Bill C-26 (Historical)
Tobacco Tax Amendment Act, 2001
An Act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco
This bill was last introduced in the 37th Parliament, 1st Session, which ended in September 2002.
Paul Martin Liberal
This bill has received Royal Assent and is now law.
Oral Question Period
February 5th, 2002 / 3 p.m.
Don Valley East
David Collenette Minister of Transport
Mr. Speaker, regional air services are very important to this government and to this parliament. That is why we have included in Bill C-26 a guarantee to maintain service for three years.
I have discussed the Magdalen Islands situation with Air Canada's President, Mr. Milton, and he has assured me that the service could be maintained, for a time at least, while we re-examine our air policy.
December 12th, 2001 / 6:50 p.m.
André Harvey Parliamentary Secretary to the Minister of Transport
Mr. Speaker, I am pleased to respond, on behalf of the Minister of Transport, to my colleague, the hon. member for South Surrey—White Rock—Langley, whom I must also thank for her work on the Standing Committee on Transport. It is, I can assure you, always a pleasure to work on that committee, because the relationships between members are good.
Over the past three months, there have been some major issues to deal with, and we have certainly not lacked work. A number of our meetings have addressed those major issues, particularly ones relating to the crisis resulting from the September 11 terrorist attacks.
My colleague is asking whether the government intends to legislate on anti-competitive acts in the delivery of domestic air services, in the interests of all Canadians. The minister's response at that time was yes, and I would like to elaborate on that.
Hon. members will recall that, in July 2000, new provisions in the Competition Act, along with new regulations, came into effect, creating a special regime for domestic air carriers. A specific offence was created for anti-competitive acts by a domestic carrier.
The regulations provide a more detailed definition of what is meant by anti-competitive acts, along with the criteria for determining them.
The amendments made to the Competition Act introduced in Bill C-26 in 2000 give the competition commissioner the power to issue temporary cease and desist orders that could put an end to actions that provoked a complaint in the time leading up to an investigation and a decision as to whether or not a case will be heard by the Competition Tribunal.
More recently, the Competition Act was examined by the House, and a number of motions to amend the act in Bill C-23, were presented to the committee last week. Two of them would make changes to the air carriers' regime.
One of the amendments would allow the competition commissioner to ask the tribunal to extend the temporary cease and desist order beyond the 80 day maximum, if the commissioner has not received all of the information necessary to allow him to determine whether or not grounds exist to make an application to the tribunal. This amendment corrects a shortcoming that was identified by the standing committee.
The second amendment allows the tribunal to impose administrative monetary penalties of up to $15 million, when ruling on a case.
These two changes are designed to demonstrate clearly that the government takes very seriously the actions that have led to complaints regarding anti-competitive acts in this country's airline industry.The changes should also prove that the government's measures will not give rise to the type of letter Air Canada sent, which led to my colleague's question.
December 12th, 2001 / 6:45 p.m.
Val Meredith South Surrey—White Rock—Langley, BC
Mr. Speaker, in December 1999 the transport committee tabled its report, Restructuring Canada's Airline Industry, which recommended a number of measures to ensure competition. The following spring when the government introduced its airline restructuring legislation, Bill C-26, it chose to ignore most of the committee's recommendations, especially those concerning competition in the industry.
Since Bill C-26 was introduced, four major airlines, Canadian Airlines International, Royal Aviation, CanJet and last month the number two airline, Canada 3000, have disappeared from the country's aviation scene.
There is even worse news. Our national carrier, Air Canada, which controls almost 80% of the market is in financial difficulty and there are fears that it may not survive without a government bailout.
The Minister of Transport on the other hand believes that Air Canada controls too much of this industry and is prepared to regulate the industry to reduce Air Canada's share of the market.
The government believes that Air Canada has participated in anti-competitive behaviour and has introduced amendments to the Competition Act that would severely punish predatory behaviour in the airline industry.
However this is not the end of the soap opera in Canada's aviation industry. On Monday the finance minister introduced a new tax on air travellers under the guise of user fees for aviation security. Under the government's plan, every domestic air traveller will have to pay a $24 security fee for a round trip. For international travellers the round trip cost will be $48.
For some travellers, for example passengers travelling on WestJet between Edmonton and Calgary or Vancouver and Kelowna, the $24 security fee will increase the cost of the ticket by 22%. When people fly from Vancouver to Seattle they can get a one-way ticket for as low as $110, but they will now have to pay an additional $24 for security; again a 22% increase in the total cost of the ticket. If those individuals fly from Seattle to Vancouver, they will have to pay an American security fee as well. That fee will be $2.50. That is correct. Under the American legislation, the aviation and transportation security act, the security fee is $5 for a round trip flight.
Why are Americans charged $5 for a round trip flight and Canadians charged $24 for a round trip flight? It is certainly not because Canada will receive a higher level of aviation security than the United States. No, it is because this government has never met a tax that it does not like and if it can be hidden as a stealth tax, so much the better.
What are these high security fees going to do to the struggling airline industry? The transport minister says that these fees will increase traffic flow because people will feel more secure.
I think it is clear that Canadians would have felt far more secure with a fee in the American range of $2.50 per flight; not $12. This fee is just another example of how the government and the minister have missed the boat on bringing real competition to the airline.
The minister quickly rejected Air Canada's suggestion of modified sixth freedom, instead claiming that he would regulate the industry. That should kill off the entire industry right away.
Therefore I ask the parliamentary secretary this. Why has the government ignored such committee recommendations as higher foreign ownership limits and Canada only carriers, and instead is planning to reregulate the industry?
December 7th, 2001 / 1:10 p.m.
Newfoundland & Labrador
Brian Tobin Minister of Industry
Madam Speaker, it gives me great pleasure to take the opportunity to participate in report stage consideration of Bill C-23. As colleagues have said, this is a bill that is a result of a great deal of very good work by members of the Standing Committee on Industry, Science and Technology. No doubt the bill has been very much improved as a result of the collaborative approach that members have taken and their commitment to working together to make this a much better bill.
The main elements of the bill comprise the prohibition of deceptive prize notices, enhanced mutual international assistance in civil competition matters, streamlining improvements to the Competition Tribunal process, broadening the scope under which the tribunal may issue an interim order, a limited right of access to the tribunal and specific measures to protect competition in the Canadian airline industry.
On the issue of private access there has been a great deal of debate. There have been a great many witnesses and those who spoke who were diametrically opposed to each other with respect to the right of private access. I will come back to that issue in just a moment and refer specifically to the amendment being proposed by the hon. member who spoke just a few moments ago on behalf of the Bloc Quebecois.
First , I want to talk about deceptive practices. The amendment to prohibit deceptive prize notices addresses unscrupulous promoters who mislead their victims into believing they have won a prize without disclosing the excessive costs associated with collecting the prize. The commissioner has testified that this is a growing problem in Canada and the bureau, quite literally, receives thousands of complaints each year.
We have all heard of Canadian seniors receiving scratch and win cards in the mail. People scratch the card and discover they have supposedly won a prize. They then follow instructions and place a telephone call in order to claim their prize. However, they are not forewarned and they cannot know or be aware that the cost of placing the call is generally greater than the value of the so-called prize.
In short, senior citizens across the country are being targeted by corrupt and unscrupulous individuals seeking to quite literally take advantage and to steal their saved, hard-earned monies.
The approach proposed in Bill C-23 sets out a balance between capturing improper conduct and the legitimate practices of the majority of the business community. No doubt there are legitimate prize contests that do in fact treat citizens appropriately.
With respect to foreign evidence gathering, Bill C-23 proposes amendments that will facilitate the gathering of evidence from foreign jurisdictions with respect to civil competition matters. This is similar to what already exists for criminal matters under the mutual legal assistance treaty to which Canada and several dozen other countries are signatories. I believe these amendments will help us do a better job in a wide variety of areas but notably with respect to these corrupt so-called competitions or prize scams.
On a more technical side, the bill proposes to streamline the tribunal process and broaden the powers available to the tribunal. First, the amendments will permit the commissioner and the person who is the subject of an inquiry to refer to the tribunal any question of law in relation to the application or interpretation of the act. This is also available to private parties that agree to refer a question to the tribunal related to part VII.1 through to part IX of the act.
Also, the tribunal will be able to assess costs. The initial position of the government was limited to the assessment of cost by the tribunal in the case of frivolous or vexatious litigation intended to hinder or delay procedures before the tribunal.
Many witnesses before the committee urged the adoption of the ordinary cost rules of commercial litigation in order to have a proper deterrence against strategic litigation. Therefore the government tabled a motion to reflect this concern. Other changes permit the tribunal through summary disposition to rapidly deal with unsubstantiated matters.
The last amendment proposed with respect to tribunal improvements addresses interim orders. We have heard that certain anti-competitive practices cause irreparable harm to the Canadian economy.
Up until now the commissioner could not apply to the tribunal during an inquiry to obtain a cease and desist order to stop anti-competitive conduct. First he had to obtain sufficient evidence to make a case before the tribunal. The problem is that these inquiries are time consuming and they are resource intensive.
The amendments proposed will now allow the tribunal, when certain conditions are met, to render an interim cease and desist order. The order will be issued for an 80 day period with the possibility of extension where the commissioner has not received the information necessary to complete his inquiry and to determine whether an application should be made before the tribunal.
I want to address the matter of private access. Under the current system, the commissioner is the only person who can submit an application before the tribunal. This monopoly has been the subject of several studies over the past three decades. Many proposals have been made to permit the right of private access to the tribunal without involving the commissioner. One of these proposals was contained in a private member's bill tabled here by our colleague, the member for Pickering--Ajax--Uxbridge, and was part of the public policy consultation.
A great deal has been said about private access, during the consultations and again during the committee hearings. There were strong views expressed and, I think it is fair to say, a division, primarily between those who belong to the small and medium sized business community and those who belong to Canada's largest corporations, those that are members of the chamber of commerce. On the one hand, there is a concern for a right to private access, and on the other, the concern that Canada not become a litigious society where strategic litigation occurs primarily for reasons of corporate warfare rather than genuine need or concern. The committee worked very hard to try to resolve both, on the one hand the request for private access, and on the other the concern about not creating an overly litigious corporate environment in Canada.
The amendments that we now see and the manner in which private access is described is very much the result of the good work of the committee and very much the result of the compromise which has been reached between the parties that had diametrically opposing views on the matter as they testified before committee. It is for that reason, because we now have, I think, a measure of harmony and a measure of agreement after a great deal of hard work, good work, by members on all sides of the House,. that I would submit that further amendments or further changes at this stage of the game may very well undo, although that would not be the intention, the consensus and the compromise that has now been reached.
There is one other matter I want to speak to during the time that is available to me and that is that the last set of amendments added to Bill C-23 are specific to the airline industry. This industry was severely affected by the tragic events of September 11. Canadian airline passenger volumes have dropped. Airlines have lost passengers to alternative tourist transportation methods. In the midst of this turbulent period, airlines in Canada and abroad are trying to continue normal operations while adjusting to the impact of the events of September 11.
All the airlines have been affected. At the time of the collapse of Canada 3000, the commissioner had sufficient evidence to issue a temporary cease and desist order against Air Canada for abusing its dominant position to the detriment of Canada 3000. Air Canada's competitors, starting with WestJet, identified shortcomings in the Competition Act that could and, they submitted, should be remedied.
The events, as we all know, attracted much media coverage and commentary across the country, especially after the news that additional amendments would be added to Bill C-23 to address the airline industry specifically. We need to remember that since the coming into force of Bill C-26 in 2000, the Competition Act has included a specific regime for domestic air transport. The amendments tabled today will close a potential gap that was created by Bill C-26 and will encourage compliance with the abuse of dominance provisions of this act.
The commissioner has indicated that based on his experience in the use of the temporary cease and desist power he obtained in Bill C-26 it was possible that the order would expire before an application could be made before the tribunal. The commissioner has an 80 day window in which to determine whether to make an application before the tribunal with respect to an abuse of dominant position by a dominant air carrier, but that determination is dependent upon having the necessary information in his hands.
The perverse effect of the rules as they currently work is that if information is not forthcoming and if in fact an investigation is not completed, the dominant carrier to whom an order is made can return to the abusive conduct the day after the commissioner's order expires. Hence, we have amendments designed to extend the cease and desist period, amendments designed to give real teeth to the powers available to the commissioner, amendments which are timely in the context of returning Canada's airline industry to a stable operation.
Oral Question Period
December 3rd, 2001 / 2:50 p.m.
Don Valley East
David Collenette Minister of Transport
Mr. Speaker, in Bill C-26, the role of Air Canada is to serve small communities for three years. This is very important for all communities.
As to the matter of loans and guarantees for Canada 3000, as I have mentioned a number of times here in the House, it was simply for Canada 3000 and the major carriers, in order to give them temporary help in the crisis.
Oral Question Period
November 20th, 2001 / 2:50 p.m.
James Moore Port Moody—Coquitlam—Port Coquitlam, BC
Mr. Speaker, it is not up to the transport minister to finance the destruction of airline competition either. Air Canada has announced plans to expand the Tango program thereby destroying competition even further in Canada's skies. We do not know who its next victim will be.
Will the transport minister amend the sections of Bill C-26 so that Air Canada can no longer launch regional discount carriers and destroy competition in the country?
Oral Question Period
November 19th, 2001 / 2:50 p.m.
Don Valley East
David Collenette Minister of Transport
Mr. Speaker, I might remind the hon. member that Bill C-26 and the former parliament did extract conditions from Air Canada to serve small communities across the country that Canadian Airlines served and Air Canada served at the time for a period of three years. This government and parliament supported the notion that these communities had to be protected. This provided a transition period for other companies to provide the service.
Certainly the competition was developing very well before September 11 but the tragic events have had an incredible effect, not only in Canada but around the world. We now have to assess the situation and determine what policy changes are required to ensure further competition.
Air Canada Public Participation Act
November 19th, 2001 / 1:15 p.m.
Val Meredith South Surrey—White Rock—Langley, BC
Madam Speaker, I find it interesting that I would agree with my colleague from Churchill when she said that one of the things which is lacking is any kind of vision from the Liberal government as to where transportation and certainly airline restructuring should be going. I must say I do disagree heartily with where she would want the Liberal government to go.
The issue is why the Liberals did not implement this policy 18 months ago when we were looking at airline restructuring under Bill C-26. In early 2000 the transport committee looked at restructuring the airline industry. Bill C-26 put in a provision to raise domestic ownership from 10% to 15%. I introduced an amendment to the bill at committee in March 2000, suggesting that the government completely get rid of any kind of limitation to domestic ownership. It is interesting that the Liberals who sat around that table, most of whom are here today, voted against that amendment, yet they will support the government's removing that same issue which my amendment dealt with when the government puts it on the floor for a vote.
The big question is what is the difference of doing it now as opposed to having done it 18 months ago? The big difference is that the timing of the Liberals is really off the mark. Eighteen months ago someone may have been interested in picking up a greater degree of ownership in Air Canada. Unfortunately, today there are not too many people around who are that excited about owning airlines. The market is not in a position where there is the same kind of interest that there was 18 months ago. The Liberals really missed the boat in that 18 months ago this would have had a much more meaningful impact on the airline industry than it will have now.
When the Liberals brought in this restriction originally it was to allow for wider distribution of shares so that not any one organization or any one person could control what used to be a national airline. Although it sounded good at the time, when we were looking at Bill C-26, we heard that in essence the restriction allowed the board of managers who owned at that time, and I understand it is not much different now, around 3% of the company's shares to make decisions that were not necessarily the best decisions for the airline.
It allowed that board of management to get into predatory practices or to make decisions to run out the competition. At that time the competition was Canadian Airlines. Today it would seem to be Canada 3000 and WestJet. It allowed the board of directors to have that kind of control over the directions the airline was taking.
Rather than determining that there was a place for Air Canada and making that place in the Canadian airline industry strong and effective, it seemed that the decisions were to get rid of the competition. Well, they succeeded. Canada 3000 is the latest victim to go under. Canadian Airlines of course was bought up by Air Canada over a year ago. A week and a half ago Canada 3000 literally ceased operations.
It is a question of, is that all the bill is going to do is allow new management? I would suggest it is a very ineffective way of dealing with that. That in itself is not going to have any meaningful impact. Once again a combination of things must happen.
The Liberal government refuses to deal with an issue which it had an opportunity to address before and has an opportunity to do so now and that is foreign ownership limits. The foreign ownership limits remain at 25%. If we were to ask the minister why that is so, he would say it is because that is the American limit. Raising the foreign ownership limit to 49% and getting rid of the domestic ownership restrictions would allow a greater pool of capital to be put into Air Canada and to help it restructure. The minister, and I would assume the government behind him, is refusing to even address the issue of raising the foreign ownership limit.
When we talk about foreign ownership limits the reason we talk about 49% is because the bilateral agreements that Canada has with other countries require that part of that bilateral agreement is that a Canadian air carrier has this agreement with another country. If we were to raise the foreign ownership component to more than 49% we would have a harder time convincing people that it was actually a Canadian air carrier.
Therefore 49% still allows Canada to have an air carrier that is a Canadian air carrier but with a greater opportunity for foreign ownership component.
I suggest that now is the time to allow Air Canada the flexibility of not only domestic ownership requirements being removed but upping that foreign ownership component.
When the committee studied the bill we were told that over 75% of the debt that is held by Air Canada is foreign owned. By not upping the foreign ownership we are also removing the ability of Air Canada to restructure its debt by transferring or converting it into equity.
If we were to up the foreign ownership we would allow that foreign debt to be converted into an equity in the airline and allow Air Canada an opportunity to look at a different way of restructuring and give it more flexibility.
I would not argue to any great degree with the NDP's attitude that Air Canada is the national carrier and is the flagship of Canada. We all accept that. However for the impression to be left that Air Canada can only function if the government takes equity and more control in the airline is a fallacy. History will show that governments do not do business well. Governments have a history of messing up some very good industries that could have operated on a profitable basis and made sure that customers were served but it was through government interference and government ownership that things were messed up, in some instances to a very large degree.
I would even go so far as to say that part of Air Canada's problem is that it was a government airline and the culture it has tends to be a government type bureaucratic culture. It is at a disadvantage when it has to work in a competitive marketplace with other air carriers. It is only when Air Canada learns how to do that, that it will survive in the international community.
I would suggest that the worst thing that could possibly happen would be for the government to get back into the ownership of Air Canada. I would think that by giving Air Canada more flexibility, which would certainly be a first step but by no means the last step, the government is allowing Air Canada a bit more flexibility in how it can restructure itself and compete in the international community.
When we start talking about government subsidization and governments throwing money into companies, I can give a couple of examples from my province of British Columbia but I will only give one. The NDP government put $380 million of taxpayer money into Skeena Cellulose Inc. to keep it operating and keep people working. All that does is defers reality. It defers the time when the company realizes that it cannot stay afloat because of bad management, where it needs to restructure and it needs to become more competitive.
Skeena Cellulose closed the doors once again. There goes 380 million taxpayer dollars that the government has no ability to collect from Skeena Cellulose.
Government subsidization or government getting back into the ownership is certainly not the way to go.
Yes, there is a role for government and that is very clear in the Canada Transportation Act. Government is there to make sure the safety of air transportation is there for consumers. It is there to make sure Air Canada does not run out all the competition. The competition bureau and the competition commissioner is there but unfortunately under the act they need more teeth. They need to have a greater ability to enforce the restrictions that are put on companies such as Air Canada when it holds a monopoly.
The issue is not whether or not we support the bill. We do support removing the limit on domestic ownership. However the bill should also have provided for an increase in foreign ownership which could be done by order in council of cabinet. I would strongly urge the Liberal government to consider doing that sooner than later. It should have learned by this example that it has to be bold and step out in a strong manner when the time is right. If it does not, it does not help to step out in a timid and weak fashion years later.
The government should be bold and increase foreign ownership along with removing the domestic ownership in Air Canada. It also should look at other opportunities to allow competition in Canadian airspace.
When it studied Bill C-26, the committee looked at things like a Canada only air carrier which could be foreign owned by British Airways or another airline. However it would operate solely in Canada so it would not need any kind of bilateral agreement. It would use Canadian crews, Canadian fuel, pay Canadian taxes and produce Canadian jobs. That is something the government should be considering.
We talked about other things when we looked at air restructuring and Bill C-26. It is appropriate to bring some of those issues back on the table. The Government of Canada should be looking at other things that could provide more competition in the airline industry and give better service to air travelling consumers. There is no reason that we cannot get into that debate and look at creative new ways of providing air service to Canadians.
What we need to do is convince, cajole and push the government into seeing the big picture on how the Government of Canada can fulfill its obligations to ensure safety and environmental issues are considered and to ensure labour and competition matters are considered without getting back into really serious ownership issues or conditional type issues.
I encourage the government to look to a much broader perspective and to be a little more creative. Hopefully we will see something in the near future that shows it is going in a direction that is for the good of all Canadians.
Air Canada Public Participation Act
November 19th, 2001 / 12:15 p.m.
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.
Air Canada Public Participation Act
November 19th, 2001 / 12:05 p.m.
André Harvey Parliamentary Secretary to the Minister of Transport
Mr. Speaker, it gives me pleasure to rise and speak to Bill C-38, which is being given third reading today.
Initially, I very much want to thank the members of this House for their co-operation in ensuring passage of this short but important bill, which was debated in this chamber at the end of October and was referred to committee immediately. I want to express my gratitude to the committee members who agreed to deal with the bill so expeditiously.
Bill C-38 has but one purpose, which is to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership by any person of voting shares in Air Canada.The bill does not try to resolve all the longer term issues relating to Air Canada that were raised during debate on second reading.
The proposed legislative changes will provide our national air carrier with one of the key tools it needs as it attempts to regain its financial health, which has been severely strained by a number of events this year. Even before September 11, it had become quite apparent that Air Canada was going to have to make some significant moves to address its weakened financial situation.
The carrier’s efforts to integrate Canadian airlines; the high fuel prices; declining passenger demand; and the severe slowdown in the economy; have all had a significant impact on Air Canada.Air Canada has stated publicly that it needs new equity and it has taken, and continues to take, measures to acquire a considerable amount of non-voting equity.
However, for those investors who may have wanted to have some say in the direction of the company, there has been the legislated limit on voting shares along with the companion prohibition on association between the holders of those same voting shares. Taken together, these measures were designed to ensure that individual shareholders could not act in concert to take control of the airline and thereby nullify the concept of a widely held company.
A 10% restriction was in place until last year, when Bill C-26, the airline restructuring legislation, came into force on July 5, 2000. Bill C-26 had in it a section that amended the Air Canada Public Participation Act by raising the individual limit on the holding of voting shares to 15%. The prohibition on association was not changed.
In the lead up to Bill C-26, both the House of Commons and the Senate Standing Committees on Transport held extensive hearings to assess the views and concerns of the airline industry in Canada. In their separate reports, both committees recommended that the limit on individual voting share ownership in Air Canada be raised to 20%. The government agreed that the limit should be raised as a means of encouraging investment in Air Canada, while still preventing a single shareholder from gaining effective control.
The government’s view, at the time, was that 15% was the appropriate threshold, and it is this new limit that was ultimately accepted and entrenched in law. In coming to the decision to remove the limit, we have been told by a number of persons that any limit can act as a disincentive to an investor with serious intentions of having a say in the management of the company.
The events of September 11, 2001 have had devastating consequences for airlines around the world. Passenger traffic has fallen significantly and short and long term financial difficulties are forecast for our entire industry. Regrettably, we have already witnessed the bankruptcy of Canada 3000, our second largest air operator.
Air Canada has been forced by the effects of the terrorist attacks in the United States to re-examine its entire operation, even more profoundly than had been previously announced. It needed to adjust the services it offered to reflect demand.
It has had to reduce costs wherever possible. This has meant extremely difficult decisions had to be made by Air Canada’s management, including laying off close to 9,000 employees.
As we know, the government did not feel it could hold the carrier to its commitment of no involuntary layoffs or relocation, which had been negotiated in the context of the acquisition of Canadian Airlines. Clearly when all other major carriers were facing similar traffic and financial problems in the wake of September 11, Air Canada could not be forced to retain all its staff on the basis of that commitment.
To reduce the layoff impacts, the company has been working with Human Resources Development Canada to ensure its employees can benefit from any existing federal programs, including work sharing to reduce layoffs.
The carrier has also eliminated some routes from its network and has scaled back on the number and size of aircraft used on other routes.
Air Canada has benefited, along with every other Canadian air carrier, from the government initiatives that were instituted to help the industry cope with the severe economic fallout from September 11.
The government provided an indemnity for third party war and terrorism liabilities for essential aviation service operators in Canada. It took this action, as did other governments around the world, to ensure our carriers would be able to keep operating.
In recognition of the closure of Canada’s airspace, the government implemented a $160 million program to compensate the more than 1,300 businesses providing air transportation for passengers and cargo and offering specialty air services.
A great many Canadian carriers have already filed their claims under the compensation package and a number of carriers have already received their initial payments, including Air Canada.
Reagan National Airport’s unique geographical location has resulted in authorities in the United States imposing more stringent security requirements than at other American airports. The requirements include aircraft size specifications, dedicated crews, and trained, armed security personnel on board flights operating to and from the airport.
In order to re-establish Air Canada’s important flying rights into that airport from Toronto and Montreal, the government authorized the presence of armed RCMP officers on Air Canada flights to the U.S. capital. It also has made the necessary provisions to allow armed U.S. air marshals on U.S. flights to enter Canada without difficulty.
The decision to amend the Air Canada Public Participation Act, at this time, is designed to provide additional assistance to Air Canada in its attempts to return to financial stability.
Let me assure the House that the board of directors of Air Canada supports this change. The matter was discussed with the chair and Air Canada has stated publicly that it supports the government’s decision.
The government is confident that this measure offers the private sector greater opportunities for investing in Air Canada that could contribute to the successful restructuring of the company.
Moreover, in the committee hearings held during the first week of November, there was not one witness who voiced objection to the elimination of the 15%. It will provide new freedom to invest in Air Canada and should attract new capital for the airline.
With the enactment of this bill, Air Canada will find itself on the same footing as the rest of the air industry with respect to individual share ownership there will be no limit except for the 25% limit on non-residents which is a very different issue.
On this point, I must emphasize that Bill C-38 will not, in any way, result in a change in the government’s position on foreign ownership. This government remains committed to ensuring that Canada’s airline industry is run in Canada, for Canadians, by Canadians. Consequently, the government’s longstanding policy of a 25% limit on foreign ownership of voting shares, which applies to all carriers and not just Air Canada, remains unchanged.
This is a bill with only three sections. The first removes the 15% limit and the prohibition on association. The second renders null any other corporate documents that addressed the 15% limit. The third deals with when the changes will come into force.
The legislative changes which will be enacted as a result of this bill are in the interests of airline passengers and all of those who believe that our national air carrier, the world’s 11th largest airline, should continue to be the great carrier that it is.
I therefore encourage members to give it swift passage on third reading.
I want to thank all the members of the Standing Committee on Transport for their extremely constructive work. While this bill has its limits, it solves a major financial problem for Air Canada's future. I am convinced that all the suggestions made in committee, both by its members and by all the witnesses that appeared before it, will give us an even better perspective on the future of Canada's transport industry.
I am convinced that the huge amount of work that will have to be done in the coming year as part of the overall re-examination of everything that relates to our transportation industry will allow us to integrate several suggestions that were made before the committee during the review of this bill, which, while being very restrictive from a financial point of view, allows us to expand our perspective regarding many issues that exist within the department. It goes without saying that we are there to make corrections as problems surface.
Therefore, I am very pleased to take part in this exercise, along with all the committee members. Incidentally, in the next few days we will travel to Washington to continue to strengthen our co-operation with the Americans regarding extremely important measures to make our fellow citizens feel safer and to make changes that will be increasingly more substantial.
Again, I thank all the members of the committee and of this House for their interest in this bill, which is substantial even though it only has three clauses and which will allow Air Canada to be financially sound.
Oral Question Period
November 9th, 2001 / 11:25 a.m.
Don Valley East
David Collenette Minister of Transport
Mr. Speaker, it is nice to stand in the House and play these partisan games while people are hurting and while travellers are stuck in places they do not want to be.
I will remind the hon. member from the fifth party that, when he was with the Alliance or Reform or the opposition, he supported Bill C-26 and he supported the current policy, and I would hope that he would have the guts to stand up and continue to support it.
Oral Question Period
November 9th, 2001 / 11:15 a.m.
Don Valley East
David Collenette Minister of Transport
Mr. Speaker, it is typical for the Leader of the Opposition. Once he is knocked off his game plan he goes to plan B, which in this case is security.
Let me come back to the earlier issue because he talked about the airline policy. I wish to remind him it was his party, his members, that supported the government on Bill C-26. We have all supported the policy that got us to a competitive state before September 11 and I think the hon. member should not stand in this place and say the contrary.
Oral Question Period
November 7th, 2001 / 2:50 p.m.
Don Valley East
Air Canada Public Participation Act
October 31st, 2001 / 4:15 p.m.
Bev Desjarlais Churchill, MB
Madam Speaker, it is a pleasure for me to rise on behalf of the New Democratic Party at second reading of Bill C-38, an act to amend the Air Canada Public Participation Act.
It was not that long ago, in fact just about 18 months, that we last debated a bill to amend the Air Canada Public Participation Act. That was the last parliament's Bill C-26 which, among other things, approved Air Canada's merger with Canadian Airlines. I think it is important that as we debate the bill before us today we remember this context. It has been about a year and a half since the government passed Bill C-26 to approve the merger of the two national airlines and I think it is now pretty safe to say it has been a disaster. The government completely dropped the ball with the merger.
One of the minister's stated objectives in Bill C-26 was to foster competition in the domestic market. He said so repeatedly in the House. What has happened? Eighteen months later we have even less competition than we had before. Royal Airlines and CanJet are no more. They have been swallowed up by Canada 3000. Two entire airlines are gone. So much for fostering competition.
The minister also said that Bill C-26 was supposed to prevent Air Canada from using predatory pricing to drive its competitors out of business. As we on the House of Commons transport committee have heard repeatedly over these months, this part of that bill has been a failure as well. The small airlines that are trying to compete with Air Canada and offer Canadian travellers some choice in the market have repeatedly been saying what we in the New Democratic Party were already saying while Bill C-26 was still before the House: that the anti-predatory pricing measures contained in that bill were toothless and completely ineffective.
This should not be surprising to the government. The commissioner of the competition bureau came before the transport committee while we were reviewing Bill C-26 and told us straight out that the bill did not give him the powers he needed to stop predatory pricing, but the Liberals ignored him. So did the Alliance and the Tories. I do not know why that happened. Maybe they just had their ideological blinders on and would not even think about the possibility that maybe a little regulation was necessary to prevent Air Canada from abusing its monopoly.
The competition commissioner said the bill would not give him the power to stop predatory pricing. My party's response was to try to do something about it. At report stage I introduced amendments to strengthen the competition bureau's ability to fight predatory pricing. The Liberals, the Alliance and the Tories opposed it and now we see the results.
The bill before us today, Bill C-38, would repeal paragraph 6(1)(a) of the Air Canada Public Participation Act. This would remove the 15% cap on ownership of shares by an individual or a group of individuals working in concert. This is a thoroughly underwhelming response to the current crisis in the airline industry. If the minister thinks that this is going to solve either the short term or the long term problems facing Air Canada and the overall airline industry, he is fooling himself.
The government argues that removing the shareholder cap will allow large investors to come in, buy the company, recapitalize it and restructure it. There are two problems with this reasoning.
First, industry and market analysts tell us that there is virtually no interest out there from investors in making any kind of major investment in failing airlines like Air Canada. This was the case before September 11 and it is even more so now given the world decline in travel and tourism since the terrorist attacks. Who does the government think is going to come along and invest all this money in Air Canada? Unless it knows something that it is not telling us, the bill would not do even a little bit of good.
The second problem with the government's reasoning is that even if removing the cap were to solve Air Canada's short term problems, which I do not believe it will, it opens up the airline to an even more long term problem down the road.
Why has the minister flip flopped from 18 months ago when arguing against the elimination of the cap? Is it simply because he sees no other way to address Air Canada's short term cash crunch? There are much better ways to address the short term necessity of keeping Air Canada in the air, which do not carry the long term costs that the bill carries. In the past few weeks, as the New Democratic transport critic I have suggested numerous alternative ways that the government could help Air Canada make it through the short term cash crunch, like tax deferrals, interest free loans, lower airport lease fees and initiating negotiations with Nav Canada to find a way to reduce the air navigation fees.
New Democrats do not want to see a direct government handout of taxpayer dollars to Air Canada, but if it is necessary we have said it should come with strings attached and should give the government a say in how the airline is restructured.
The bill addresses only the immediate short term problem facing Air Canada and it does not even do a credible job at that.
We have to look at the long term issues facing the industry. In the long term it is crucial that the government break the airline industry out of the destructive cycle it has been in for the last decade. The cycle repeats itself over and over again in every country that, like Canada, has an unregulated airline industry. First, capacity rises to unsustainable levels. This leads to massive financial losses. Then the weakest companies go under. They collapse and are downsized or the airline reduces capacity. Then the cycle repeats itself.
This is a ridiculous way for the government to let an industry as important as the airline industry operate. The uncertainty we get from going from crisis to crisis undermines the entire national economy. We can ill afford this with our economy on the verge of recession.
If the government ever wants to end this cycle it has to drop the passive, minimalistic approach the transport minister is suggesting. It has to stop responding on a crisis by crisis, patchwork and piecemeal basis and look at some modern regulation to limit the growth of capacity. I am not talking about the old fashioned regulation of every route and every fare. I am talking about limited, targeted regulation to control the growth of capacity: a modern regulatory regime.
For the good of our airline industry the minister needs to take off the ideological blinders telling him that all regulation is bad and realize that total deregulation is just as bad as total regulation. There is a middle way and that is what he should be aiming for.
Although I do not believe this extinction of the shareholder limit will be the saviour of Air Canada or do the job of stabilizing industry, my party will not delay the bill going to committee. The transport committee needs to review the situation and, quite frankly, I hope we will see investors come forward. However, more must be done to stabilize our entire airline industry. Had one or two shareholders owned Air Canada, where would they be today? Would they have survived the huge losses of the past six weeks? Will these present changes ensure service to all regions of Canada? I think not.
My colleague from the Bloc has rightfully criticized the government for its approach to offering loan assistance. The government has said that if the airline restructures and lays off workers it will get assistance. The government has abandoned smaller rural and northern communities by not holding Air Canada to the merger agreement.
I also want to join my colleague from the Bloc in the disappointment I feel that the Alliance Party refuses to accept our bilingual nation.
Much more needs to be done to stabilize the airline industry. It is time to realize that the strategy of the last decade has not worked. We need to look at alternative methods. I look forward to having witnesses appear before transport committee and to coming up with a resolution that I hope will truly, once and for all, give some stability to our airline industry.
Air Canada Public Participation Act
October 31st, 2001 / 3:35 p.m.
James Moore Port Moody—Coquitlam—Port Coquitlam, BC
Madam Speaker, it is my pleasure to stand in favour of Bill C-38, an act to amend the Air Canada Public Participation Act. This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian air carriers with respect to the sale of its shares.
For the first time in Canadian history Canadians can buy, sell and trade as many Air Canada shares as they want, just as if they were shares of any other Canadian company. Bill C-38 represents a marked departure from the traditional thinking of Liberal governments.
Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. It has been the subject of much discussion in the House since that time. 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 be no longer an agent of the crown. It remained a crown corporation and cabinet retained the power to appoint its directors.
In 1987 the Progressive Conservative government passed the National Transportation Act. It 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.
Paragraph 6(1)(a) of the Air Canada Public Participation Act limited the number of shares that could be owned by a single shareholder to 10%. This was done to ensure that Air Canada stocks would be broadly held by as many Canadians as possible. The section also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International.
Members must not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988. This was nearly five months after the January 1, 1988, birth of Canadian Airlines International from the fusion of all Air Canada's pre-1980 domestic competitors, Pacific Western Airlines, Transair, Nordair, Quebec Air, Eastern Provincial Airways and Canadian Pacific Airlines, into a single entity.
In 1988 Canadian Airlines parent company was governed by Alberta's Pacific western airlines act which set a 4% limit on the number shares any one group could control. In fact the 10% share limit set in the original Air Canada Public Participation Act was actually more liberal than the 4% limit set in the act governing Canadian Airlines.
Bill C-26 raised to 15% the number of shares that could be held in Air Canada following the takeover by Air Canada of Canadian Airlines in 2000. We are finally discussing whether to give Air Canada some of the same rights as other companies some 64 years after parliament first created a national airline.
If we were to believe government members, Bill C-38 would put Air Canada on a level playing field by striking down paragraph 6(1)(a) of the Air Canada Public Participation Act. Bill C-38 ostensibly puts Air Canada on that level playing field with all other airlines with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone it should be supported, and the official opposition supports this legislation.
Bill C-38 does little to address the short term financial woes of Air Canada that led to thousands of layoffs at Air Canada, including the laying off today of 500 to 700 pilots. I will explain.
First, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller. Second, no single shareholder is currently restricted by the present 15% limit, that is no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of this section. Third, if people were not inclined to buy Air Canada stock before the legislation the fact that they can buy more of it is simply not an incentive.
There are only two ways that Bill C-38 would financially benefit Air Canada. First, some of the debt which the Caisse de dépôt et placement holds would have to be converted into shares. The caisse currently owns roughly 9% of Air Canada stock and converting its debt into shares would give the caisse roughly 18%.
First, this move, based on a $2.50 price for shares 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 voting shares. Second, an individual or group would have to take control of Air Canada with a clear plan to restructure the company. This would not be enough unless the restructuring plan were to meet the approval of the transport minister and be acceptable to Air Canada unions.
The bill is essentially political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's plea for bigger and bolder policy moves such as the implementation of permanent new security regimes on the ground that are not only better but faster and more streamlined, placing air marshals on planes, and putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberation.
Bill C-38 requires us to examine the Air Canada Public Participation Act. While I am in favour of striking down paragraph 6(1)(a) of the act we should not stop there. We should ask ourselves a basic philosophical question. As we enter the third millennium should the government continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns?
Why should paragraphs 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada to maintain facilities and/or offices in certain cities? Surely these decisions are the responsibility of the company's shareholders and board of directors.
Why should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable to Air Canada and no other Canadian airline? If the Official Languages Act applies to Canada's airline industry it should do so in the Official Languages Act and not in the Air Canada Public Participation Act.
It hardly seems fair to hold Air Canada to a higher standard than Toronto based Canada 3000, Calgary based WestJet or Montreal based Air Transat.
Why should paragraphs 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? Paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. The transportation minister should know that there is already 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 Canada or a province, that is controlled in fact by Canadians and of which at least 75% , 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 that 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 an airline's status as being Canadian. Paragraph 61(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic air service.
Section 69 only allows two types of carriers to operate international air service: Canadian air carriers and non-Canadian air 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, Canada 3000 and Air Transat were to allow foreigners to acquire more than 25% of their voting shares they would no longer be Canadian. They would lose both their ability to serve domestic routes within Canada as well as international routes between Canada and another country. In essence, they would lose the value of any potential buyer. This restriction is utterly redundant.
Given the restrictions against foreign ownership already present in the Canada Transportation Act, paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. Even if there were no prohibitions in the Canada Transportation Act, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because of the convention on international civil aviation, more commonly referred to as the Chicago convention. It sets out the basis of international commercial aviation.
Internationally scheduled commercial air traffic is made possible through bilateral agreements in which governments exchange air rights for the benefit of their respective carriers. Each country can designate a national carrier on any international route.
Air Canada and Air France fly between Montreal and Paris. Air Canada and Korean Air Lines fly between Vancouver and Seoul. Air Canada and Cubana Airlines fly between Canada and Cuba. Only in the most exceptional cases will we find an airline flying between two cities where 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 airline's home base. 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.
If Americans or people of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes in those countries even without the safeguards of the Canada Transportation Act. 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.
Air Canada as an airline would cease to hold value for the investors who just purchased it without the ability to serve international routes. For this reason alone its board of directors would never allow foreigners to own a majority of Air Canada's stock.
We only need to look at the arrangement that American Airlines had with Canadian Airlines in 1999. Passengers were flown from the U.S. to Vancouver and then from Vancouver to Asia on Canadian Airlines jets. The reason for this was that American Airlines had only been granted routes to Japan from the U.S. and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian service provided by Canadian Airlines was based on bilateral agreements between Canada and the Asian countries concerned. American Airlines would have literally killed the goose that laid the golden egg had it taken control of Canadian Airlines.
I agree with repealing paragraph 6(1)(a) of the Air Canada Public Participation Act. The official opposition will support Bill C-38. However, having carefully examined the Air Canada Public Participation Act, we see no reason not to repeal the entire act itself.
It has at least four irrelevant sections. Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the past 12 years since the act has been passed. Section 11 deals with the continued appointment of 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 section has also been spent.
The act also discriminates against Air Canada in four specific areas. Paragraph 6(1)(a) limits share ownership of an individual or group to 15%. Paragraphs 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. That is mandated by the government and is not a decision of the company. That is mandated against Air Canada and not levied against other businesses. This is a government regulation that retards the economy.
Paragraphs 6(1)(b) and (c) restrict foreign share ownership in Air Canada. Section 10 makes the Official Languages Act applicable only to Air Canada and not other carriers.
The transport minister says that because the head office is mandated to be in Montreal it somehow adds virtue to a discriminatory policy which handcuffs Air Canada but does not handcuff other carriers. He says that it is in the national interest. It is in the national interest if it is in Montreal but not if it is in Calgary or Vancouver. That is not in the national interest; Montreal is the national interest.
It is a rather perverted approach to public policy. Why does the government not just leave companies alone to compete on an equal and level playing field in the free market? It might try it once. It does wonders.
If the government is intent on putting Air Canada on a level playing field with its domestic competitors it can do this not only by removing the share limitation in paragraph 6(1)(a) of the act but by repealing the entire act itself. This is what the official opposition believes the government should do.
I intend to call witnesses before the standing committee to examine the practicalities of repealing the entire act and the best ways to put Air Canada on an equal footing with its domestic competitors while respecting the other priorities now contained in the act.
If the transport minister would like to come before the committee and tell us why Montreal is more a Canadian city than Calgary, Hamilton, Toronto or Edmonton, he is free to do so. I encourage him to do so. It would be the death of the government if he did that.
The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers. Aviation law should apply to all Canadian carriers equally, not just to Air Canada.
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 Air Canada employees 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 and 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 and finally create the level playing field that people on both sides of the House keep saying they want.
I will be supporting Bill C-38, but I will also be introducing at committee amendments aimed at doing what Bill C-38 should be doing, which is putting Air Canada on a level playing field with its domestic competitors for the first time in its 64 year history; transport minister be damned.