House of Commons Hansard #106 of the 37th Parliament, 1st Session. (The original version is on Parliament's site.) The word of the day was airlines.


Air Canada Public Participation ActGovernment Orders

3:15 p.m.

Don Valley East Ontario


David Collenette LiberalMinister of Transport

moved that Bill C-38, an act to amend the Air Canada Public Participation Act, be read the second time and referred to a committee.

Mr. Speaker, it is a pleasure to rise to speak to Bill C-38 this afternoon to try to get the sense of the House on furthering the improvement of airlines in Canada. This is a very short bill and it has one purpose: to amend the Air Canada Public Participation Act to eliminate the 15% limit on ownership of voting shares in Air Canada by any one person. I hope there will be speedy passage of the bill.

As most people know because we have been engaged in the airline file for a number of years Air Canada took on Canadian Airlines a couple of years ago. Over the last couple of years it has done a remarkably good job of merging the two airlines together.

There have been problems, not all of them of Air Canada's making. Some had to do with bad weather in the summer of 2000. Others had to do with the increase in air traffic when the economy was doing well. There was also an inability to merge the workforces on time.

All these things came together to create a situation that combined with high fuel prices and a declining economy in the last year caused problems for Air Canada before the events of September 11. Air Canada had publicly stated its need to get its house in order to attain more equity before September 11. The events of September 11 have compounded the problem and there is no question that Air Canada, as other airlines, requires a new infusion of equity.

Because of the constraints parliament imposed when Air Canada was privatized, it was impossible for the normal kinds of investment to occur in Air Canada that occur in other public corporations in the country. Investors who wanted a say in the direction of the company were stymied because of the legislation and the restriction on voting shares.

If we are asking the House to eliminate the limit on individual ownership it would be useful to give a bit of the history as to why the limit was imposed in the first place.

Air Canada was privatized in 1988 and 1989 under the enabling legislation which is before us and which would be amended by this bill. At the time the act contained a section that limited individual ownership of voting shares to 10%. The justification for the 10% limit was to ensure that voting shares would be as widely held as possible by Canadians.

Most people do not realize that the 10% limit was accompanied by a prohibition on association between persons who hold voting shares. This was designed to ensure these persons could not act together and take control thereby nullifying the concept of a widely held company. At the time no one thought much about that and the bill was passed. The 10% restriction remained in place until the year 2000 when we raised it to 15% by way of Bill C-26.

Members may remember that leading up to that bill there was an initiative by the government in the fall of 1999 to find a private sector solution to the woes that were bedeviling Canadian airlines. As a result of actions we took we precipitated a private sector solution. Two offers were before Air Canada at the time. One was from Onex Corporation. The other was a proposal that originated with the management of Air Canada.

I will not go into all the details, but people know that Onex withdrew and subsequently Air Canada's management made good on its promise to take over Canadian Airlines subject to certain restrictions. At the time in December 1999 there were intense negotiations between the government and Air Canada because with the demise of Canadian Airlines there would be one large carrier with 82% of the capacity in the country.

As a result of those negotiations, Air Canada decided on certain guarantees with respect to no involuntary layoffs and service to small communities. It has made good on its promises. I emphasize that during those discussions at any time the Air Canada board of directors was free to walk away from that initiative. It made a conscientious business decision which it had to live with in good times and in bad.

Of course the times right now are not as good. That is why the original objection by Air Canada management to changing the 10% and having single shareholders potentially own the company has changed. It has publicly stated its willingness to agree to this kind of a change. It is in agreement with it. Therefore I cannot see any great controversy.

The decision to move to the 15% limit was one we felt was at least in keeping with other crown corporations such as Canadian National Railways. We cannot take that particular comparison too far because the ownership limits on former crown corporations have been tailored to the specific industry sector. CN and Petro-Canada for example have a 15% limit but no limits on non-residents. Nordion for example has no individual share ownership limits except for the 25% for non-residents. Major Canadian banks will allow 20% but there is a fitness test. What we are proposing for Air Canada is appropriate to the Canadian air services sector at this time in our history.

As I said there has been some degree of support for this from Air Canada. In coming to the decision to remove the limit, I have been told by a number of people that any limit in the past has been a disincentive to an investor with serious intentions when investing to have a say in the company. That is why we have decided to re-examine the entire operation and to ensure that there is an equity infusion into Air Canada.

We have been fully engaged with all of the airlines since September 11 to look at their finances and ascertain their financial health. Obviously they have been adversely affected, as have airlines around the world. What we see in Canada is not unique to us; it is something that is being played out elsewhere.

We know what the United States government has done in the aftermath of the terrorist attacks. It came forward with a $15 billion package for the airlines, $5 billion for immediate compensation, $10 billion for loan guarantees. There was another $3 billion included in the $40 billion appropriations bill for reconstruction specifically for security measures. As I have said publicly, we are examining the efficacy of the Government of Canada taking on more of those security costs.

We have watched with some concern as airlines have faced difficulty. They have all reduced capacity and made many adjustments.

Just last week I announced a loan guarantee package for Canada 3000. That airline met certain objectives such as equity infusion by investors, reduction in capacity, the paring of workforces and most important, a business plan that would restore Canada 3000 to profitability.

What I said publicly last Thursday night is that kind of program will be available for the five principal airlines in the country that cover 95% of the market. I realize from questions in question period there are other smaller carriers that would like to avail themselves of a similar loan guarantee program, but they were covered in the initial compensation program. They were covered, as were all the airlines and airports, by our agreement to pick up the war risk liability for 90 days, the third party liability that was terminated by insurance companies which affected not only Canada's air industry but air industries around the world. We did this for the air carriers, the airports and Nav Canada. Everyone has benefited.

One has to draw the line somewhere in how far one goes in terms of loan guarantees. That is why we have said the five largest carriers that cover 95% of the market that are national in scope, they being Air Canada, Air Transat, Canada 3000, WestJet and Sky Service, would be eligible for the loan guarantee initiative. I am not sure that all of them will require it.

There is no question that air traffic has come back to some degree in the last number of weeks. It is gradually coming back to approximate pre-September 11 levels. However, that is not the case certainly on transborder traffic where there is still a significant reduction as compared to the period prior to September 11.

In looking at Air Canada in particular, we have said that perhaps by eliminating the single ownership limit the company would become more attractive to investors. It would allow more of an infusion of equity. It certainly would facilitate with the overall restructuring of the company.

We come with the message that we are preoccupied with the health of the transportation sector in general, but in particular the airline industry. We have made a number of changes to security regulations and safety regulations on board aircraft with the locking of cockpit doors and the strengthening of cockpit doors. In fact last Friday after I boarded the plane and before it left the gate, I was asked by an Air Canada pilot to see the new measures that had been put in place. I was quite impressed with how quickly that had been done and it had been done with the co-operation of Transport Canada. This is being done not only here but in the U.S. and elsewhere around the world. We are facilitating extra security on planes with the new regulations.

I hear my friend from the Alliance who is preoccupied with Americana and wants the provision of armed security personnel to be blanketed on Canadian aircraft. We have said yes for those flights to Reagan national airport, specifically because the American government has said that is a condition for Air Canada to go back to that airport. I think everyone in the House understands that. Anyone who has flown into that airport knows its proximity to the downtown core. It is not just any downtown core; it has the seat of government of one of the largest nations, arguably the most powerful nation in the world. Obviously there have to be some extra security provisions. We have agreed to that because Air Canada is unique on the open skies treaty in being able to use that airport. We did not want to inhibit Air Canada in any way, so we have agreed that the RCMP, Canada's national police, will be on those flights. I have said that we would consider it elsewhere.

However, our preoccupation has been to ensure that airport security be made more stringent and that those rules be put in place quickly and be enforced. Yes, there is some inconsistency across the country, but we are getting to that. We are dealing with that through inspections.

I was on the CBC town hall meeting last night. The Leader of the Opposition was on the panel. I was very happy when he agreed that the security regime has improved and that lineups at airports are diminishing as people get through the new rules.

Of course the one disagreement, in terms of substance, was the question of whether the government should go along with armed security personnel. As I have said publicly, we have that under advisement.

We have done much to help the airline industry and the airports. There are new regulations, new security regulations. I have no doubt that the security regime at Canadian airports, in the skies generally, and in other parts of the world is much better than it was before. I thought it was good before September 11 but it is much more stringent now. Canadians should feel very comfortable in flying. Indeed gradually people are going back. Even business class passengers who stayed away in droves following September 11 are starting to travel again, even some of them to the United States.

Our decision to amend the Air Canada Public Participation Act at this time is to provide another kind of assistance to Canada's largest carrier in its attempts to return to financial stability.

Air Canada is the world's 11th largest airline. It is an airline of which we can be proud. It has not been easy for Air Canada in the last couple of years with some of the problems that it has undergone. However, the quality of the professionals that work at Air Canada both in the air and on the ground is unparalleled. The quality of service we get on Air Canada is among the best in the world. It has been adjudged as such by international bodies.

We have an airline of which we can be proud. It is an airline that is having some problems, but it is an airline which I think has the ability to get over those problems. It is incumbent upon us as politicians and upon the House in general to facilitate solutions, certainly private sector solutions, on the part of our airlines, particularly Air Canada.

I am confident that if we enact the bill it will provide the private sector greater opportunities for investing in Air Canada which will contribute to a successful restructuring of the company. With the enactment of the bill, Air Canada will find itself on the same footing as all of the other airlines. No one else has a single ownership limit. We are not at this time proposing to raise the 25% foreign ownership limit. We do not think that is necessary. We are being consistent with many other countries around the world, including the United States, which keep that 25% limit. They believe inherently that an industry so fundamental to the economy, the fibre and the being of the country should indeed not only be operated by Canadians but controlled in effect by Canadians. If we need to change that we would not need legislation because current legislation allows that change to occur, at least the raising of the limit from 25% to 49%, by order in council. However we do not think that would be necessary.

We believe that the passage of the bill would be timely. It would give Air Canada the investment. As I said before, it is a very simple bill. It has three sections. The first removes the 15% limit and the prohibition on association. The second renders as null and void any other corporate documents that address the 15% limit. The third deals with when the changes will come into force.

I would hope that my colleagues would agree that this is just another step in the government's response and parliament's response to the tragic events of September 11. But in particular, it is also a response to the ongoing restructuring and realignment of the Canadian air industry which predated September 11. I hope that my colleagues would ensure speedy passage of the bill. Certainly at committee if there are any detailed questions members would like to ask, I am fully prepared to be there with my officials.

This is a bill that is in the national interests. It is certainly in the interests of airline passengers and all of those who believe that our national air carrier, Air Canada, should continue to be the great carrier that it is.

Air Canada Public Participation ActGovernment Orders

3:35 p.m.

Canadian Alliance

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

Madam Speaker, it is my pleasure to stand in favour of Bill C-38, an act to amend the Air Canada Public Participation Act. This change is long overdue. It finally puts Air Canada on a level playing field with other Canadian air carriers with respect to the sale of its shares.

For the first time in Canadian history Canadians can buy, sell and trade as many Air Canada shares as they want, just as if they were shares of any other Canadian company. Bill C-38 represents a marked departure from the traditional thinking of Liberal governments.

Air Canada was created by an act of parliament in 1937 as Trans-Canada Airlines. It has been the subject of much discussion in the House since that time. For the first 40 years of the company's existence it was seen as an agent of the crown and as the federal government's principal policy instrument in the field of aviation.

That changed with the passage of the original Air Canada Act in 1977. For the first time Air Canada was required to borrow in its own name and was declared to be no longer an agent of the crown. It remained a crown corporation and cabinet retained the power to appoint its directors.

In 1987 the Progressive Conservative government passed the National Transportation Act. It fundamentally changed the rules of the game and attempted to introduce competition rather than regulation as the primary arbiter within Canada's domestic airline industry.

Within a year the Progressive Conservatives had correctly realized that in a competitive situation the government had no business owning one of the competitors, so the parliament of the day quickly passed the Air Canada Public Participation Act essentially privatizing Air Canada and turning it from a crown corporation into a regular company whose operations were subject to the Canada Business Corporations Act.

Paragraph 6(1)(a) of the Air Canada Public Participation Act limited the number of shares that could be owned by a single shareholder to 10%. This was done to ensure that Air Canada stocks would be broadly held by as many Canadians as possible. The section also put Air Canada on a level playing field with its principal domestic competitor, Canadian Airlines International.

Members must not forget that the Air Canada Public Participation Act was first read in the House on May 19, 1988. This was nearly five months after the January 1, 1988, birth of Canadian Airlines International from the fusion of all Air Canada's pre-1980 domestic competitors, Pacific Western Airlines, Transair, Nordair, Quebec Air, Eastern Provincial Airways and Canadian Pacific Airlines, into a single entity.

In 1988 Canadian Airlines parent company was governed by Alberta's Pacific western airlines act which set a 4% limit on the number shares any one group could control. In fact the 10% share limit set in the original Air Canada Public Participation Act was actually more liberal than the 4% limit set in the act governing Canadian Airlines.

Bill C-26 raised to 15% the number of shares that could be held in Air Canada following the takeover by Air Canada of Canadian Airlines in 2000. We are finally discussing whether to give Air Canada some of the same rights as other companies some 64 years after parliament first created a national airline.

If we were to believe government members, Bill C-38 would put Air Canada on a level playing field by striking down paragraph 6(1)(a) of the Air Canada Public Participation Act. Bill C-38 ostensibly puts Air Canada on that level playing field with all other airlines with respect to the way its shares can be bought, sold and traded by Canadian citizens. On that basis alone it should be supported, and the official opposition supports this legislation.

Bill C-38 does little to address the short term financial woes of Air Canada that led to thousands of layoffs at Air Canada, including the laying off today of 500 to 700 pilots. I will explain.

First, Air Canada does not obtain money when its shares are acquired by a new buyer unless Air Canada is the seller. Second, no single shareholder is currently restricted by the present 15% limit, that is no current shareholder owns 15% and has publicly expressed a desire to purchase more but cannot as a result of this section. Third, if people were not inclined to buy Air Canada stock before the legislation the fact that they can buy more of it is simply not an incentive.

There are only two ways that Bill C-38 would financially benefit Air Canada. First, some of the debt which the Caisse de dépôt et placement holds would have to be converted into shares. The caisse currently owns roughly 9% of Air Canada stock and converting its debt into shares would give the caisse roughly 18%.

First, this move, based on a $2.50 price for shares at the date of the transport minister's announcement of his intention to introduce this legislation, would allow the company to convert roughly $17.789 million worth of caisse debt into 9% of Air Canada voting shares. Second, an individual or group would have to take control of Air Canada with a clear plan to restructure the company. This would not be enough unless the restructuring plan were to meet the approval of the transport minister and be acceptable to Air Canada unions.

The bill is essentially political posturing. It lets the government claim to be addressing Air Canada's concerns while ignoring the company's plea for bigger and bolder policy moves such as the implementation of permanent new security regimes on the ground that are not only better but faster and more streamlined, placing air marshals on planes, and putting the issue of airline industry restructuring before the Standing Committee on Transport and Government Operations for immediate consideration and redeliberation.

Bill C-38 requires us to examine the Air Canada Public Participation Act. While I am in favour of striking down paragraph 6(1)(a) of the act we should not stop there. We should ask ourselves a basic philosophical question. As we enter the third millennium should the government continue to regulate the internal affairs of a publicly traded corporation whose shares it no longer owns?

Why should paragraphs 6(1)(d) and (e) of the Air Canada Public Participation Act require Air Canada to maintain facilities and/or offices in certain cities? Surely these decisions are the responsibility of the company's shareholders and board of directors.

Why should section 10 of the Air Canada Public Participation Act make the Official Languages Act applicable to Air Canada and no other Canadian airline? If the Official Languages Act applies to Canada's airline industry it should do so in the Official Languages Act and not in the Air Canada Public Participation Act.

It hardly seems fair to hold Air Canada to a higher standard than Toronto based Canada 3000, Calgary based WestJet or Montreal based Air Transat.

Why should paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act restrict foreign share ownership in Air Canada when a more equitable regime would see similar limits placed on all Canadian carriers? Paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. The transportation minister should know that there is already a prohibition against foreigners owning more than 25% of a Canadian air carrier in the Canada Transportation Act. Section 55 of that act defines a Canadian carrier as:

A corporation or other entity that is incorporated or formed under the laws of Canada or a province, that is controlled in fact by Canadians and of which at least 75% , or such lesser percentage as the Governor in Council may by regulation specify, of the voting interests are owned and controlled by Canadians.

Section 56(3) of that act gives the Canadian Transportation Agency the power to review all mergers and acquisitions in the airline industry and determine whether such activities would affect an airline's status as being Canadian. Paragraph 61(a)(i) requires a carrier to be Canadian in order to have a licence to operate domestic air service.

Section 69 only allows two types of carriers to operate international air service: Canadian air carriers and non-Canadian air carriers which have been designated by a foreign government or an agent of a foreign government to operate an air service under the terms of an agreement or arrangement between that government and the Government of Canada.

Under the Canada Transportation Act, if WestJet, Canada 3000 and Air Transat were to allow foreigners to acquire more than 25% of their voting shares they would no longer be Canadian. They would lose both their ability to serve domestic routes within Canada as well as international routes between Canada and another country. In essence, they would lose the value of any potential buyer. This restriction is utterly redundant.

Given the restrictions against foreign ownership already present in the Canada Transportation Act, paragraphs 6(1)(b) and (c) of the Air Canada Public Participation Act are wholly unnecessary. Even if there were no prohibitions in the Canada Transportation Act, Air Canada's board of directors would undoubtedly take actions to ensure that control of the firm remained in Canadian hands because of the convention on international civil aviation, more commonly referred to as the Chicago convention. It sets out the basis of international commercial aviation.

Internationally scheduled commercial air traffic is made possible through bilateral agreements in which governments exchange air rights for the benefit of their respective carriers. Each country can designate a national carrier on any international route.

Air Canada and Air France fly between Montreal and Paris. Air Canada and Korean Air Lines fly between Vancouver and Seoul. Air Canada and Cubana Airlines fly between Canada and Cuba. Only in the most exceptional cases will we find an airline flying between two cities where neither is in the airline's home country.

In virtually every case where a foreign airline flies between two foreign destinations it is only as an extension of a flight that started in the airline's home base. Air Canada flies between Sao Paulo, Brazil, and Buenos Aires, Argentina, but only as part of a Toronto, Sao Paulo, Buenos Aires service and only with the approval of the governments of Canada, Brazil and Argentina.

If Americans or people of any other nationality were to acquire a majority of Air Canada's voting stock, foreign governments might refuse to recognize Air Canada as a Canadian company and thereby deny it the ability to continue serving routes in those countries even without the safeguards of the Canada Transportation Act. Thus, if United Airlines and Lufthansa were to buy 51% of Air Canada's voting stock, the British, French and Chinese governments would have the right to deny Air Canada permission to fly to London, Paris and Shanghai.

Air Canada as an airline would cease to hold value for the investors who just purchased it without the ability to serve international routes. For this reason alone its board of directors would never allow foreigners to own a majority of Air Canada's stock.

We only need to look at the arrangement that American Airlines had with Canadian Airlines in 1999. Passengers were flown from the U.S. to Vancouver and then from Vancouver to Asia on Canadian Airlines jets. The reason for this was that American Airlines had only been granted routes to Japan from the U.S. and needed access to Hong Kong, China, Taiwan, Thailand and the Philippines. The Asian service provided by Canadian Airlines was based on bilateral agreements between Canada and the Asian countries concerned. American Airlines would have literally killed the goose that laid the golden egg had it taken control of Canadian Airlines.

I agree with repealing paragraph 6(1)(a) of the Air Canada Public Participation Act. The official opposition will support Bill C-38. However, having carefully examined the Air Canada Public Participation Act, we see no reason not to repeal the entire act itself.

It has at least four irrelevant sections. Section 4 deals with the transfer of shares to the Minister of Transport. Air Canada tells me these shares have since been sold. Section 5 deals with continuance. Presumably this has been achieved in the past 12 years since the act has been passed. Section 11 deals with the continued appointment of Air Canada directors past the privatization date. Presumably the terms of these directors have long since expired. Section 14 repeals the Air Canada Act. This section has also been spent.

The act also discriminates against Air Canada in four specific areas. Paragraph 6(1)(a) limits share ownership of an individual or group to 15%. Paragraphs 6(1)(d) and (e) make Air Canada maintain facilities and/or offices in defined cities. That is mandated by the government and is not a decision of the company. That is mandated against Air Canada and not levied against other businesses. This is a government regulation that retards the economy.

Paragraphs 6(1)(b) and (c) restrict foreign share ownership in Air Canada. Section 10 makes the Official Languages Act applicable only to Air Canada and not other carriers.

The transport minister says that because the head office is mandated to be in Montreal it somehow adds virtue to a discriminatory policy which handcuffs Air Canada but does not handcuff other carriers. He says that it is in the national interest. It is in the national interest if it is in Montreal but not if it is in Calgary or Vancouver. That is not in the national interest; Montreal is the national interest.

It is a rather perverted approach to public policy. Why does the government not just leave companies alone to compete on an equal and level playing field in the free market? It might try it once. It does wonders.

If the government is intent on putting Air Canada on a level playing field with its domestic competitors it can do this not only by removing the share limitation in paragraph 6(1)(a) of the act but by repealing the entire act itself. This is what the official opposition believes the government should do.

I intend to call witnesses before the standing committee to examine the practicalities of repealing the entire act and the best ways to put Air Canada on an equal footing with its domestic competitors while respecting the other priorities now contained in the act.

If the transport minister would like to come before the committee and tell us why Montreal is more a Canadian city than Calgary, Hamilton, Toronto or Edmonton, he is free to do so. I encourage him to do so. It would be the death of the government if he did that.

The legitimate policy aims which are contained in the act should apply equally to all Canadian carriers. Aviation law should apply to all Canadian carriers equally, not just to Air Canada.

The Air Canada Public Participation Act discriminates against Air Canada in ways that are utterly counterproductive and which retard the marketplace. Just because Air Canada is a corporation does not mean that the thousands of Air Canada employees should be held to a higher standard than their colleagues at other companies. Either we believe in fairness as a nation or we believe in double standards. The official opposition believes in fairness and competition. I hope the government's opinion of the air industry will one day be the same.

Since 1937 the federal government has regulated Air Canada mercilessly. It is time to throw off the shackles and let Air Canada be held to the same high standards and only the same high standards as every other Canadian carrier. It is time to repeal the Air Canada Public Participation Act and finally create the level playing field that people on both sides of the House keep saying they want.

I will be supporting Bill C-38, but I will also be introducing at committee amendments aimed at doing what Bill C-38 should be doing, which is putting Air Canada on a level playing field with its domestic competitors for the first time in its 64 year history; transport minister be damned.

Air Canada Public Participation ActGovernment Orders

3:50 p.m.

The Acting Speaker (Ms. Bakopanos)

I am sure the hon. member would like to correct the last part of his speech. Would he like to correct it?

Air Canada Public Participation ActGovernment Orders

3:50 p.m.

An hon. member


Air Canada Public Participation ActGovernment Orders

3:50 p.m.

The Acting Speaker (Ms. Bakopanos)

I think it would be much more prudent to withdraw?

Air Canada Public Participation ActGovernment Orders

3:50 p.m.

Canadian Alliance

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

Yes, Madam Speaker, I withdraw.

Air Canada Public Participation ActGovernment Orders

3:50 p.m.


Mario Laframboise Bloc Argenteuil—Papineau—Mirabel, QC

Madam Speaker, today's debate on Bill C-38 is in connection with Air Canada's demands for a review of the ceiling on individual ownership of shares.

The Bloc Quebecois will support Bill C-38.

Of greatest concern are the speeches by the Minister of Transport and the representative of the official opposition on the future of Air Canada and airlines in Canada.

Bill C-38, a simple bill with only three pages, repeals section 6 of the act. I will read it for the men and women of Quebec. The Air Canada employees watching us surely understand it. The act contained, and I quote:

  1. (1) provisions imposing constraints on the issue, transfer and ownership, including joint ownership, of voting prevent any one person, together with the associates of that person, from holding, beneficially owning or controlling, directly or shares to which are attached more than 15% of the votes that may ordinarily be cast to elect directors of the Corporation—

What the Minister of Transport is proposing in Bill C-38 seems thoroughly harmless. It would, however, allow a single shareholder to hold more than 15% of shares. It would be this shareholder other shareholders or entities who would hold the shares. They would thus have the right to take over control or to take part in the control of Air Canada's board of directors.

Is this desirable? It is what Air Canada is asking for. It is thought that investors could be interested. Citizens and companies across Canada will probably want to buy Air Canada shares, ensuring with colleagues, friends or related corporations that they have a certain degree of control over the board of directors so as to be able to play a greater role in the company's decisions, to perhaps be able to run it better and turn a profit. This would surely allow them to make some sort of return on their investment.

What this means is giving Canada's business community a free hand to control, to continue to control and to increasingly control this national company, Air Canada.

This is cause for concern, because the minister has told us quite candidly what our neighbours to the south have done. He has told us in all sincerity that the Americans provided massive assistance to the airline industry, over $15 billion he tells us, and that was the figure. Five billion dollars in direct aid and $10 billion in loan guarantees. A choice was made. In the wake of the sad events of September 11, the Americans decided to invest heavily. The minister was quite open about this. The Americans invested heavily, he told us, and that is so. The figure mentioned was $15 billion to revive the airline industry.

Other countries in the world suffered, such as Switzerland's Swissair, which sought bankruptcy protection. Switzerland decided to invest heavily in a company called Crossair, a regional airline in Switzerland. This company will soon buy up Swissair's shares and revive the airline industry. Switzerland has made a choice. It decided to invest heavily in Crossair, which will soon take over the defunct Swissair. This is a choice as a society.

What is saddening to hear today is that Canada has decided to give the market free rein and not to make any massive investments to kick start the airline industry. Anything it does do is on a bit by bit basis. Canada's approach is a piecemeal one. At the outset, the minister announced investments to meet high insurance costs.

As a result of the sad events of September 11, the airlines were faced with astronomical hikes in insurance costs. Some carriers were no longer even able to insure themselves. The government therefore decided to compensate them for the astronomically high premiums they were being charged for insurance.

It then reimbursed expenses. Since the air space was totally closed down, all companies' equipment was grounded. The Government of Canada decided, still within its piecemeal approach, to announce one week later that it would offer compensation and assistance, reimbursing the airlines' losses that were the result of the six day closing of Canadian air space.

This assistance was in dribs and drabs. After that a loan guarantee program was announced, followed last week by another loan guarantee to Canada 3000 of $74 million.

The minister refers to a business restructuring. He spoke of massive staff reductions. Once again the minister helped out Canada 3000 once it had restructured and, in particular, made massive staff cuts.

The minister has told us very candidly that the government can help the five major carriers in Canada, including Air Canada, Air Transat, WestJet and Canada 3000. He said very candidly “once they have restructured”. Downsizing is an important part of the restructuring of any company.

This is a message to the employees of all these airlines in Canada and Quebec, saying “In the end, you are the ones who will pay for the September 11 events. We will help—as was the case with Canada 3000—once your company has restructured financially”. And the minister adds “once your company has reduced its staff”.

In order to get help from the federal government, airlines must absolutely restructure. They must submit a restructuring plan that includes staff reductions. This is very hard to accept for airline industry workers, because what happened on September 11 was not their fault. It is not their fault if their industry suffered such setbacks but they are the ones who are paying for this.

Again, this applies to four airlines at the exclusion of Air Canada. In the agreement and in the various acts, very important guarantees were demanded for Air Canada. Such guarantees were demanded by the Bloc Quebecois, which questioned the government in debates on the various acts establishing Air Canada as we know it today, and by others. Why? To protect the rights of workers.

Air Canada is the largest airline, with 80% of Canada's air traffic. Therefore, it is important that it be afforded some protection. When Canadian was integrated with Air Canada, we made sure that workers would not lose. As the minister said, we made sure that small municipalities would be served. This has always been a requirement in the original legislation that is now being amended. These requirements have not changed. Protecting the rights of workers and serving small municipalities are still requirements under the acts that established Air Canada and French in the skies.

It is sad to hear speeches such as that of the Alliance member in a country where there are two founding peoples, anglophones and francophones. Members will understand why, with such speeches, that sovereignty is not dead in Quebec. If we were to hear speeches like that of the Alliance member every day, I am sure sovereignty would take off for the pure and simple reason that francophone rights must be protected.

And the law provides for the protection of French in the air.

What is harder to accept is the fact that 136 complaints are before the commissioner of official languages. They were lodged against Air Canada because French is not respected in the air. This is the harsh reality.

It is hard to hear the representatives of the Canadian Alliance say, today, that it is time to stop protecting French in the air, a practice established by one of the two founding peoples, thanks to representations by the Bloc Quebecois, among others. Air Canada is Canada's largest airline, carrying 82% of the volume.

Obviously we must carry on and make sure that the rights of travellers are protected. As regards service to small municipalities—I am using the minister's expression—it must be protected. That is what the minister said earlier.

There are no large or small municipalities. Canada was built from communities that diversified their approaches. Communities were established around natural resources. Cities—this is the term we should use and not small and large municipalities—were established across Canada.

No law makes a distinction between towns and cities in Quebec. They are cities. There are no large and small cities in the Quebec Loi des cités et villes. There are cities. Obviously, there are cities in the regions and there are cities near major urban centres, and the law must protect and continue to protect service to cities in the regions.

Canada owes its existence to its natural resources and continues to be very much a country of natural resources. The future is very important for all regions of Canada. Such is the diversity of Canada, what makes it great. We are one of the largest countries in the world in which the decision has been made to allow the market to operate freely.

That is where the problem lies. In such a vast country, a country of such diversity, the strength of which depends in large part on the natural resources located in distant regions, the government has a duty to intervene in order to ensure that transportation services are maintained, including the most rapid means of transportation, air service, so that regional cities are connected with the major urban centres.

That is why it was hard to swallow today the statement in the minister's speech saying that, with Bill C-36 which merged Air Canada and Canadian, we obtained and included protection for service to small municipalities.

I hope he will rethink his choice of words. Cities in the regions have as much right to air service as major urban centres. That is reality. Just as Canada's francophone air travellers have as much right to service in their own language as anglophones.

I am proud that the act which created Air Canada protects the use of French in the air. I hope the rumours that Air Canada wants to abandon Air Canada Regional precisely because the use of French in the air is a constraint on the expansion of all the businesses that make up Air Canada Regional, are not true.

Apparently they want to abandon these businesses, sell them or transfer a part of their routes. That is the current rumour. This is an attempt to improve the bottom line and to avoid having to respond to the 136 complaints received by the official languages commissioner against Air Canada regarding the use of French in the air.

It is difficult and it is a hard fight but we must continue to fight to protect the rights of workers under the statutes that created Air Canada as we know it today. We must continue to protect service to cities in the regions, and not small municipalities as the minister said, and protect the use of French in the air.

This bill only changes the percentage of individual or group participation in the share capital of Air Canada. It only amends this clause.

The Bloc Quebecois will support Bill C-38 for the simple reason that the rights of workers at Air Canada will still be protected, as will service to cities in the regions, and the use of French in the air.

We must continue to fight so that cities in the regions of Canada and Quebec are better served and that the use of French, the language of one of the two founding peoples of Canada, is better protected in the air.

This is a commitment which the Bloc Quebecois is determined to defend in the House.

It is sad to see the federal government deciding to put its faith in the free market in something as important throughout Canada as the airline industry. This is a position strongly backed by the Canadian Alliance, which would like to go much further. It would be a disaster for Canada's entire airline industry for the good and simple reason that this great country of Canada, and of Quebec, needs flights linking cities in the regions with major urban centres. They do not all have the same number of inhabitants and are so diversified that we must support them. In my view, the Government of Canada would do well to do as Switzerland or the United States have done and provide massive aid to the airline industry. It is a vital part of our economy.

Companies such as Bombardier were able to create markets in aeronautics because we in Canada were heavy users of air services. The entire aeronautics industry is supported by the airline industry and we must encourage this industry and its workers. They should not have to pay for what happened on September 11. They should not bear the brunt of industries' losses through the loss of their jobs. We are condemning entire families to poverty just because the government decided to give the market free rein.

I call on the minister to rethink his position on this issue. I call on the federal Liberal government to start looking at the larger picture and to send out a clear message. I hope the Minister of Finance will understand and that in his next budget he will announce heavy investments to support Canada's airline industry. As in the United States, Switzerland and other countries, this industry needs significant government support right now, until business picks up. We all hope that business picks up in the airline industry. Only time will tell.

Working on security is a good example. I support the Minister of Finance with respect to the Government of Canada's investments in security.

The problem is that we did not do enough before September 11. This is why we now have to invest so massively in security. We did not do it before. In 1987 the government decided to move the RCMP out of all Canadian airports. The RCMP was responsible for monitoring and supervising security at airports. It is not just the Liberal government that made this type of decision. That decision was made by the Conservative government and was supported by the current Liberal government. Why? For reasons of economy.

The government delegated to so-called non-profit organizations the responsibility of managing and administering some of the duties relating to security at airports.

Today we are seeing some of the results of that decision. There has not been much investment. Instead, cuts were made. The government tried to transfer the burden of security to airline companies which, over the past 20 years, have undergone major changes, including bankruptcies and the merging of Canadian Airlines International and Air Canada. Meanwhile, it was asking airlines to pay for security.

It did so by investing as little as possible. Since 1987 Transport Canada has been responsible for security at airports. This is a civilian agency which over the past 15 years has been much busier dealing with disputes about the costs to airline companies compared to the services provided by non-profit organizations set up by the Government of Canada to transfer its responsibility. They tried to make it as inexpensive as possible and now we can see the results.

Today we are being forced to make massive investments and the Liberal government is now afraid that it will not have enough money, for the simple reason that we do not know exactly how much the security bill will cost. In the meantime, we are not investing in the airline industry, we are saving our pennies to invest in security and protect passengers, users and all Canadian.

This is a choice we as a society made, and today the airline industry is paying the price. The federal Liberal government does not want to invest like the Americans have done. Once again, I thought the minister's statement was quite frank when he said that the Americans had provided massive support for the airline industry, $5 billion in direct assistance, $10 billion in loan guarantees; $15 billion in all.

Switzerland made a choice, following Swissair's filing for protection under the bankruptcy act, when it decided to invest massively, with the purchase of 38% of the shares of Crossair, which will take over from Swissair in January. So, it is a societal choice.

In Canada, all that is being promised, all that is being offered to employees in the airline industry, which supports the aviation industry, airplane manufacturers, et cetera, is Bill C-38. The world's leading companies in aviation and aeronautics are here, there are manufacturers and companies that produce parts, and all that we can promise them today is Bill C-38.

We agree that individuals should be able to have more than a 15% control of shares if they want to. If this finally allowed a major investor to control Air Canada's board of directors and try to jump start the company and get it on track, this is a societal choice that the government of Canada has made.

We must think about the workers in the airline industry, in all the companies, and not just the five major ones. There are regional companies as well. This afternoon, Air Alma was mentioned. There is Air Inuit and all the other regional carriers, which were hit with the reduction in air traffic across Canada and around the world. They are not being helped by the measures the minister announced yesterday.

This afternoon in oral question period, the minister told us candidly that revitalizing the major companies was likely to give the smaller regional carriers a boost. This represents a choice not to support the regional companies, which are often family operations, and letting them go adrift. When they hit really hard times and are within inches of seeking bankruptcy protection the government might agree to guarantee loans for them, if things are really going bad.

No plan is in place to help the airline industry. They will deal with things piecemeal, day by day. They put out fires. That is how security was dealt with. When problems arise, they deal with them. Otherwise, they try to save as much as possible in security. This is the way they have operated since 1987.

They are making massive investments because there is a security problem but the passengers on the airlines are paying the cost in Canada. Today they have nothing more to sink their teeth into. They have a bill that will enable private investors to participate more in Air Canada in an attempt to revive it.

I hope and we will demand that the context in which today's Air Canada was established will be maintained. In other words, Canada and Quebec need a strong airline that respects travellers' rights, that serves the cities and the regions and that uses French in the air, for both founding peoples.

Air Canada Public Participation ActGovernment Orders

October 31st, 2001 / 4:15 p.m.


Bev Desjarlais NDP Churchill, MB

Madam Speaker, it is a pleasure for me to rise on behalf of the New Democratic Party at second reading of Bill C-38, an act to amend the Air Canada Public Participation Act.

It was not that long ago, in fact just about 18 months, that we last debated a bill to amend the Air Canada Public Participation Act. That was the last parliament's Bill C-26 which, among other things, approved Air Canada's merger with Canadian Airlines. I think it is important that as we debate the bill before us today we remember this context. It has been about a year and a half since the government passed Bill C-26 to approve the merger of the two national airlines and I think it is now pretty safe to say it has been a disaster. The government completely dropped the ball with the merger.

One of the minister's stated objectives in Bill C-26 was to foster competition in the domestic market. He said so repeatedly in the House. What has happened? Eighteen months later we have even less competition than we had before. Royal Airlines and CanJet are no more. They have been swallowed up by Canada 3000. Two entire airlines are gone. So much for fostering competition.

The minister also said that Bill C-26 was supposed to prevent Air Canada from using predatory pricing to drive its competitors out of business. As we on the House of Commons transport committee have heard repeatedly over these months, this part of that bill has been a failure as well. The small airlines that are trying to compete with Air Canada and offer Canadian travellers some choice in the market have repeatedly been saying what we in the New Democratic Party were already saying while Bill C-26 was still before the House: that the anti-predatory pricing measures contained in that bill were toothless and completely ineffective.

This should not be surprising to the government. The commissioner of the competition bureau came before the transport committee while we were reviewing Bill C-26 and told us straight out that the bill did not give him the powers he needed to stop predatory pricing, but the Liberals ignored him. So did the Alliance and the Tories. I do not know why that happened. Maybe they just had their ideological blinders on and would not even think about the possibility that maybe a little regulation was necessary to prevent Air Canada from abusing its monopoly.

The competition commissioner said the bill would not give him the power to stop predatory pricing. My party's response was to try to do something about it. At report stage I introduced amendments to strengthen the competition bureau's ability to fight predatory pricing. The Liberals, the Alliance and the Tories opposed it and now we see the results.

The bill before us today, Bill C-38, would repeal paragraph 6(1)(a) of the Air Canada Public Participation Act. This would remove the 15% cap on ownership of shares by an individual or a group of individuals working in concert. This is a thoroughly underwhelming response to the current crisis in the airline industry. If the minister thinks that this is going to solve either the short term or the long term problems facing Air Canada and the overall airline industry, he is fooling himself.

The government argues that removing the shareholder cap will allow large investors to come in, buy the company, recapitalize it and restructure it. There are two problems with this reasoning.

First, industry and market analysts tell us that there is virtually no interest out there from investors in making any kind of major investment in failing airlines like Air Canada. This was the case before September 11 and it is even more so now given the world decline in travel and tourism since the terrorist attacks. Who does the government think is going to come along and invest all this money in Air Canada? Unless it knows something that it is not telling us, the bill would not do even a little bit of good.

The second problem with the government's reasoning is that even if removing the cap were to solve Air Canada's short term problems, which I do not believe it will, it opens up the airline to an even more long term problem down the road.

Why has the minister flip flopped from 18 months ago when arguing against the elimination of the cap? Is it simply because he sees no other way to address Air Canada's short term cash crunch? There are much better ways to address the short term necessity of keeping Air Canada in the air, which do not carry the long term costs that the bill carries. In the past few weeks, as the New Democratic transport critic I have suggested numerous alternative ways that the government could help Air Canada make it through the short term cash crunch, like tax deferrals, interest free loans, lower airport lease fees and initiating negotiations with Nav Canada to find a way to reduce the air navigation fees.

New Democrats do not want to see a direct government handout of taxpayer dollars to Air Canada, but if it is necessary we have said it should come with strings attached and should give the government a say in how the airline is restructured.

The bill addresses only the immediate short term problem facing Air Canada and it does not even do a credible job at that.

We have to look at the long term issues facing the industry. In the long term it is crucial that the government break the airline industry out of the destructive cycle it has been in for the last decade. The cycle repeats itself over and over again in every country that, like Canada, has an unregulated airline industry. First, capacity rises to unsustainable levels. This leads to massive financial losses. Then the weakest companies go under. They collapse and are downsized or the airline reduces capacity. Then the cycle repeats itself.

This is a ridiculous way for the government to let an industry as important as the airline industry operate. The uncertainty we get from going from crisis to crisis undermines the entire national economy. We can ill afford this with our economy on the verge of recession.

If the government ever wants to end this cycle it has to drop the passive, minimalistic approach the transport minister is suggesting. It has to stop responding on a crisis by crisis, patchwork and piecemeal basis and look at some modern regulation to limit the growth of capacity. I am not talking about the old fashioned regulation of every route and every fare. I am talking about limited, targeted regulation to control the growth of capacity: a modern regulatory regime.

For the good of our airline industry the minister needs to take off the ideological blinders telling him that all regulation is bad and realize that total deregulation is just as bad as total regulation. There is a middle way and that is what he should be aiming for.

Although I do not believe this extinction of the shareholder limit will be the saviour of Air Canada or do the job of stabilizing industry, my party will not delay the bill going to committee. The transport committee needs to review the situation and, quite frankly, I hope we will see investors come forward. However, more must be done to stabilize our entire airline industry. Had one or two shareholders owned Air Canada, where would they be today? Would they have survived the huge losses of the past six weeks? Will these present changes ensure service to all regions of Canada? I think not.

My colleague from the Bloc has rightfully criticized the government for its approach to offering loan assistance. The government has said that if the airline restructures and lays off workers it will get assistance. The government has abandoned smaller rural and northern communities by not holding Air Canada to the merger agreement.

I also want to join my colleague from the Bloc in the disappointment I feel that the Alliance Party refuses to accept our bilingual nation.

Much more needs to be done to stabilize the airline industry. It is time to realize that the strategy of the last decade has not worked. We need to look at alternative methods. I look forward to having witnesses appear before transport committee and to coming up with a resolution that I hope will truly, once and for all, give some stability to our airline industry.

Air Canada Public Participation ActGovernment Orders

4:25 p.m.

Canadian Alliance

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

Madam Speaker, I am pleased to be debating the second reading of Bill C-38. It is with a degree of astonishment that we find ourselves addressing the issue 18 months after the fact.

The issue of public ownership and domestic ownership in Air Canada did come up when we were reviewing the restructuring of the airline industry 18 months ago. One of the dissenting opinions of the Canadian Alliance Party and myself was that this limitation of 15% was not a good thing and should not be in the legislation. We said at that time, and I repeat it now, that the 15% limitation in ownership hindered Air Canada from dealing with the issues rather than helping it. The government was urged at that time to remove the controls on ownership to give Air Canada the ability to raise capital in order for it to be able to afford the debt it was taking on with the acquisition of Canadian Airlines.

At that time the government said, as the minister did today, that it was not necessary to remove the limitations, that it was all fine and well and Air Canada could move ahead without it. Today I heard the minister say the same thing about foreign ownership, that it is not important at this time to remove the limit or raise the limit from 25% to 49% because all is well and Air Canada, with this amendment to the legislation, would be able to garner the capital that is necessary.

I would suggest that now it is time for the government to look seriously at the issue of Air Canada, at its financial position, the issues and the problems it has to deal with, and the government should realize that now is not the time for government to put on restrictions. Air Canada has an enormous debt load. Airlines cost big dollars, not small dollars. Air Canada will require a large amount of money, not a small amount of money, in order to remain afloat.

I would suggest that today the government is showing the lack of foresight that it showed 18 months ago when it would not remove the government restrictions to ownership in a way that would have allowed Air Canada to reach the maximum possibilities of getting fresh capital into its company.

It is interesting to see that Air Canada is now in favour of these changes, that Air Canada is now willing to look at removing this 15% control of domestic ownership and raising the foreign ownership limits from 25% to 49%. It is interesting because 18 months to two years ago it was this restriction on domestic ownership that caused the other bidder, Onex, to remove itself from the merger of Canadian Airlines and Air Canada. It was this limitation on domestic ownership that forced the government to deal with the bid that Air Canada had put on the table. This control on domestic ownership allowed Air Canada, I would suggest, to perhaps make an unwise decision to fight the takeover bid that Onex had put on the table.

Having said that, let me say that the problems Air Canada is facing are not due to September 11. September 11 did not help, but certainly the problems did not originate with the horrific events of September 11. The problems that Air Canada is facing have been ongoing.

There was an article in The Economist of July 7, 2001, obviously before September 11, that outlined in great detail the problems in the airline industry, the problems with the downturns in the economy, the fact that air travel fell in the United States and Europe for the first time in decades in May, and the fact that on any given day, at that time, four million people around the world were taking to the air and that at any one moment in time a quarter of a million people were in flight. However, bad weather, congestion on the runways, hamstrung air traffic control, computer failure and the late arrival of incoming flights all turn air travel into a lottery.

It was quite apparent before September 11 that there were major problems in the airline industry. Air Canada is one of the larger players. I understand it is the 11th largest airline in the world but that just means that its problems are perhaps larger than some of the smaller airlines. Air Canada has been having difficulties, to say the least, in merging the two workforces and cultures of Canadian Airlines and Air Canada. It is because of these problems that it ended up in a dire situation that preceded September 11.

We cannot deny that the events of September 11 had an impact on the airlines but I suggest that the government's decision to remove the domestic controls on ownership is a sorry response to the issue Air Canada is facing. The government has shown a complete lack of vision as to where the airline industry should be going. Had it had some vision of how Canada could have a strong national airline with support from other airlines and that all those pieces could work together, perhaps a lot of this angst would have been sorted out before now. Unfortunately, the government has not shown that kind of vision. It had a knee-jerk reaction to emergency situations that arose at the time.

The government had a knee-jerk reaction when Canadian Airlines was going under. Now that Air Canada finds itself in financial difficulty, again it has a knee-jerk reaction. Canada 3000 found itself in financial difficulties and there was yet another knee-jerk reaction. I think Canadians would like to know that their government has given some thought to the future of the airline industry and how their expectations will be met. We have not seen that from the government.

I would argue that there is surely room for one national carrier in Canada. Surely there is enough business. I know in this room alone there are 301 people who end up flying somewhere. Surely there is enough business to support one national carrier, but it should not be at the exclusion of all regional carriers. We should not allow this one national carrier to put every other carrier out of business.

When Air Canada was given some support, as were other airlines, the federal government gave it $160 million to supplement or compensate it for its direct costs of September 11. What was Air Canada's response to that? It immediately started Tango. What is Tango? Tango is another lower cost airline that is in direct competition to Canada 3000. When the federal government guaranteed a loan of $75 million to Canada 3000, what did Canada 3000 do? It immediately lodged a complaint with the competition commissioner against Air Canada.

I would like to think and I think Canadians would like to think that there is a long term plan, that the government does not just give money to airlines to get into a fight with the other competing airlines. That seems to be what is happening. Even though Air Canada is financially vulnerable right now, it is planning to create another subsidiary airline to go into direct competition with WestJet.

Why is the government not encouraging through measures one strong national airline that has a role to play and encouraging regional airlines and low cost airlines which also have roles to play? Why would we encourage or allow a dominant air carrier to take out its competition?

Let me get back to Air Canada and the amendment to the Air Canada Public Participation Act which removes the controls on domestic ownership.

Air Canada's board of managers own less than 3% of the company's shares. They are very small shareholders. When we are talking about running a big corporation, being a small shareholder creates a problem because the decisions that are being made need to consider the shareholders' that the board represents. If the board of managers own a very small share of the corporate shares, perhaps the decisions being made are not being made in the best interests of the shareholders, looking at the bottom line.

My colleague from the NDP would probably say that it is time to stop worrying about the bottom line, that it is time for the government to support Air Canada and perhaps take over ownership again, but I do not think that is what Canadians want.

I think Canadians are looking for an airline that has the capacity to operate without government interference and one that has the capacity to restructure its debt and move it into equities. I think they want a company that can take advantage of opportunities and operate in the private sector without looking for taxpayers to bail it out. I think that is possible. If there were a larger group of shareholders with more say and who had higher investments in the company, perhaps decisions would be made in such a way that the company could move forward.

I was a little concerned when Air Canada's largest shareholder, la Caisse de dépôt et placement, made a huge profit by selling short on Air Canada's stock during the downturn and post-September 11 when share value was dropping like a rock. In other words, it was profiting by the decline in value of Air Canada.This company then wanted Canadian taxpayers to bail it out. How can anyone explain to taxpayers that the largest shareholder is making a profit on the devaluation of the stock and yet turn around and expect Canadian taxpayers to bail it out?

I think Canadians would like to see the federal government remove the restrictions on domestic ownership and raise foreign ownership restrictions from 25% to 49%. This would allow Air Canada to restructure in such a way that its debt would be put into equity. Perhaps the largest shareholders, maybe la Caisse de dépôt et placement, would buy more shares and show their interest in making this company work. Perhaps some foreign investment could be brought in to get new capital to make it work. This is not a question of losing control. If ownership remains under 50% then the ownership is still Canadian. This would allow Air Canada to get the necessary influx of capital to function in the real world without constantly going to Canadian taxpayers for subsidies. I think it is possible for Air Canada to compete given a fresh approach and new capital.

We in the Canadian Alliance will be supporting the legislation. It is 18 months overdue which just shows that the government is, as always, slow in doing the right thing.

Air Canada Public Participation ActGovernment Orders

4:40 p.m.

Progressive Conservative

Elsie Wayne Progressive Conservative Saint John, NB

Madam Speaker, in my hon. colleague's presentation she referred to regional carriers. Since September 11 we have seen many changes with regard to regional carrier service. It has been cut dramatically. We need that regional service in smaller areas if we expect municipalities to grow. How can we guarantee that the municipalities will be able to keep their people and the companies that employ the people if there is no regional carrier?

I will give one example. Because of the changes since September 11, next week I will have to fly from Saint John, the largest city in the province of New Brunswick, to Fredericton, then back from Fredericton over Saint John to Halifax, then from Halifax back over Saint John and Fredericton to get up to Ottawa. That is absolutely ridiculous.

I ask my colleague, what can we do to protect the regional carriers and the municipalities and make sure the quality of life the people have had is there for them and that it will continue to grow?

Air Canada Public Participation ActGovernment Orders

4:40 p.m.

Canadian Alliance

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

Madam Speaker, if regional carriers and smaller carriers had the freedom to grow and expand their market then local businesses could expand and service areas that may not now be serviced.

I take one example of a small local airline that started up in Terrace, B.C., a very small community in northern B.C. with about 15,000 people. It has one or two Dash 8s and provides a two-way service twice a day from Vancouver to Terrace. Because it is local, it offers good service and it originates out of Terrace, it is now bringing in another plane to service the surrounding communities. However, if we allow a dominant carrier to come in, interrupt and interfere with that local airline's potential growth perspective and the travelling public's access to that airline, then it will not maintain its ability to remain in the business.

We need to free up and encourage Air Canada, as the dominant carrier, to concentrate on being the national carrier and to stop trying to drive out the WestJets, the CanJets and other airlines that can provide regional carriage and do it well and service the communities well. If we allow the dominant carrier to replace them, the time will come when they will remove the service as they have done now.

What we want to do is encourage the smaller airlines to fulfill that role in our society. They can do it and they can do it very well.

Air Canada Public Participation ActGovernment Orders

4:45 p.m.

Canadian Alliance

Deepak Obhrai Canadian Alliance Calgary East, AB

Madam Speaker, it is a privilege for me to speak on our transportation industry. This is the second time I will have spoken on this subject.

When my colleague who just spoke was the Alliance critic, I spoke to her about this. She is now the DRC critic and many of the points she mentioned today were what I was going to mention. Nevertheless, I will re-emphasize many of those points.

Before I go to that, I would like to set the record straight. The Bloc and NDP members who spoke alluded to the fact that the Canadian Alliance was opposed to bilingualism. I would like to make the record very clear for them, especially the Bloc member who brought the separatism issue into this.

My colleague, the transport critic, did not say that we opposed bilingualism. He said that only Air Canada was forced to speak in two languages while the other carriers were exempt from that. He said that the rules should be equal for everybody, which would mean that the other carriers should also speak in both languages. He was trying to say that this restriction tied the hands of Air Canada. Let us not twist the facts.

I listened to what the Minister of Transport had to say. I was extremely stunned when he said that parliament put the 15% per cent restriction of ownership on Air Canada . As my colleague from the DRC said, both she and I stood 18 months ago and said free up the ownership rule and let Air Canada fly on its own. At that time, he stood up and said that it was not possible and gave all the usual excuses. Eighteen months later he is proposing a bill removing that ownership.

This indicates that the mess the Canadian airline industry is in is partly the responsibility of inaction and not well thought out plans by the government. We also know that this mess was also created by Air Canada itself. Everybody knows Air Canada's management has been disastrous at times.

Some of the management decisions have made me shake head and wonder if they have been made by supposedly qualified managers. Many times I have asked questions about the operations of Air Canada.

Let me go back to mismanagement by the government. Regulations have tied Air Canada's hands. However the government is untying them slowly. It wants Air Canada to act as a private company. Then it does not want that. Then it wants to put in restrictions. Nobody has the foggiest idea where this is going. Who is aware of what is going on? I am sure even the management of Air Canada is at times wondering what it has to do.

Let us talk about restrictions the government wants to remove. We have the foreign ownership restriction but, as my friend said, that is immaterial.

We want Air Canada to be a viable institution. By removing the 15% restriction, it will be able to trade. It will be a private company.

Government has no ownership. If the government has no ownership, why is it poking its nose in Air Canada? It claims and says that the smaller communities do not have services and that we have to provide them with these services. My colleague from DRC articulated one point very well. WestJest provides services.

One of the reasons WestJet came into existence was simply because Air Canada was charging too much. It was ridiculous. Hence WestJet came out with a sound business plan and look where it is stands today. Even after the disaster of the September 11 attack, WestJet said it did not need much money.

Members of parliament, who have travelled over the last three and a half years or four years, know that Air Canada and Canadian Airlines were trying to kill each other. It was not good for the airline industry. We had planes departing at the same time. What were they trying to do? I do not understand. They were routed to the same place, which was absolute nonsense. These planes were half full.

We now have Air Canada doing the same thing with Tango airline. Their experts say Tango is a great name. I guess we will have to get used to it.

My colleagues just advised me that Air Canada picks them up and pushes them over to Tango. Air Canada is using its bigger monopoly for this discount airline in competition with the other regional airlines.

What is the intent of Air Canada? It has more than 70% of the market. It has all the international routes. If it concentrated on its core business to provide good service, it could do well. However, it is more interested in opening up Tango and trying to run other people out of the business, which has fallen off from since they were dealing with Air Canada. There is absolutely no change in the mentality of the management of Air Canada.

As a matter of fact, when I travel and talk to Air Canada and Canadian Airline employees at the Ottawa airport, the Calgary airport and in some other place, I do not see happy employees. They are, of course, worried about jobs, but in general their morale is down. As a former businessman, I do not know how people can run a company with unhappy employees. It will eventually translate into frustration and bad service. I have had bad service on many occasions. Who has not had this bad service?

We need to make Air Canada what it is supposed to be: a business that is an expert in transportation. That can only be done if we remove the regulations.

The NDP members said they liked competition but they wanted regulation. The Bloc wants to protect the employees. We all want to protect the employees. However, in the long run, if Air Canada's hands were untied and it had the ability to make sound management decisions with happier employees and a happier public, that would benefit Canadians.

Canadians would like to see that maple leaf flying all over the world. It is a great sight to see but not at the expense of Canadians.

After the September 11 attack, a statement made by the CEO of Air Canada stunned everybody. He said he wanted $3 billion to $4 billion of Canadian taxpayer money. This airline has a monopoly. It is an airline that, through its predatory practices, killed Canadian Airlines. It has all the international market, yet it wants money and blames it on September 11.

Everybody knows that previous to that it was having severe financial difficulties. Obviously, if we really looked at it, the restrictions put on Air Canada by the government has had an impact on it. It has not been able to work as an efficient business entity.

People keep saying they want Air Canada. Then they say they will let Air Canada go like they did to CN. Look what happened to CN. There are two railway lines, the CN and CP. That is all right. When CN was let go, CN's performance improved and now we have two viable railways.

What happened was people did not want to let Air Canada go. There was this fear, especially with the Bloc, the NDP and the Liberal government that services would not be delivered to small communities and to others. Canadians are very entrepreneurial. Canadians will seize the opportunity.

I can say that, if the opportunity is there, lots of regional airlines and other airlines will come in. Right now with all the restrictions, Air Canada is in a dominant position and will not let anybody come in. It is running these operations at a loss, but it still wants to maintain its market share.

The pricing structure of Air Canada right now makes me shake my heard. Air Canada charges $3,000 from Calgary to Ottawa. That is pretty expensive. I flew from Vancouver to Shanghai for $4,000. If a person flies last minute economy it is over $2,000. Is it going to let discount air carriers come and let them take the traffic?

It is obviously a stupid business decision as far as I am concerned. No wonder the other airlines woke up. Now Air Canada has Tango, the no frills service. The bottom line is simple, most people travelling on Air Canada are travelling at half the price.

There is a need to allow Air Canada management to be let go. There is a need for an infusion of capital, and it should get it. There is a need for sound management practices by Air Canada

Air Canada Public Participation ActGovernment Orders

4:55 p.m.

The Acting Speaker (Ms. Bakopanos)

I apologize to the hon. member, but it is my duty pursuant to Standing Order 38 to inform the House that the questions to be raised tonight at the time of adjournment are as follows: the hon member for Kamouraska--Rivière-du-Loup--Témiscouata--Les Basques, Employment Insurance; the hon. member for Burnaby--Douglas, Terrorism.

Air Canada Public Participation ActGovernment Orders

4:55 p.m.

Canadian Alliance

Deepak Obhrai Canadian Alliance Calgary East, AB

Madam Speaker, I am bringing to the attention of government that its regulations have brought this mess to the airline industry. Let us talk about this. Members should talk to the public and the airline employees. We have unhappy customers and unhappy employees.

The government has to unshackle Air Canada and that is why we are supporting the bill. It is time that we have a real look at Air Canada and the airline operation. We cannot let it go and hope like the Minister of Transport does. With all his policies he hopes this will happen or that will happen. We do not need hopes. We need a concrete plan.

The minister hopes competition will come. Create the situation so competition will come. There are thousands of Canadian business people who would invest in small regional airlines that could feed into main feeder routes. We have an excellent infrastructure for the transportation industry. We just want to make effective use of it.

Air Canada Public Participation ActGovernment Orders

5 p.m.

Progressive Conservative

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

Madam Speaker, I will be sharing my time with the member for Saanich--Gulf Islands.

This debate is an extremely important one. Perhaps it is no more important to anybody else in this whole House than it is to the members who represent the province of Newfoundland and Labrador. Should members from any other province decide they want to walk or drive home, they can do it. We cannot. We have to fly, swim or take the ferry. We are more dependent on the airlines, especially our business people, our everyday travellers, people going on vacations, many students who are at universities on the mainland, and I could go on. Practically every family is affected by the service to our province by the airline. Basically, we are talking about Air Canada.

Fortunately, over the last while we have seen Canada 3000 coming in to the province and providing a bit of competition and some extra service. This certainly is looked upon by many as being one of the factors that kept the rates down somewhat. However, to a large degree Air Canada still has a monopoly. That is one of the concerns we have when we talk about this bill.

As we look at protecting and preserving our national airline, which we favour tremendously, we also have to make sure that the service that is eventually settled upon is provided at a reasonable price. Regardless of whether it is completely operated by the private sector, whether there is government involvement, or whether involvement by foreign companies is much greater than at present, whatever the case may be, that service must be provided to Canadians from British Columbia to Newfoundland at a reasonable price.

We are getting more letters than ever before from people who have no choice but to use the airline but cannot afford to do so. The prices to fly out of many of our smaller areas are extremely high. Consequently this has a very negative effect on many ordinary people throughout the country.

It is great if someone is travelling for a wealthy company that is paying the bill or travelling on behalf of the government, realizing of course that if the government is paying the bill, it is coming out of the taxpayers' pockets anyway. However, for the average family on medium or low income who have to travel because of sickness, educational needs or work, whatever the case may be, it is extremely difficult for them to get on and off the island of Newfoundland at the present rates that are being charged by the airline. We must keep that in mind. It is not just in Newfoundland; the service provided has to be reasonable enough to be used by all the people of the country.

The private sector, God love it, keeps the economy going. However, the bottom line for everybody involved in business is to make money. In order to make money they provide a service. In providing that service, any company worth its salt will try to make as much money as it can. When we are talking about providing an essential service to the people of this country, then companies have to be regulated to some extent so that they cannot charge people whatever they wish, or just pick lucrative routes into the larger areas.

Everybody wants to fly out of Toronto. Everybody wants to fly out of Vancouver. Everybody wants to fly out of Montreal. However, not everybody wants to fly out of Stephenville, Deer Lake, Goose Bay or even St. John's and many other small towns and cities throughout this great country.

People in the lucrative areas usually earn much higher incomes than those in the rural areas. If they can fly for fairly reasonable rates, why should people who are in areas where the going is tough economically have to pay two to six times more per mile than the people in the larger centres? It is entirely unfair. The government has to do something about it.

The problems first started a couple of years ago with the closure of Canadian Airlines. That was when the government should have stepped in and made the right decision. It certainly did not. The private sector had the opportunity to move in and solve the problems that we face today and by refusing to do what the government is now asking with the share restriction, we could have solved that problem two years ago.

Instead, the government basically forced the then lucrative Air Canada to take on the complete debt of Canadian Airlines. Canadian Airlines, with all kinds of employees, was going down the tubes. The government said to Air Canada, a company that was doing very well, that it could merge with Canadian Airlines and take it over but it would have to take all the debt and carry all the baggage, pardon the pun, with it.

It just cannot work that way. Rearranging the company so it would be a viable option was not allowed. Instead Air Canada was saddled by government regulations with a company that has now put it under.

Now that we are revisiting this whole situation, hopefully common sense will prevail. Whatever the resolution is, by the time we pass the present legislation and deal with the Air Canada situation in total, hopefully we will have a decision that will enable Air Canada, whoever the owners may be, to operate viably and to provide a reasonably priced service to everyone in the country.

Air Canada was viable before government asserted its authority and tried to tell it how to run the company. When we look at the experiences of this government in particular, when it asserts itself to try to do anything, we know the result is not successful. The records are there to prove it.

In all of this process the group of people we all must be concerned with is the employees of Air Canada itself. From coast to coast we have a tremendous number of hardworking dedicated Air Canada employees, some of whom have been with Air Canada for quite some time. Some of their jobs were jeopardized when Canadian Airlines was taken over by Air Canada. The type of deal the government set up was entirely unfair to the employees who had been with that company for quite some time.

Regardless of that, an employee is an employee. We certainly do not want to make choices as to who should be laid off and who should not. Hopefully a properly structured regulated airline can be busy enough and the profits lucrative enough for it to ensure that all the employees, regardless of whether they were with Air Canada for 30 years or whether they came with the Canadian Airlines merger, can find good, solid jobs within the airline.

In view of September 11, we must instill some confidence in people to get back in the airplanes and fly. As many of us know, in many cases it is much safer to fly than it is to drive or walk. Hopefully, we can get back to creating a good economy around our airlines.

However, profits are made around numbers. I mentioned this before. I know I am repeating myself to some degree, but I cannot overemphasize the fact that we are pricing ourselves out of business. It is great to say that we made a profit because we can charge $2,000 for a trip from point A to point B. If we charge $1,000, three times as many people may take the trip and then the profits would be even greater.

We have to make sure that an airline, especially where it is serving areas of the country which depend entirely upon that mode of travel, charges prices that are within reason. We are getting away from that. From Newfoundland to Ottawa the round trip costs anywhere from $1,800 to $2,000. Not many people can afford that. To fly from Newfoundland to Halifax quite often costs in the range of $700 to $800 and sometimes even more. Just a few years ago it cost in the range of $200 to $300. How many average people can afford to fly when they are paying three times more than they paid just a few years ago? Why should they have to pay that?

It is interesting to compare fares, as I mentioned earlier, in areas of British Columbia. I should not say British Columbia because it has the same problem in certain parts of the province that we have. However, quite often the fares from Vancouver, Toronto and Montreal are quite reasonable.

The member for Saint John who has been flying for some time will tell us that the prices paid to get from New Brunswick to here are much greater today than they were even two or three years ago. It does not make a difference for us; I have to come to work and the government pays my way. However, the taxpayers are paying for it. It is affecting our bottom line. If the person next door to me has a job in Ottawa and wants to go home, or his family wants to come to visit, they usually cannot afford to do so because the costs are so exorbitant.

There are a few things we have to keep in mind. If government is asserting itself by bringing forward and approving legislation, let us make sure it is good legislation. If we are to interfere with the operation of a company, let us make sure that we have some say. If government money is going into a company, the government has to have some say in its operation, not telling it how to run the company, let us stay out of that, but making sure that the consumer is protected.

We have to make sure that a private company can operate viably. Quite often the best way to do that is to get out of its way, cut the red tape and bureaucracy and let it do the job.

If we had let Air Canada do that two years ago or the private sector we would not be here today worrying about how to straighten out our national airline. If we had not stuck our nose in and interfered with Air Canada as it took over Canadian Airlines we would not be here today. It would undoubtedly still be a profitable operation.

We all know that Air Canada, Canada 3000, West Jet and all the other airlines were affected by the events of September 11. It is right and proper, because of actions taken by governments around the world, that the government compensate them for the direct losses they incurred during that process. We have no problem with that. However we cannot let inefficient companies or companies that are operating under such government restraints that they become inefficient piggyback on September 11. However, if it is the government's fault, as I would suggest it is with the present situation as it relates to Air Canada, then the onus is on the government to correct the mistakes of the past.

We should have learned from what happened a couple of years ago. Let us not make the same mistake again. Let us not make our cuts and changes on the backs of employees of the company. Nor should we make our decisions and cuts on the backs of people who live in certain areas. We should not sock it to them, as the saying goes, and say that if they want to travel they must pay the price.

Confederation is about looking after all the people and provinces that fall within this great dominion. We are supposed to be brothers and sisters who share and share alike. Some of us have advantages because we live in larger regions. Many have advantages because we live in small ones, whether it be greater resources, the types of freedoms we have or whatever.

When it comes to movement throughout this country, we should not be penalized because we live in remote areas. We should not be disadvantaged when it comes to educational or employment opportunities because we live in small communities or because our accent or skin colour is different. That is not what Confederation is about. That is not what Canada is about.

We have a chance here to do something right. Let us use a bit of common sense, as I said before, and make sure we do it right this time.

Air Canada Public Participation ActGovernment Orders

5:15 p.m.

Canadian Alliance

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

Mr. Speaker, I wanted to come back to the House after my speech and clarify some things that were said about my speech within the context of the debate on Bill C-38.

It was said by the hon. Bloc member that I was somehow anti-French and anti-Quebec because I dared say that the Air Canada Public Participation Act is not the most efficient means by which to enforce official bilingualism in Canada.

By mandating that only Air Canada must enforce the Official Languages Act and not the other carriers, we are doing a disservice to the principle of official bilingualism rather than a service to it. That is the only point I was trying to make. The member dared to stand in this place and say I am anti-Quebec and anti-francophone because I dared to point out that principle and enforce the view that official bilingualism is an appropriate principle for Canada.

I would inform the hon. member that my mom taught French immersion in British Columbia. My sister teaches French immersion in British Columbia. I am a product of French immersion. When I was 12 years old I lived in Quebec for a month in a community that was totally francophone. I did so because I wanted to learn the language and understand the country better by being exposed to literature in both official languages.

I would say to the Bloc member that there are a lot of British Columbians who want to learn both official languages to understand the country better. However enrolment in French immersion classes is way down because of the Bloc Quebecois and separatist movements.

My family has done more for the country by advancing official bilingualism and the French fact than the Bloc Quebecois has ever done. For the hon. member to dare stand in this place and say I am opposed to official bilingualism is absolutely offensive.

I would encourage the hon. member to withdraw the remarks because the official opposition and I are in favour of official bilingualism. That sort of smear is totally inappropriate and undignified for the French language in Canada.

Air Canada Public Participation ActGovernment Orders

5:20 p.m.

The Acting Speaker (Mr. Bélair)

That was more a point of order than a question or comment. I do not know if the hon. member for St. John's West wishes to respond to it or not. He is indicating that he does not.

Air Canada Public Participation ActGovernment Orders

5:20 p.m.

Progressive Conservative

Elsie Wayne Progressive Conservative Saint John, NB

Mr. Speaker, I congratulate my hon. colleague for his presentation but I want to ask a question. In Saint John, New Brunswick, as I was leaving to fly to Ottawa this week, one of the men who had been working at Air Canada for 23 years received his notice that he was being laid off. He needed a little more time to get his retirement pension.

When we are bringing in legislation and talking about things like this we must somehow have protection for people like him. That must be part and parcel of the legislation.

I then went to the ticket agent who had been there long before I started flying to Ottawa. She got her notice that day.

This is what is happening. Many people are being hurt right now. We gave the airline $160 million and it went out and bought another carrier instead of looking after those employees. How does my hon. colleague feel about this?

Air Canada Public Participation ActGovernment Orders

5:20 p.m.

Progressive Conservative

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

Mr. Speaker, the hon. member is dead on in what she says. I think all of us who have gone through airports recently have run across employees in a similar situation. A while ago Air Canada tried to lay off a number of employees who had come from the Canadian Airlines system. Because of an agreement they have been asked to put it all on hold.

Because of the transition that has taken place I would suggest to the government that Air Canada not be allowed to tamper with its employees until the mess is straightened out. I hope we can deal with them by keeping them on. If not, we should still proceed in the right and proper fashion and try to get the company back on solid footing so we can continue for many years to provide the type of employment we need so badly in Canada.

Committees of the HouseRoutine Proceedings

5:20 p.m.


Marlene Catterall Liberal Ottawa West—Nepean, ON

Mr. Speaker, I believe you would find consent for the following motion. I move:

That notwithstanding Standing Order 106(1), the Standing Joint Committee on the Library of Parliament be permitted to meet on Thursday, November 1, 2001 at 1.00 p.m. for the purposes of Standing Order 106(2).

This is to forgo the usual 48 hour notice for a committee to meet. It is simply to establish a meeting to select the chair and vice-chair. The opposition House leader has agreed with the motion.

Committees of the HouseRoutine Proceedings

5:20 p.m.

The Acting Speaker (Mr. Bélair)

Does the government whip have unanimous consent to move the motion?

Committees of the HouseRoutine Proceedings

5:20 p.m.

Some hon. members


Committees of the HouseRoutine Proceedings

5:20 p.m.

The Acting Speaker (Mr. Bélair)

The House has heard the terms of the motion. Is it the pleasure of the House to adopt the motion?

Committees of the HouseRoutine Proceedings

5:20 p.m.

Some hon. members


(Motion agreed to)

The House resumed consideration of the motion that Bill C-38, an act to amend the Air Canada Public Participation Act, be read the second time and referred to a committee.