Transport Committee on June 11th, 2009

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

That does not change the fact that, with Air Canada, the cost plus contract did not work.

[Moya Greene]

With Air Canada, it was the “plus” part that was the problem. That business relationship had existed for decades. In my view, we could have really taken issue with how the relationship with Canada Post was managed. Yes, the costs were incredible; it meant at least another $15 million. But they wanted to make changes in the middle of the contract. The approach they took created a variety of problems. We did not feel that the relationship between these two companies would be beneficial to Canadians.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

I think that their approach caused problems for you and that things will run more smoothly with Purolator and Kelowna Flightcraft. However, I think that the amount of your cost plus contract may go up and that you may end up having to pay Kelowna what you were not willing to pay Air Canada. That is my problem. I repeat: the transparency of the process is in doubt because you are doing business with Kelowna, a company that is a shareholder in Purolator, alongside Canada Post. You have a business relationship.

You are trying to tell me that Mr. Lapointe was not involved in the discussions. Indeed, he was probably smart enough to know better. He refrained from taking part, as anyone in a conflict of interest would do. The fact remains, the outcome speaks volumes: he is the one who got the contract.

[Moya Greene]

And the outcome is very good.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

The people at Cargojet are not very happy. They say that they were not treated fairly.

Mr. Courtois, you can say what you like, but given that you are on both the Canada Post Corporation's board of directors and Purolator's, I am inclined to believe the owner of Cargojet. He feels that the process was not transparent in one way or another.

[Marc Courtois]

If I may, I want to clarify two things.

First, our relationship with Kelowna Flightcraft is indirect and is completely different from the relationship we had with Air Canada. Air Canada transported our mail, whereas, under the indirect relationship that we have established with Kelowna Flightcraft, Purolator has chartered two of Kelowna Flightcraft's airplanes, pure and simple. We are talking about pilot, cargo and operational responsibilities. The cost plus contract that you, Mr. Volpe and the journalist refer to comes from Purolator. The extent of the relationship between Kelowna Flightcraft and Purolator is nothing more than two chartered aircraft.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

So, it does not bother you to award a cost plus contract to Purolator, your subsidiary, but it does bother you to do so with Air Canada.

Our job is to protect air transport across Canada. Therefore, we want things to be more transparent. I understand that as far as business relationships go, Ms. Greene prefers to do business with her subsidiaries than with outside companies.

[Marc Courtois]

If it is in the company's best interest.

[Moya Greene]

If it is in the company's best interest and if it saves a lot of money.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

We will have to see. But for now, I have my doubts.

[The Chair, Conservative, Merv Tweed]

Thank you.

I will just advise the committee that I have the two documents that were referred to. They weren't in both official languages so we have sent them out to be translated. Members will get them as soon as that's done.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

Thanks, Mr. Chair.

You say here that Canada Post's overall costs are now less than they would have been with Air Canada. The bid from Air Canada came in April of 2008 when fuel prices were escalating dramatically. Does your statement stand up if Air Canada was dealing with the same fuel costs today as Purolator? In other words, does the total cost bear the fact that the fuel cost went down dramatically shortly after you signed the contract with Purolator?

[Moya Greene]

Yes, because there were several features of cost increase in the Air Canada demand, Mr. Bevington.

Secondly, the contract with Purolator, as Mr. Courtois has explained, is for an array of services. The airlift is critically important, but also, the tarmac services are very important. The movement of the mail from the various cities to our facilities, so the--

[Dennis Bevington, NDP, Western Arctic, NT]

What percentage of the extra $15 million that Air Canada was going to charge you for the contract could have been taken up with the greatly increased fuel prices that were in place in April of 2008?

[Moya Greene]

I don't have that information, but I will get it for you.

[Dennis Bevington, NDP, Western Arctic, NT]

Okay, but that's a very critical part of this whole analysis.

[Moya Greene]

Well, I've just been given a bit of information from my colleagues at Canada Post. The fuel portion is actually a complete pass-through. There's no markup with Purolator.

[Dennis Bevington, NDP, Western Arctic, NT]

There's no markup with Purolator for...?

[Marc Courtois]

You pay for the cost of fuel.

[Moya Greene]

You just pay for whatever is the cost of the fuel.

[Dennis Bevington, NDP, Western Arctic, NT]

But Air Canada's bid with you was based on 100%--

[Moya Greene]

Well, they put a range. They put 25% to 100%, so we never got to the point of negotiating all of the--

[Dennis Bevington, NDP, Western Arctic, NT]

So how could you then determine that it was going to cost you $15 million more--

[Moya Greene]

Well, that's right. We--

[Dennis Bevington, NDP, Western Arctic, NT]

--if you didn't know what the fuel cost was going to be?