Thank you, Mr. Chair.
I am pleased to be here today to talk about how the Air Canada Public Participation Act, ACPPA, sets out the obligation for Air Canada to maintain in its articles of continuance a provision that it would maintain its operations and overall centres in three key locations in Canada.
However, I think it's important to provide you with some background on why the ACPPA was enacted and on the evolving organizational structure of Air Canada since its privatization.
In 1988-89, as part of the government's deregulation of the air transport industry more broadly, Air Canada was privatized under the ACPPA, which authorized the sale of the Government of Canada's share holdings in the air carrier.
ACPPA provided obligations on Air Canada that the government of Canada felt it was important to continue as part of the new private sector entity, in the interest of protecting Canadians. These obligations include, among other things, the direct obligation for Air Canada to comply with the Official Languages Act.
But the obligations imposed on Air Canada as part of the ACPPA also include a requirement that it retain in its articles of continuance certain provisions. These include provisions not to exceed 25% of foreign ownership of its voting shares; maintaining its head office in the greater Montreal area; and provisions maintaining operational and overhaul centres or maintenance bases in Winnipeg, Montreal, and Mississauga.
I know this last is of particular interest to your committee today and I will come back to it later in my comments.
I would like to spend a few minutes talking about how Air Canada has evolved since it was first privatized. First, in 2000 it merged with Canadian Airlines. After the merger, the economy and the air sector, whose financial ups and downs very closely mirror the global financial situation, experienced a number of shocks, including the events of September 11, 2001, and concerns about severe acute respiratory syndrome, or SARS. As a result of some of these pressures, Air Canada was one of the many legacy carriers worldwide that sought bankruptcy protection in 2003.
It emerged from bankruptcy protection in 2004 after a major restructuring. As part of that restructuring, Air Canada's in-house maintenance, repair, and overhaul division became Air Canada Technical Services, or ACTS, one of several operating companies of ACE Aviation Holdings Inc., or ACE, the new parent company of Air Canada and its former divisions.
Then in October 2007 private equity firms Kohlberg Kravis Roberts & Co. and Sageview Capital combined to purchase about 70% of ACTS from ACE for $723 million. This left ACE with a 27.8% stake in the company.
Finally, in September 2008 ACTS, now a private company, renamed itself Aveos.
Aveos employs about 4,500 people across its operations in Montreal, Mississauga, Winnipeg, Vancouver and El Salvador. The large majority of Aveos employees are former Air Canada employees.
You may be aware that Air Canada and Aveos have filed an application with the Canadian Industrial Relations Board requesting a split of the collective bargaining certification of the International Association of Machinists and Aerospace Workers for the aircraft maintenance technicians of Aveos from the certification of the baggage handlers, cargo agents, warehouse personnel, financial staff, and other staff at Air Canada. This is a matter between private sector firms and their employees, and as such I cannot comment further on it.
Let me now turn back to how ACPPA deals with Air Canada's maintenance bases.
Section 6 of the ACPPA requires Air Canada to include certain provisions in its articles of continuance. Specifically, paragraph 6(1)(d) says the articles of continuance must contain a provision requiring the corporation to maintain operational and overhaul centres in Winnipeg, Montreal, and Mississauga. Air Canada is in compliance with this section, since its articles of continuance do indeed contain such a provision.
The bottom line is that the ACPPA does not directly require that Air Canada retain maintenance bases in Winnipeg, Montreal and Mississauga, nor does the legislation specify employment levels at the locations in question.
It is worth noting that the operational and overhaul centres that Air Canada must maintain, according to its articles of corporation, are separate functions from the activities performed by Aveos. Aveos has no obligations under the ACPPA.
Air Canada's articles of incorporation and of continuance may be viewed as a sort of contract between the corporation, its management, and its shareholders. As a result, the obligation to maintain certain centres in certain cities is owed by Air Canada to its shareholders. It is a private obligation that only a shareholder can enforce as part of the governance obligations of the organization. In this case, Transport Canada does not have any oversight or enforcement obligation, nor is the Government of Canada still a shareholder of Air Canada.
That terminates my comments.