Evidence of meeting #30 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aveos.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Calin Rovinescu  President and Chief Executive Officer, Air Canada
  • Louise-Hélène Sénécal  Assistant General Counsel, Law Branch, Air Canada
  • Duncan Dee  Senior Vice-President, Corporate Affairs, Air Canada
  • Kristine Burr  Assistant Deputy Minister, Policy, Department of Transport
  • Pierre Legault  Assistant Deputy Minister, Business and Regulatory Law Portfolio, Department of Justice

9:20 a.m.

Conservative

The Chair Merv Tweed

Thank you.

Mr. Toet.

9:20 a.m.

Conservative

Lawrence Toet Elmwood—Transcona, MB

Thank you, Mr. Chair.

I want to pick up a little bit on what you were talking about there. In the short period of time that Aveos basically went through such a huge investment.... Obviously that investment plan they had, their business plan, was a solid plan. We don't have people investing that type of money in a company and having it disappear as quickly as it has from the Canadian landscape.

Do you have any sense of where this has come from and what occurred there? I know it's not your company, but as such, is there a perspective you could try to share with us on that?

9:20 a.m.

President and Chief Executive Officer, Air Canada

Calin Rovinescu

Thank you for the question.

Basically, our sense is that despite the $975 million investment, and despite the quality of shareholder they had and the lenders, Aveos was not able to be competitive when compared to other international MROs. They were not able to regularly attract third-party business for several of their business units, including, in particular, the airframe area.

They had three business units: airframe, engine, and components. Our understanding is that try as they would, several other carriers came in and found that the productivity was not adequate, which led to turnaround time that was not adequate, which meant that over a period of time these airlines decided to go elsewhere. So the business did not grow.

Contrary to some of the other business units created and sold around that time by Air Canada, this one was not able to attract adequate third-party business to build their business case, largely because of, I believe, productivity issues.

9:20 a.m.

Conservative

Lawrence Toet Elmwood—Transcona, MB

If the government were to come forward and bail out Aveos and spend all that money.... I mean, we've already had a group of private investors that have lost a lot of money through this process. I've done a few investments in my day, and I'd be very shy about thinking about investing in a company that over a period of five to seven years went through this type of investment and was not able to make it go. I mean, it's not like they started with a shoestring budget. I think that's a critical part of what we have to look at going forward here.

I also wanted to direct my comments back a little bit to where I started, and that's the employment issue. That still comes to the heart of it for me. I wonder if you have initiated contact with any companies that would be looking at facilities in Canada, specifically in Winnipeg, Mississauga, and Montreal.

9:20 a.m.

President and Chief Executive Officer, Air Canada

Calin Rovinescu

Yes, indeed. You know, it's interesting.... As I have said a few times before, there are great opportunities because of the pool of talent. We, of course, have needs. Among the companies we've had early discussions with is MTU, which is a very well-regarded engine facility and which in fact has existing facilities in British Columbia. They could certainly look at operations elsewhere if they were interested. They'd have to do due diligence, understand the business unit, and understand the opportunities there.

There are other engine companies, and potentially even some manufacturers, such as, potentially, companies like GE and Lufthansa Technik. We've had, again, very early conversations, recognizing, of course, that the failure of Aveos was sprung on us like it was sprung on the rest of the country.

9:20 a.m.

Conservative

Lawrence Toet Elmwood—Transcona, MB

Can you share with us at all the reaction to these initial conversations with these companies? Again, you have the facilities there, and you have the pool of talent there. You have two things that should be very attractive to these companies.

9:20 a.m.

President and Chief Executive Officer, Air Canada

Calin Rovinescu

Again, I've encouraged our maintenance people to get into these early discussions, but it really is premature at this stage. I think, as I said in my remarks, that I'd encourage provincial economic development departments to reach out to some of these companies that are expressing an interest to see what can occur.

In the case of Quebec, the economic development group in Quebec has already met with our maintenance people to try to ascertain what would be within the realm of the possible. I think many of these business units, but not necessarily the whole, are absolutely capable of being resurrected through different ownership by more powerful strategic players.

9:20 a.m.

Conservative

Lawrence Toet Elmwood—Transcona, MB

In some of these initial discussions has there also been talk of being able to attract some additional business, actually, to these facilities so that we actually potentially grow these facilities?

You talk about a complete restructuring of the airline industry throughout North America. I don't think that's come to an end yet. There are definitely possibilities with some of our friends and partners. We have a lot of partnerships with our friends in the south in the United States. Is that also going to be part of the consideration and part of, hopefully, the incentive package for these companies to move forward in moving into these facilities that are now abandoned?

9:25 a.m.

Conservative

The Chair Merv Tweed

I'm going to ask you to be very brief if you can.

9:25 a.m.

President and Chief Executive Officer, Air Canada

Calin Rovinescu

Very much so, indeed. Let me say that it is essential to do exactly as you say. For them to be competitive, they have to be able to rely on business from more than just one customer. I think the sine qua non to building a successful business is ensuring that they can actually attract third-party business from other North American carriers and potentially from carriers elsewhere in the world.

9:25 a.m.

Conservative

The Chair Merv Tweed

Thank you.

We'll go to Mr. Martin.

9:25 a.m.

NDP

Pat Martin Winnipeg Centre, MB

Thank you, Mr. Chair. I will share my time with Mr. Sullivan.

9:25 a.m.

Conservative

The Chair Merv Tweed

I will advise you that at 9:30 I'll stop the proceedings.

March 29th, 2012 / 9:25 a.m.

NDP

Pat Martin Winnipeg Centre, MB

Thank you, Mr. Rovinescu.

Let me just say that it is actually more in sadness than in anger that a lot of us are seeing our worst fears realized, those of us who were critical of the original privatization.

We took some comfort in the testimony of your predecessors, Claude Taylor and Pierre Jeanniot, when they sat in your place and assured people not only that maintenance meant more than line maintenance of good-to-go aircraft landing and taking off, but that maintenance meant the service overhaul work we talked about.

We also took some comfort in them saying that their maintenance shop, at least in Winnipeg, made them a net revenue profit of over $10 million a year, which in 1988 may or may not have been a lot of money, but the vertical integration of the company at the time helped them offset other costs with the money they made on maintenance.

If the Ontario Supreme Court found that you were in compliance last year, can you not agree that part of that was because you were giving 95% of your maintenance work to a Canadian company in those three locations? If you intend to farm out and contract out some of this work in the interim to the United States, you're falling out of compliance, surely, by anyone's definition. Is that not a reasonable position?

9:25 a.m.

President and Chief Executive Officer, Air Canada

Calin Rovinescu

Thank you, Mr. Martin. I'm going to do the first part first.

If the maintenance operations of Air Canada made money in 1988, obviously that was a very good thing, then, at the time. That is precisely what we had hoped the Aveos company could do, just like we hoped the same thing for Aeroplan, just like we hoped the same thing for Jazz, when these business units were sold. Again, this was not a structure designed to fail. The objective for these companies was exactly that, to make money.