Debates of Oct. 1st, 2001

Canadian Airline Industry

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

Mr. Speaker, all of this hype and that is it. A statement. There is no commitment to legislation, no commitment to coming to the transport committee, no announcement of broadening security measures. The transport minister bragged about the fact that he has new security measures, but he has not said whether or not they are permanent. He has not entrenched them into law. He has not in fact apologized for Transport Canada's one in five failure rate in smuggling replica guns, knives and bombs past security.

What are the reforms the minister is offering to change that? He has offered no legislation whatsoever. He has talked about new technologies at the airport, new screening devices, but he has not announced that the airport staff and security teams are going to be trained on the new technologies.

[An hon. member]

There was a bomb scare in Calgary.

[James Moore, Canadian Alliance, Port Moody—Coquitlam—Port Coquitlam, BC]

As the hon. member just said, there was a bomb scare today in Calgary. There is a concern in the airline industry.

The transport minister said that he likes to come to question period to make small little announcements in scrums. That is not what the country needs. The country needs a broad, firm public statement and a showing of leadership by the transport minister. Frankly we need to see what happened in the United States on Thursday last week.

U.S. President George W. Bush stood in Chicago with the transportation secretary and the governor of Illinois and announced some bold initiatives. It was not just some fluffy rhetoric or a prepared statement. It was not a bunch of fluff like we just heard.

The president said that the U.S. is going to put 12,000 air marshals on planes. It is going to retrain all airport security staff . It is going to look at whether or not it should re-nationalize airport security. He made some bold initiatives and committed some real capital and some real financial resources to making it a reality.

He stood before the American people on CNN, live on a national, global network and said, “Fly the friendly skies. Our standard of living will not be impacted by these terrorists. There are air marshals on the planes. You are free to fly. There are new security measures on the ground”. He made real substantive announcements. He said, “Get on planes. America is behind you. We will not have our standard of living impacted by these terrorists”. That is the sort of leadership we need to hear in Canada but instead we have gotten fluff and a vague statement.

I want to move specifically to the issue of Air Canada. The debate has been hyped all day. Frankly I do not know that many Canadians were holding their breath for serious answers, but we were looking for them and hoping for them.

September 11 did have a devastating impact on airlines around the world. Canada has been no exception. In other countries leaders have undertaken bold initiatives to reinforce public confidence in the airline industry and to quickly address the public security concerns with regard to flying. They understand only too well that the best way to restore the international health of the airline industry is to put people back in airline seats where they belong.

Airplanes filled with passengers more than any government bailout of cash that may be proposed is the long term solution to airline competition in Canada and around the world. I must say it is more than difficult to fully engage in this debate regarding financial compensation for the airline industry given the absence of some crucial information.

One, the fact is that neither Air Canada nor any other air carrier has publicly stated the compensation amounts they are seeking.

Two, neither Air Canada nor any other air carrier has submitted a written request for tax dollars.

Three, we have not had a full audit and accounting of the rumoured lost revenue to the air carriers as a direct result of the terrorist attacks.

Four, neither the transport minister, the finance minister nor the Prime Minister has publicly and unequivocally ruled out even the most inflated rumoured requests for taxpayer dollars giving the House and the public no clear indication of their direction vis-à-vis a possible bailout for the air industry.

Five, neither the transport minister nor any other cabinet minister has tabled in the House or before any of the standing committees a specific proposal as to how the government should assist the airline industry in this time of difficulty.

Six, the finance minister has not committed to bringing in a budget at any time in the foreseeable future. Therefore, parliamentarians are left without a clear sense of Canada's fiscal capacity to assist any industry let alone the airline industry.

I say that absent this data, absent having these fundamental questions answered, this debate has been rendered largely neutered. Absent this information, this debate is taking place in an information vacuum.

That having been said, as the transport critic for the official opposition, there are some principles I would like to outline that should guide this debate as we move forward.

First, it is a dangerous game to go down the road of subsidizing business without a clear objective and an end to the subsidization in sight. To reinforce this point, I would like to quote Air Canada CEO Robert Milton. When he appeared before the Commons transport committee on Wednesday, October 27, 1999, he said:

For Canada what we really need to do is to draw a line in the sand and say we're going to stop these unnatural market forces taking place. We're going to truly do what the minister said two and a half months ago and let the market forces prevail in order to achieve a really sensible competitive set in the industry where competition can really flourish. That's what I believe will happen if the government gets out of the game and lets the market prevail.

Mr. Milton was right then, but I am afraid that it may now be up to others to address this principle.

As a second principle, it is, I would say, a moral obligation for members of parliament, those of us entrusted with overseeing the spending of billions of taxpayer dollars, to ensure that those dollars are spent efficiently and appropriated to the areas of highest collective priority for Canadians.

In recent days, various Canadian air carriers have made statements regarding the financial impact of September 11 on their businesses. We, as the official opposition, are prepared to consider any proposal that is tabled in the House. With regard to Air Canada specifically, we understand that Air Canada was reported to have requested roughly $1 billion prior to September 11. The debate should be focusing on how to assist Canada's airline industry in dealing with the drastic consequences of the September 11 attack.

In considering this, we are prepared to examine the airlines' reservations for September, October, November and December of this year and compare them to similar numbers in recent years with a view to trying to determine the financial impact on each airline due to the events of September 11. These numbers can be compiled and they will help answer questions surrounding how big an impact the attacks had on the industry and how much money Canadians might be asked to contribute.

That having been said, the situation with Air Canada prior to September 11 must be taken into account. It has lost $168 million in the first quarter of 2001 and $108 million in the second quarter, but was forecasting a pre-tax profit of $28.6 million for its third quarter, which includes July, August and September airline traffic. The net financial reality of these three quarters has been abysmal. Normally if an airline cannot turn a profit over the summer season its long term viability is in doubt.

I understand that my time is running low but I want to make this point from the official opposition very clear. If any compensation from the government is forthcoming, for the official opposition it must follow three guidelines.

Number one, it must maximize taxpayer and consumer benefits. Number two, it must be fair to all carriers and that includes the view from the official opposition that Air Canada should not be subsidized by taxpayers in order to create a low cost regional carrier that can be seen to drive its competitors out of business. Number three, Air Canada should ask for taxpayer bailouts only after it has maximized all other avenues.

Mr. Milton in his speech in Montreal last week said that he has over $1 billion in cash on hand, he has assets that he has not refinanced and he has credit that he has not tapped into. All these other resources need to be tapped into fully before taxpayer dollars are asked for.

Of course, as a fundamental principle of this party, any potential bailout must come to the House for a full vote. There must be no secret deals. This should not be decided by cabinet in the absence of the contributions of the members here, in the absence of the full House. It should come to the House for a full vote, a free vote. That is the only way to do this properly. Until then, Canadians and the official opposition certainly hope to see much more concrete, not rhetorical, leadership from the Minister of Transport and the Prime Minister than we have seen thus far.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Speaker, let me read again the motion now before the House. It says:

That this Committee take note of the difficulties experienced in the Canadian airline industry.

To listen to the Minister of Transport, the industry's problems are all linked to security issues. He told us that he has solved all these problems. He has had or will have changes made to cockpits. He was very eloquent about the viability of the industry. What he promised is that he would look after things if the industry ever got into trouble.

That is what the Minister of Transport had to say in a debate that is surely watched by some air industry workers. After all, Air Canada did announce 9,000 layoffs; Air Transat, 1,300; Rolls Royce, 22; and Pratt & Whitney, 600. All the government has to say for itself today is that security in the cockpit will be improved, which brings us back to the same old question “Does the government have a plan? If so, will it tell us what it is?”

There have been requests from the airline industry. Air Canada was one of these. Can we know today what Air Canada asked for, and what the government's financial situation is? How is it capable, with the taxpayer money, of predicting the impossible, this tragic and horrible situation that occurred last September 11, putting the safety and security of air travellers in jeopardy as well as the future of an entire industry that is highly prosperous in Canada, and in Quebec in particular?

In a debate as important as this one today, an emergency debate on the airline industry, all that we get out of the Minister of Transport is “We have improved security”. As was necessary. It was what everyone would want to see to restore travellers' confidence. That was obvious. The decision has been made to reinforce cockpits, and we agree with that. What about the 13,602 jobs lost in the airline industry in recent weeks? What about that? That is the debate we thought we would have seen develop here in the House today.

The Bloc Quebecois will give its position to the minister. That is what he wanted and we are prepared to do so. What we want is for the airline employees not to be the ones that have to pay through job losses for the entire problem arising out of the September 11 events. That is what we want. That is what the 13, 602 workers want from the minister. They want to have job security, as far as the events of September 11, which were not of their doing, are concerned. It is as simple as that.

Today then, it is clear: the airlines must be helped, in all sectors, the men and women who have lost their jobs or will do so in the weeks to come, because of this dreadful situation to which they had no connection and for which they assuredly did not ask to lose their jobs. That is what we are proposing: to help the struggling airlines and the entire aeronautical and aerospace sector to absorb all the repercussions.

We are now seeing the domino effect of these sad events. People are less inclined to fly. Airlines are losing money. This has an impact on aircraft manufacturers and parts suppliers. The whole industry will be penalized. If we look even further, there are repercussions also on the tourism industry and on everything international tourism could bring to Quebec and Canada.

We want to know if the government is willing to deal with all job losses resulting from events beyond the control of any of the employees who have been laid off since September 11. That is what we want to hear today. The government has the money. We know that the accumulated surplus since the beginning of the year is estimated at nearly $10 billion, and the government has access to that money. Is it ready to sit down and negotiate with businesses, to find ways of getting the industry back on its feet? That is what we want to hear. We want to know if the government is willing to help all sectors that have suffered losses because of the sad events of September 11, be it the airline industry, the aeronautics industry, international tourism or any kind of tourism.

That is what we are hoping to see develop tonight. That is what the Bloc Quebecois will focus on over the next few days. We will not stop asking questions because we want to know what the government plan is and what the airlines' demands are.

If we take the case of Air Canada, we know very well that, prior to September 11, Air Canada had made requests. Cuts had already been announced. There was talk of 3,500 jobs being lost. In Air Canada's annual report to shareholders on May 15, the president, Mr. Milton, had already announced that there would be staff cuts in his company, which were to be achieved through voluntary departures, authorized leave, and attrition. No one would have their job ripped away from them. This was the policy Air Canada had announced.

There was also a request for loans. We were told that there would be a request for $500 million in loans to help buy new aircraft. The company asked for a $500 million reduction in federal government airport fees, as well as a reduction in fuel tax. These were requests made by the company prior to September 11.

These are requests about which the Bloc Quebecois will be very demanding. We do not wish to enrich the shareholders of a private company without due cause. We want everyone to be very clear on this: we are prepared to agree to assistance to the industry for all the problems associated with the September 11, 2001, attacks; but the industry will have to pay for mistakes it made on its own prior to September 11, 2001.

Earlier, the minister told the House that errors were made along the way. What the public needs to understand is that those mistakes were not made only by the industry. The government also made mistakes when planning the integration of the two airlines, because that is what we are talking about here, the integration or merger of two airlines.

Under the circumstances, we have to be able to put things in perspective for the benefit of those who are watching us. We need to cover the losses incurred by the industry since September 11. Investors and shareholders have to face the music for what happened before September 11, just like the other companies have to do.

In a press release, WestJet announced it was doing fine, that, despite the tragic events, it was in top shape financially. It was in great shape at the beginning of the year, unlike Air Canada. As we can see, some companies did well.

It is important to tell the men and women who are watching us, who work hard to pay their taxes, that the federal government will not spend their money to correct the mistakes made by some airlines managers. We will leave it to the shareholders to assess the decisions made by the CEOs and the boards of those companies.

To deal with the serious impact a tragedy like the terrorist attacks of September 11 has had on the airline industry, the aeronautics industry and the international tourism sector, what we want and what we need is a governmental action plan. We know the federal government has money. Some of that money could be made available following a thorough debate, and not just the rhetoric we heard from the Minister of Transport tonight.

This evening, on the strength of a motion as simple as “That this Committee take note of the difficulties experienced in the Canadian airline industry”, the minister managed to boast about the merits of his decisions on security, for which he guaranteed that, if the industry had a problem, it would have the support of his government.

It seems to me that the minister must reveal now or never the demands of the industry so we, with him, may be able to make recommendations. How much money does the government have to help out the industry and the 13,602 people who, as we speak, have seen the layoff notices: 9,000 men and women at Air Canada will lose their job, 1,300 employees of Air Transat, 2,680 people at Bombardier, 22 at Rolls Royce and 600 at Pratt & Whitney. So, we have 13,602 people who have paid their taxes like everyone else and who did not deserve to lose their job.

As the result of a single day, a single tragic event we all deplore, they are today, with their families and their children, practically out in the street. This event occurred, and the government made no provision for special assistance or for money to be available to help these 13,602 people and the others who will join them in the coming days.

We hope there will not be others. We do not want to be prophets of doom, we want no more loss of jobs, but these are the logical consequences of the domino effect in an industry that strongly felt the backlash of a catastrophe Canada had never imagined.

We hope that the government makes the right decisions and that it tables in the House a plan with figures, the demands of the various types of industry and the amounts that should be made available so that the men and women who have lost their job may see the light at the end of the tunnel.

[Bev Desjarlais, NDP, Churchill, MB]

Mr. Chairman, I would like to acknowledge all the members who are here this evening to take part in this take note debate to highlight some of the key issues related to the September 11 attack.

From the airline industry perspective, we are looking at three specific types of issues. First is the security of airports. Second, is the devastation of the industry and the economy and the domino effects it will have. Going along with that, third, and it is important that we list it and pay special attention to it, is the number of workers who will be laid off as a result of the number of the companies that have been affected. This has been mentioned by my colleague from the Bloc and we need to highlight that as a key issue.

On the last issue and the second one, it will involve not only the transport minister's willingness but the willingness of the members of his cabinet to do what was intended by their own departments. I will comment on those a little further.

I will start off by commenting on the security. The minister mentioned a number of things that have been done. Quite frankly, a number of things now being done as we go through airport security, such as checking with electronic devices and all these things, have been in place for a number of years. They should have happened all along, but there was a failure to ensure that they were being done. Electronic devices were always supposed to be checked. Every laptop was to be opened and every cellular phone and camera checked. However the travelling public gets in the way of that.

Security guards take a lot of flack at the airports. They earn $6 or $7 an hour.

[An hon. member]

$7.20 in Halifax.

[Bev Desjarlais, NDP, Churchill, MB]

Mr. Chairman, my colleague from Halifax says $7.20 in Halifax. Every couple of years the contract comes up for renewal, but the employer tells them if he cannot keep his costs down he will not get the contract and they will be out of a job. I have seen it happen on numerous occasions where those contracts have changed every two years in some airports. It is crazy. How can we have qualified, experienced people working at an airport doing airport security checks making $6, $7 or $8 an hour and taking the flack they take? It just does not work.

What has happened since September 11 is that the failure in the security system has been highlighted and people are uneasy. I am not saying that that is the reason the attack happened on September 11 because it is not. I do not think that because those few knives went through that the attack happened. However, people are more uneasy now because they are questioning everything that is happening as far as security.

Last week or the week before that, ten pounds of cocaine were found on the inside panel of an Air Canada jet landing in Winnipeg. It had come from Bermuda or the Bahamas through Florida up to Winnipeg. I believe that has happened on eight occasions in the past five years where drugs have been put in panels in different spots in an aircraft. It comes right through all the systems. A fairly easy way to deal with that, at a little more cost, is to have sniffer dogs to check this out.

We all recognize that when drugs are involved, this increase tension and the risk of danger on aircraft because these people can be dangerous to deal with. Workers are enticed in some of those areas to be part of that, thus increasing the risk to travellers.

From a security perspective, a number of things have happened. The minister announced improvements to the cockpit doors. I think everyone thought, thank God at least that has happened. People will at least feel they have a door between them and that hopefully it will be thick enough that it cannot be booted in. Let us face it, if any of the doors on the planes right now were locked, we could boot them through with a little kick of our leg or a push of our hand. So hopefully that will help.

However, we have to wonder that, if the pilot of the plane knows his crew and passengers are at risk, how strong will he feel about not opening that door? No question, September 11 will have changed a lot of people's thoughts, but in time how would that pilot feel about leaving his crew and passengers on their own?

I believe other security issues are being looked at such as cameras or contact devices where there can be notification that something is happening.

These are all excellent security measures, however, there is a lot more that could be done and it needs to be done. If we want to get the confidence of the travelling public back, it is not good enough just to say the skies are safe, get up there and fly. We have not proven to Canadians that the skies are safe, not when reports indicate that 18% of checks show that all these different things go through. These are not little things, not like a little file that is in someone's pocket, but guns and explosives. That is crazy. It should not happen.

Certainly from a security perspective there is a lot that needs to be done. As a caucus we strongly believe that the department and the Government of Canada needs to take over the responsibility of operating the airport security, without question.

It is a sure way. I do not agree with everything the U.S. has suggested, certainly not the air marshals. An air marshal with a gun on a plane is not going to make me feel a whole lot safer about flying. There are some things that can be done to improve the security measures. Having the national security overseeing what is happening and doing part of the baggage checks now is definitely a plus.

From the perspective of the situation of the industry and where it was before, we all recognize Air Canada was in a bit of a pickle before September 11. If anyone goes through their clippings from Transport Canada and from the industry, they will see numerous clippings about the number of job layoffs in the province.

From my perspective that just exemplifies what we as a caucus, as a party, have maintained all along. Merging those two airlines without any kind of regulation was not going to save the airline industry. Something as basic as regulating domestic capacity would have saved both airlines, Air Canada and Canadian Airlines, if we had done it internationally with a strong international market. In other words, if there were so many people flying out of Calgary, then there should be so many carriers there. If they reached a certain number, then another carrier could be allowed there.

We should not allow this cutthroat kind of approach where we have two aircraft right after one another and not expect to have problems in the airline industry.

With Air Canada, Mr. Milton made a lot of promises he did not kept. I listened to that man say to numerous employees and numerous people that this was what they were going to do and that everything would be wonderful. He said that he would save the world, that everyone would have their jobs and that it would be fair for Canadian Airlines and Air Canada employees. It has not been, but in spite of that they tried to work it out. It was not a pleasant situation.

On top of that, even at this crucial time with a destabilized industry, he is still talking about pulling certain jets off from regional areas and starting up a low cost airline. Mr. Milton should give his head a shake. If we will not fly with his company on regular basis, why would we fly with him on a low cost one? Most air passengers will say that they cannot get much more low service than what they have got for the last little while. Jokes about the pretzels are minor. The service was not good just a short while before September 11.

From that perspective, there needs to be some rules put in place. I hope the market can handle this. I hope all these people who believed in a capitalized, private market that would set the tone and pace and provide everything we need feel good about this because it has not and it has jeopardized the whole airline industry in our country. It has not worked.

I encourage, especially at this time, the government if it does not do any other regulation, at least regulate domestic capacity and do not allow the airlines at this time try to cut each other's throats and jeopardize the whole industry. There needs to be a cooling off period. We need to put up the cautionary flag like on the race track. The yellow flag is up for this many laps guys, until the industry gets a chance to stabilize. Let us see how that works. We might find it is the best thing we can do for the airline industry in Canada.

To also assist in the economic downturn, we mentioned a number of things over the last couple of weeks. I will credit the minister because he has been in the House probably every day since this all started. Although we do not always appreciate his answers, to his credit he has been here each and every day, taking the flak and doing it rather graciously.

He knows that I have never been one for favouring the cutting of the airport leases because I always felt that if they wanted this privatized system, they could pay market value.

However with the situation in the airline industry, the government should look at cutting the airport leasing fees or reducing them, whatever needs to be done to give all airports in Canada a fair shake, and as a result make sure they pass that savings on to the airlines. Again, everyone benefits.

The government should be giving greater support to NavCan so it does not have to increase its fees and hopefully be able to low them. Again, this would benefit every airport in Canada. We would not have a situation where only a few benefited.

Members will not often hear us talking about giving corporations tax deferrals, but this probably is one of those times where interest free loans are an appropriate way to go. This is a crucial time. The rules changed on September 11.

From the perspective of the workers, the Minister of Finance will have to give up part of his cash cow, the EI fund of the Minister of Human Resources Development. He will need the assistance of his colleagues in the cabinet. That EI fund is intended for specific things. Numerous members have criticized the use of it over the years. It has been used as part of general revenue. This is a crucial time and that EI fund needs to be there for all those workers who will feel the impact.

The suggestions that have come from a number of the unions such as the IAM, CUPE, CAW--

[The Speaker]

I am sorry to interrupt the member but her time has expired under the rules. I am afraid I have to cut her off at this point.

[Val Meredith, Canadian Alliance, South Surrey—White Rock—Langley, BC]

Mr. Chairman, I will begin by complimenting the minister on his attending and giving us an opportunity to share with him some of our thoughts on where the government should be going with regard to the crisis in which the airline industry finds itself.

There is no question that the world of aviation changed on September 11 but not all the problems that are being faced, particularly by Air Canada, began September 11.

Some of the problems, quite frankly, are decisions that the government made in responding to the last crisis in the airline industry. I think Canadians would agree, some more so than others, that there is a financial responsibility that the Government of Canada has in regard to the airline industry.

It is quite clear that Canadians accept the fact that the Canadian government should be responsible for the direct costs that Canada's airlines have incurred since September 11. There might be different ways of dealing with that direct cost. It could be money up front and then, after audited statements, additional support given months down the road. It could also be credit assurances or whatever. Canadians will accept the fact that the direct costs incurred should be covered.

Many of my colleagues this evening have spoken about the security issues. I think Canadians want the federal government to take back control of security at all airports in Canada.

There are only three countries in the world that the government does not control airport security: Canada, the United States and Bermuda. Canadians want the security of knowing that it is the Canadian government that is looking after the security at airports and making sure that the security agents are well trained and paid well so they do not end up rotating because of cheap labour.

I think Canadians are comfortable with that but what September 11 showed us is that it is not just airline pilots that have to be concerned. Those airplanes were used as a tool of destruction. Many innocent people who merely went to work in an office building ended up losing their lives. So it is not just airline passengers for whom security is required.

I think Canadians would also acknowledge that the government has a role to play in insuring airports and airlines for terrorist activities if that insurance cannot be found at a reasonable cost in the private sector. I believe Canadians would be comfortable with the government making sure that airlines and airports are properly insured for events such as the one that occurred.

Where we get into greater concern is when we start talking about the loss of revenue that airline companies may be looking forward to or not looking forward to. This is more of a controversial subject.

Air Canada has made its claims based strictly on the numbers used in the American legislation. The American legislation does permit subsidizing the loss of business but it is very specific. It is for a period of time from September 11 to December 31. It is not for the ongoing loss of revenue for days, months or years ahead. The response from government has to keep that in mind.

The question we must ask is whether Canada is obligated to follow the U.S. numbers. We certainly do not in the agricultural industry. We do not subsidize our agricultural industry to the degree that the Americans subsidize their agricultural industry. One has to question the premise that because the U.S. government is subsidizing to this tune that Canada must do the same.

If Air Canada is competing with an American airline for a flight from say Toronto to New York and the American airline is being subsidized for that flight, would it be fair that Air Canada or the other Canadian airline is not subsidized? There is an argument that there is some support that would be required. The question is how we give that support. If it is given through insurance, through direct costs, through taking away the security measures and other things, then there are ways of helping the airlines to compete.

I certainly think that Air Canada and all officials who are concerned about this issue must have the right to appear before the transport committee to give their case so that all the evidence and all the information is done in a public way. If decisions are being made and having to be supported by the Canadian people then they have the right to have exposure to the information that is being laid on the table.

If the government does decide to subsidize--and I am not convinced that is the decision it should come to other than the direct costs and other measures that I have put on the table--conditions need to be placed on the table at the same time. The unions have to agree to waive the no layoff provision. Every airline company around the world is dealing with restructuring. It is not right that a Canadian airline feels it does not have to deal with that whole restructuring as well.

I sympathize with all the employees. I would wager that there is not any other constituency in the House that has as many airline employees as my constituency. A lot of people will be directly affected by any kind of layoffs. However I have to ask the government how it could possibly pick out one industry and protect that one industry from layoffs when it would have to consider the trucking industry, automotive industry and every other industry that has been or would be affected by the events of September 11.

Fourteen thousand British Columbians have been laid off from their jobs because of the duties placed on softwood lumber. Communities have been devastated because of these layoffs. Do these 14,000 British Columbians not deserve the same consideration that the government might be giving to the airline workers?

The other concern I have, which I have raised before, is how the government could subsidize an air carrier that is in direct competition with another existing air carrier in Canada. That would be subsidizing one business to provide competition to another. It is very hard to find any rationale to support that. I do not see any indication on the part of Air Canada to change its direction on that issue.

Limitations would have to be placed on compensating high income employees or officers of the company if the government decided to subsidize the company. The government would need to examine the recent stock market dealings of major Air Canada shareholders, including its largest shareholder, Caisse de Dépot et Placement which apparently made a large profit for selling short on Air Canada stocks. In other words, profiting from the decline of Air Canada stocks.

In looking at the comparison between Air Canada's quoted market value and WestJet's quoted market value, I cannot understand how the major airline in Canada, the flagship in Canada with almost a monopoly on a lot of air travel, is worth one-third of what a small, low cost carrier can be. The management issues there have to be questioned if the government is planning on any kind of subsidization.

I mentioned earlier that not all of Air Canada's problems relate to September 11. From a high of $17.50 in November 2000, Air Canada shares had dropped to $6 before September 11. After September 11 they dropped an additional $2.50, just a small portion of that initial $11.50 drop.

Air Canada's current market valuation is $270 million. I would suggest to the government that puts Air Canada in a position where the private sector could very easily manage to adjust the management of the company. The private sector is in a position where it could come in and take over the company and do a restructuring.

When we contrast that with WestJet, we really have to wonder if that is not what needs to happen here.

In conclusion, the federal government should not take an equity position in Air Canada, but rather should eliminate the restrictions on private, domestic ownership to allow more capital into the company. The private sector solution is the best solution and it is available.

I am a little concerned that we should not even be having this debate. Had we allowed the private sector more ability without that limitation, perhaps it would have looked after itself over the years. However that was a decision that was made a couple of years ago and now we need to make sure that we do not make another decision that prevents Air Canada and all Canadian airlines from being viable, well run airlines that compete and are solvent companies that give good, solid, long term employment to their employees whom they treat fairly. I think that can happen with private sector involvement. I would urge the government not to get involved in any kind of equity share in Air Canada.

[Dennis Mills, Liberal, Toronto—Danforth, ON]

Mr. Chairman, since September 11 the Minister of Transport has been on the job from the first hour. Canadians and members of the House forget that within three hours nearly 300 planes that were not allowed in U.S. airspace landed at every airport across Canada.

Within days other security measures were taken, measures which have not been mentioned tonight by some members of the opposition. These included drug sniffer dogs at airports across Canada. We are not saying tonight that it was enough. Nor is the minister. He announced a number of other security measures that would be taken.

Most important, it is tremendous that we as members of parliament have an opportunity tonight to put forward our ideas and thoughts and the views of our constituents on the floor of the House of Commons. The minister is here and I know the Prime Minister is listening to the debate. I hope he moves quickly on some of the constructive and doable ideas tomorrow in cabinet or before the end of the week.

I will begin with an experience I had Friday night. I landed in Toronto and got into a taxicab. Coincidentally the driver was Nick, a man who has been in the cab business for years and who happens to be, of all things, from my riding. I asked him how business was. He said that since September 11 his business was down by 50%. When someone makes a wage of $500 to $700 a week and it is all of a sudden cut in half, members must know what a shock it is to one's system, one's family, one's grocery bill and one's rent payments.

I appeal to the Minister of Transport that the debate tonight is not about Air Canada and the airline industry alone. It is about the thousands, not hundreds but thousands, of small and medium size business men and women from across the country who are affected by the operation of the airline system.

When twenty daily flights from New York City to Toronto are all of a sudden reduced to three there is a ripple effect on the person who does not have the leverage to go to a bank manager for more money. Most people cannot go to a bank manager and ask for the difference until cabinet and the House of Commons decide what will happen with the airline industry of Canada. It does not work that way. Banks do not operate that way. They will give time to the airline industries and the lead corporations but not to the thousands of small business men and women.

I appeal to the Minister of Transport, the Prime Minister and our cabinet colleagues to move quickly on this file. I will be specific in my recommendations tonight because it is a night of thinking outside the box. It is a night of trying to propose creative, constructive and doable ideas.

I do not share all the ideas of the previous speaker, my colleague from the riding of South Surrey--White Rock--Langley. It is no secret that I have always been a person who believes in government intervention.

We are facing a national challenge in terms of consumer confidence. Anyone who would challenge consumer confidence in airlines right now has not been walking through airports or flying on airplanes. We have a crisis in consumer confidence in our airline industry and we need to do something to deal it. I propose the following ideas for restoring consumer confidence.

First, we should figure out a way to creatively apply a 50% reduction to all airline fares for youth under 25 and people over 60. This would encourage and stimulate people to fly again, not just with Air Canada but with all airlines in the country. It would have a tremendous ripple effect on our tourism industry and national unity. It could be achieved through the transport committee but it should be done quickly. The reduction would apply only to flights within Canada, only outside the busy periods of Christmas and Easter and only for eight months.

We need to stimulate people to get them back on airlines. I have a lot of respect for President Bush. He gives great pep talks and tells everyone to fly to Disneyland next weekend, but it will not happen that way. In this country we must give it a stimulus. This is where I disagree with my friend from South Surrey--White Rock--Langley because her party says we should have no government stimulus.

Second, I have stood behind Air Canada from the first day I was elected to the House and will continue to stand by it. Two years ago it was voted one of the best airlines in the world. It has been going though a super bad patch since September 11, but I believe any taxpayer money that goes into stabilizing Air Canada should be exchanged for equity.

The Ministry of Industry would be responsible for that. I hope the Minister of Industry, who is sometimes referred to as Captain Canada, would agree to stabilize Air Canada even if that means it becomes a crown corporation again. That is my view. I know some people will not like it but it is my view. That is the beautiful opportunity of having a debate tonight.

Third, the member for South Surrey--White Rock--Langley said something tonight that I totally agree with. She said we cannot deal with only one airline. We must do something in the next couple of weeks that will stimulate all industries and every sector of the economy. Even before September 11 we knew we had a bit of a fragile economy.

I think my friends in the Canadian Alliance will love this idea, and I call on the Minister of Finance and every member of the House to consider it. As a bold, broad step to stimulate the whole economy we should spend the GST for one year.

This would cause a blast of confidence to go through the entire economy. It would touch every sector. It would stabilize the temptation of many industries that are thinking of laying off Canadians. As taxpayers and as a government we would ultimately pay for this through various government programs.

The beautiful thing about the GST is that we do not need to consult the provinces. We do not need to consult the municipalities. We can come in here and put it to the House. What member of parliament would not support it as a means of re-igniting the economy and touching every sector?

Yes, it would cause the Minister of Finance a bit of a jar because the standard line around here is to ask where we would get the money. However if we do nothing we may have to come back here eight months from now to find more money. Let us bite the bullet and do it now.

[Jason Kenney, Canadian Alliance, Calgary Southeast, AB]

Mr. Chairman, as always I am sure the finance minister will be pleased to hear the latest suggestion from the hon. member for Toronto--Danforth. He has a reputation for being one of the few policy innovators opposite. It is a well earned reputation.

I am happy to rise on this take note debate. I thank the House for the opportunity to join my colleague if he would agree to yet again press for a flat tax in the Liberal caucus or a single tax as the case may be. I thank the government and all parties for allowing us to bring this matter forward because the airline industry is a central element in our modern economy, especially in a country so huge.

As a Canadian who spends many days and dozens of hours every month on airplanes I have a personal understanding of how central the industry is to the flow of traffic, goods, services and human capital across the country. I do not envy the difficult position the transport minister finds himself in although to a great extent he and the government's policy have created the predicament in which they find themselves.

In terms of the immediate economic consequences of the September 11 tragedy, my colleagues in the official opposition and I support in principle the notion that all our airline companies, not just the principal monopoly of Air Canada but all airline companies, that suffered direct economic harm as a consequence of the shutdown of our airspace and commercial air traffic from September 11 to September 13 ought to be compensated for those losses and any perhaps other provable losses as a consequence of the shutdown.

We have not yet seen, at least in the opposition, what kinds of losses the airlines might have incurred. I understand from published reports that it could be in the neighbourhood of $100 million for Air Canada and several dozen million more for the smaller air carriers.

That seems reasonable because the companies operate on small margins to begin with and their ability to operate is dependent on the government authorizing open air space. For two or three days they did not have that and were unable to operate or generate revenue. Because the shutdown of commercial air traffic was clearly the consequence of a national and continental emergency, I think all parties and all Canadians would support in principle compensation limited to the direct consequences of the shutdown.

We in my party support the idea of an appropriate degree of government fiscal support for additional security imposed on airline companies by way of federal regulation. Clearly all Canadians expect the government to engage in a comprehensive review of airline security. We do not think the government has moved quickly enough in regard to certain obvious measures, certainly not as quickly as the government of the United States.

There will be costs associated with this. In so far as the costs are the result of a federal mandate to protect Canadians and promote public security, my colleagues and I would support limited government fiscal compensation for some of the additional security measures.

I am disturbed to see certain companies, Air Canada in particular, playing the lobbying game, seeking special interests and engaging in rent seeking behaviour. We understand from published reports that Air Canada approached the government prior to the September 11 disaster for a major bailout in the order of $2 billion. Shortly after the September 11 disaster the CEO of Air Canada upped the ante to $3 billion or $4 billion.

This raises the question, was Mr. Milton using the outpouring of public concern and compassion following September 11 as a political lever to squeeze more tax dollars out of the federal government? I think that is an important question. I find it quite troublesome that we would have seen his company seeking corporate welfare before this event and then doubling its ante afterwards.

I believe as my colleague, the member for Port Moody--Coquitlam--Port Coquitlam, has already stated in this debate, we need a strong, vibrant airline industry. We have tens of thousands of people employed in that industry and millions of Canadians served by it. We need to maintain a strong industry.

However let us not be coy about this. We do not have a strong airline industry in this country. As a result of government inaction and government policy, we have a de facto monopoly, a virtual monopoly, in a tightly government regulated industry in the hands of Air Canada. We have predatory pricing practices. We have a company, even though it has a virtual monopoly, that still has managed to lose money, quarter after quarter and month after month, rather than making the difficult management decisions that it needs to make in order to provide the services and make a profit or at least not continue to run quarterly deficits. That is a management requirement. It ought not to be laid at the feet of the taxpayers of Canada.

This is a huge, trillion dollar, complex, free market economy with a number of enormous industries and corporations. If we accept the premise of Air Canada's request for a bailout of some $2 billion, and I think it has gone back down to $2 billion now which really raises the question about on what basis it is making these claims and these requests, we are essentially establishing a precedent that the Government of Canada and the public treasury will be available to backstop and bail out companies in any sector of the economy that find themselves in a period of economic difficulty. That is simply wrong in principle. Every day, unfortunately, dozens if not hundreds of small businesses and entrepreneurs go bankrupt, lose their businesses, have to lay off employees and have to go without incomes themselves because they are struggling to operate in the marketplace.

I think it would be wrong to prejudice the federal government and the taxpayer to subsidize one chosen industry, one chosen monopoly corporation, at the expense of all of those taxpayers, entrepreneurs, small businesses and small and medium-sized enterprises in various sectors, including the transportation sector, which are struggling day by day to make it by, to make their payroll and to make a profit. We need to treat all sectors of the economy with a degree of equity and not prejudice ourselves in favour of any particular one.

We would speak out against any unspecified bailout of any corporation. This is not just with respect to Air Canada. Again, this points to a greater need for a review of government policy in the airline industry to allow for greater competition. I now look forward, in light of September 11, to the government allowing a continental security policy in terms of a common border and a common perimeter so that we can look toward a common transportation policy. I would hope the government would consider allowing American carriers to compete on an equal footing with their Canadian counterparts to give more choices and more services to Canadian consumers.

My colleague, the opposition critic for transport, has addressed a number of security issues that have arisen. I do not need to delve into them. However, I will say in closing that this is a particularly difficult moment. I believe we are moving into a recession. We had negative growth in the last month of the second quarter and the first month of the third quarter. I have no doubt in light of September 11 that we actually are in a domestic and international recession. In fact, the Bank of Nova Scotia is now projecting a $5 billion fiscal deficit for the government in the fiscal year 2002-03.

That means that it is time to make some tough choices. At a time like this we have an urgent imperative to invest more public resources in areas of national security such as national defence, where we spend less than any country in NATO save Luxembourg, or such as CSIS, which has the lowest relative intelligence expenditure of any major western country, or such as the RCMP, which has had major cuts. These are all areas of the highest public importance and we cannot justify unspecified corporate bailouts and corporate welfare at a time like this when public resources must be dedicated to national security. I hope the government will find the right priorities to govern those decisions in the future.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Mr. Chairman, I would like to use the few moments I have tonight to talk about three main issues.

First, the minister asked me to explain that he had to leave to take part in a meeting. He apologizes and will be back as soon as it is over. His parliamentary secretary, the hon. member for Chicoutimi--Le Fjord, is here and is taking note of what is being said tonight.

The first item I would like to cover briefly is the matter of safety in our air transportation system. I readily recognize that I am not an expert in this area and I will not attempt to provide advice as to what can be done to improve it. There is certainly a recognition nationwide that it has to be improved somehow. There will be those who are more familiar with these matters who will come forward and provide sound advice and we will improve the system.

There seems to be a consensus throughout the country that the government must take the lead in ensuring safety and security in the airline industry.

Everyone I have talked to since the tragic events, the horrific events of September 11, agrees that the government must ensure that Canadian airports and air carriers implement the best security measures possible. The government has a role to play in this area. It must once again assume some responsibilities, ask the RCMP to be more visible, and so on. That is the first point I guess on which most Canadians and certainly the residents of my riding of Ottawa--Vanier, with whom I have had the opportunity to discuss this issue, would agree.

The second item I would like to bring up is the matter of insurance companies that a few days after the horrors of September 11 decided they were no longer offering a certain item of coverage relating to war and terrorism. I find that behaviour despicable. I am speaking of companies that have been engaged to provide insurance coverage and suddenly decide, unilaterally, that they will no longer offer this coverage no matter how much they are paid.

That essentially put governments in the position of stepping up to the plate. Otherwise the entire system would have been grounded. I congratulate the government for having stepped up to the plate and for giving a 90 day breathing period to the industry to come up with a different solution.

I hope that we look in terms of those solutions to a self-insurance mechanism of sorts, whether it be through a co-operative venture involving all partners in the airline industry, whether it be through government or whatever mechanism we eventually end up with on self-insurance. I would hope that at that point we would look at the three other product lines that these insurance companies have not revoked and perhaps offer them to this joint venture, co-operative self-insuring mechanism that we have devised.

It is unacceptable that the private sector, which I hear being lauded by a lot of people across the way, would in a time of crisis and a time of dire need pull the plug as they have on their coverage. This is behaviour that I would not have expected from Canadian corporations. They are not Canadian. They are multinationals, I gather, and three of them control this market worldwide. I would hope that we have learned a lesson in not trusting monopolies.

The matter of insurance is one that I wish to bring to the attention of the government because I hope it will push these insurance companies very hard and reprimand them for their behaviour.

The third item is Air Canada itself. I have to admit that I am one of those who were quick to criticize Air Canada in the past, either because of its casual attitude or because of its lack of service or because of one of its employees or representatives. I have to admit that I am not always pleased, even today, with its behaviour, particularly since it has indicated its intention to ask $3 to $4 billion in government assistance. It is now down to $2 billion. I find this behaviour most reprehensible.

That being said, I think it is absolutely crucial for a country like ours, a country that has trading partners all over the world, to have a national air carrier. I think it is a must.

We need a national carrier. For a trading nation it is a necessity. Therefore we either deal with Air Canada or we invent another one. We have Air Canada for the moment and I for one think that it would be very detrimental to our economy and to our international reputation should this carrier be grounded. I am of the view that somehow, somewhere, we have to help Air Canada restructure itself and be sure that it can continue occupying the air space that Canadians wish to occupy.

What should we do? On one hand, the company is asking us for money; on the other hand, we do not want to give it a blank cheque, and I agree with that. There is no question of giving a blank cheque to Air Canada, and I think the government was pretty clear on that.

We must show some imagination. I want to go back to a suggestion made by the member for Davenport. We should invest in Air Canada. I do not think we should buy Air Canada shares that are currently available.

There are about 120 million shares outstanding. I think Air Canada closed at somewhere around $3.35 today, so its market capitalization is around $400 million. I am not suggesting that the Government of Canada buy those shares, buy back Air Canada. I am suggesting that it should consider making an equity investment to be issued as treasury shares, and it could make a significant equity investment before it goes out to secure loan guarantees and so forth. There might be a package of measures to sustain Air Canada but at the same time protect the Canadian public and its tax dollars.

The government should seriously consider some form of investment for which it would receive treasury shares, which would give it seats on the board, and I said seats, in the plural.

I think it is rather important that the government obtain through that mechanism seats, in the plural, on the board to help Air Canada restructure. For instance, having a good presence on the board, it could force Air Canada out of unfair competition, out of the regional carriers, out of the low cost carriers where there are others in the country that are prepared to compete in that area. It could concentrate on long haul flights in Canada and certainly on our international routes, which is what we would expect a national carrier to do. That is my first idea that I would encourage the government to consider. I am not the only one who has such an idea.

Second, there is a need for loan guarantees, it goes without saying, especially if the government has a major investment in Air Canada.

Third, It is perhaps time to act quickly and offer Air Canada employees, those remaining anyway because, unfortunately, there are many fewer than before, an opportunity to buy shares in Air Canada, so that they too are at the table to protect their interests.

An employee share ownership plan that might encourage some equity investments into Air Canada at this time could be very useful, certainly for the remaining employees of Air Canada. It might have been useful for those who may have been given notice that they will not work there any more.

Those are some of the measures that I think the government should look at: equity investment, some loan guarantees and certainly employee share ownership. As well, once we have seats on the board we can reorganize Air Canada and help it restructure. The government has proven that it can be a good manager. A private-public partnership would help us protect two things. As a private concern Air Canada is focused on maximizing shareholder value. That is its job. However, as a public concern we are here to be mindful of service to the public.

Now, as Air Canada heads into some very difficult times over the next few years, a private-public partnership would be one way of ensuring that the government does not just maximize value for shareholders and profitability, but that it also concerns itself with service to the Canadian public. It is important that we have a national carrier.

Incidentally, the government could ensure that Air Canada reviews the percentage it gives travel agents who sell its tickets. There was a decision on this very recently. Air Canada took a very tough stand against travel agents who sell plane tickets. This would be a way of forcing Air Canada to review this treatment of travel agents which is, in my view, heavy-handed.

These are the basic ideas I wanted to present. It is a very difficult situation and I hope that wisdom will prevail.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Madam Chairman, I am pleased to take part in this debate. The motion reads:

That this Committee take note of the difficulties experienced in the Canadian airline industry.

It is important to make a distinction between the difficulties experienced before September 11 and those that result from the events of September 11. If the events of September 11 had not occurred, the House would not have met to settle Air Canada's problems, including its longstanding management problems, and problems with the Official Languages Act and with providing adequate services in the regions. It is quite possible that this company, with the type of services that it provides to the regions, is experiencing serious financial problems. It is always necessary to have business clients to succeed and, in the end, make money.

But if services are disorganized, as they have been in recent years, it becomes less and less practical to fly. This problem is one that existed before September 11 and it should not influence the efforts that must be made to solve the current situation at Air Canada and in the whole Canadian airline industry.

What happened since September 11, since these terrible events? The terrorist attack generated a fear that has resulted in a major loss of clientele within Canada and in terms of the number of passengers coming from abroad, because this is very much an international crisis, since travellers all over the world are still traumatized by what happened. Some efforts should be made in that regard. The most harmful effect being felt today as a result of this loss of clientele is the loss of thousands of jobs everywhere.

For years society kept saying “The less governments get involved, the better it is”. We are now realizing that it is important to have a true state, a real state that can take action to ensure compliance. Today, we heard that safety should really be a government responsibility and that we should make sure that security officers are properly trained, that the hired staff is well paid and that it gets the necessary training to do its job.

I believe these are the essential basic conditions because what has to be done is to get people back to taking the plane. They have to be told that people are flying again. MPs have begun to fly again within Canada. So have others, and this must be made known. I believe a promotional and advertising effort needs to be made to tell people that yes, things are safe again. But, as always in marketing, claims must not be made that cannot be guaranteed. If we are going to assure people that the system is going to be safe, means must be taken first to correct the situation so that it is.

As well, a very thorough assessment of losses is necessary. What are the consequences of the September 11 terrorist attacks? What are their true consequences on the air industry? Have all companies been affected, not just Air Canada? Do they have to be considered as well? As well, we need to realize, and this is very important, that this is going to be a terrible test of our social programs.

Let us keep in mind that EI has been cut markedly in recent years, rather viciously and deeply cut. Today, we have to realize that, in circumstances such as these, an emergency solution has to be found. Also, in my opinion, a long term solution is necessary so that our social programs will not only serve the people in the airline industry who are living through a catastrophic situation, but also the other people also affected by it.

The tourist industry does not have the lobbying power that Air Canada does, because it is often made up of a number of small businesses. Today, we are already aware that there are fewer tourists from the U.S. and Europe. Why would the tourism industry not also be entitled to some form of government assistance? It is no more responsible than was Air Canada. These elements must therefore be taken into consideration.

As far as the EI system is concerned, this afternoon I asked the Parliamentary Secretary to the Minister of Human Resources Development whether the minister was indeed prepared to agree to job sharing. There seems to be some openness toward this, and it must be available as well to all other industrial sectors affected by the situation. We do not want a response like the one given today about “proceeding on a case by case basis”.

Does case by case mean that the important company with a lobby will win points and that the small businesses, which lack the power and influence with the government, will not? The government has to make a clear and definite decision. It must make a commitment to the effect that, yes, it will make airline travel safe, show that it is safe and provide equal help to all industrial sectors that were affected, and will unfortunately continue to be affected, by the events of September 11.

We have a set of situations that requires a much more dynamic approach than what we have seen from the minister this evening. I was really disappointed, because this afternoon, during oral question period, we were told “Wait for the debate. We will see what the outcome is”. This evening we have been debating practical matters, but they do not get to the heart of the problem and the issue on the table.

I would like someone from the government to tell us whether the suggestions by a Liberal member, who said the price should be lowered for all young people and seniors, will be the government position. We are anxious to know.

Here again this is a bit of interventionism. Another attempt at targeting and creating bureaucracy. What it would take basically is something that brings customers back to planes, something that makes them want to fly. It is a good, quick and efficient service. The services provided must meet consumer needs.

Tomorrow morning, even if everyone were asked to take Air Canada planes in the regions of Quebec, we still have the problem of few flights. The customer gets very little consideration. It is not easy to arrive at a reasonable time. When changing planes is involved, it becomes really awful. It is quicker to drive from Ottawa to Rivière-du-Loup than to fly there. This is a fact. It is a specific example and must be addressed in the recovery planned for Air Canada and the entire Canadian airline industry.

I hope that tonight's debate will make the government understand that it has to show some leadership, so that people can believe that flying is once again a safe and efficient way to travel. Through word of mouth, people will come to realize that flying is once again a valid option and will regain confidence in other industries as well.

It is important to realize that. We need to show compassion to the people who stand to lose their jobs. When people lose their jobs, it has an impact not only on their families, but even on the corner store operator and on the whole economy. If we take all these things into account, if the Liberals show the leadership the people expect to see from them, I think we will manage to pull through this crisis and find some kind of solution to put the economy back on track. We will erase all the fear the terrorists have put in the heads and hearts of our fellow citizens.

This should be our main purpose. To show the terrorists that they have not won anything by the attacks they carried out on September 11, we have to pull through, to turn things around, and to restore the people's confidence in the airline industry, which would be in the interests of all Quebecers and all Canadians.

[Shawn Murphy, Liberal, Hillsborough, PE]

Madam Chairman, I appreciate the opportunity to speak to this take note debate on the difficulties being experienced at present by the Canadian airline industry. Our airline industry has long and short term challenges.

These challenges should be dealt with separately. We should not be mixing apples and oranges. The short term challenges result from the dramatic decrease in the appetite of the consumer for flight travel, especially international flight travel resulting from the terrorist incidents that occurred in New York City, Washington, D.C. and Pennsylvania on September 11.

Before dealing with the financial assistance that a lot of us are speaking about tonight, the first issue that has to be addressed is providing consumers with total confidence in the security of our airline system. Our Canadian system is safe and has been safe. Canada has an enviable aviation safety and security record and is committed to improving that record. However the system is not perfect and improvements have to be made.

Canada and all other countries around the world are taking extraordinary steps to improve the system. Changes must be made in both airport and air flight security. There must be increased terrorism response training for flight crews; increased use of sophisticated technology; total separation of the cockpit from passenger areas; worldwide identification and tracking of known terrorists or people who in the past have associated with known terrorists; and increased penalties for both the travelling public and, more important, the companies that operate within our Canadian airports for any violation of airline security regulations.

It has been said tonight that many of these actions are being taken. I compliment our Minister of Transport for the actions that have been taken to date.

I support the privatization of our airports. I have read or heard nothing that convinces me the Government of Canada is better able to operate the country's airports than the companies that are presently operating them.

Improvements have to be made, especially with the financial plight of our smaller airports. The Government of Canada must make and enforce the rules. What the Canadian airline industry needs right now is a return to normal flight levels.

Airline traffic will return. We are seeing positive signs, especially on domestic flights, that the number of passengers is slowly returning. Immediately after the September 11 incident traffic was down by 60%. Today it is my understanding that traffic is down by approximately 20% and decreasing daily.

On the issue of financial assistance to Air Canada, I am compelled to recommend a go slow and cautious approach. Any decision has to bear in mind that Air Canada lost $108 million in the second quarter of this year. That is nearly a million dollars per day for every day that it was operating during that period.

Robert Milton, president and chief executive officer, announced that Air Canada had to adopt a new business plan and lay off approximately 4,000 employees. That announcement was made prior to the September 11 incident.

Many of the commitments made by Air Canada during the takeover of Canadian Airlines and incorporated in Bill C-26 were in serious jeopardy prior to the September 11 incident. Any compensation package should be based on losses directly incurred as a result of the September 11 incident, and any package should be available to all airlines operating in Canada. That is the short term solution.

Unlike some of my colleagues, I am against the Government of Canada taking over Air Canada. A government owned airline would be cumbersome, uneconomical and inefficient. It would not have the flexibility to operate in today's complex airline industry.

Unlike many of my colleagues, I am against the Government of Canada taking an equity position in Air Canada. This would be politically pleasing in the short term but would cause considerable grief to the Government of Canada. I see difficulty convincing the public as we go forward that the government is not operating Air Canada. As the saying goes, “if you are in for a penny, you are in for a pound”.

The industry's long term problems are caused to a large extent by the sheer size of our country.

Canada is a geographically large country, the second largest country in the world, with a relatively small population. Servicing cities like Montreal, Ottawa, Toronto, Calgary and Vancouver will not be the challenge. The challenge will be providing air service to other cities, towns and regions that require economical, stable and reliable air service.

If Canada is to remain a strong country, regular, stable and cost efficient service is needed in smaller centres. We need a competitive environment, the environment that existed prior to the September 11 attacks. We also need mechanisms that in the long term protect service to our smaller communities.

Looking at the long term and going forward, I invite the transportation committee and the Minister of Transport to look at the following positive recommendations.

First, all airlines should be required, depending on the number of flights they have, to offer service to outlying communities, to the smaller towns, to the smaller regions. This would be done on a comparative basis, based upon the size of the airline and the flights they operate.

Second, all airlines operating on major routes should be required to accept passengers of a competitive regional carrier at a reasonable cost. This code sharing is similar to the concept that has been already successfully adopted in the long distance telephone industry.

Finally, and most important, there are many routes because of their remoteness that will require government assistance. Air service is the lifeblood of many communities in the western part of Canada, right across the northern part of the country and in Atlantic Canada.

The Government of Canada provides assistance for roads and wharfs. It assists the rail industry. It is only normal to accept the proposition that some assistance would go directly to the airlines that provide service to these communities.

There is tremendous pressure today, tonight and tomorrow on the government to straighten all the problems of the airline industry. We are under some artificial deadline this week. There is suggestion the train is leaving town and that everyone should be on the train.

What I am saying tonight is that the trains are already gone from a lot of these smaller towns, cities and regions. They do not have trains and they need air service.

The public is returning and will continue to return to the air. The short term difficulties should be dealt with as such. At the same time the government should seize this opportunity, this crisis, to look at a made in Canada solution to the long term challenges facing our Canadian airline industry.

[Charlie Penson, Canadian Alliance, Peace River, AB]

Madam Chairman, I am happy to participate in this take note debate. I will begin by looking at the federal government's role, in particular its role and legacy with respect to Air Canada and the airline industry in general. It is a sad legacy that goes back several decades.

Air Canada was incorporated by an act of parliament in 1937, although it was called TransCanada Airlines at the time. In 1965 it became a crown corporation and was renamed Air Canada. Like most other airlines it expanded dramatically during the sixties and seventies, largely fuelled by revenues from the population of Canada. However by the mid-1970s rising fuel costs, price wars and the recession took its toll.

Before restrictions were removed from CP Air, Air Canada carried almost 80% of domestic air traffic. However passengers and cargo declined drastically in the early 1980s with the recession that occurred. The previous Conservative government privatized Air Canada in 1989. It was a good move as it got rid of some of the crown corporations that were bleeding a lot of money from the Canadian public.

It was no surprise that financial losses for Air Canada continued even though it came out of it with a pretty generous restructuring package and a modern fleet when it was privatized.

With the introduction of the open skies agreement between Canada and the U.S., Air Canada introduced 99 direct flights to Florida. Overseas and transborder flights are where Air Canada earns the bulk of its profits. Domestic service, however, remains a problem.

After the Onex bid to merge Air Canada and Canadian Airlines was declared illegal by a Quebec court, the transport minister suspended the competition laws to give the two companies 90 days to talk merger. In December 1999, against the advice of the Competition Bureau, the government permitted Air Canada to swallow its only large competitor, Canadian Airlines, for $92 million or $2 a share. That is where it started to come apart.

We have a market economy in all sectors in Canada. Essentially 99% of all businesses operate under a market economy. We have a few regulated industries as well. Why was the market not allowed to take its natural course in the time that Canadian Airlines had problems?

Bankruptcies occur all the time. Many Canadian businesses are subject to bankruptcies in tough times. It is a natural part of the business cycle. The shares and product of Canadian Airlines could have been picked up by a company. It could have been accomplished for 20 cents on the dollar and a company could have been structured in a way that it could make money. However we gave it to Air Canada, the only major competitor. Not only that, we put it through a regulated environment, took it back to regulation, and the market economy was not allowed to take its course.

Even when Canadian Airlines was operating and swallowed PWA about 10 years earlier, it acquired too much debt. The same thing occurred with Air Canada when it took on Canadian Airlines. There was too much debt. Too many conditions were imposed in a regulated environment by the government.

Monopolies are not good for consumers. With 80% of the domestic market the new Air Canada was close to a total monopoly. In the vacuum of competition the Liberals attempted to regulate the situation by setting up watchdogs who, despite having $10 million in fines and jail terms to back them up, turned out to be rather toothless in practice.

The Canadian Transportation Agency was given powers to determine acceptable levels of prices to protect consumers against price gouging. The Competition Bureau was ordered to ensure that Air Canada did not deliberately undercut what little competition it had. It did not take long for the new Air Canada to flex its muscles against smaller airlines.

Following complaints from WestJet and CanJet the competition commissioner issued a temporary order requiring Air Canada to withdraw a targeted seat sale for routes served by the two discount airlines. This put the Competition Bureau in an awkward spot. An organization dedicated to protecting consumers by enhancing competition now found itself arguing for higher prices.

The Liberal government's style of corporate governance is a sham. It is a sad legacy of what should have happened in the country. There is no substitute for the market economy, and we are living evidence of it today when we talk about the difficulties in Air Canada. We have had regulated airlines and airlines that fail. There were three small ones in the last year. RootsAir is one that comes to mind. That is the legacy of the government.

Air Canada responded by challenging the order of the Competition Bureau on a constitutional basis that was rebuffed by the Quebec superior court. Air Canada tried again before the Competition Bureau but again it lost.

Currently the whole issue of whether Air Canada is abusing its dominant position by offering tickets below cost to drive out competition is before the tribunal. I recall being in Calgary about a month ago when two Air Canada flights, each half full, left for Vancouver seven minutes apart. Price is not the only way that competition can be discouraged. Overcapacity is another.

Prior to the September 11 incident Air Canada was getting busy to launch its own discount carrier and musing about entering the growth charter business. Obviously 80% of the market was not enough for Air Canada.

Why a monopoly was less tasteful to the Liberal government than increasing the foreign investment caps or allowing foreign airlines to compete in Canada is not the subject of this debate. However we would like to get involved in that another day.

The Liberals should resist the urge to intervene yet again in the airline industry. Let the market take its course. If the company goes bankrupt, somebody will pick up some of that fleet and offer service across the country in a good fashion.

Assistance to airline companies could include lowered or deferred air navigation fees, gas tax relief and continued third party liability indemnity. However no bailout for the industry.

What industry will be next? We have many that are suffering difficulties as a result of September 11. There have been four hour backups at the border with the United States last week. Members should think of the trucking companies and the tourism business in Quebec City and Whistler, B.C., that had conventions cancelled.

Any post-terrorist attack drop in air passenger traffic should be allowed to work itself out through the market. Ninety-nine per cent of Canadian businesses operate in a market economy. Why should the airline industry not do the same?

The unfortunate reality that existed prior to September 11 was that passenger traffic was down. There were too many half empty airplanes flying and too many employees to retain during the economic downturn that we all knew was coming.

Although there is no question and answer period this evening I would like to end with a question. If we bailout the airline industry how long will the list be of those who come next asking for the same treatment? Let the market decide what should happen.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Madam Chairman, following the horrible events of September 11, Transport Canada worked together with the airline industry to help them adapt to the new operational realities in the transportation sector. The Minister of Transport and his department, Transport Canada, must be congratulated for the way they are managing the current crisis.

The layoffs announced by Air Canada last week are not related to commitments made by the airline, which were incorporated into Bill C-26 regarding the merger with Canadian Airlines. It is worth acknowledging that these circumstances are not unique to Canada or North America. Airlines around the world have been forced to reduce their number of flights, and have announced layoffs.

Air Canada announced that it would be reducing its workforce by 9,000 employees. Four thousand of these layoffs were already announced in August. Eight thousand positions will be cut from the main airline and 1,000 more are to be cut from the regional carriers. Air Canada has also announced that it will be reducing service by some 20%.

Clearly, our priority for the airlines right now must be to help them until business returns to normal, and all of our efforts must be concentrated on achieving this.

I do not support opening Canada's airspace to foreign carriers. I feel that foreign airlines operating in our country would only be interested in the major routes, leaving smaller Canadian communities without service. Therefore, it is appropriate and even essential that the federal government take the time to review all the issues relating to the airline industry.

If compensation is provided to the airline industry, it should only be for financial losses directly related to the closing of the airspace following the events of September 11. Any federal compensation program should include the whole industry.

Let us not forget that there are other airlines operating in Canada and that if we provide some kind of assistance, they must all be treated fairly since they are all equally affected by the events of September 11.

In fact, the Minister of Transport said on September 27 that whatever form this assistance may take, it will be costly. It will cost a lot of money. The Minister of Transport is currently assessing the financial situation of not only Air Canada, but of all the other airlines.

This federal assistance should in no way be used to solve some Canadian airline companies' major financial problems that are not related to the events of September 11.

Any financial assistance provided to Air Canada should not give it more resources to maintain its seemingly anti-competitive behaviour and should not allow it to pursue what seems to be a fight for total domination of the market.

However, the issue deserves to be considered from a different angle. Of course, the tragic events of September 11 have had a terrible impact on air carriers. Unfortunately, the whole transportation industry is affected by this crisis. Be it trucking, shipping or transportation of manufactured goods, the whole industry is weakened by this crisis.

The Minister of Transport referred to this in the House on September 19, when he said there was a need to assess the degree of the dislocation and the damage, and there was no doubt that there had been a lot of it. He added that the airline industry is just one aspect of the transportation industry.

We must ensure that any compensation provided is fair and equitable. For that, we must also look at the other components of the transportation industry and not only focus on the airline industry.

On the issue of safety, Transport Canada is committed to maintaining and increasing the safety of passengers. In fact, safety measures in place in Canada's aviation industry meet and even exceed International Civil Aviation Organization standards.

However, to excel even more, the Canadian government has taken extra safety measures. These measures deal with the presence of dangerous substances and sharp objects aboard an aircraft. They also deal with access to aircraft by airport workers, security personnel training, ID photos, improving infiltration testing and reinforcing cockpit doors.

In closing, the Government of Canada must reexamine its policy with regard to the protection of sensitive and highly populated areas such as downtown cores, sites where major cultural or sporting events are held and very tall buildings.

For example, it is unthinkable and ridiculous that all kinds of aircraft are allowed to get close to the Peace Tower for tourism or for recreational purposes.

In conclusion, passenger safety must remain the priority of the Government of Canada.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Chairman, I will be splitting my time with the hon. member for St. John's West if he should arrive in the appropriate amount of time.

[The Assistant Deputy Chairman]

As I do not think that is in the rules, I think you need to ask for unanimous consent.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Speaker, I would ask for consent.

[The Assistant Deputy Chairman]

Is there consent?

[Some hon. members]

Agreed.

[Ken Epp, Canadian Alliance, Elk Island, AB]

Madam Chairman, I rise on a point of order. With all due respect, there are a number of us who want to speak within the time limit. I do not think you have the option under the rules. Perhaps you could check with the table officer.

[The Assistant Deputy Chairman]

The member misunderstood. The member for Fundy--Royal is splitting his time, which means five minutes and five minutes. He is not taking time from anyone else.

[John Herron, Progressive Conservative, Fundy Royal, NB]

Madam Chairman, we have heard from a myriad of individuals speaking about security issues and about the best way to approach the issue from an economic perspective. What I would like to concentrate most of my time on are the workers themselves, those individuals who are going through a very uneasy time at home.

I am speaking to this from the perspective that my riding of Fundy--Royal will be heavily affected. Members may be aware that the principal reservation system evolves out of the call centre facility in Saint John and essentially half of those workers reside in the riding of Fundy--Royal.

I am very appreciative of the comments that I have heard from many constituents. The management of the call centre were also very concerned with the issue, as was the vice-president of the Atlantic CAW for local 2213. These people helped to shape the remarks that I will be making.

Let us first admit that the grand experiment by the Government of Canada failed. It tried to have a private sector company work in the environment of a regulatory regime as if it had a function as a crown corporation. We understand as a point of fact that particular case did not work.

What the Progressive Conservative/Democratic Representative Coalition is advocating is that we need to look at the issue from a holistic perspective in terms of how we approach this. We must admit that in the coming days, weeks and months the airline industry that we presently have will need to be reshaped and reformed.

When we look at the ideology that may be advanced by members of the Canadian Alliance, they may not subscribe to one perspective. I would like to compliment our transport critic from Vancouver in that regard. We need to recognize that a lot of the revenues from Air Canada happen from international flights. If the Americans help their carriers compete with Air Canada which may not have governmental intervention, then that would unfairly penalize Canadian companies in their capacity to compete. There are legitimate reasons for us to look at that.

Many Canadians are also concerned about just giving money to Air Canada in the form of a blank cheque. They are concerned that Air Canada may actually use the cash to set up a discount airline. It might have been a good idea but are we going to use taxpayers dollars to compete with a private sector venture like WestJet or Canada 3000? Those are things that should raise legitimate concerns.

In my view, there are other methods the Government of Canada should engage. If it does engage in that regard it must do it with respect to what I would see as a logical thing in terms of a severance perspective. It could use the cash to ensure that the employee ratio that Air Canada has per flight compared to maybe a WestJet flight is addressed.

We still need to recognize the fact that although we do have more competition, Air Canada is still part of Canada's national transportation infrastructure. We have to ensure that we do have a competitive national airline but not to the detriment of private sector competition.

I would also like to highlight another issue, which is clearly a solution the Government of Canada has to look at and which we have been raising in question period. If we want an infusion of cash, if we are really serious about having liquidity in terms of actually helping the private sector lift this industry, we clearly have to drop the 15% stock share issue and also the 25% foreign ownership issue. Those issues have to be raised as well.

In conclusion, Madam Chairman, I want to thank you for the opportunity to participate in the debate. My first priority is the workers affected by this issue. I want to stand with the workers as they go through this transition. I want to thank my constituents who have helped me shape my debate this evening.

[Loyola Hearn, Progressive Conservative, St. John's West, NL]

Madam Chairman, I would like to thank my colleague from Fundy--Royal for sharing his time. Coming from the far east of the country, we are certainly affected by what is happening as much as anyone in the country, and more than most except for the people from the far west, including my colleague from South Surrey--White Rock--Langley.

Newfoundland is often referred to as the rock, even though those who know it know it certainly is not. It is a tremendous place. Ottawa is often referred to as a hard place in which to get anything done. I guess I am always caught between a rock and a hard place. I am at the mercy of Air Canada because basically it is the only regular airline we have coming in. It is basically a monopoly.

What does it do for service? Let me say this: not very much.

Like all my colleagues who have spoken, I have concern about what is happening. We saw a tremendous change in the air industry after September 11. In fact, while I am on my feet I should pay tribute to the numerous Newfoundlanders who played a tremendous part in assisting all those who were affected and who helped out the many people who had to land in Newfoundland, at St. John's, Gander and some others, perhaps at Goose Bay and Stephenville. I guess even Deer Lake was affected to a large degree by the people who landed there and had to stay there for quite some time.

In fact one person was met by a friend of mine. He said “So are you stuck here for a few more days?” The person said “I'm not stuck. I've never had such a time in my life”. That speaks pretty well for the members of the Newfoundland and Labrador constituencies and it is no surprise to anyone who knows the area.

However these people from Newfoundland and Labrador who were so gracious are also greatly affected themselves, not only the people who work in the airports, but as others mentioned, the people who work in the hotels, the taxi drivers, the truckers, the tourism industry, the stores. I could go on and on because everyone is affected. Consequently, if we are to help one, we must help all. If we are to help one airline, we must help all airlines.

There are two things we must look at: first, that we do have what we call a national carrier, and second, that a way must be found to keep it flying, but not at the risk of negatively affecting others who are in competition because it is competition that makes the world go round.

In Newfoundland if we had more competition we would not have to put up with some of the poor service we have been getting. I will take a minute or so just to illustrate a couple of examples. I can use personal examples from the weekend.

I left here on Friday, rushed to the airport to find out my flight was delayed and got into Halifax to find out we did not have a plane. Finally one was found and when we were ready to board, after another hour and a half wait, there were mechanical difficulties with the plane and more delays. Finally we got into St. John's and I got home at 1 or 1.30 in the morning after driving from the airport.

When I was coming back on Sunday, most people on the flight I was on would have left home at 12 o'clock to get to the airport in time to check in. We got on our flight, got to Halifax and were told we had an hour's wait. We got up to get off the plane and were told we could not get off the plane unless we were changing planes; if we got off we would not be allowed back on. We waited for an hour and a quarter and then came on to Ottawa. Between St. John's and Halifax, we had a bag of peanuts. Between Halifax and Ottawa, we had a bag of peanuts. It was about eight hours from the time people would have left home until they got to Ottawa, and others probably went further, and they had two bags of peanuts, including a person who had a diabetic condition and needed some sugar. There was no fruit or anything on the plane to give to that person. That is the type of service we get for paying $2,200, round trip.

The dangerous thing I heard here tonight was the suggestion that there is a possibility that an influx of money might be put into Air Canada but it would be the responsibility of the Minister of Industry, Captain Canada, as someone said, the person who arrested the Spanish fishermen's boat, gave back the fish, gave them extra quota, apologized, kissed them and sent them on their way.

Government should challenge the private sector to get involved here. What an opportunity. Change the rules so that it can do so and let us get on with the business.