Transport Committee on March 8th, 2011

[The Chair, Conservative, Merv Tweed]

Good morning, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities, meeting number 53.

Our orders of the day, pursuant to Standing Order 108(2), are to study issues related to the Air Canada Public Participation Act, ACPPA.

Joining us today, on behalf of the International Association of Machinists and Aerospace Workers, Local lodge 1751, is Marcel St-Jean, president; Jean Poirier, vice-president; Richard Guay, recording secretary; and Serge Gélinas, secretary-treasurer. Welcome to our meeting here today.

I know that you know the order and the process, so I would ask you to begin. When you're done, we will move to questions by the committee members.

Thank you.

[Jean Poirier, Vice-President, International Association of Machinists and Aerospace Workers - Local lodge 1751]

Good morning, Mr. Chair and members of the committee.

Thank you for this opportunity to explain how Air Canada failed in its duty to comply with the Air Canada Public Participation Act by selling its overhaul centres to Aveos.

Let us look back in time to explain why the Conservative federal government of the day included another measure in section 6(1)(d) which reads as follows:

6.(1) The articles of continuance of the Corporation shall contain

(d) Provisions requiring the Corporation to maintain operational and overhaul centres in the City of Winnipeg, the Montreal Urban Community and the City of Mississauga;

To protect and reinforce that clause, the government added section 7a) and b), which read as follows:

7. The Corporation and its shareholders and directors shall not

(a) apply for continuance of the Corporation in another jurisdiction; or

(b) make any articles or by-laws that are inconsistent with the provisions included in its articles of continuance pursuant to subsection 6(1).

As another guarantee, section 2(3) states:

2. (1) In this Act,

(3) In the event of any inconsistency between this Act and the Canada Business Corporations Act, or anything issued, made or established under that Act, this Act prevails to the extent of the inconsistency.

To better understand the meaning of the Act, we must return to April 12, 1988, when Don Mazankowski, Conservative Deputy Prime Minister and former Transportation Minister, introduced Bill C-129 in the House of Commons. At that time, the Deputy Prime Minister stated that the operational and overhaul centres in Montreal, Winnipeg and Toronto were fundamental to the success of Air Canada, that the company fleet maintenance would continue to be done at those locations, and that for any change in the location of Air Canada maintenance activities the act would have to be amended.

This says a lot about the meaning and the spirit of the Act.

Liberal and NDP MPs of the day, John Turner, Brian Tobin, Ed Broadbent and David Orlikow, were not at all convinced by the Conservative government’s guarantees to employees that they would keep their jobs at Air Canada's operational and overhaul centres. The MPs argued that the Conservative government was trying to deceive the residents of Winnipeg, as the federal elections were held shortly after the act was introduced. In order to convince MPs and voters about the guarantees included in the act, the Conservatives worked with senior government officials and experts to clearly define both the intent and the spirit of the act in order to eliminate any ambiguity and prevent any authority from circumventing the act.

Janet Smith, then Deputy Minister of Privatization and Regulatory Affairs, along with Doug Lewis, general counsel, appeared before the legislative committee to explain the spirit and essence of the act. They stated that what is enshrined in law is as tight as you can get it and if they are in sections of continuance, it requires two-thirds of the shareholders to change that.

[The Chair, Conservative, Merv Tweed]

Monsieur Poirier, we have a point of order from Mr. Jean.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I apologize, but because you're very loud it's very difficult to hear you in one ear in French and the other in English. If you could just talk in a normal voice into the microphone, it would be much easier for all of us.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Particularly when you discuss with your neighbour, too, it's difficult to understand.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

I agree. It's difficult with any communication, even with the phones ringing.

[The Chair, Conservative, Merv Tweed]

Thank you.

[Jean Poirier]

Right, I will lower my voice.

They also said:

The things you are referring to, such as the operational centres, are not only enshrined in law but are required by statute. They cannot be changed unless the Act is amended. You cannot get any more of a guarantee than that.

The Conservative MP for Winnipeg, George Minaker, asked for clarification:

Is it my understanding that section 7 will prevent any future Boards of Directors of the new company from manipulating the requirements in sections 6(1)(a), (b), (c) and (d), in particular regarding the overhaul centres being located in Winnipeg, Toronto and Montreal, and that this section restricts any fooling around at some future date? I also think they cannot do it by normal two-thirds vote …

Ms. Smith, the senior official who is an expert in these matters, replied: "That is right. The only way they can do it is if somebody amends the Act."

I will now yield the floor to my colleague Serge Gélinas.

[Serge Gélinas, Secretary-Treasurer , International Association of Machinists and Aerospace Workers - Local lodge 1751]

Two other expert witnesses, Professor Fred Lazar, a well-known and respected economist at York University, and economist Arthur Donner appeared before the legislative committee in 1988. They stated:

The new company’s private shareholders will have no other choice than to take legal action against the government to amend the section referring to the overhaul centres. Maintaining the overhaul centres is public policy, as is the Official Languages Act. These are public policy decisions that I regard as part of the public policy role.

The final experts invited by the legislative committee in 1988 were Air Canada President Pierre Jeaniot and Claude Taylor, Chairman of the Board. Here are a few questions they were asked:

"Could Air Canada consider getting rid of its maintenance centres, even if this does not appear in the Act?"

Mr. Jeaniot replied: "No."

"What would be your definition of an overhaul centre?"

Mr. Jeaniot replied: "You can just about strip an airplane completely and rebuild it. The physical centres that have that kind of capability are referred to as overhaul centres."

When Michel Bissonnette, Senior Director, Engines and Airframe Maintenance, appeared before the Transport Committee, he confirmed Mr. Jeaniot’s position regarding the definition of an overhaul centre. He stated: "The overhaul centres perform what I would call major repairs. They look after long-term maintenance of engines, cells and components."

This lent credibility to the Conservative politicians of the day.

Conservative MP George Minaker stated in response to the unions, including the International Association of Machinists, that the Act protects us and the employees from any attempt by Air Canada to get rid of or to sell its operational and overhaul centres. The Parliamentary Secretary to the Deputy Prime Minister and President of the Privy Council, Jim Hawkes, added that employees’ workplace, their benefits, their future, all of that is guaranteed.

In hindsight, we must thank the opposition parties for asking many experts to appear and for having questioned the Conservative Party which, in view of the upcoming election, had to be clear on the question of the overhaul centres. If the government of the day had not provided iron-clad protection, thousands of workers at the overhaul centres would be out of work and Air Canada would be operating like low-end companies that award maintenance contracts to countries such as El Salvador and Costa Rica, which do not have the same quality and safety standards.

If the government does not enforce the Act, the concerns raised by Liberal MPs Grondin and MacLellan would be justified. The MPs said:

With privatization, Canadians will be stuck with the bill once again. The services offered as well as passenger safety will decrease since profit will be the company’s only goal. What will happen if the company subcontracts outside Canada?

In enacting legislation that guaranteed the preservation of the operational and overhaul centres, the government of the day guaranteed flawless maintenance service to ensure passenger safety. This safety is due to our conscientious, professional and experienced mechanics, who ensure that Air Canada passengers have a safe trip. If maintenance is no longer performed by Air Canada at its overhaul centres, but by subcontractors such as Aeroman in El Salvador, the safety level will obviously decrease.

If the Act is not enforced and upheld, you could one day have to answer to Canadian taxpayers, the media, the people closest to you and, ultimately, yourself. Why did you play with the safety of your fellow citizens? You can imagine the worst scenario. One day, you could be the victim.

[Jean Poirier]

Here are our recommendations:

1. That Air Canada comply with the Act by reverting to ownership of its overhaul centres.

2. That the Canada Industrial Relations Board’s decision concerning the transition of Air Canada employees to the subcontractor Aveos be set aside until the government takes a position on the Act.

3. That the transfer of Air Canada employees to Alfred Nobel Boulevard in Ville St-Laurent, that is planned by Aveos and not by Air Canada, be suspended until the government takes a position on the Act.

[The Chair, Conservative, Merv Tweed]

Thank you.

Mr. Lamoureux.

Mr. Byrne, do you have a point of order?

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you.

In relation to our discussions on the Air Canada Public Participation Act, when officials from Air Canada, in particular the legal counsel for Air Canada, appeared before our committee, I repeatedly asked them if an arrangement had been made with their subcontractor, Aveos, to ensure that there would be a continuous presence.

What I actually asked was whether there was a clause in the contract between Air Canada and Aveos to ensure that Aveos would continue to operate out of the three principal overhaul locations noted in the Air Canada Public Participation Act. Legal counsel for Air Canada said that they were not prepared to respond at that time, and that they were concerned about potential legal implications with their partner, Aveos, as to what they could disclose or could not disclose.

I was under the impression that Air Canada's legal representative said that they would get back to the committee on that question of whether or not there was any provision in the contract between Air Canada and Aveos for guarantees that Aveos would continue to operate out of Montreal, Mississauga, and Winnipeg. Can I ask the clerk through you if Air Canada has bothered to respond to this committee, or are they in contempt of this committee?

[The Chair, Conservative, Merv Tweed]

I'm not certain if they have. I do know that there was a document circulated this morning. I haven't had a chance to review it, but I suspect members of the Air Canada staff are listening to this debate, and if we don't have an answer or a response, I will send a letter directly from the committee asking for that response.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you, Mr. Chair.

If there are representatives of Air Canada in the room, and they don't want to render to this committee what was promised to us in recorded testimony, they should know that a motion of contempt may be coming their way.

[The Chair, Conservative, Merv Tweed]

I wouldn't want to jump to that conclusion until I've read the document—

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I think they've had enough time to respond.

[The Chair, Conservative, Merv Tweed]

—but we will certainly ask them.

Mr. Lamoureux.

[Kevin Lamoureux, Liberal, Winnipeg North, MB]

Thank you, Mr. Chair.

I agree wholeheartedly with Brian's concerns with regard to Air Canada. I don't appreciate the games that are being played. I think that Air Canada has a duty to respect the laws of Parliament. Based on the law and what it states, and some of the discussions that led up to the passage of the law at the time, Air Canada officials and the board have to review whether they're actually abiding by the law. I am of the personal opinion that they are not.

I know I've had opportunity to have discussions within our caucus, and I appreciate that Ms. Neville is with us this afternoon as we try to gain more information. This is an issue that is important, not only to me and Ms. Neville, but to a great deal of people.

I appreciate the presentation. Jean gave a very emotional presentation, and justifiably so. We're talking about thousands of jobs in Winnipeg, Montreal, and Mississauga, and to a certain extent in Vancouver also.

Recently I had the opportunity to meet with a number of Air Canada employees in Winnipeg. They showed up outside in minus 25 degree weather in large numbers—80 to100 workers.

The concern I have, and I will pose the question to the presenters, is that in the discussions I had with these workers they were fairly clear in their thinking that Air Canada is in violation of the law. From their perspective, Air Canada is not abiding.... And what they are really wanting to see is that their members of Parliament in Ottawa hold Air Canada accountable to the Air Canada Public Participation Act.

Is that a fair assessment? Is that the general sense you get as union representatives, not only from Winnipeg employees, but employees in Mississauga and Montreal?

[Serge Gélinas]

In 1988, we studied the essence and spirit of the act, which clearly said that Air Canada has an obligation to maintain its operational and overhaul centres in the three cities named: Montreal, Mississauga and Winnipeg. Considering what has been read to you, it is clear and plain that Air Canada is not complying with the act at present. Because it is not complying with the act, we are afraid that over 3,000 jobs are in danger of being transferred to El Salvador and that layoffs in excess of that number will continue. That is what we are afraid of at present.

I want to tell you what protections we have and why we are afraid of this.

At present, Air Canada provides three protections for our jobs, and for the aviation industry in Canada which is found in all provinces—Manitoba, Alberta, British Columbia, Quebec. First, there is the Air Canada Public Participation Act, which guarantees that the centres where Air Canada planes are maintained and overhauled, and the jobs in those centres, will be preserved. Second, Air Canada has planes that need maintenance. Third, there is a contracting-out clause in our collective agreement, so that if Air Canada wants to send planes outside Canada for maintenance, there must first be a discussion with the union. The company has to agree with the union if it wants the work to be done outside Canada.

Now let's talk about what we're afraid of. First, if the Conservative government in power did not enforce the law, the jobs would end up at Aveos and would ultimately be moved to El Salvador. The three protections we have with Air Canada would not apply, since the Air Canada Public Participation Act applies solely to Air Canada. It does not apply to Aveos. Aveos would have no obligation to preserve the three operational and overhaul centres. Second, Aveos does not own any planes and so does not need repair services. It works by contract. That protection would also be eliminated. Third, the contracting-out clause applies because Air Canada has planes. Aveos has no planes, however, and that means the third protection would disappear. That is why we are afraid that the jobs would be moved to El Salvador.

As well, Calin Rovinsecu, who is currently the President of Air Canada, put on what we call a road show. He explained that starting in 2013, Air Canada employees, who will then be at Aveos, will have to compete with the employees working in El Salvador in terms of wages. Workers in El Salvador earn 15% of our wages. It is impossible to compete with them. Given that Air Canada's and Aveos' ultimate goal is to make maximum profits in minimum time, we can be sure that starting in 2013 the aviation industry, and more specifically maintenance, will be relocated to El Salvador.

[Jean Poirier]

When Ms. Sénécal and Mr. Bissonnette came here to testify, they put on an excellent show for you and told you not to worry, Aveos was going to continue to build planes, for a long time yet. Excuse me, but the contract between Aveos and Air Canada ends in June 2013. I have a copy right here. As well, I have two certifications from the Department of Transport signed with Aveos where there are provisions concerning all Canadian planes.

I would remind you that the only Canadian planes that Aveos repairs belong to National Defence, the government, and Air Canada. The company does not repair other Canadian planes. At present, the Department of Transport is agreeing to those planes being repaired in El Salvador and Costa Rica. I am putting myself somewhat in the shoes of the people who have a difficult choice to make because April 15 is the deadline for employees to decide whether they will join Aveos or retire or resign. They have to make an ultimate choice. Those workers know they will not have a job in two years. There has not been compliance with the act. That is where we stand today and this is very important. Our meeting with you today is very important and we are expecting support from all parties.

[The Chair, Conservative, Merv Tweed]

Thank you, Mr. Poirier.

Mr. Guimond, you have seven minutes.

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Thank you, Mr. Chair.

To interpret a statute, and I don't want to waste all my time explaining the process of statutory construction, we are guided by two factors: the wording of the statute, that is, the text of the statute, and the spirit of the statute. There is also a principle that Parliament does not speak in vain. When the 1988 Conservative Parliament decided what Air Canada's obligations would be, it was precisely to avoid the concerns people have today. The first obligation is to comply with the Official Languages Act, to be sure that a company like Electrolux, whose head office is in Sweden, doesn't write to its unilingual French-speaking employees in l'Assomption exclusively in English. That is one example. It is also to make sure that in the event that Air Canada, the new privatized Air Canada, were sold to the Dutch, the Official Languages Act did not cease to apply. The second obligation was that a head office would be maintained in the Montreal Urban Community, and the third was that the operational and overhaul centres would be maintained in three cities: Mississauga, Winnipeg and the Montreal Urban Community.

Do you think—and any of the four of you can answer—that Air Canada still has general overhaul centres at present?

[Richard Guay, secrétaire archiviste, Association internationale des machinistes et des travailleurs et travailleuses de l'aérospatiale - Section locale 1751]

Mr. Guimond, members of the committee...

[Michel Guimond, Bloc, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Answer quickly, please.

[Richard Guay]

If you had asked me that question in October 2007 or just before that, I would have said yes. But in 2007, Air Canada sold all its operational centres and all its technical overhaul centres to a conglomerate composed of KKR and Sageview Capital LLC, financed by Lehman Brothers. The loans were guaranteed by Air Canada.

Today, I would answer that Air Canada no longer has operational and technical overhaul centres in Canada. There are none left. If we refer to Air Canada's 2010 Management's Discussion and Analysis, we read: "Air Canada has various related party transactions with ACE and Aveos. As a result of the Aveos Restructuring Plan, Air Canada and Aveos are no longer related parties." That is in the financial report. They are no longer related parties. As well, in ACE's 2010 financial report, it says: "...on January 22, 2010, ACE entered into a Restructuring and Lockup Agreement with Aveos, Aero Technical Support & Services Holdings sarl ("ACTS Aero"), lenders and other shareholders. The restructuring was completed on March 12, 2010. Under the terms of the restructuring, ACE transferred its shares ... for nil consideration." That is, it transferred its shares for nothing. ACE transferred $36 million to Aveos to divest itself of its shares in ACTS Aero and have no further connection with the new company that was formed.