Transport Committee on May 9th, 2016

[The Chair (Hon. Judy A. Sgro (Humber River—Black Creek, Lib.)), Liberal, Judy Sgro]

I am calling to order meeting number 12 of the Standing Committee on Transport, Infrastructure and Communities of the 42nd Parliament, first session.

I would like to welcome our witnesses, both via teleconference and in the room with us. We very much appreciate your taking time out of your schedules to come in and help us with the review of Bill C-10.

In the room right now we have Jim Quick, president and chief executive officer of the Aerospace Industries Association of Canada, and Ronnie Di Bartolo and Jean-Pierre Bastien from the Premier Aviation Overhaul Centre.

Via video conference we have Yves-Thomas Dorval and Benjamin Laplatte from the Quebec Employers Council.

I would like to welcome all of you.

I will go to Mr. Quick first. Would you like to lead off, please?

[Jim Quick, President and Chief Executive Officer, Aerospace Industries Association of Canada]

Good afternoon, Madam Chair and honourable members.

Thank you for the invitation to join you today to discuss Bill C-10 and the Air Canada Public Participation Act. We are pleased to be here to provide you with our perspective on how this legislation will support the growth and the competitiveness of the Canadian aerospace industry.

The AIAC represents Canada's aerospace industry, including major manufacturers and their suppliers. Our members are a diverse group of companies that are world leaders when it comes to the design, manufacture, and delivery of aerospace, space, and defence products, as well as the maintenance, repair, and overhaul, or MRO, of existing aircraft.

Aerospace is a global industry, so for us and for our members it is important to make business, policy, and investment decisions in a global context. Aerospace supply chains are not limited to a single country or even to a single continent. Our members are competing for contracts against other companies from around the world.

Canada's aerospace industry is the fifth largest in the world. For decades, we have punched well above our weight in the global marketplace. This is because we have built globe-leading capacity and capability when it comes to high-value, innovative aerospace products and services. We are home to a world-leading OEM in Bombardier and we have fostered a highly innovative supplier base that is integrated into growing markets all over the globe.

The legislation in question comes in the context of the announcement of two centres of excellence that will drive aerospace innovation and capacity in Montreal and Winnipeg, two of Canada's major aerospace clusters. These centres of excellence will help us maintain our competitive advantage in the global marketplace. They will help us ensure that Canadian aerospace firms continue to expand their capacity and capability to offer innovative solutions, not only to Air Canada but also to other major airlines and operators around the world.

In Montreal, a centre of excellence focused on maintaining the C Series will establish an important competitive advantage for companies seeking to conduct maintenance, repair, and overhaul activities on this new platform.

Bombardier, as I mentioned, is a world-class manufacturer, and they have created a world-class aircraft. As the C Series enters into service, this is also a prime opportunity for Canadian companies to secure a competitive advantage when it comes to contracts for any MRO activity related to the aircraft, not only for Air Canada but also for other major global airlines.

Manitoba is already home to a highly innovative aerospace sector. Winnipeg boasts Canada's largest aerospace composite manufacturing centre, an industry-leading cold weather engine-testing facility, and the world's largest independent gas turbine engine MRO company. The presence of a centre of excellence focused on MRO activity presents a new opportunity to develop additional capacity and capability for the Manitoba aerospace companies that can be exported into the international marketplace.

Bill C-10 is also important because it creates a level playing field for Canadian companies. As I mentioned at the beginning of my remarks, being competitive in a global industry requires an environment in which companies have the ability to make business, policy, and investment decisions in a global context. If our companies are going to survive, they need to be able to compete against the rest of the world, and we know they can.

For AIAC and our members, Bill C-10 is not only about providing services within Canada or to one Canadian company; it is also about the way in which we build an environment for our industry that will make Canadian aerospace companies more innovative and competitive on a global scale, and more able to attract business from airlines and operators all over the world.

Thanks to the strength of our industry and to smart investments in innovation, such as these centres of excellence, we are confident that Canadian companies will continue to win contracts with Air Canada and with other airlines and operators. We believe that Bill C-10 takes an approach that is necessary for Canada's future aerospace growth. It supports innovation, competitiveness, and Canadian growth at home and in the global marketplace.

Thank you very much. I would be happy to answer your questions.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Di Bartolo

[Ronnie Di Bartolo, President and Chief Executive Officer, Premier Aviation Overhaul Center]

Good afternoon, ladies and gentlemen.

Thank you for inviting us to this committee to speak about Premier Aviation and Bill C-10.

My name is Ron Di Bartolo and I am the president and CEO of Premier Aviation. I'm joined by my colleague Jean-Pierre Bastien, vice-president of operations of Premier Aviation in Quebec City.

To start, I would like to provide you with some background on Premier Aviation. We are a wholly owned Canadian business that provides primary airframe maintenance to the aviation industry. In addition to doing airframe maintenance, we also have facilities and capabilities to do paint work and other maintenance on aircraft.

We currently have four facilities, located in Trois-Rivières, Quebec; Quebec City; Windsor, Ontario; and Rome, New York. Our Canadian facilities employ 550 people, while our facility in the U.S. employs 170 individuals.

Our company facilities provide service to a number of airlines and different aircraft types. In Trois Rivières we service Air Canada and its fleet of Embraers and its partner Sky Regional and its fleet of Embraers also. We also provide paintwork for WestJet.

In Windsor we service WestJet's fleet and currently service First Air, Canadian North, and Sunwing. This facility handles Boeing 737s, ATR 42s, Embraer 190s, and other aircraft types.

In Quebec City we service American, Caribbean, and European operators, including Piedmont Airlines, Peninsula Airways, Corvus, LATAM, Air Guyane, LIAT, and several lessors of aircraft.

In Rome, New York, we service a variety of aircraft for Republic Airlines, Atlas Air Cargo, and GECAS.

Our ability to service so many aircraft types for different clients has come from years of investment in our workforce. Clients seek Premier Aviation because of our hard-earned reputation for excellent quality of work, quick turnaround times, and flexibility to schedule maintenance, all while being cost competitive. This is what it takes to be competitive in this industry. Our ability to also do paintwork and other maintenance provides us a significant advantage over our competitors and makes us value-added to our clients.

With respect to our work with Air Canada, we were first contracted to do paint and maintenance in 2009. Following the closure of Aveos in 2012, the scope of our work for the airline expanded to include heavy maintenance of some of its Embraer aircraft. Due to the positive results of this maintenance, Air Canada soon contracted Premier to do all maintenance on its Embraer fleet. Previously this work had been done by Aveos and Embraer facilities in Nashville, Tennessee.

Today, because of the advantage we can provide to Air Canada, all of its work is done in Trois-Rivières and supports the 354 employees presently there. In addition, this growing work has required us to expand our facilities throughout Québec at different times. As a competitive MRO facility in Canada catering to not only Canadian but international companies, we know we have what it takes to compete in this industry. We are competitive. Bill C-10 and its amendments to the Air Canada Public Participation Act would not restrict the location of the work we do for Air Canada and would provide flexibility for us to keep growing our business with the airline.

Over time we have shown that we can compete for Canadian business as well as for international business, and it is our hope that we will continue to grow and create maintenance jobs in Canada. With our highly skilled workforce and our expertise, flexibility, and low cost structure, we are well positioned to do so.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Di Bartolo.

We will now move on to the Quebec Employers Council.

Gentlemen, either one of you could speak to us. Please go ahead.

[Yves-Thomas Dorval, President and Chief Executive Officer, Quebec Employers Council]

Good afternoon.

I will deliver my remarks in French, if you don't mind.

First of all, we would like to thank the committee for allowing us to speak to you today about the importance of modernizing the Act to amend the Air Canada Public Participation Act through Bill C-10.

My name is Yves-Thomas Dorval and I am the chief executive officer of the Quebec Employers' Council or QEC. I am accompanied by Mr. Benjamin Laplatte, principal director, Public Affairs and Corporate Development.

For close to 50 years, the QEC has represented the majority of industry associations, and Quebec's largest employers. Directly or indirectly, it represents the interests of more than 70,000 employers of all sizes, in both the private and parapublic sectors, some of which are Canada-wide, if not international, enterprises.

The mission of our organization is to see to it that in a context of increasing global competition, businesses benefit from the best possible conditions to prosper in a sustainable way, that is to say a stable, predictable and competitive environment.

In keeping with the priorities dictated by the economic situation, the actions of the council are guided by five broad strategic axes set out in its action plan; three of these are more closely related to Bill C-10: competitive labour costs, intelligent regulation, and a sustainable, competition-based economy.

In light of these, the QEC was pleased to see the introduction of Bill C-10, which gives Air Canada the necessary flexibility to optimize its activities and continue to develop.

However, let us take a step back and look at the situation more globally, as others have done before me.

We think it is important to appreciate the value of the bill in the context of the need to strengthen the aviation industry in Canada, which has to be competitive.

The Canadian aviation industry is one of the cornerstones of our national economy. It is comprised of more than 700 companies spread out across the country, supports close to 180,000 direct and indirect jobs, and contributes $29 billion annually to our GDP.

Every year, it invests about $1.8 billion in R and D, which is on average five times more than the manufacturing sector invests.

Finally, the Canadian aviation industry plays a large part in our export market, as close to 80% of overall production is sold on foreign markets. That is enormous.

As it is among the largest world-class international players, Air Canada makes an important contribution to the Canadian economy, and is among the largest employers.

Exporting Canadian ingenuity and inventiveness to the world allows us to develop our competitiveness and continue to grow, and will help us to come out of this period of economic uncertainty. Knowledge- and innovation-based industries make us competitive and contribute to Canada's economy.

However, the players of the aviation industry are not dealing with a level playing field on world markets, as they face competition both from giant multinationals and governments. Since 1980, the contracting out of certain maintenance activities to specialized firms has become standard in this sector throughout the world. Allow me to remind you in this regard that the number of Air Canada's maintenance workers has more than doubled over the past 10 years. Today the carrier hires approximately 2,400 maintenance workers in Canada alone, in addition to the 1,000 workers employed by its regional partners.

However, no airline company in Canada or the world was subjected to maintenance restrictions like the ones that were imposed on Air Canada by the Air Canada Public Participation Act, even though these enterprises compete on the same markets for the same consumers. These airlines make their decisions based on the how their services compete in quality and price, and their lead times.

It is true that the Aveos company unfortunately had to close, and many jobs disappeared, but it is important to point out that as for any private firm, the success of that type of business depends first and foremost on its ability to compete effectively with its competitors through the quality of its services and prices.

It must be acknowledged that over the years Aveos was unable to keep up in this regard. Following its closure, other Quebec suppliers emerged. Through their expertise and competitiveness, they created hundreds of jobs in Quebec. They compete internationally to win airline carriers' heavy maintenance contracts, as was said a few moments ago.

The modernization of the Air Canada Public Participation Act will amend a law that was passed more than a quarter century ago, taking into account the fact that the air transport industry has changed greatly since then.

Bill C-10 will allow the carrier to make decisions based on its business acumen and its commercial discretion, just as private sector enterprises must be able to do. The bill affords it greater flexibility, which Air Canada needs if it is to compete effectively on the world stage. The bill recognizes that the carrier is an enterprise that belongs entirely to private sector interests, and does business in a highly competitive global industry. Indeed, the experts, some of whom appeared before your committee, refer to a very low profit margin of 2% to 4% for this industry.

By creating more equitable conditions, Bill C-10 will allow Air Canada to determine how much and what type of aircraft maintenance to do in Canada and elsewhere in the world. It seems clear that Bill C-10 will allow Air Canada to remain competitive and contribute to job creation in the fields of aviation, tourism and aeronautics in Canada for many years to come.

This bill is in fact in keeping with agreements concluded at the provincial level, in Quebec especially, where Air Canada has committed to contributing to the creation of a centre of excellence and maintenance for its C Series aircraft. The federal government acknowledges the settlement of suits involving provincial governments by amending the act in order to avoid similar litigation in the future.

In conclusion, the time has come to ask ourselves a simple question: do we believe the aviation industry should be a competitive part of our future? Our answer is a resounding yes. That is why we support Bill C-10.

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Thank you to everyone for being as direct as possible so that the committee has sufficient time to ask questions.

I understand, Mr. Quick, that you need to leave by 4:30.

[Jim Quick]

That's the deal, Madam Chair.

[The Chair, Liberal, Judy Sgro]

That was for the information of the committee.

Mr. Berthold, you have six minutes, please.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you very much, Madam Chair.

I thank all of the witnesses for their participation today.

I understand from what you have said that the representatives of the three groups of witnesses support Bill C-10 as presented.

Madam Chair, for the information of all the parliamentarians who are here and who need all of the necessary information in order to vote on Bill C-10 in the House, as well for the stakeholders who have just shared their position on the bill, I want to mention that my colleague Ms. Kelly Block has tabled a notice of motion which reads as follows:

That the committee request any documents, research projects, notes, emails and correspondence that contributed to or discussed the deck “Amendments to the Air Canada Public Participation Act” and that these documents be submitted to the committee by Wednesday, May 11, 2016.

This motion was tabled by Ms. Block within the required timeframe. It is important that our guests have access to this information. From the beginning, all sorts of things have been happening in committee. One day we are told that there were meetings with Air Canada; another day, we are told that there were no meetings with Air Canada. Sometimes we hear that Air Canada met with people; and then we hear that Air Canada did not meet people. In short, it would be important, to support the work of the committee, that members of the committee adopt this motion, and that we be given access to all of the information we need.

There is a reason for this. In fact, the bill itself mentions that, even if Quebec has stated that the term “overhaul” referred to heavy maintenance, the courts recognized that no such maintenance had ever been done in Mississauga. We have also heard that Air Canada concluded an agreement with the Government of Manitoba to create a centre of excellence in western Canada for the maintenance of aircraft in that province. However, we have learned that the agreements have not been concluded yet. The Government of Quebec said the same thing in the brief it sent to members of the committee.

I want to quote two excerpts from that brief. This is the first:

Pending the conclusion of final agreements, the Government of Quebec has agreed to drop its lawsuit in relation to Air Canada's obligations to have an overhaul and maintenance centre.

I repeat that that is “pending the conclusion of final agreements”. And yet today we heard the witnesses tell us that the agreement had been concluded with the Government of Quebec. However that does not seem to be the case; the Government of Quebec itself has said so.

This is another excerpt from the brief:

Additionally, in order to provide for all aspects of the agreements reached, the Government of Quebec is asking that, once Bill C-10 receives royal assent, the legislation come into force after the final agreements described above have been concluded.

Once again, I understand that the agreement with the Government of Quebec has not been concluded.

Later we will be hearing from a representative of the Government of Manitoba who will probably also tell us that the agreement has not yet been signed.

That is why, Madam Chair, it is important that the members of the committee be made aware of this notice of motion, which is quite simple. The purpose of the motion is simply to allow us to have access to all the necessary information. This will help parliamentarians and witnesses taking part in this committee's study of Bill C-10.

Madam Chair, with the authorization of my colleagues, I would like us to adopt this motion immediately so that we may conduct our study with all of the necessary information in hand. This will also help witnesses to form an opinion about the bill.

[The Chair, Liberal, Judy Sgro]

Mr. Berthold, are you asking that we debate and vote on the motion now, or, given the fact that we have witnesses here who have their own time constraints, would you like to wait until the end of the meeting to deal with this motion?

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I would like us to adopt the motion. It is a simple motion that will help all parliamentarians. If my colleagues across the way have no objection, we could proceed, and then continue questioning the witnesses.

[The Chair, Liberal, Judy Sgro]

Does the committee choose to go in camera to deal with this motion, or will we deal with it here?

[Sean Fraser, Liberal, Central Nova, NS]

We'll go in camera.

[The Chair, Liberal, Judy Sgro]

All those in favour of going in camera to deal with the motion?

(Motion agreed to)

Gentlemen, I have to ask that you vacate the room. We'll also have to disconnect the teleconference to go in camera.

[Sean Fraser, Liberal, Central Nova, NS]

Madam Chair, could I make a quick comment?

One of the witnesses said he's on a timeline to leave by 4:30. Would it be possible to deal with this after we have the witnesses so that we don't miss out on their valuable time today?

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I have no problem with our continuing with the witnesses, if we agree to discuss the motion afterwards. I understand the time constraints. If you agree, we can come back to it.

[Vance Badawey, Liberal, Niagara Centre, ON]

I have a point of order, Madam Chair—

[The Chair, Liberal, Judy Sgro]

There's no translation.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Okay.

I agree we'll be in camera in a few minutes after that first block, but I don't know why you want to go in camera for that.

[The Chair, Liberal, Judy Sgro]

We had a discussion last week that committee business would be done in camera. That's why I asked the committee.

Mr. McColeman.

[Phil McColeman, Conservative, Brantford—Brant, ON]

I have a point of order.

Having been a committee chair for quite some time, I know that if a motion relates to what's happening here, typically it's not handled in camera.

[Vance Badawey, Liberal, Niagara Centre, ON]

I have a point of order—

[Phil McColeman, Conservative, Brantford—Brant, ON]

It's not part of—can I finish my point of order, please?

[Vance Badawey, Liberal, Niagara Centre, ON]

I have a point of order, Madam Chair.