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.