An Act to amend the Air Canada Public Participation Act

This bill was last introduced in the 37th Parliament, 1st Session, which ended in September 2002.


David Collenette  Liberal


This bill has received Royal Assent and is now law.


All sorts of information on this bill is available at LEGISinfo, an excellent resource from the Library of Parliament. You can also read the full text of the bill.

Message from the SenateThe Royal Assent

December 18th, 2001 / 5:05 p.m.
See context

The Deputy Speaker

I have the honour to inform the House that when the House went up to the Senate chamber the Governor General was pleased to give, in Her Majesty's name, the royal assent to the following bills:

Bill C-6, an act to amend the International Boundary Waters Treaty Act--Chapter No. 40.

Bill C-24, an act to amend the Criminal Code (organized crime and law enforcement) and to make consequential amendments to other acts--Chapter No. 32.

Bill C-31, an act to amend the Export Development Act and to make consequential amendments to other acts--Chapter No. 33.

Bill C-32, an act to implement the free trade agreement between the Government of Canada and the Government of the Republic of Costa Rica--Chapter No. 28.

Bill C-34, an act to establish the Transportation Appeal Tribunal of Canada and to make consequential amendments to other acts--Chapter No. 29.

Bill C-36, an act to amend the Criminal Code, the Official Secrets Act, the Canada Evidence Act, the Proceeds of Crime (Money Laundering) Act and other acts, and to enact measures respecting the registration of charities in order to combat terrorism--Chapter No. 41.

Bill C-38, an act to amend the Air Canada Public Participation Act--Chapter No. 35.

Bill C-40, an act to correct certain anomalies, inconsistencies and errors and to deal with other matters of a non-controversial and uncomplicated nature in the Statutes of Canada and to repeal certain provisions that have expired, lapsed or otherwise ceased to have effect--Chapter No. 34.

Bill C-44, an act to amend the Aeronautics Act--Chapter No. 38.

Bill C-45, an act for granting to Her Majesty certain sums of money for the public service of Canada for the financial year ending March 31, 2002--Chapter No. 39.

Bill C-46, an act to amend the Criminal Code (alcohol ignition interlock device programs)--Chapter No. 37.

Bill S-10, an act to amend the Parliament of Canada Act (Parliamentary Poet Laureate)--Chapter No. 36.

Bill S-31, an act to implement agreements , conventions and protocols concluded between Canada and Slovenia, Ecuador, Venezuela, Peru, Senegal, the Czech Republic and Germany for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income--Chapter No. 30.

Bill S-33, an act to amend the Carriage by Air Act--Chapter No. 31.

Carriage By Air ActGovernment Orders

November 20th, 2001 / 3:45 p.m.
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Canadian Alliance

James Moore Canadian Alliance Port Moody—Coquitlam—Port Coquitlam, BC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 1:45 p.m.
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Jocelyne Girard-Bujold Bloc Jonquière, QC

Madam Speaker, I am pleased to speak today to Bill C-38. Before I begin though, I would like to congratulate the member for Argenteuil--Papineau--Mirabel for the excellent work that he has done on this bill.

I listened intently to his speech this morning, and I must say that it contained all of the elements the government needs to ensure that this bill really helps the airline industry in Canada and particularly in the regions.

I am pleased to speak to Bill C-38, an act to amend the Air Canada Public Participation Act. This issue of restructuring the industry in Canada has been discussed at great length for over two years now.

In fact, in the summer of 1999, the sale of Canadian Airlines led to a power struggle between Air Canada and Onex for the purchase of this company, which was in dire financial straights. After giving his implicit support to Onex, the transport minister had to backtrack when the takeover bid was ruled illegal by the Superior Court of Quebec.

At that time, the basis for the ruling was the percentage limit of capital shares in Air Canada that could be held by a Canadian investor. Just one year ago, the Minister of Transport raised the limit from 10% to 15%. Under the current bill, the government would remove the ceiling for this figure.

It must be said that this proposal would not be without consequences. In fact, removing the 15% ceiling would pave the way for the private sector to invest even more heavily in air transportation and the industry would find itself in the hands of financial sharks with no sense of the importance of offering quality.

In my opinion, the current quality of air service offered to the regions of this country, but more specifically to Quebec, should serve as an alarm bell for the federal government. Remember now that Baie-Comeau no longer has direct air service to Quebec City. Business people who want to travel on Air Canada's regional carrier must first go to Montreal, before boarding a flight to Quebec City. How crazy is that? It is completely unacceptable.

Given the situation, business people on the north shore would do better to walk to Quebec City. It would probably be faster than taking the plane.

Such a situation also exists in Gaspé and in the lower St. Lawrence area. Regional air services have disappeared. This is a paradox in the 21st century. It seems to me that this should be an era of modernity and of easy travel. But no, people in the regions are 50 years behind the times now. If they want to travel out of their region in future, they will have to take the bus. As Michel Vastel put it a few weeks ago in an editorial in which he was taking a few pot shots at this government, “Welcome to the 21st century!”

My comments on Bill C-38 are therefore understandable. By removing the 15% limit, we could be making the present situation even worse. The only way to try to improve this potentially disastrous situation is to strongly urge the federal government to impose some very strict conditions.

The Bloc Quebecois, through the hon. member for Argenteuil--Papineau--Mirabel may therefore approve of removing the ceiling, but only if amendments are made and very strict conditions set.

This is a difficult challenge, but we are offering Liberals the chance to correct past mistakes. They can no longer be counted on the fingers of just one hand. I need only mention the dreadful quality of French in this country's airline industry. Moreover, there seem to have been a good many reprimands to the government about this by the Commissioner of Official Languages, Dr. Dyane Adam and her predecessors.

This is just one more source of government tax revenue.

I would also like to mention the federal government's unfair treatment in terms of financial assistance for the smaller airlines that operate in the regions.

This morning, my colleague mentioned to me that it was the Parliamentary Secretary to the Minister of Transport, the member for Chicoutimi—Le Fjord, who spoke on behalf of the government. He said that he was pleased that Air Canada was in the process of getting its business in order, cutting short haul flights within the regions.

I come from the Saguenay—Lac-Saint-Jean, the same region as my colleague, the member for Chicoutimi—Le Fjord. I think that we have a right to the same service we had in the past. When Air Canada received permission to purchase Canadian Airlines in 1999, it assured us that it would increase the number of flights in the regions. Air Canada did the opposite.

In our region, we pay $800 to $850 for a return flight, Bagotville-Ottawa. I could go to Europe or Florida, return, and both would cost less. We have a right to the service promised by this company in 1999. Today, the Parliamentary Secretary to the Minister of Transport says that they are in the process of putting their house in order; they are in the process of cutting flights in the regions.

The Saguenay—Lac St. Jean region does not deserve this sort of treatment from the government. I remind the House that, a few weeks ago, the Minister of Transport decided to help out the five major carriers: Air Canada, Air Transat, Sky Service, WestJet and Canada 3000, by giving them interest-free loans.

But such a policy is extraordinarily unfair. By giving financial assistance to these major carriers, the Minister of Transport has put the last nail into the coffin of small carriers. Let us not forget that the major carriers will be able to use this money to engage in unfair competition with small regional carriers, such as Air Alma, in my region of Saguenay—Lac St. Jean.

I read an article this morning in Le Soleil , in which the Minister of Transport said that the competition commissioner must be given more power. When he appeared on CTV yesterday, he talked about giving more power to the competition commissioner. But there is no need to do that because there will be no more competition, no more regional carriers.

I think that telling the people in the regions not to worry, that the government is going to give the competition commissioner more power, is just another way of misleading them.

This is an extremely important issue because jobs are at stake. Workers deserve to get back their fair share of what they are paying in, of what they are entitled to, from the government. This is completely ridiculous.

Last week, I asked the Minister of Transport a question. Since Canada 3000 had gone bankrupt, he had promised it a loan guarantee. I asked whether he could give the remaining $45 million to the regional carriers so that they could get back on their feet too.

But he did not even answer. So it is clear that this bill will not solve anything. It will make matters worse. It will not make Air Canada a better administrator. It will simply prevent the regions from obtaining the services to which they are entitled.

I think that the Bloc Quebecois will support this bill, but I hope that the government will include in it the extremely important conditions we put forward.

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 1:35 p.m.
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Robert Lanctôt Bloc Châteauguay, QC

Madam Speaker, we are dealing with Bill C-38, which we are told is an important bill. When one takes the time to read it, however, and it does not take long, it is of a rare simplicity. In fact, it is so simple, one wonders how much it is justified.

One cannot be opposed to it, knowing how affected the workers in the airline industry are. One cannot do otherwise than to say yes to such a bill. Yet, what will the repercussions of such inaction be? This bill alone will not help this industry, which is so much in need of help, particularly since September 11, 2001.

We have no choice but to look at how the private sector might invest in its capital stock to see how it will be managed. At the present time, an individual or company may own 15% of Air Canada's stock. Will removing this limit improve the situation of shareholders? Will it be the same, or worse?

Quite frankly, I do not think there will be huge numbers of investors rushing to invest in an industry like the aviation industry, especially since September 11. They are trying to convince us that this bill is of such importance that it will solve the problems. My point of view is that the problem will not be solved if there is no direct investment in the airline or aeronautical industries.

One needs only think of Pratt & Whitney in Quebec. One needs only think of all the job losses directly linked to it, not only in the aftermath of September 11, but also because of poor management by the board. Is this board going to be changed by changing the number of shareholders? Who will monitor this? For what purpose?

There will perhaps be no other choice but to rationalize. Those who are going to invest are certainly all involved in high finance and will at some point expect the company to break even and also generate a profit. How will this be done? Obviously, all a board of shareholders could require of an executive board is to rationalize. Is this what will really happen? Is this good for the men and women who work for Air Canada?

Unions are telling us that they will accept this decapping. They have no choice. The government has no other idea. It is not directly investing the money that is required. It is simply saying that it will ask the private sector if we can privatize even more and put new money into the industry. What is the government doing right now?

Madam Speaker, I forgot to inform the Chair that I will be sharing my time with the hon. member for Jonquière. I appreciate the fact that she is here.

Will this new investment with new money really take place? I am not sure, particularly since the government just told us that it would deal with this as the situation evolved.

We all saw how things went with Canada 3000. It was requested that the necessary money be invested directly, while knowing full well—at least I hope so—what the situation was with Canada 3000. A short time later, Canada 3000 went bankrupt. The government did not put money directly into that company. Yet, workers everywhere in Quebec and in Canada are losing their jobs.

What is the government waiting to protect workers' jobs? As we know, Air Canada employs a number of people in Quebec. Why not invest, why not be proactive and create a new situation? The government has several billion dollars in surpluses, but it hesitates to invest directly in our airline industry, an industry that Canada and Quebec greatly need.

During various oral question periods, we asked the government to invest directly in Quebec's regional companies to support the airline industry and these airline companies. The government flatly rejected our request, saying that it would help major carriers instead. Some help.

Canada 3000 is bankrupt and has not yet received any money. The government is talking about $160 million, but I think this is for part of the loan guarantee, for new money. The government has billions of dollars in surpluses. It must protect that airline and that industry.

These amendments must not set the stage for the cap on foreign investment to be lifted in future. I know that this is not mentioned in Bill C-38, but the role it gives the government does open the door. It sees the bill as a way to allow greater privatization.

What if shareholders are not interested? What will they do? I hope that they will not lift the 25% cap on foreign investment in Air Canada. That is a risk. I am not saying that this is the direction in which the government is heading, but merely that I hope that this is not its goal.

This money must be invested directly. There are billions of dollars in the surplus. We are told that the government is waiting for the budget before deciding where to spend them but, in the meantime, the airlines are in trouble, so much trouble that some of them are going bankrupt and others are looking for ways to cut costs. Who is going to foot the bill? Once again, Air Canada workers.

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 1:05 p.m.
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Judy Wasylycia-Leis NDP Winnipeg North Centre, MB

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 12:40 p.m.
See context


Mario Laframboise Bloc Argenteuil—Papineau—Mirabel, QC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 12:15 p.m.
See context

Canadian Alliance

James Moore Canadian Alliance 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 ActGovernment Orders

November 19th, 2001 / 12:05 p.m.
See context

Chicoutimi—Le Fjord Québec


André Harvey LiberalParliamentary 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.

Air Canada Public Participation ActGovernment Orders

November 19th, 2001 / 12:05 p.m.
See context

Westmount—Ville-Marie Québec


Lucienne Robillard Liberalfor the Minister of Transport

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

(Motion agreed to)

Business of the HouseOral Question Period

November 8th, 2001 / 3 p.m.
See context

Glengarry—Prescott—Russell Ontario


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

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

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

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

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

Airline SecurityOral Question Period

November 8th, 2001 / 2:45 p.m.
See context

Canadian Alliance

James Moore Canadian Alliance Port Moody—Coquitlam—Port Coquitlam, BC

Mr. Speaker, this Sunday will mark two months since the tragic attacks in the United States where commercial airliners were used as weapons.

In the past two months the House and Senate transport committees have studied three transport related bills: Bill C-34 to create a transportation tribunal, Bill C-38 to amend the Air Canada Act and Bill S-23 to update an airline liability convention passed in 1929.

Airport security is the top priority of the industry right now. Yet no legislation at all has come forward from the transport minister. When will the transport minister show leadership and table legislation to get people flying again so we can have first tier security in our skies?

Air Canada Public Participation ActGovernment Orders

October 31st, 2001 / 5:20 p.m.
See context

Canadian Alliance

Gary Lunn Canadian Alliance Saanich—Gulf Islands, BC

Mr. Speaker, I want to speak to Bill C-38 in which the government is finally acknowledging that it is willing to raise the foreign ownership restriction from 15% to 45%. I compliment the member for South Surrey--White Rock--Langley. She has been a leader on the issue and has fought for these changes ever since I was a member of parliament.

If the government had taken leadership on the issue years ago the airline industry may not be in the mess it is in right now. It is important to emphasize that. Canada's airline industry is in a disastrous state. The government is scrambling and grasping at straws to make the changes that will somehow pull it out of the ground.

The government must take responsibility for the mess we are in today. It was directly involved with the Canadian Airlines and Air Canada deal. Who knows to what level it was involved? It is important that this be stated here in the House.

We in my party support the bill. I cannot overemphasize the amount of work my colleague the member for South Surrey--White Rock--Langley has done on the issue. She has been a leader. She saw the problem when the airline industry was first in trouble. She did virtually everything in her power to get them to come to their senses.

It is important to emphasize that this is not a result of the events on September 11. There is no question that the attacks had a compounding effect, but the industry was in dire straits prior to that. Air Canada was losing something like $1.5 million a day and the government refused to move. I wish the government had done something sooner.

I am not convinced the bill would save Air Canada. Air Canada has huge problems. I have spoken to people directly involved in the industry who are not convinced Air Canada can survive. Technically it should be bankrupt now.

I have stated before on the record that I do not believe bailouts at the cost of the taxpayer are the solution. It is one thing to provide Air Canada with direct compensation as a result of September 11. However to start bailing it out with the billions of dollars it is asking for is not the answer. There must be changes to Air Canada. There must be changes to the way the airline is managed. It is a disaster.

We in the Canadian Alliance will be supporting the bill. I am pleased to stand and support legislation that the member for South Surrey--White Rock--Langley might well have drafted herself. She is the one who brought the issue to the forefront. She is the one who has advocated it for so long.

It is a pity the government would not listen to her. It is a pity the government would not listen to the good ideas of a member of parliament who knows the industry inside and out, who has many airline workers in her riding and who has followed the issue. It is a pity the government would not put the future of airline industry employees who face losing their jobs ahead of politics. Unfortunately the government only started listening at the 24th hour. It is now uncertain whether this can be saved.

We in my party will be supporting the legislation. It is about time the government woke up.

Air Canada Public Participation ActGovernment Orders

October 31st, 2001 / 5:15 p.m.
See context

Canadian Alliance

James Moore Canadian Alliance Port Moody—Coquitlam—Port Coquitlam, BC

Mr. Speaker, I wanted to come back to the House after my speech and clarify some things that were said about my speech within the context of the debate on Bill C-38.

It was said by the hon. Bloc member that I was somehow anti-French and anti-Quebec because I dared say that the Air Canada Public Participation Act is not the most efficient means by which to enforce official bilingualism in Canada.

By mandating that only Air Canada must enforce the Official Languages Act and not the other carriers, we are doing a disservice to the principle of official bilingualism rather than a service to it. That is the only point I was trying to make. The member dared to stand in this place and say I am anti-Quebec and anti-francophone because I dared to point out that principle and enforce the view that official bilingualism is an appropriate principle for Canada.

I would inform the hon. member that my mom taught French immersion in British Columbia. My sister teaches French immersion in British Columbia. I am a product of French immersion. When I was 12 years old I lived in Quebec for a month in a community that was totally francophone. I did so because I wanted to learn the language and understand the country better by being exposed to literature in both official languages.

I would say to the Bloc member that there are a lot of British Columbians who want to learn both official languages to understand the country better. However enrolment in French immersion classes is way down because of the Bloc Quebecois and separatist movements.

My family has done more for the country by advancing official bilingualism and the French fact than the Bloc Quebecois has ever done. For the hon. member to dare stand in this place and say I am opposed to official bilingualism is absolutely offensive.

I would encourage the hon. member to withdraw the remarks because the official opposition and I are in favour of official bilingualism. That sort of smear is totally inappropriate and undignified for the French language in Canada.

Air Canada Public Participation ActGovernment Orders

October 31st, 2001 / 4:25 p.m.
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Canadian Alliance

Val Meredith Canadian Alliance South Surrey—White Rock—Langley, BC

Madam Speaker, I am pleased to be debating the second reading of Bill C-38. It is with a degree of astonishment that we find ourselves addressing the issue 18 months after the fact.

The issue of public ownership and domestic ownership in Air Canada did come up when we were reviewing the restructuring of the airline industry 18 months ago. One of the dissenting opinions of the Canadian Alliance Party and myself was that this limitation of 15% was not a good thing and should not be in the legislation. We said at that time, and I repeat it now, that the 15% limitation in ownership hindered Air Canada from dealing with the issues rather than helping it. The government was urged at that time to remove the controls on ownership to give Air Canada the ability to raise capital in order for it to be able to afford the debt it was taking on with the acquisition of Canadian Airlines.

At that time the government said, as the minister did today, that it was not necessary to remove the limitations, that it was all fine and well and Air Canada could move ahead without it. Today I heard the minister say the same thing about foreign ownership, that it is not important at this time to remove the limit or raise the limit from 25% to 49% because all is well and Air Canada, with this amendment to the legislation, would be able to garner the capital that is necessary.

I would suggest that now it is time for the government to look seriously at the issue of Air Canada, at its financial position, the issues and the problems it has to deal with, and the government should realize that now is not the time for government to put on restrictions. Air Canada has an enormous debt load. Airlines cost big dollars, not small dollars. Air Canada will require a large amount of money, not a small amount of money, in order to remain afloat.

I would suggest that today the government is showing the lack of foresight that it showed 18 months ago when it would not remove the government restrictions to ownership in a way that would have allowed Air Canada to reach the maximum possibilities of getting fresh capital into its company.

It is interesting to see that Air Canada is now in favour of these changes, that Air Canada is now willing to look at removing this 15% control of domestic ownership and raising the foreign ownership limits from 25% to 49%. It is interesting because 18 months to two years ago it was this restriction on domestic ownership that caused the other bidder, Onex, to remove itself from the merger of Canadian Airlines and Air Canada. It was this limitation on domestic ownership that forced the government to deal with the bid that Air Canada had put on the table. This control on domestic ownership allowed Air Canada, I would suggest, to perhaps make an unwise decision to fight the takeover bid that Onex had put on the table.

Having said that, let me say that the problems Air Canada is facing are not due to September 11. September 11 did not help, but certainly the problems did not originate with the horrific events of September 11. The problems that Air Canada is facing have been ongoing.

There was an article in The Economist of July 7, 2001, obviously before September 11, that outlined in great detail the problems in the airline industry, the problems with the downturns in the economy, the fact that air travel fell in the United States and Europe for the first time in decades in May, and the fact that on any given day, at that time, four million people around the world were taking to the air and that at any one moment in time a quarter of a million people were in flight. However, bad weather, congestion on the runways, hamstrung air traffic control, computer failure and the late arrival of incoming flights all turn air travel into a lottery.

It was quite apparent before September 11 that there were major problems in the airline industry. Air Canada is one of the larger players. I understand it is the 11th largest airline in the world but that just means that its problems are perhaps larger than some of the smaller airlines. Air Canada has been having difficulties, to say the least, in merging the two workforces and cultures of Canadian Airlines and Air Canada. It is because of these problems that it ended up in a dire situation that preceded September 11.

We cannot deny that the events of September 11 had an impact on the airlines but I suggest that the government's decision to remove the domestic controls on ownership is a sorry response to the issue Air Canada is facing. The government has shown a complete lack of vision as to where the airline industry should be going. Had it had some vision of how Canada could have a strong national airline with support from other airlines and that all those pieces could work together, perhaps a lot of this angst would have been sorted out before now. Unfortunately, the government has not shown that kind of vision. It had a knee-jerk reaction to emergency situations that arose at the time.

The government had a knee-jerk reaction when Canadian Airlines was going under. Now that Air Canada finds itself in financial difficulty, again it has a knee-jerk reaction. Canada 3000 found itself in financial difficulties and there was yet another knee-jerk reaction. I think Canadians would like to know that their government has given some thought to the future of the airline industry and how their expectations will be met. We have not seen that from the government.

I would argue that there is surely room for one national carrier in Canada. Surely there is enough business. I know in this room alone there are 301 people who end up flying somewhere. Surely there is enough business to support one national carrier, but it should not be at the exclusion of all regional carriers. We should not allow this one national carrier to put every other carrier out of business.

When Air Canada was given some support, as were other airlines, the federal government gave it $160 million to supplement or compensate it for its direct costs of September 11. What was Air Canada's response to that? It immediately started Tango. What is Tango? Tango is another lower cost airline that is in direct competition to Canada 3000. When the federal government guaranteed a loan of $75 million to Canada 3000, what did Canada 3000 do? It immediately lodged a complaint with the competition commissioner against Air Canada.

I would like to think and I think Canadians would like to think that there is a long term plan, that the government does not just give money to airlines to get into a fight with the other competing airlines. That seems to be what is happening. Even though Air Canada is financially vulnerable right now, it is planning to create another subsidiary airline to go into direct competition with WestJet.

Why is the government not encouraging through measures one strong national airline that has a role to play and encouraging regional airlines and low cost airlines which also have roles to play? Why would we encourage or allow a dominant air carrier to take out its competition?

Let me get back to Air Canada and the amendment to the Air Canada Public Participation Act which removes the controls on domestic ownership.

Air Canada's board of managers own less than 3% of the company's shares. They are very small shareholders. When we are talking about running a big corporation, being a small shareholder creates a problem because the decisions that are being made need to consider the shareholders' that the board represents. If the board of managers own a very small share of the corporate shares, perhaps the decisions being made are not being made in the best interests of the shareholders, looking at the bottom line.

My colleague from the NDP would probably say that it is time to stop worrying about the bottom line, that it is time for the government to support Air Canada and perhaps take over ownership again, but I do not think that is what Canadians want.

I think Canadians are looking for an airline that has the capacity to operate without government interference and one that has the capacity to restructure its debt and move it into equities. I think they want a company that can take advantage of opportunities and operate in the private sector without looking for taxpayers to bail it out. I think that is possible. If there were a larger group of shareholders with more say and who had higher investments in the company, perhaps decisions would be made in such a way that the company could move forward.

I was a little concerned when Air Canada's largest shareholder, la Caisse de dépôt et placement, made a huge profit by selling short on Air Canada's stock during the downturn and post-September 11 when share value was dropping like a rock. In other words, it was profiting by the decline in value of Air Canada.This company then wanted Canadian taxpayers to bail it out. How can anyone explain to taxpayers that the largest shareholder is making a profit on the devaluation of the stock and yet turn around and expect Canadian taxpayers to bail it out?

I think Canadians would like to see the federal government remove the restrictions on domestic ownership and raise foreign ownership restrictions from 25% to 49%. This would allow Air Canada to restructure in such a way that its debt would be put into equity. Perhaps the largest shareholders, maybe la Caisse de dépôt et placement, would buy more shares and show their interest in making this company work. Perhaps some foreign investment could be brought in to get new capital to make it work. This is not a question of losing control. If ownership remains under 50% then the ownership is still Canadian. This would allow Air Canada to get the necessary influx of capital to function in the real world without constantly going to Canadian taxpayers for subsidies. I think it is possible for Air Canada to compete given a fresh approach and new capital.

We in the Canadian Alliance will be supporting the legislation. It is 18 months overdue which just shows that the government is, as always, slow in doing the right thing.

Air Canada Public Participation ActGovernment Orders

October 31st, 2001 / 4:15 p.m.
See context


Bev Desjarlais NDP 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.