Madam Speaker, I will be dividing my time with the Liberal member for Mississauga West.
I am speaking today in the context of the policy framework made public earlier this week by the Minister of Transport.
I must thank the minister for appearing before the Standing Committee on Transport and all of its members. His vision of a Canadian airline industry that is not only safe and prosperous, but also meets the needs of Canadians in the XXI century is clear and lucid.
That vision identifies the issues requiring government action and the areas in which such action will make it possible to strengthen this industry on the eve of the new millennium.
One of the questions being debated is the possibility of amending the Air Canada Public Participation Act. Under this legislation, no individual or group of individuals may hold or control more than 10% of voting shares in Air Canada.
When Air Canada was privatized in 1988 and the Air Canada Public Participation Act came into effect, the view at the time was that Air Canada shares should be spread over a large shareholder base. Whether that point of view is still valid in 1999 is debatable.
In his statement on his policy last Tuesday, the minister indicated that he was prepared to increase this limit, if, and only if, doing so would help achieve the objective of a prosperous airline industry under Canadian control.
To this end, the minister asked the two Standing Committees on Transport to examine the question of the 10% limit and, after consulting the main stakeholders and considering the future of the industry, to make recommendations on a possible change to this limit.
All the members of this House know that the airline industry must undergo major changes; they are inevitable. The broad policy for the restructuring of the airline industry in Canada the minister presented to us establishes guidelines for the transformation of an industry, currently comprising two main carriers, into an industry in which a dominant carrier will emerge.
In this regard, the public at large, consumer associations, independent carriers, travel agents and other stakeholders have raised serious concerns about the impact of consolidation on competition in the airline industry.
In fact, in my big region of Abitibi—Baie James—Nunavik, with over 36 airports, and airlines such as Air Inuit, Air Creebec, First Air, Air Boréal and Air Wemindji, First Air is the third largest regularly scheduled airline in Canada and its Inuit owned parent company, Makivik, is paying close attention to statements and actions by the various groups in the reorganization of the airline industry in Canada.
The fear is that a dominant carrier could, by design or inadvertently, act unfairly. Such action would eliminate or limit competition with the intent of controlling air traffic.
In August of this year, Canada's Minister of Transport wrote to Konrad Von Finckenstein in his capacity as Commissioner of the Competition Bureau. In particular, the minister called on the commissioner and the bureau to help the government develop a position that would take the interests of Canadians into account, while giving the private sector the necessary leeway to develop proposals for the structure of a viable industry. The bureau's response, dated October 22, was made public last Tuesday.
I would like to take a few minutes to examine certain issues having to do with domestic competition that were identified by the Competition Bureau.
I am referring here to the issue of predatory pricing and to the issue of airport access. The Competition Bureau notes that a dominant carrier will have both the incentive and ability to engage in various types of anti-competitive behaviour, including predation. Within the airline industry, predatory behaviour can take various forms, including predatory pricing.
Predatory pricing occurs when an airline temporarily sets low fares to inflict losses on one or more rival airlines, or matches fares while adding additional capacity. Once it has eliminated the competitor, the carrier restores higher prices.
The policy framework announced by the federal Minister of Transport deals with this very issue. The document states that “Small and new entrant carriers are potentially vulnerable to excessively aggressive competitive attacks from a larger, established airline. Small carriers run the risk that a dominant carrier may try to drive them out of a market or out of business by substantially lowering fares and increasing capacity in the short run with the intention of recovering the short term losses with price increases in the long run”.
Initially, consumers might seem to benefit from lower prices, but the long term result will be a narrower range of choices and higher prices.
The federal Minister of Transport stated that predatory prices will not be tolerated. According to the overall policy, the Government of Canada must ensure that effective measures are taken to deal with abuse in the air transportation industry.
The commissioner recommended that some sections of the Competition Act and its regulations be amended to grant him the authority to act in this area. Under the overall policy of the federal Minister of Transport, the government recognizes that this is a key issue which must be dealt with decisively.
The minister has asked the House and Senate committees to make recommendations on the best way to reach this goal.
Also, small or new air carriers have trouble gaining access to airports. This is a complex problem that was also examined in detail by the Competition Bureau.
In order to be competitive, new Canadian carriers must get reasonable access to departure and arrival slots as well as various airport facilities, such as boarding gates, loading bridges and ticket counters.
The federal government intends to come up with innovative ways to facilitate access to airports. I would like to elaborate on this point.
A “slot” is an expected time of departure or arrival that is available or allocated to a specific airline, for a specific date, at a specific airport. Take, for example, Toronto's Pearson airport. It is the only Canadian airport that is currently operating at full capacity. It is also the airport where most new entrant carriers will want to land.
A carrier created by merging Air Canada and Canadian Airlines would use up a large portion of the slots at Toronto's airport, particularly during peak hours.
Since the slots are reserved for carriers as long as they need them, it would be difficult, if not impossible, for other carriers to get enough slots to establish new services.
The policy framework announced by the federal Minister of Transport deals with this specific issue. It notes that independent carriers and airport authorities have identified access to airport facilities at the large congested airports as a potential barrier to competition.
Without being able to offer services at Lester B. Pearson International Airport in Toronto and other major airports, new entrant carriers and other small carriers will not be able to compete effectively against a dominant carrier.
The policy framework states that the dominant carrier may need to give up some of its access to congested runways so that other airlines can add to their domestic services.
Guidelines or regulations to ensure fair and competitive allocation of slots may be needed at Toronto and at any other airports where slot control proves necessary.
The guidelines would ensure that a reasonable portion of the surrendered slots comes from the most congested times, days and seasons, as these slots are the hardest to obtain.
In conclusion, in a restructured industry with a dominant carrier, it will be necessary to promote competition. The government intends to put in place the necessary mechanisms to encourage the arrival of new entrant carriers and the growth of existing ones, such as First Air, Air Inuit, Air Québec, Air Canada, Air Wemindji, Canadian Airlines and others in Canada.