Evidence of meeting #10 for Transport, Infrastructure and Communities in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was maintenance.
A video is available from Parliament.
Conservative
Dianne Lynn Watts Conservative South Surrey—White Rock, BC
I'm going to share it as well, we'll take their other four.
You mentioned that Australia has some facilities in Australia and elsewhere, and that some other countries are more competitive outside Canada. You mentioned Germany, which is in the forefront. Can you give me an understanding of where those centres are, and why they're top in the world?
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
Certainly Germany, France, the United Kingdom, Singapore. In Singapore's case, tax differences have definitely encouraged the type of investment you need in the modern high economies of scale, high specialization. Singapore has picked up a lot of the work, specifically from Australia. The list goes on.
There certainly are developing countries that have picked up some of this: Brazil is an example. We have to remember that Brazil is also a manufacturer of aircraft. Bombardier is now competing with Boeing and Airbus, but its main competitor until recently has been Embraer aircraft. They make wonderful aircraft that see service here in Canada. Brazil's been much more aggressive in its training programs and tax incentives for investing in modern aircraft maintenance.
Conservative
Dianne Lynn Watts Conservative South Surrey—White Rock, BC
What about Mexico? Is there anything on that front?
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
I confess I'm not as familiar with Mexico. They don't have a manufacturing sector there. They have severe constraints in their airports. I confess I can't think of any examples of aircraft from Europe or North America or Australia that go to Mexico for maintenance. They certainly maintain Mexican aircraft, all the big airlines in all of their new low-cost groups.
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
China is increasingly developing both aircraft manufacturing—they have products that compete with Bombardier now. They assemble A320s and other aircraft in China. I'm expecting they are going to become very aggressive in entering the aircraft market.
The good news is 30,000 narrow-bodied aircraft are expected to be built in the next 20 years. The world does not have enough capability. China's going to fill that, but I think Canada can do that with the right policies and incentives. I think this bill is positive in that regard.
Conservative
President and Chief Executive Officer, Van Horne Institute, As an Individual
I'd like to add that I don't know anything about Mexico's capacity. I wasn't able to find anything when I was researching for this appearance, but clearly Air China Technics and Ameco in Beijing are two of the up-and-comers when it comes to the whole area of aircraft maintenance.
Conservative
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
Thank you very much.
You are probably going to need the simultaneous interpretation.
You have raised an interesting point. In the beginning of your presentation, you pointed out that no other country obliges airline companies to do the maintenance of their aircraft on their territory. However, Mr. Tretheway, you just raised the following point. In Singapore, the tax regime encourages investments. So, if I am not mistaken, the state does intervene and encourages the maintenance of aircraft in Singapore. There is a cost involved for the taxpayers of Singapore.
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
I will answer what I think the question is. Certainly state intervention is important, and not just in aviation maintenance but in the film industry—there are lots of industries. My own opinion as an economist is that state intervention through forcing carriers to have to compete to do things a certain way is not the way to go. If state intervention is there, it should be in the form of incentives for education and incentives for investment, and that's what they've done very successfully in Singapore.
Conservative
President and Chief Executive Officer, Van Horne Institute, As an Individual
No, thank you.
Conservative
Luc Berthold Conservative Mégantic—L'Érable, QC
I am raising this question because the legislation protected jobs. We are talking about 2,600 jobs here, in Canada, that do not cost taxpayers one penny. I think it's important to mention it.
Do you know how much the state invests in Singapore to create conditions that make airlines choose to go there? I think that regarding aircraft maintenance, Canadian engineers and the engineers in Singapore are equally competent. However, I must say I have a small bias in favour of our own.
I will let you answer the question.
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
I don't know the number in Singapore. I do know that aviation is one of their strategic sectors. They don't have mining and forest industries, for example, so aviation is one of the most important sectors they invest in.
I agree. I have a preference for Canadian engineers and maintenance as well, but I am concerned about the focus on only the 2,600 jobs in maintenance. Remember that airlines operate with about a 2% profit margin. It's one of the thinnest profit margins of any transport industry, and we can and do see airlines go bankrupt. We've had 60 airline bankruptcies in Canada, and Air Canada itself has gone through one bankruptcy.
We have to focus on the bigger issue and that is the health of the air carrier. We want to make sure they have safe maintenance, but in the end we're going to generate more jobs by creating incentives for competitive maintenance and competitive air carriers that are healthy and grow.
Liberal
Liberal
Sean Fraser Liberal Central Nova, NS
Thank you very much.
I'll pick up where I left off earlier. You'll have to forgive me. One of you mentioned both the recent Air Canada purchase and the major Delta purchase as well. Can you describe to me the impact you think this may have in terms of a ripple effect in the industry and whether we may see an increase in maintenance work in Canada as a result?
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
I would like to take a crack at this. As I said, this is a magnificent aircraft. The market appreciates it. Lufthansa, Delta, Air Canada are major global airlines that purchased this aircraft. I think the sales of this aircraft will grow quite significantly.
At the same time, there is an enormous opportunity because nobody is maintaining this aircraft. It's a brand new aircraft, and because we already have 350 orders, which will probably grow eventually into the 1,000 range, somebody, somewhere in the world is going to find the opportunity to develop a heavy maintenance operation line for that aircraft. It would be natural to put that here in Canada. We have to make sure that instead of forcing Air Canada to do things a particular way in the government's wisdom our policy has incentives for investors to build those facilities in Canada, to train Canadians to do this maintenance, and then Lufthansa and others will take advantage of that because this will be the place it can be done. There is no place in the world that's maintaining this aircraft right now.
Liberal
President and Chief Executive Officer, Van Horne Institute, As an Individual
No, I agree with that answer. As I said a little earlier, the opportunity to create a centre of excellence in Montreal as the location for maintaining this new series of airplanes is a huge one. I'm sure I'm not the first to have mentioned that.
Liberal
Sean Fraser Liberal Central Nova, NS
That's excellent.
Shifting gears a little, Mr. Tretheway, you mentioned the razor-thin margins in the aviation industry. Do you see the existing legislation having an impact on aviation or air travel costs for Canadians?
Chief Economist and Chief Strategy Officer, InterVISTAS Consulting Group, As an Individual
I think it'll have an impact on air travel costs for people flying Air Canada. It will help them get better competitive choices to maintain the high safety standard that Canada requires of them. As they become more competitive that I think will get translated, not just for their customers, but customers of the other airlines they compete with, both Canadian airlines like WestJet and Porter as well as foreign carriers that fly in and out of Canada.
Liberal
Sean Fraser Liberal Central Nova, NS
Mr. Wallis, I see you nodding in agreement. I take it you accept that answer as your own, or do you have further input as well?
President and Chief Executive Officer, Van Horne Institute, As an Individual
No. I'd very much like to associate myself with that answer.
Liberal
Sean Fraser Liberal Central Nova, NS
That's great. I'll give you a chance to take a crack at this one first because I put it to Mr. Tretheway in the previous round.
He mentioned Bill C-10 may not go far enough, and he mentioned the foreign ownership restrictions in his answer.
Do you see any opportunities that are not covered by Bill C-10 that we could take advantage of to make Air Canada more competitive?
