Industry Committee on March 11th, 2021

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair, and thank you to all our witnesses for their input.

As I look at the aerospace industry, we've talked about what I characterized as the three dimensions: civil aviation, defence and space. Today we heard a lot from organizations and companies that are in civil aviation, both for the short term and the longer term, on what needs to be done. I'd like to spend a little bit of time, if I may, on the defence side.

I'd like to ask Airbus Helicopters Canada what the short-term and long-term strategies should be around supporting this segment.

Specifically in your comments, Mr. Charette, you talked about defence procurement strategies, about fair competition, and about international investment playing a part so long as that environment is suitable. Can you please comment on the short-term and long-term strategies around those three pillars?

[Dwayne Charette]

Is the question regarding, and I'll paraphrase to make sure I understood, military government procurement and the pillars?

[Majid Jowhari, Liberal, Richmond Hill, ON]

Yes.

[Dwayne Charette]

Really, when we look at what government procurement has been in the past and the future, we are looking for, I would say, a level playing field. It's understanding the criteria and the metrics laid out in the evaluation process, and then being, I'll say, judged on that accordingly.

When we look at investment, certainly at Airbus Helicopters—I can speak significantly for Airbus Helicopters—we've invested in Canada since 1984. We are the number one helicopter manufacturer in the world. We offer support and services. We keep the customers flying. We would dearly love the opportunity to be able to compete and support our military in Canada and see our aircraft flying.

I would say I believe every NATO country flies an Airbus helicopter, except for maybe one, so when you have questions regarding military procurement, to me it would be about being fair, unbiased, open and transparent, and really evaluating on a clearly defined metric.

[Majid Jowhari, Liberal, Richmond Hill, ON]

You felt, or at least I understood that you felt, that international investment into this sector has been hindered because the competition might not be fair. Am I right to understand that? If I'm right, why do you think the competition is not fair?

[Dwayne Charette]

I wouldn't say that international investment has been hindered. I would say that as a multinational, when we look at where dollars should be spent and dollars should be invested, we want to make sure that we're investing and spending dollars in a market where we have a fair opportunity to compete.

I would not speculate as to say why something has or hasn't been fair. It's not for me to judge. I believe, and I'm somewhat biased, we have a really great product and we're able to address all the many different missions that we see based on the civil and parapublic markets we have. I think globally our product and our brand speaks for itself.

Again, I wouldn't say that it hasn't been fair. We just want to ensure moving forward that we're judged on criteria that are clearly defined.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Do you believe the criteria are not clearly defined right now?

[Dwayne Charette]

I believe the criteria are getting better. In the past they may not have been. My previous comment was regarding more around maybe the amount of time to define the criteria. I understand it does take time, but traditionally we have seen in other campaigns, other countries, where they're able to define and bring to market or bring to a solution and an offer more quickly.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Then it's timing to be able to bring the offer, or is it characteristics of the offer that vary, or the components of the offers that vary?

[Dwayne Charette]

Yes, I think in Canada we're seeing, as I mentioned, the ITB and the value proposition, and we certainly support that. We think it's good for Canada and it creates jobs in Canada. I would say today, from what we're seeing in some of the recent, let's say, federal procurement campaigns, it looks very reasonable and, I would say, very fair.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

It's Mr. Lemire's turn now.

I will add the extra 30 seconds. So you have the floor for the next three minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

My question is for Mr. Brouillard.

It is crucial to understand the importance of the supply chain. It is obviously global and every element matters. If you don't trust where a country is, for example Canada, it can hurt its attractiveness and affect who you want to do business with.

What are the solutions you are considering so that Canada can invest? Is it a wage policy or an advantageous tax rate? How can investment be encouraged given the cost pressure you are under?

We know that the revenue may be coming in a decade or so and then the capital will need to be paid back. A competitive incentive might also be granted on rent to continue your operations in Mirabel, for example.

[Hugo Brouillard]

Thank you, Mr. Lemire.

I'll give you a quick explanation. When we talk about the quality of the workforce that we have in Canada, you have to put yourself in the shoes of the airplane manufacturers who are now becoming more democratic. In the past, aircraft manufacturers built all the segments of the aircraft under one roof and then certified, tested and delivered the aircraft to the customer. Now, because they want to cut costs and be competitive, aircraft manufacturers have developed procurement strategies whereby the construction of the aircraft is now segmented.

I was telling you about Stelia, which is positioned as a tier 1 supplier. Now, the construction of the major parts of an aircraft, such as the cockpit, the rear fuselage, and even the wings, is not necessarily done the way it used to be, under one roof.

What we are looking for is competitiveness. Original equipment manufacturers, or aircraft manufacturers, are looking for a good cost price so as to be competitive when they offer their products to Air Canada or WestJet.

Offshoring has happened at Canada's expense, while emerging countries are investing heavily to get their piece of the pie. Original equipment manufacturers can often be seen in a positive light. We often think we are lucky in Canada to be able to make aircraft and deliver them from here, but the supply chain is also very important. When tier 1 suppliers are outsourced to countries like the ones I mentioned earlier, the entire subsequent supply chain follows: the machined part producers, the sheet metal work, the surface treatments and the whole environment that follows. Emerging countries want to get these jobs and they are training people interested in becoming aerospace engineers.

Finally, coming to a country like Canada has different consequences than settling in emerging countries. Here, when we start a new plant, we have to pay $1.3 million a year in rent. In other countries, the tax system may mean that rent is free for 10 years, which is the time it takes to rebuild our cash flow and become competitive again. This is what the market looks like today in Mexico, Turkey and Tunisia.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Mr. Brouillard.

Madam Chair, would you allow me to ask Mr. Balducchi a closed-ended question, so that he can answer yes or no? That is the question I could not get an answer to earlier.

[The Chair, Liberal, Sherry Romanado]

If you hurry, yes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Perfect.

France provides a bonus for scrapping old planes and buying A220 planes.

Would you see Canada buying planes right now, since WestJet and Air Canada can't afford them, and then selling them back to those companies after that? Do you think that might be a good solution?

Please answer yes or no.

[Philippe Balducchi]

Anything that helps to get rid of old planes and replace them with new and more efficient ones is a good thing, I think.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair. I appreciate your flexibility.

[The Chair, Liberal, Sherry Romanado]

I'm pleased to hear it.

Our next round of questions goes to MP Masse.

You have the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair. I'm going to return to Mr. Gibbons.

You mentioned Nav Canada. They're talking about cutting air traffic controllers and eliminating them from air towers in several cities. Is this a positive or a negative thing for regional recovery?

[Andy Gibbons]

Thank you for the question.

Obviously, we feel for the situation at Nav Canada and those employees. I think, Mr. Masse, that the common denominator here is the lack of flights and the lack of demand. That has had a trickle-down effect for everyone in our supply chain and all of our partners.

I'm not sure that the tower decisions are going to negatively impact our investment decisions, because—and I mentioned this at the transport committee—we fly to cities that don't have towers and we fly to cities that do have towers and also different combinations. That—

[Brian Masse, NDP, Windsor West, ON]

So, costs and other things like that, you will absorb them.

[Andy Gibbons]

Sorry?