Mr. Speaker, I am pleased to rise in the House to speak to Bill C-10, an act to amend the Air Canada Public Participation Act and to provide for certain other measures.
Speaking in technical terms, this legislation will remove the articles of the act that stipulate that Air Canada undertakes operational and overhaul maintenance in Mississauga, Montreal, and Winnipeg.
In plain English, the proposed amendments to the 1988 Air Canada Public Participation Act mean that the jobs of 3,000 Canadians who provide aircraft maintenance will be affected. Under the amendment, Air Canada would still be required to do some maintenance work in each of these provinces, but would be allowed to change the type, volume, or scope of any or all of those activities in each of those provinces. As well, the level of employment in any or all these areas could be changed, depending on the scope. Air Canada would be free to dictate how many people would be employed by these centres and what work they will do.
Let me be clear with regard to one particular aspect of this. The Conservative Party believes it is time that Air Canada becomes a private sector company that is not supported by taxpayers. We agree that Air Canada, and all of our carriers, should have the ability to be more competitive, a level playing field, and this does not have to be at the expense of high-quality, well-paying jobs of Canadians. Having spent almost 20 years in aviation, I am aware first-hand of the challenges that Canadian aviation industries face in remaining competitive in an ever-changing global industry.
However, before getting into the weeds of the bill, let me speak about the history of Air Canada in this country for a moment.
Air Canada inherited a fleet of 109 aircraft upon being privatized in 1988. All of Canada's major airports where Air Canada first flew were built with the financial support of the Government of Canada at the time. Air Canada is the largest airline in this country, and an important international player in the aviation sector. However, that is because of, not despite, the support from the Government of Canada and Canadian taxpayers over the years.
Today Air Canada is the largest tenant in nearly every major airport in this country, with the exception of Calgary and the Billy Bishop Toronto City Airport. This gives Air Canada significant influence over each airport's operations, and access to the best landing slots in all of our major airports. One might be tempted to say it is a bit of a competitive advantage over other carriers, including our other national carriers.
As I said before, we welcomed the original intent of the Air Canada Public Participation Act when it was introduced in 1988. The act put in place clear conditions to ensure that all of the support that Air Canada had received from the government to turn it into a profitable crown corporation was not lost. The government could be seen as perhaps protecting its investment.
The conditions were that Air Canada would be subjected to the Official Languages Act, would maintain its headquarters in Montreal, that 75% of its voting shares had to be held by Canadians and, finally, it had to “maintain operational and overhaul centres in the city of Winnipeg, Montreal urban community, and the city of Mississauga”. Given all this, it is surprising that the government would only make such a narrow change to the act. While it is unclear what level of benefits this legislative change will give Air Canada, it is clear that the intended change will make it possible for the carrier to move thousands of jobs from Canada to other jurisdictions.
If we are talking about giving further competitive advantage to one of our national carriers, perhaps it would be appropriate to look at the industry as a whole. If afforded all of the advantages previously and Air Canada is still having difficulties remaining competitive, it might be a sign that our national aviation industry might need some retooling.
Let me talk about some of the challenges facing the aviation industry as a whole, because to understand the issues, one must first understand the product. Air transport is a critical, economic, and social infrastructure. It provides access to trade and investment; connects people to jobs, friends, and family; and delivers vital goods and services in remote areas, such as air medevac.
Geography, population size, and environmental conditions increase the operating costs of air transport in Canada compared to other jurisdictions. The Canadian passenger travel market is relatively mature, and it has enjoyed small to medium growth over the years. The total Canadian passenger market is estimated at between 122 to 125 million enplaned and deplaned passengers. However, this pales in comparison to the emerging and developing markets around the world.
In some measure, this is due to some of the very same policies developed for the industrial and economic environment in the 1990s. Simply put, the very same policies that were designed to protect our industry are now the ones hindering it.
Most of Canada's domestic air services are provided by Air Canada and WestJet. A small number of regional and local air carriers across the country service some small communities from coast to coast. This allows for better customer service and connectivity.
In the 1990s, Canada saw the Southwest Airline low-cost airline model introduced by WestJet. This came at a time when consumers and communities were held hostage by predatory pricing by Canada's two major airlines of the time, Canadian and Air Canada.
Canada's main charter carriers are Transat and Sunwing. They are focused primarily on seasonal vacation destinations. WestJet's entrance into the Canadian market created excitement by offering low-cost travel. It allowed many Canadians to experience air travel for the very first time. It was an exciting time and it was an exciting project of which to be part.
There was a time that air travel was only for the elite and was considered glamourous and accessible to only those who could afford it. With the entrance of low-cost carriers and competition, air travel is now easily afforded and this has stimulated market growth.
Both Air Canada and WestJet have now introduced lower cost, lower fare vacation or charter subsidiaries, Rouge and Encore. Respectively, this has stimulated some vacation or destination growth in a number of markets and, as we speak, there are a number of start-up low-cost carriers at various stages of financing that are expected to enter the market in the short term.
Ultimately, this will lead to a price competition with existing carriers. For a time, our national carriers will react with even greater seat sales and maybe even new routes, but as past experience suggests, only the new entrants with deep pockets will be able to survive.
Unable to compete or go head to head with the big boys because the deck is stacked against them, airline start-ups and failures are frequent. The ones that suffer the most are the communities and, ultimately, the consumer.
All of this is to say that maybe it is time to reconsider policies that may have served us well when the Canadian aviation industry needed protection to flourish, but now impairs our competitiveness. Of course, such protectionism comes at a cost that is largely borne by consumers, who pay relatively high airfares, and the Canadian travel and tourism sector that also, due to higher costs, has been losing market share for over a decade. Simply put, Canada is sliding backward in its competitiveness.
The Conference Board of Canada estimates that Canadian airports in 2012 accounted for $4.3 billion in real GDP, but had a total economic footprint of $12 billion, generating almost 63,000 jobs, and contributing over $3 billion in federal and regional taxes. Canadian airports are vital to the success of the Canadian economy, key gateways for inbound and outbound tourism, business, and personal travel. Domestic commerce and international trade are dependent on our key gateways, our airports.
Canada is blessed with strategic geographical location. We are at the crossroads of the great circle routes among Asia, Europe, and the Americas, and we have this competitive advantage, but yet our nation has never taken full advantage of it. Competition has successfully negated this competitive advantage with integrated policies and programs aimed at stimulating inbound tourism and facilitating connecting traffic through their global hubs, essentially overstepping or, to use an aviation term, doing a flyby of Canada.
Canada's airports face increasingly aggressive competition from countries that have recognized the importance of air transportation as a driver of economic growth. Our neighbouring U.S. counterpart markets directly to and easily accesses a large portion of Canada's U.S. transborder and international travel market. Finally, Canadian airports also compete with each other for the allocation of limited carrier capacity.
Our regional airports and communities are oftentimes pitted against one another in competition for airline service. As mentioned during the Billy Bishop debate, Canadian airports also face challenging times with changing aircraft capacity and the continued focus on environmental issues such as noise due to residential encroachment.
In the 1990s, with the introduction of the national airports policy, a new framework was defined with relation to the federal government's role in aviation. NAS airports, comprised of the 26 airports across Canada that were deemed as critical links for our country, were deemed essential to Canada's air transport system. They served 94% of the air traffic in Canada. These airports were transferred under lease to airport authorities, and in some cases, municipalities.
The infrastructure in many of these airports was antiquated. Some, if not all, of them were in need of attention. Through the transfer negotiations, reinvestment monies were given, but the expectation for these airports was that they were to do everything in their power to be self-sufficient.
Airports have very few revenue generation streams. With the transfer of airports and the newfound independence also came the realization that user-pay systems were needed. Airport improvement fees have now become the norm, and today we have airports that are incredible examples of the NAS airport of the 1990s. We have also seen airports that continue to struggle to be competitive and to be innovative.
The user-pay approach to financing air infrastructure and services is effective and sustainable, but it further increases costs for the sector and for users. It costs more for airlines to fly into our airports because it costs more for our airports to operate.
Canada is unique among its competitors in charging onerous rents and taxes that undermine competitiveness. Airport rents, for example, can represent up to 30% of airport operating budgets, far more than what would be expected in dividends and income tax from a private for-profit airport, such as what we see in Europe.
The federal government takes in about $300 million annually in rent, but it only invests $50 million back into our airports. Canada cannot become a world leader in terms of cost competitiveness of air transport without heavy public subsidization of the sector, not only to match the subsidies offered by some of our competitors, but also to overcome the naturally high-cost operating conditions and lack of economies of scale.
If Canada wants to remain competitive, we need to fully integrate parts of our local transportation system and recognize essential partners, such as the government, airlines, tourism and business interests, using an overall team Canada approach to align policy and promotion. We need to stimulate air travel to, from, and within Canada. This alone would have a broader, far reaching, positive industry impact than continually giving a single private sector company competitive advantages over others.
Arguably the most important challenge facing Canadian industry today is our air policy. The key to enhancing Canadian connectivity, global competitiveness, and economic prosperity is to realign Canada's air policy. The government can improve Canada's competitiveness and help create opportunity in trade and tourism, which in turn would create more demand for air services, strengthening our national carriers, all of our carriers and not just one, by using their time not to pick off the low-hanging fruit, the easy wins, and looking after friends.
Let us look at our air policy. Let us apply our blue sky policy more progressively and in a manner that is strategically aligned with Canada's international trade and tourism objectives. Let us pursue more aggressive open skies agreements with Canada's free trade partners. Let us pursue progressive and more open agreements with Canada's tourism markets. Open up more markets for tourism and trade: wow, what a novel idea.
Tourism is a large and high growth industry. It has a significant impact on the global economy. In 2013 alone, the tourism industry saw more than one billion international tourists worldwide, generating more than $1.3 trillion in receipts. Canada's tourism industry contributes $84 billion to the economy and employs more than 600,000 people.
Competition for tourism is heating up more and more as more countries are investing in tourism marketing, aligning their aviation and visa policies to attract a greater share of this market. Canada is lagging further and further behind. Aligning our tourism objectives with our aviation policy would only serve to build a stronger Canadian aviation industry and stronger carriers.
I have a quote from Air Canada's president and CEO, Calin Rovinescu:
It is indeed time that the Air Canada Public Participation Act, dating from the company's privatization nearly 30 years ago, be modernized to recognize the reality that Air Canada is a private sector company, owned by private sector interests, which operates in a highly competitive global industry that has undergone dramatic transformation over the past three decades.
I agree, but there needs to be a level playing field, and protecting Canadian jobs should be the number one priority.
The announcement made by Air Canada to undertake and overhaul maintenance comes only after the airline announced that it would be purchasing Bombardier's C Series jets.
Air Canada until very recently had been subject to lawsuits from Quebec and Manitoba as a result of the service centre closures in those provinces.
In the Quebec case, it failed to reopen a factory that went bankrupt in 2012, putting 2,000 skilled workers out of work. The Quebec government filed a lawsuit that accused Air Canada of breaching its legal obligations when it transferred some heavy maintenance work outside the country. The Quebec Court of Appeal sided in a ruling last November. However, Quebec dropped the case when Air Canada agreed to purchase 75 Bombardier C Series jets and service them in the province. Was that convenient timing? I think not.
The Manitoba government also ended legal proceedings after the airline signed a new maintenance agreement that is expected to create at least 150 jobs in the province.
Air Canada already outsources its maintenance work to two suppliers in Quebec, in addition to providers in the U.S., Singapore, Ireland, and Israel.
While the Minister of Transport's proposed legislation should have nothing to do with Bombardier, this bill unfortunately has everything to do with Bombardier. While the government has yet to announce whether it will provide Bombardier with yet another billion-dollar bailout as requested on December 11, 2015, it seems it is finding ways to skirt the public with backroom deals.
In his short justification for introducing Bill C-10, the minister hailed Air Canada's decision to purchase the C Series aircraft combined with the Government of Quebec's and the Government of Manitoba's intention to discontinue litigation against the carrier as the main cause. That is so nice of them. The minister also noted that this would allow Air Canada to be more competitive in an evolving and ever-increasing globalized industry. I think that line alone speaks for itself.
The taxpayers of Canada have done a lot for Air Canada and the company is rewarding them by taking away high-quality, well-paying jobs. The Conservative Party does not support any bill that seeks to eliminate jobs, especially when there are viable alternatives to do so that will not affect the company's bottom line.
The government has an opportunity to look at all of our industry and make some real change. If the government really wanted to take a measure that would stimulate the entire Canadian aerospace sector, and as I said, create real change, including Air Canada, it could choose to tackle any of the issues I have mentioned previously. I would note that all of these measures have near universal support in the aviation sector and would not lead to a single loss of jobs in Canada.
