Mr. Speaker, each year at this time over one million Canadians take to the skies for their spring vacation. Families, students and parents make plans to get away from their regular routines for a week of family time and relaxation. Many have saved for months and have paid a valued portion of their income for this March break, one of the busiest travel seasons of the year.
As much as break-bound Canadians look forward to this annual tradition, Canada's airlines and countless tourism operators across our country count on this activity for a substantial portion of their annual business. However, this year Canadians' travel plans and the economic health of the numerous sectors relying on them are in jeopardy.
That is because of a threatened strike by the roughly 8,200 mechanics, baggage handlers and cargo agents at Air Canada who are members of the International Association of Machinists and Aerospace Workers, and a threatened lock-out by Air Canada of its approximately 3,000 pilots who are members of the Air Canada Pilots Association.
Indeed, all sectors of the Canadian economy are at risk of disruption, with potentially devastating financial consequences if a work stoppage goes ahead. The greatest risk may be to Air Canada itself. A work disruption during the busy March break period could potentially wreak havoc on the financial viability of Canada's only national airline and the many communities that it serves.
I remind the House that Air Canada has been struggling with financial problems for many years dating back to 9/11. The entire global airline industry has been under strain ever since. Indeed, by 2003, Air Canada was facing the prospect of bankruptcy. It began operating under the Companies' Creditors Arrangement Act when the Ontario Superior Court issued an order granting it protection from insolvency.
In 2004, it emerged successfully from the restructuring. In the years since, Air Canada has sought solutions to its financial situation to ensure its long-term viability. However, like airlines all over the world, it faced yet another setback in 2008 due to the global financial collapse.
When commercial credit markets all but freeze, companies like Air Canada with defined benefit pension plans suddenly face much higher pension funding obligations. The combined effects of the recession and Air Canada's contractual obligations led to more challenges for the company.
The airline continued its aggressive cost-cutting to ensure its financial stability and sustainability. Every option had to be considered. In 2008, Air Canada asked its unions to agree to the extension of existing collective agreements. In the end, all the bargaining units at Air Canada renewed their contracts for an additional 21 months. They also agreed to a short-term pension funding moratorium.
Thanks to these agreements and Air Canada's success in securing additional loans, the airline was able to continue operating and again avoid bankruptcy. However, Air Canada remains in a fragile financial situation today, with high fixed costs and low profit margins. In fact, it did not see a profit at all last year, in part because of fixed costs which airlines have no control over such as foreign exchange and fuel costs, sometimes representing as much as a third of their operating costs. These price increases, coupled with a sluggish economy and increased domestic competition, resulted in a loss for the airline in 2011, including $80 million in the fourth quarter alone.
The threat of a work stoppage at Air Canada for the third time in less than a year during such an important travel season is the last thing the company needs.
Given the precarious financial position of Air Canada and the fragile state of our economic recovery, Parliament must meet its obligation to get involved and stop any potential negative economic impacts of the current Air Canada labour disputes.
We know from past experience what a heavy toll these stoppages take on the economy. Since 1984, there have been 35 work stoppages in the air transportation industry, six of them involving Air Canada.
The last time pilots walked off the job in 1998, the airline industry was in a much better position than it is today. Even then, Air Canada reported losing some $300 million. That does not begin to take into account the inconvenience and cost for the individuals, families and businesses relying on the airline.
Each time there has been a labour disruption, business travellers have either been stranded or forced to miss meetings and sometimes have lost valuable contracts because they could not get to where they needed to be.
Air Canada provides a comprehensive range of air services to small and large Canadian communities and destinations in the United States, Europe, the Middle East, Asia, Australia, the Caribbean, Mexico and South America. These are important markets for Canadian businesses. They are places businesses need to get to and from in order to maintain their businesses, create jobs and grow our economy.
Companies that rely on the airline to ship cargo to their customers have also been seriously hurt in past air transportation work stoppages. Air Canada is this country's main air cargo carrier. It provides 22% of domestic capacity, 4% of transborder capacity and 49% of international capacity. At the Toronto Pearson Airport, Canada's largest air cargo hub, the airline moves approximately 68% of domestic and 40% of international air cargo lift.
To put this into perspective, if a work stoppage were allowed to proceed today, losses to all sectors of the Canadian economy are estimated to be as much as $22.4 million a week for every single week the stoppage drags on.
Any work stoppage right now would have a drastic and negative consequence for Canadians and our economic recovery. The Government of Canada is committed to doing what it takes to sustain our economy, keep businesses working and support Canadians who rely on air travel.
Let me be clear, the government action on this dispute is certainly not our preferred option. Ideally, all three parties would sort out these disputes between themselves and get back to business. I can assure this House that the Government of Canada respects the right of unions to strike and the right of employers to lock out their workers. In fact, the Minister of Labour has done everything she possibly could to avert a work stoppage.
The collective agreement of approximately 8,200 Air Canada employees represented by the International Association of Machinists and Aerospace Workers expired on March 31, 2011. From the outset, the Government of Canada encouraged both parties to reach an agreement through the negotiation process. Initially this appeared to produce success. On February 10 of this year, the parties reached a tentative agreement.
However, despite assistance from a conciliation commissioner and a tentative agreement, the parties have been unable to resolve their differences. The tentative agreement was rejected by union members at 65.6%. The members also voted 78% in favour of a strike and gave the Minister of Labour their strike notice on March 6.
It is a similar narrative in the case of Air Canada and its pilots. These parties have been bargaining for a year. During that period, the parties did reach a deal that needed to be ratified by ACPA's membership. Unfortunately, that deal was ultimately rejected by the membership and the parties had to go back to the bargaining table. They were assisted at the bargaining table by not only a conciliator from the Federal Mediation and Conciliation Service but also by two co-mediators who were appointed by the Minister of Labour.
However, after many months of negotiations and meetings between both parties and the Minister of Labour, ACPA voted 97% in favour of strike action. On March 8, Air Canada gave notice of its intention to lock out its pilots.
In the event of a work stoppage involving technical, maintenance, operation and support workers, Air Canada would have no choice but to begin shutdown protocols almost immediately for safety and insurance purposes. In the event of a work stoppage involving the pilots, Air Canada, again, would effectively be grounded.
As previously outlined, the ensuing inconvenience to travellers and the serious disruptions to Canadian businesses would have a dire impact on Canada's fragile economy.
Canadians have mandated the government to protect our national interest in a period of global economic uncertainty. That is precisely what we are committed to do. As the prospect of ratified agreements in the short term seems unlikely, the Government of Canada must act now to ensure the continuation of air service operations at Air Canada.
It is clear that Canada cannot afford the consequences of a work stoppage. For the sake of our fragile economic recovery, Canadian businesses and Canadian families, I urge all parties to support the government in its actions to keep Air Canada flying.