Transport Committee on May 2nd, 2016

[Mike Tretheway]

I think there's a dichotomy. Many of what we call the legacy carriers continue to do their maintenance in-house. Carriers that have been newly created in the past 30 years almost never do their maintenance in-house. They seek a more efficient, specialized solution.

Even among the legacy carriers we're seeing a strong movement to contracting out, especially the heavy maintenance, Qantas, for example. Australia is a bit smaller country than Canada, but geographically it's similar. We're colder, and Australia is tipped on its side. Most of the activity is on the east coast. Qantas now does almost all its heavy maintenance through outsourcing, some of it in Australia and some of it elsewhere.

[Vance Badawey, Liberal, Niagara Centre, ON]

Just to follow up on that question and to dig a bit deeper, what type of maintenance is usually done by the airline today, and what type is contracted out, in particular to a centre of excellence?

[Mike Tretheway]

Typically, heavy maintenance is one that will be contracted out. Line maintenance, or things that come up flight to flight, will often be done by the maintenance staff of the newly created carriers.

This is a complex area. One of the big issues is inventories of spare parts. It's very expensive for an airline like WestJet or Air Canada, given the hundreds of points they fly to, to keep a complete set of spare parts. That's one of the reasons why this industry has evolved. We're seeing more and more contracting out, even these days, of some of the line maintenance, simply because if you contract out all the line maintenance of one airport for a particular aircraft type you probably will have the needed trained staff as well as the spare parts.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you.

Finally, how does Air Canada's maintenance operations in their programs compare to other competitors throughout North America?

[Mike Tretheway]

I don't have any benchmarking information to share.

[Vance Badawey, Liberal, Niagara Centre, ON]

Peter.

[Peter Wallis]

I don't have any information on that either. Sorry.

[Vance Badawey, Liberal, Niagara Centre, ON]

Thank you.

Madam Chair, I'm going to pass to Mr. Iacono.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Thank you for being here today. My question can be addressed to both individuals.

According to media reports, work previously done for Air Canada by Aveos is now split among companies in Quebec, United States, Israel, and Singapore.

According to you, is the aircraft maintenance sector growing in Canada, and why or why not?

[Peter Wallis]

There are pockets of maintenance expertise in Canada, which have grown and waxed and waned over the years. To answer your question as to whether it is growing or not, I don't think I can give you any information that would be of value.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Mr. Tretheway?

[Mike Tretheway]

Again, this is a really complicated issue. There are aspects of maintenance that have grown in Canada and other aspects that haven't. The sense I have overall is that we used to be number three in the world in terms of aerospace, including aircraft production. We're likely around number five at this point.

One of the complications in this is that a big aspect of aircraft maintenance is engines. Engines today are incredibly reliable, so reliable that we have almost no aircraft flying that have more than two engines. Again, if you go back 30 years, most of the intercontinental aircraft had three or four engines. Today there are 777s, 787s, A330s, and so forth, and these are all two-engine aircraft. The A340 and the 747-8 are exceptions.

As engines have become more reliable, maintenance throughout the world has been reduced, because we have fewer and much more reliable aircraft.

The overall sense I have is that we have declined somewhat, largely in aircraft production. It's starting to come back now as the C Series takes orders.

[Angelo Iacono, Liberal, Alfred-Pellan, QC]

Is the only way to protect maintenance jobs by legislation? What else can be done to encourage companies like Air Canada to perform maintenance in our country?

[Mike Tretheway]

I don't think we protect by legislation.

Go ahead, Peter.

[Peter Wallis]

I was just simply going to say that I don't think you protect jobs by legislation. I think like in any marketplace companies have to step up and show value, and by doing so you create centres of excellence. With the Bombardier C Series being built in Montreal and with the orders that appear to be starting to be flowing in as a result of the Air Canada and the Delta orders, it seems clear to me that centres of excellence and maintenance of that particular equipment, both the avionics and indeed the airframes, is not a sure bet, but it's a good opportunity.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

[Mike Tretheway]

Tax incentives on investments that are required are important.

[The Chair, Liberal, Judy Sgro]

Okay.

[Mike Tretheway]

Tax incentives for the type of equipment.

[The Chair, Liberal, Judy Sgro]

Thank you, Mr. Tretheway, maybe you can get your point on someone else's questions.

Mr. Boulerice, you have six minutes.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you very much, Madam Chair.

I thank the two witnesses for being with us here today.

First, I would like to point to the peculiarity of this bill, which authorizes the loss of 2,600 jobs in our country, legalizes this and makes some vague promise that we may some day have a centre of excellence which would do the maintenance on the 45 C Series aircraft, if ever Air Canada really purchases them.

Let us understand each other; we are not talking about the same thing at all. Let's talk about Montreal. In 2012, before Aveos went bankrupt, 300 planes were maintained each year by qualified people in the Montreal area, whereas here we are being promised that there may be work maintaining 45 airplanes, some time in the future.

I would also like to mention to the witnesses that people may be concerned about the quality of the work to be done offshore.

There is a document from Innovation, Science and Economic Development Canada that mentions that Canadian aircraft manufacturers pay higher initial costs in order to integrate global supply chains, but they also accept higher risks. That sets off alarm bells.

Do you know what kind of risk we are talking about? What is it that Canadian aircraft manufacturers are putting at risk in global supply chains? In your opinion, what are the risks we are talking about?

[Peter Wallis]

Perhaps I could just venture a start to the answer. I'd just like to point out to the honourable member that when we're talking about sending this work offshore we're talking about sending it to companies like Air France Industries, to Airbus, to Boeing, to British Airways Engineering, GE Aviation, Hong Kong Aircraft Engineering, Lufthansa. These are all companies that have great reputations for maintenance on the world scale. I think that type of information should give you some encouragement that any aircraft that are maintained by these companies, including Rolls-Royce engines, is going to be not only world class but it's also going to be entirely acceptable by the Canadian authorities.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Mr. Tretheway, what do you think?

[Mike Tretheway]

I really don't have much to add to that. If the concern is about safety then safety should be regulated rather than forcing operations to be at any particular location. I think you address the issue head-on through safety regulation and safety management systems and oversight.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.

This is a unique case. A company, Air Canada, was privatized at the end of the 1980s, in 1988-1989, and this came with certain conditions. One of them was that certain jobs had to remain in this country. The company also had to ensure a certain level of services regarding the maintenance of Air Canada airplanes. This allowed our society to keep some good jobs. These jobs provided a livelihood for communities. People paid taxes and all of this was protected by law.

We are talking about a case where the company stopped complying with the law and caused 2,600 people to lose their jobs. And yet in the initial agreement, these jobs were supposed to be kept here. The workers turned to the courts and they won. They won their case in the Superior Court of Quebec and they also won in the Court of Appeals in Quebec because they were right. The law was clear on this.

The new Liberal government is now going to authorize Air Canada, retroactively, to do what it did not have the right to do in 2012.

Put yourself in the place of the citizens concerned. Do you think the government is acting responsibly by authorizing illegal activities by a company, and the illegal decisions this company made four years ago? Is it responsible to say that that is all well and good, and there's no problem? What message are you sending citizens with regard to respecting the laws of this country?

Take your time before you answer me.