrupt companies, such as Canada 3000, that they provide better service to the regions?

Some restrictions should be included, to avoid the situation described by the parliamentary secretary when he said that Air Canada did a clean up by eliminating certain routes from its network.

Eliminating certain routes means that some towns located in various regions will no longer be served by Air Canada. How are we going to explain this to these communities? I can never say it enough: these towns are located in various regions. In committee, the expression used was small municipalities. These are towns that gained their status because they are located near the natural resources that make Quebec and Canada such beautiful countries. This is the reality. These towns are all entitled to the same transportation services as every other centre across our beautiful Quebec and Canada.

Of course, this is the harsh reality. Once again, we are letting the free market dictate things. Last week, Canada 3000 went bankrupt. One thing is certain: if all the investments and assistance measures announced by the parliamentary secretary and the minister since the beginning had produced such good results for the industry, Canada 3000 would not be closed today. The government must recognize that it has failed. It is obvious that it did too little too late. And the same thing will happen with the airline and aviation industries, where Canada used to be a most competitive player on the international scene.

This is the message we must send Canadians and Quebecers, and all workers in the airline and aviation industries “You are the best and that is why we are going to help you”. Sitting around and watching the Americans investing to support their industry, the Swiss using public money to support their industry and all its workers, will not encourage the rest of the world to buy the planes and parts we produce in Canada. By not supporting its airline industry, Canada is sending a terrible message to the rest of the world.

This is what the highly competitive human capital in the airline and aviation industries finds hard to accept. I repeat, the government must address this very serious issue. This is what matters today, that and the fact that Bill C-38 will allow the capitalists of this world to increase their share in Air Canada and to control the board of directors.

The message that needed to be delivered today, a message that the government failed to deliver, was that there would be support for all the human capital in the airline and aviation industries in Quebec and in Canada. What the government is doing, and I again refer to the message the parliamentary secretary delivered for his minister, is dealing with problems as they arise.

To conclude, once again, this is the approach adopted by the Government of Canada, this Liberal government, which has no respect for one of the most prosperous industries in Quebec and in Canada.

James Moore Port Moody—Coquitlam—Port Coquitlam, BC

Mr. Speaker, I am going to speak in favour of Bill C-38, an act to amend the Air Canada Public Participation Act, but I would like to reiterate the points I made when I last spoke to the bill on October 31.

This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian carriers with respect to the sale of its shares. For the first time in Canadian history a Canadian citizen can buy, sell or trade as many Air Canada shares as he or she wants, just as if they were shares of any other private sector Canadian company.

Bill C-38 represents a marked departure from traditional thinking of Liberal governments. Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. Ever since that time it has been the subject of much discussion in the House. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation. That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to no longer be an agent of the crown. Even so, it remained a crown corporation and cabinet retained the power to appoint its directors.

Then in 1987 the Progressive Conservative government passed the National Transportation Act. This fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry. Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Section 6(1)(a) of the Air Canada Public Participation Act limited to 10% the number of shares that could be owned by a single shareholder. This was presumably done in the interests of ensuring that Air Canada stocks would be held broadly by as many Canadians as possible. The clause also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International. Let us not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988, nearly six months after the January 1, 1988 birth of Canadian Airlines International from the fusion into a single entity of all of Air Canada's pre-1980 domestic competitors: Pacific Western Airlines, Transair, Nordair, Québecair, Eastern Provincial Airways and Canadian Pacific Airlines.

In 1988 Canadian Airlines' parent company was governed by Alberta's Pacific Western Airlines Act which set a 4% limit on the number of shares any one group could control. The 10% share limit set in the original Air Canada Public Participation Act was actually a more liberal limit than the 4% set in the act governing Canadian Airlines. Then with the takeover of Canadian Airlines by Air Canada in 2000, Bill C-26 raised to 15% the number of shares that could be held in Air Canada.

Now, some 64 years after parliament first created Air Canada, we are finally discussing whether to give it some of the same rights as any other private sector company. If we were to believe the government members, Bill C-38 would put Air Canada on a level playing field. By striking down section 6(1)(a) of the Air Canada Public Participation Act, Bill C-38 ostensibly does put Air Canada on that level playing field with other carriers with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone quite frankly, it should be supported. As a party that believes in free market and free choice we support that.

At the same time it must be said that Bill C-38 does little to address Air Canada's short term financial concerns that have led to thousands of layoffs at Air Canada. This is because: one, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller; two, no single shareholder is currently restricted by the present 15% limit, in that no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of the current restrictions; and three, if one were not inclined to buy Air Canada stock before this legislation, the fact that one can buy more of it does not work as an incentive.

In fact there are only two ways that Bill C-38 would financially benefit Air Canada. One would be if some of the debt which the Caisse de dépôt et placement holds were to be converted into shares. The caisse currently owns roughly 9% of Air Canada's stock. Converting its debt into shares would give the Caisse roughly 18%. This move, based on the $2.50 price per share at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada's voting shares.

The second way it could help Air Canada is if an individual or group were to take control of Air Canada with a clear plan to restructure the company.

It has been alleged that this legislation is legislation on behalf of the transport minister, urged by a whole bunch of interests as a “get Robert Milton” piece of legislation. It may very well be but time will tell. Frankly that is not any of the government's business but it puts it on a level playing field. If that leads to broader restructuring of Air Canada and new management, and looks after the broader interests of the company, the people who work there and Canadian consumers, that is a choice and decision for the board of directors of the company.

When we really look at it, the bill basically is political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's pleas for bigger and bolder policy moves such as the implementation of air marshals or putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberations.

Bill C-38 requires us to examine specifically the Air Canada Public Participation Act, and while I must report that I am in favour of striking down section 6(1)(a) of the act which this legislation does, we should not stop there. There is more to be done. We should ask ourselves a basic philosophical question. As we enter the third millennium, do we believe that the government should continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns? Why for example should sections 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada by law to maintain facilities and/or offices in certain cities? Surely these decisions are more properly the responsibility of the company's shareholders and board of directors.

Why for example should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable only to Air Canada while no other Canadian airline is similarly bound? If we really believe that the Official Languages Act should apply to Canada's airline industry, to place it only against Air Canada and not against other carriers, against in the sense that it is a regulation and a requirement that they meet its standards, then it hardly seems fair to hold Air Canada to a higher standard than the former Toronto based Canada 3000, Calgary based WestJet and Montreal based Air Transat.

Why should sections 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? I believe that sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. There already is a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

--a corporation or other entity that is incorporated or formed under the laws of laws of Canada or a province, that is controlled in fact by Canadians and of which at least seventy-five per cent, or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56.3 of the act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect the airline's status as Canadian under law. Section 6(1)(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic services. Section 69 only allows two types of carriers to operate international air services: Canadian air carriers under the definitions I have just outlined; and non-Canadian carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, formerly Canada 3000, or Air Transat were to allow foreigners to acquire more than 25% of their voting shares, they would no longer be Canadian. As such they would lose their ability to serve domestic routes within Canada and international routes between Canada and any other country, which is to say they would lose their value to any potential buyer.

Given that restrictions against foreign ownership are already present in the Canada Transportation Act, sections 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. As well, it is important to note that if we do have a debate finally in this place, as some government members have said should happen, that the foreign share restriction on carriers, specifically Air Canada, should be raised from 25% to 49%, then it makes total sense to scrap that provision in the Air Canada Public Participation Act and leave it in the Canada Transportation Act so that when we do have that debate, the new restriction which would be lifted would apply to all carriers evenly. We would not have to amend two pieces of legislation in order to get the same thing done which would require more time of the transport committee, more bureaucracy and politicians wasting more time standing around talking about things they already agree on.

This is just simple streamlining and making things easier to do.

Even if there were no prohibition in the Canada Transportation Act on the 25% foreign shareholder limit, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because the convention on international civil aviation, more commonly referred to as the Chicago convention, sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is then made possible only by bilateral agreements in which governments typically exchange air rights for the benefit of their respective carriers. Typically, on any international route, each country can designate a national carrier. Thus Air Canada and Air France fly between Montreal and Paris, Air Canada and Korean Air Lines fly between Vancouver and Seoul and Air Canada and Cubana Airlines fly between Canada and Cuba.

Only in the most exceptional cases do we find an airline flying between two cities when neither is in the airline's home country. In virtually every case where a foreign airline flies between two foreign destinations, it is only as an extension of a flight that started in the home base of the airline. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto-Sao Paulo-Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

Even without the safeguards in the Canadian Transportation Act, if Americans or anybody of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might well refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes to those countries. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Without the ability to serve international routes, Air Canada, as an airline, would cease to have value to its investors. For this reason alone, its board of directors would never allow foreigners to own a majority of stock of Air Canada.

Anyone doubting this needs only to look at the arrangement that American Airlines had with Canadian airlines in 1999. It flew passengers from the United States to Vancouver and then from Vancouver on jets of Canadian Airlines to Asia. The reason for this was that the American Airlines had only been granted routes to Japan from the United States and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian services of Canadian Airlines were based on bilateral agreements between Canada and the Asian countries concerned. Had American Airlines taken control of Canadian Airlines, it would quite literally have killed the goose that laid the golden egg.

As I said earlier, I am in agreement with repealing section 6(1)(a) of the Air Canada Public Participation Act. For this reason I and the official opposition will be supporting Bill C-38. At the same time, having carefully examined the Air Canada Public Participation Act, I see no reason why we cannot just eliminate the entire act itself. It has at least four irrelevant clauses.

Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me that these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the 12 years since the act was passed. Section 11 deals with the continued appointment of the Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This clause has also been spent.

The act also discriminates against Air Canada in four specific areas.

Subsection 6(1)(a) limits share ownership of an individual or group to 15%.

Subsections 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. They make them maintain offices in Montreal, Mississauga and Winnipeg. We talk in the House all the time about getting out of the face of business, letting people sink or swim on their own merit, and getting out of the business of corporate welfare, mandating useless bureaucracy that is none of the government's business. This is a clear example of that.

I raised an amendment at the committee stage to have this part of the act struck down and it was voted down without any logic. It would be unheard of for the United States to mandate that Southwest Airlines, or United Airlines or American Airlines maintain facilities in Chicago, or Dover or Portland, Maine. The idea of telling a private sector company that it has to have a maintenance facility in a certain city is absurd. It is none of the government's business.

Specifically, subsections 6(1)(b) and (c) of the act restrict foreign share ownership in Air Canada, as I mentioned. Section 10 makes the Official Languages Act applicable only to Air Canada. As a Canadian who happens to believe in the principle of official bilingualism, who was taught in a French immersion class, whose mother taught French in this country, whose sister is a teacher of French immersion, in British Columbia no less, it seems bizarre to me that if we believe in bilingualism, if we believe that all Canadians should be able to speak equally in both of Canada's official languages, all we would have to do is put the idea of mandating official bilingualism in the air service, say that it was in the national interest and then put it under the Official Languages Act.

Why would we put the Official Languages Act and mandate it into the Air Canada Public Participation Act? It is a level of bureaucracy. It is a restriction and a burden on Air Canada that is not placed on other Canadian carriers. If we believe that people should be speaking in both official languages, if we believe in reaching out and it is an important principle for the country, then apply it to all of Canada's air carriers evenly, not just to one of them.

If the government is really intent on putting Air Canada on a level playing field with its domestic competitors, it can do this by not just removing the share limitation of section 6(1)(a) of the Air Canada Act, but by repealing the entire act itself. The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers and not just Air Canada.

As written, the Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace.

Just because Air Canada is a corporation, does not mean that the thousands of employees of Air Canada should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles. It is time to let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act in toto and finally create the level playing field that people on both sides of the House say they want.

I will be supporting Bill C-38, as will the official opposition, but I have also introduced amendments and will continue to push for the full repeal of this legislation, so that Air Canada can be put on a level playing field with its domestic competitors for the first time in its 64 year history.

I also wish to mention something else. We are now at the third reading of Bill C-38. Many thing have gone on in Canada's air industry. Since we started debating Bill C-38, Canada 3000 has gone bankrupt and thousands of people have lost their jobs.

Since we started debating Bill C-38, 78% of Canadians have said that air marshals would make them feel safer. Since we started debating Bill C-38, 66% of Canadians have said that they worry that the airline they use will go belly up, leaving them stranded. Since we started debating Bill C-38 the U.S. congress has passed S-1447, the aviation security act, dramatically improving U.S. airline security. Since we started debating Bill C-38, a host of experts have come before the transport committee and called for the entire scrapping of the Air Canada Public Participation Act to put all air carriers on a level playing field. In all of these areas the government has turned a deaf ear.

I want to look specifically at the poll that was released by Ipsos-Reid, CTV and the Globe and Mail , six days ago. It is quite something. The press release reads:

As Air Canada begins flights to Washington, D.C. Reagan National Airport with an armed security officer known as an Air Marshal on board, an Ipsos-Reid/Globe and Mail/CTV poll released today indicates that most Canadians support the idea of Air Marshals on Canada's airlines. Eight-in-ten (78%) Canadians say that they would feel safer flying if they knew that there was an armed Air Marshal on board. In fact a majority (52%) strongly agrees with this view. The cost of providing security aboard flights should be covered by the Federal Government according to seven-in-ten (72%) of Canadians.

Two-thirds (67%) indicate that they would be more likely to fly if they knew that an armed Air Marshal was on board the flight.

When we break down the numbers, it is quite something. It went on to say:

Those in Atlantic Canada (87%) are most likely to agree that they would feel safer if they knew an Air Marshal was on board their plane. This compares to those in British Columbia (78%), Alberta (78%), Ontario (78%), Saskatchewan/Manitoba ( 77%), and Quebec (77%).

Canadians with a high school education (82%) or less than high school education (86%) are more likely than those with post-secondary education (76%) or those with a university degree ( 72%) to say they would feel safer if an Air Marshal were on a flight.

Older (81%) and middle aged (80%) Canadians are more likely than younger (74%) Canadians to say that they would feel safer on a flight with an Air Marshal.

Women (81% versus 75% of men) are more likely to agree that they would feel safer on a flight with air marshals.

According to seven-in-ten (72%) of Canadians the cost of providing security aboard flights should be covered by the Federal Government. In fact, four-in-ten (41%) strongly agree with this view.

It goes on and on. It is overwhelmingly evident that Canadians believe in this principle. When we came back to the House after the September 11 attack, I raised the issue of air marshals with the transport minister. He said it was a radical idea and he would not go in that direction because it was not a good idea. He has for years said that Canada should have a seamless security regime in our skies. Yet about a month ago he said that he would put armed air marshals on flights only to Reagan National Airport, by definition creating a seam in the security regime in this country by saying we would have air marshals on some flights but not on other flights.

Either we agree with the principle or we do not. The United States said that we could only fly into Washington's downtown Reagan National Airport, if we had air marshals on planes. The transport minister has said that because it is an important relationship he would do it. He either agrees with the principle that it is safer, he agrees with 78% of Canadians and with most parties and most members in the House that it would make air travel safer and does it, or he does not. If the transport minister does it for Reagan airport and if he is to hold to this principle of a seamless security regime in this country, I would think that he would extend the air marshal program and make everybody feel safer flying. That is what we need.

It should also be noted that since 1993, when this government came to power, seven Canadian air carriers have either declared bankruptcy, sought bankruptcy protection or have been taken over. Almost one carrier each year has been dropping like flies in the country.

Blame can be spread to a lot of places, but a lot of the blame does fall on the shoulders of the government because of legislation like the Air Canada Public Participation Act, which holds Canadian private sector companies to differing regulatory standards and therefore retards the marketplace. It does not allow carriers to compete on a pure level playing field so that the truly best will survive. It is time for the government to rethink where it is going, to end the political correctness and to stop mandating that Canadian air carriers and private sector companies have to have maintenance facilities in certain cities. Let Canadian carriers compete on their own.

We support Bill C-38, but if the government really had the chutzpah, it would show greater leadership, introduce real legislation on air marshals and airport security, scrap the Air Canada Public Participation Act and have renewed thinking with regard to Canada's air industry.

Lucienne Robillard for the Minister of Transport

moved that Bill C-38, an act to amend an act to amend the Air Canada Public Participation Act, be concurred in at report stage.

(Motion agreed to)

Don Boudria Minister of State and Leader of the Government in the House of Commons

Mr. Speaker, this afternoon we will continue with Bill C-10, the marine parks bill.

Tomorrow we will consider Bill S-31, respecting a number of tax treaties.

As indicated by the deputy House leader for the opposition, next week is a week in our constituencies. When we return we will consider: report stages and third reading of Bill C-38, respecting Air Canada; second reading of Bill C-41, respecting the Canadian Commercial Corporation; report stages and third reading of Bill C-27, the nuclear waste legislation; Bill C-35, respecting foreign missions; and second reading of Bill S-33, respecting carriage by air. During that week the government may introduce another bill dealing with public safety and we would begin debate on that matter as soon as possible.

Finally, I intend to consult colleagues later this afternoon, given the uncertainty in the airline industry, to see whether there would be a favourable disposition, notwithstanding the tabling of the report on Bill C-38 today, to see if the House would agree with dealing with third reading tomorrow. I intend to consult later this day on this matter.