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.